Middle District of North Carolina Certifies Class of Duke And UNC Medical School Faculty in “No Lateral Hire” Class Action

Christina Tabacco
Zelle LLP

On February 1, 2018, Judge Catherine C. Eagles of the District Court for the Middle District of North Carolina certified a class of medical school faculty from the University of North Carolina at Chapel Hill (“UNC”) and Duke University who alleged that the universities violated section 1 of the Sherman Act by agreeing to and enforcing a “no lateral hire” policy that prevented medical faculty from obtaining employment from the rival campuses and suppressed faculty wages. Seaman v. Duke Univ., No. 1:15-CV-462, 2018 WL 671239, at *1 (M.D.N.C. Feb. 1, 2018).


The no-hire policy was discovered by Dr. Danielle Seamen, a Duke radiology professor, when she sought employment from UNC in 2015. Dr. Seamen was told via e-mail from a UNC department head that, “lateral moves between Duke and UNC faculty are not permitted” due to a “‘guideline’ which was agreed upon between the deans of UNC and Duke a few years back.” Id. at *2. The agreement historically prevented lateral hires from moving between the two schools, but was “tightened up” when Duke attempted to hire UNC’s bone marrow transfer team in 2012 and UNC had to offer a substantial retention package to keep them.

Plaintiffs sought certification for a class of both faculty and non-faculty, the latter group comprised of physicians (without academic appointment), nurses, and skilled medical staff working for both defendants. The court held that the faculty class met Federal Rule of Civil Procedure 23(a) and (b)(3) requirements, but the non-faculty class injected issues that could not be “resolved based on the proof offered for the faculty case, would cause significant confusion at trial, and would raise difficult manageability problems.” Id. at *1.

The class certification decision came nearly one month after settlement was reached between the UNC defendants and the plaintiffs, leaving the Duke entities (collectively “Duke”) as the remaining defendants. See Seaman v. Duke Univ., 2018 WL 718961 (M.D.N.C. Jan. 4, 2018) (granting final approval of class action settlement because the “broad injunctive relief” secured, both preventing UNC from making agreements to refrain from recruiting, hiring, or competing for employees and securing UNC’s assistance with the ongoing litigation, was adequate). The court noted that injunctive relief would have been largely impossible without the settlement because most of the UNC defendants “are agents of the State of North Carolina for purposes of Eleventh Amendment immunity, barring suit without their consent,” and that UNC’s cooperation “provides a significant benefit in the ongoing pursuit of monetary damages against the Duke Defendants.”  Id. at *3.

Class Certification

The court weighed class certification of the faculty and non-faculty separately, considering the merits of plaintiffs’ claims “only when relevant to determining whether the Rule 23 prerequisites for class certification [were] satisfied.” Seaman, 2018 WL 671239 at *3 (internal citation and quotation omitted). In opposition, Duke argued that antitrust impact and damages could not be proven with common evidence, emphasizing that the core problem was the individualized nature of class members’ claims.

Faculty Class Certified

The plaintiffs’ two experts opined that the two schools were “unique competitors” in the Durham/Chapel Hill, South Carolina area based on evidence of the schools’ similar rank and geographic proximity. Seaman, 2018 WL 671239 at *4.Thus, the schools were each other’s main rivals for physicians who want to live in the area. Plaintiffs’ experts concluded that “lateral hiring competition between the defendants would encourage the defendants to preemptively increase compensation to retain faculty.” Id. at *5.

In support of this conclusion, Plaintiffs offered two theories of antitrust impact. First, because the no-hire agreement, defendants were not required to “preemptively increase compensation” that otherwise would have ensured against faculty members leaving for higher paying positions at the school across town. Id. at *5. This, plaintiffs argued, suppressed compensation across all faculty, based on Duke employees’ testimony about the need to increase salaries to prevent lateral movement and Duke’s attempted recruitment of UNC’s bone marrow transplant team.

Second, plaintiffs alleged that “defendants’ internal equity structures—policies and practices that are alleged to have ensured relatively constant compensation relationships between employees— spread the individual harm of decreased lateral offers and corresponding lack of retention offers to all faculty, thus suppressing compensation faculty-wide.” Id. at *4. Plaintiffs’ experts also conducted “‘sharing’ regression analyses that examine how an individual faculty member’s compensation moved in relationship to other faculty compensation.” Id. at *6.

Plaintiffs proposed calculating damages using a “returns to seniority” concept drawing on class-wide data, namely payroll and other employment records for all faculty. Id. Returns to seniority are compensation increases commensurate with increasing experience. Using regression analyses, one of plaintiffs’ experts calculated the degree to which returns to seniority were suppressed, developing an aggregate class-wide damages estimate for faculty. Thus, for both impact and damages, the court was satisfied that the faculty class showed class-wide theories supported with class-wide proof.

Analyzing predominance and superiority, the court batted down Duke’s arguments that individual issues could undermine predominance, because the issues Duke raised didn’t align with plaintiffs’ theories of liability. Duke unsuccessfully challenged that plaintiff established internal equity structures, the unique competitive relationship between the schools, and identified alleged flaws in one expert’s analysis, but did not move to exclude it. Id. at *6. The court held that issues raised went to the persuasiveness of plaintiffs’ evidence and did not defeat the fact that impact and damages were offered by common proof.

As to the Rule 23(a) requirements, numerosity, commonality, typicality, and adequacy, the court breezed through all but the last, finding them easily satisfied; of note was the size of the proposed faculty class at 5,469 members. One concern was raised as to whether defendants might assert a res judicata defense against future claims that are based on a theory of individualized (rather than class-wide) impact and damages. The court held that the risk was small because res judicata does not bar theories not raised in the first instance, no other antitrust claims had been brought against defendants based on the no-hire agreement, and any risk could be managed via disclosure in class notice. Id. at *10.

Non-Faculty Class Not Certified

At the outset of the court’s discussion of the non-faculty class, the court wrote that plaintiffs “do[] not seriously contend that the no-hire agreement applied to non-faculty,” setting the tone for its consideration and decision to deny the motion as to non-academic physicians, nurses, and skilled medical workers. Id. at *6. The court accepted plaintiffs’ theories of antitrust impact as provable through common evidence, but agreed with Duke that individualized issues defeated predominance and superiority.

The court found that inclusion of non-faculty in addition to the faculty would cause confusion, in part because “[d]isputes already have arisen as to whether witnesses are talking only about faculty, only about non-faculty, or both.” Id. at *9. Coupled with this, “the evidence as to non-faculty is substantially weaker, at least on this record, since it is based on several inferences-on-inferences; this gives rise to the possibility that the strength of the faculty claim or the weakness of the non-faculty claim might tend to bleed over to the other claim in the jury’s mind.” Id. In the court’s view, an otherwise straightforward trial would become “unduly complicated” and present potential unfairness to the class members and defendants. Cumulatively, the court held that this caused non-faculty class claims to fail the predominance and superiority requirement, noting that non-faculty class members were free to pursue a separate class action. Id.at *10 n.1.