A groundbreaking criminal conspiracy trial involving Denver-based DaVita Inc. and its former CEO Kent Thiry is set to begin Monday, pitting the company against federal prosecutors who say DaVita’s agreements with competitors not to recruit each other’s workers violated antitrust laws.
The closely-watched federal trial is the first time a company or CEO has been criminally charged for so-called non-poaching agreements under the 132-year-old Sherman Anti-Trust Act, said attorney Ann O’Brien, an expert in antitrust law.
Every part of the trial will reverberate nationally throughout the business and legal realms, she said, from the judge’s decisions on what testimony to allow before the jury to the particulars of jury instructions to the ultimate verdict.
“There just isn’t another case like this,” O’Brien said.
Prosecutors say the “gentlemen’s agreements” between DaVita, Thiry and three other health care firms not to recruit DaVita’s employees limited workers’ ability to seek out higher wages, advance their careers and compete in a free marketplace.
DaVita and Thiry were indicted last year on three conspiracy counts. The indictment alleges DaVita and Surgical Care Affiliates agreed not to recruit each other’s top-level employees during a five-year period from 2012 to 2017, and that DaVita from 2017 to 2019 entered similar arrangements with two other unnamed companies that covered all employees, not just senior workers.
Thiry moved the headquarters of DaVita, one of the country’s largest providers of kidney dialysis services, from Segundo, Calif., to Denver in 2009 and rapidly grew the company’s network of dialysis centers before stepping down as CEO in 2019 after two decades at the helm.
He considered but decided against entering a crowded Republican primary for governor in 2017, and bankrolled political initiatives to open up party primaries to unaffiliated voters and reform how political maps are drawn on the state and federal level.
The indictment cites numerous emails that show DaVita’s competitors not only agreed to avoid recruiting DaVita employees, but in some cases also promised to direct DaVita employees who did apply to reconsider “their potential opportunities” within DaVita, and require that DaVita employees alert their bosses to their job hunt before the competitors would offer DaVita employees a job.
In 2017, one of DaVita’s competitors was considering a DaVita employee for a job, but told the woman she had to first inform her boss that she was looking for a new job.
“If we like the candidate enough, we ask if they have let their boss at DaVita know they are looking for other positions… If no, we ask if they are comfortable going back to DaVita and letting their boss know,” an unnamed senior executive at that company wrote in an email quoted in the indictment.
Attorneys for DaVita and Thiry have denied wrongdoing, arguing in court filings that non-solicitation agreements aren’t illegal and that prosecutors are stretching the law in new ways in order to bring the conspiracy charges.
“The charges against the company are unjustified and rest on an unprecedented application of antitrust law to alleged discussions years ago by former company executives,” Katherine Wetzel, head of DaVita’s communications, said in a statement. “We will continue to defend the company vigorously.”
“We believe this is an unjust and unconstitutional overreach by the antitrust department, and we will focus on showing the jury the facts that prove Kent’s innocence,” said Cliff Stricklin, one of Thiry’s attorneys.
O’Brien said there’s no question the case is a new application of law. The Department of Justice indicated in 2016 that it intended to pursue such prosecutions, she said, and there are several underway across the country (including one in Texas for Surgical Care Affiliates, an alleged co-conspirator), but the DaVita case in Denver is the first to actually go to trial.
“The statute has been around since 1890 — no other defendants, individual or corporation, have faced trial for an alleged agreement not to poach each other’s employees as a criminal violation,” she said.
DaVita’s attorneys argued that the prosecution’s legal theory is so new that it is unfair to DaVita and Thiry, potentially violating Thiry’s due process rights.
“Defendants have certainly had no fair warning,” a motion to dismiss reads. “There is no precedent holding that an agreement merely not to solicit another’s employees violates the Sherman Act.”
DaVita’s stance was supported by the National Association of Criminal Defense Lawyers, the Chamber of Commerce of the United States and the Colorado Chamber of Commerce, but was rejected by U.S. District Senior Judge R. Brooke Jackson, who declined to dismiss the case.
“Non-solicitation agreements are a method of allocating the market that have rarely, if ever, been prosecuted,” Jackson wrote. “However, as discussed at length above, the conduct proscribed… is allocating the market, an action that defendants knew or should have known was illegal. The fact that defendants allegedly allocated the market in a novel way — by using a nonsolicitation agreement — does not matter. Defendants had ample notice that entering a naked agreement to allocate the market would expose them to criminal liability, however they did it.”
If convicted, DaVita faces a maximum penalty of $100 million per count, while Thiry could be sentenced to spend up to 10 years in prison and pay a $1 million fine per count.
The trial in U.S. District Court for the District of Colorado is scheduled to begin Monday with jury selection and is expected to last about three weeks.
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