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Legal Updates

When Cooperation Becomes Collusive: A Carolina Tale

As college sports fans know well, followers of the Duke University Blue Devils and the University of North Carolina Tar Heels are rarely accused of getting along too well with one another. Now, however, the two universities are alleged to have done just that – purportedly entering into an agreement not to hire away each other’s medical faculty employees.

In a lawsuit pending in federal court, a professor within Duke’s School of Medicine, Dr. Danielle Seaman, has brought a putative class action lawsuit against Duke University, the Duke University Medical System, and numerous individual defendants, alleging violations of federal anti-trust laws. Seaman v. Duke University, Case No. 1: 15-cv-462 (W.D.N.C., filed June 9, 2015).

The Lawsuit

In her court complaint, Dr. Seaman alleges that “a few years back,” Duke attempted to lure away the entire UNC bone marrow transplant team. Upon learning of Duke’s recruitment efforts, UNC put together a lucrative compensation counter-offer that succeeded in keeping its bone marrow transplant team intact.

Subsequently, in an effort to forestall further raids on one another’s employees, the deans of the two universities’ medical schools allegedly agreed that neither institution would recruit or hire the other’s medical faculty employees.

The complaint goes on to allege that in late 2011, while Dr. Seaman was employed as an Assistant Professor of Radiology within the Cardiothoracic Imaging group at Duke’s School of Medicine, she contacted the Chief of Cardiothoracic Imaging at UNC’s School of Medicine, asking that UNC keep her in mind for any appropriate job openings in the future. Soon afterward, Dr. Seaman participated in a tour of UNC’s facilities, took part in an informal interview, and was informed that UNC would consider her for future job openings.

In February 2015, Dr. Seaman sent an email to UNC’s Chief of Cardiothoracic Imaging, indicating her desire to be considered for an advertised position as a Thoracic Radiologist. Dr. Seaman claims to have received a response stating, “I just received confirmation from the Dean’s office that lateral moves of faculty between Duke and UNC are not permitted. There is reasoning for the ‘guideline’ which was agreed upon between the deans of UNC and Duke a few years back.”

Later, UNC’s Chief of Cardiothoracic Imaging allegedly explained to Dr. Seaman that the impetus for this agreement was Duke’s earlier attempt to recruit “the entire UNC bone marrow transplant team; UNC had to generate a large retention package to keep the team intact.”

Thus, Dr. Seaman’s Complaint alleges a scheme between Duke and UNC aimed at preventing their medical faculty employees from moving from one institution to the other. The effects of such an agreement would include keeping those employees’ salaries artificially low, as well as forcing them to decide whether to stay with their current employer, relocate to a similarly prestigious institution out of state, or settle for a position at a less prestigious institution nearby (in what would likely be a less lucrative capacity).

Case Status

The lawsuit is still in its initial stages. Duke’s motion to dismiss Dr. Seaman’s complaint, based on immunity allegedly derived from UNC’s status as a state institution, was denied by the District Court in February 2016. Although the court gave Duke permission to seek an immediate appeal of its ruling from the U.S. Court of Appeals for the Fourth Circuit, the Fourth Circuit declined to hear the matter and returned the case to the District Court.

Barring a quick settlement, then, the litigation will proceed to discovery, a process that is likely to take at least several months and culminate in further motions aimed at disposing of the case before trial.

Recommendations

The Duke lawsuit is an important reminder that educational institutions, like other employers, are bound by the anti-trust laws, despite their non-profit status. While UNC’s and Duke’s apparent motivation in allegedly agreeing not to hire one another’s medical faculty members may be understandable – a desire to retain skilled professionals and keep their labor costs down – the fact remains that broad no-hire agreements between competing employers, regardless of the industry, are almost always unlawful.

Instead, employers that are concerned about losing valuable employees should consider other potential means of retaining them. For instance:

  • For certain types of employees – particularly those who are privy to trade secrets or other confidential business information – post-employment non-competition agreements may be worth exploring. (As the legal standards governing such agreements vary widely from state to state, and their enforceability depends heavily on the individual circumstances, employers are wise to consult legal counsel in connection with proposed non-competition agreements.)
  • Employers might also consider potential deferred-compensation arrangements (such as Section 457 plans for non-profit organizations) to incentivize key employees to stay.

Ultimately, compensating employees fairly and providing a positive workplace environment that makes them feel that their efforts are valued and appreciated may well be the most important factor in encouraging employees to remain.

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Please feel free to contact us if you have any questions about the Duke/UNC litigation or its implications for your organization.