Jury acquits DaVita, ex-CEO on all counts in landmark antitrust trial, dealing major blow to DOJ

A jury in Denver acquitted dialysis provider DaVita and its former CEO Kent Thiry on Friday of charges that they conspired with competing employers not to hire each other's key employees.

The verdict, which came after two days of deliberations, marks a resounding defeat for government prosecutors who had targeted the dialysis giant’s non-poaching agreements with rival companies in an unprecedented criminal conspiracy case. The Department of Justice (DOJ) argued that the agreements are anti-competitive and violate the Sherman Antitrust Act. It's the first criminal trial for labor-related antitrust violations.

The Sherman Antitrust Act dates back to 1890 and is a federal statute prohibiting activities that restrict interstate commerce and competition in the marketplace.

The DOJ had alleged in the case that both DaVita and Surgical Care Affiliates LLC required senior-level employees who sought to work for them to notify their current employers that they were job hunting. 

“Congratulations to the defendants, condolences to the government,” U.S. District Senior Judge R. Brooke Jackson said once the jury was dismissed, The Denver Post's Sam Tabachnik reported.

In a statement issued Friday, DaVita executives said, “We appreciate the jury’s decision and are grateful to put this matter behind us. We remain committed to operating with integrity and upholding the highest standards of law.”  

If convicted, DaVita would have faced a maximum penalty of a $100 million fine for each of the three counts, and Thiry would have faced a maximum penalty of 10 years in prison and a $1 million fine per count.

A federal grand jury indicted Denver-based DaVita and its ex-CEO on three counts of conspiring with competing employers to not hire one another's senior-level employees. The dialysis giant and Thiry allegedly struck anti-poaching agreements with two other healthcare companies.

The DaVita verdict marks the second defeat for the DOJ's Antitrust Division this past week. The antitrust division lost its first criminal no-poach trial and its first criminal wage-fixing trial, dealing a major blow to the government's new strategy of enforcing antitrust laws in labor markets by attempting to hold executives criminally liable.

"This has to be the most devastating week of losses for the criminal program in the history of the antirust division," Ann O’Brien, a partner at Baker & Hostetler and former DOJ antitrust division manager and prosecutor, told Fierce Healthcare. O'Brien attended the trial in Denver as an observer.

"Acquittals across the board for all defendants on all charged Sherman Act counts. In addition, the Assistant Attorney General for the Antitrust Division [Jonathan Kanter] had to fly across the country and stand before a federal judge in Denver who repeatedly questioned the judgment of the antitrust division that the interests of justice will be served by putting defendants through a third trial after two hung juries," said O'Brien.

In the criminal wage-fixing trial, a Texas jury acquitted the owner of a physical therapy staffing company and its clinical director on charges that they violated the Sherman Act in a federal wage-fixing case.

The staffing company owner, Neeraj Jindal, was found guilty on a single count of obstruction of Federal Trade Commission proceedings. The government charged Jindal with conspiring with competitors to lower pay and recruit others to the scheme.

"The DaVita case was a well-tried case by both sides," O'Brien said. Copious evidence was presented by the defense through cross-examination and an economic expert about the strategic business reasons for such agreements, the actual movement of employees, and the lack of effect and harm of such agreements, she noted.

"The antitrust division attempted for the first time ever to push the bounds of the Sherman Act and try no-poach conduct as a per se criminal offense. The defense lodged a rule of reason defense, including extensive expert economist testimony. The jury seemed attentive and intelligent. In the end, the jury had the last word, and justice was done," she said.

The verdict is expected to have significant repercussions on how the Sherman Antitrust Act is used to regulate free competition, experts say.

"What we are seeing in these trial defeats for the antitrust division is the culmination of a years-long effort to find 'labor market' cases and push the boundaries of Section 1 of the Sherman Act to criminalize conduct that has never before been treated as per se criminal conduct," O'Brien said. "Juries have spoken, as have judges in their jury instructions, and they do not agree."

She added, "Unfortunately, other defendants still face trials and investigations of conduct the division has so far failed in its efforts to criminalize."

The DOJ's case against DaVita

DaVita owns and operates outpatient medical centers that focus on dialysis and kidney care. It operates a network of 2,816 kidney dialysis centers in the U.S. and 339 more in 10 countries worldwide.

According to the DOJ, DaVita and Thiry struck an anti-poaching agreement with Surgical Care Affiliates that was designed to prevent each company from recruiting the other's senior-level employees. DaVita had similar no-poaching agreements with Hazel Health and Radiology Partners, the prosecutors allege. All three companies were headed by former DaVita executives, according to media reports.

The charges were the result of an ongoing federal investigation conducted by the antitrust division and the FBI.

The first count charges DaVita and Thiry for conspiring with Surgical Care Affiliates not to solicit each other’s senior-level employees from as early as February 2012 until as late as July 2017. The second count alleges the company and the former executive conspired with another healthcare company from as early as April 2017 until as late as June 2019 to allocate employees by agreeing the other healthcare company would not solicit DaVita’s workers. 

The prosecution, in its closing arguments Wednesday afternoon, cited “overwhelming evidence” that Thiry and DaVita used these agreements with rival companies to “cheat employees out of job opportunities," Tabachnik reported

The executive would also use his influence and personal relationships to retaliate and block employees trying to leave DaVita, the government’s attorney, Anthony Mariano, told the jury, Tabachnik wrote.

The government brought nine witnesses in the week-and-a-half trial, including former DaVita executives, an FBI agent and a former midlevel employee, BusinessDen reported

The defense brought one witness, an economist, who testified that a data analysis of compensation and turnover rates did not show economic evidence that competition had been stifled through any agreements, according to the BusinessDen report.

The DOJ has taken an aggressive antitrust enforcement strategy especially as it relates to labor issues and worker pay. The department has brought a series of criminal cases against employers for colluding to suppress wages, including prosecutions of employers of home health aides, nurses and aerospace engineers.

Defense attorneys have questioned the wisdom of the antitrust division’s fixation on so-called “labor market cases," O'Brien said, as the criminal cases create confusion about labor agreements.

"Right now, companies are even more confused than ever about what they can and can’t do in terms of labor movement and restrictions. Business leaders and the counsel who advise them want clear guidance, not failed criminal cases. And the antitrust division has probably made its job of enforcing hard-core criminal per se antitrust conduct harder going forward," she said.

Editor's note: This article has been updated and the headline changed based on the jury's verdict on Friday.