In re Ry. Indus. Emp. No-Poach Antitrust Litig., Master Docket: Misc. No. 18-798

• Court: United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania
• Writing for the Court: CONTI, Senior District Judge
• Citation: 395 F.Supp.3d 464
• Parties: IN RE: RAILWAY INDUSTRY EMPLOYEE NO-POACH ANTITRUST LITIGATION This Document Relates to: All Actions
• Decision Date: 20 June 2019
• Docket Number: Master Docket: Misc. No. 18-798,MDL No. 2850

395 F.Supp.3d 464

IN RE: RAILWAY INDUSTRY EMPLOYEE NO-POACH ANTITRUST LITIGATION

This Document Relates to: All Actions

Master Docket: Misc. No. 18-798
MDL No. 2850

United States District Court, W.D. Pennsylvania.

Signed June 20, 2019

395 F.Supp.3d 470

OPINION

CONTI, Senior District Judge

395 F.Supp.3d 471

I. Introduction

In this multi-district antitrust putative class action, plaintiffs¹ allege defendants,² their employers, violated the Sherman Act, 15 U.S.C. § 1, by entering into unlawful "no-poach" agreements pursuant to which defendants agreed to not hire or solicit each other's employees. Defendants, who are railway equipment suppliers and their subsidiaries, filed a joint motion to (a) dismiss the consolidated class action complaint under Federal Rule of Civil Procedure 12(b)(6), and (b) strike the class action allegations under Federal Rule of Civil Procedure 12(f) (ECF No. 124). Plaintiffs oppose the motion. (ECF No. 152.)

The parties dispute whether the rule of reason or per se violation analysis should be applied to defendants' alleged "no-poach" agreements and whether the factual allegations in the consolidated complaint are sufficient to show plausibly that beginning at least in 2009 all defendants were engaged in a conspiracy in violation of the antitrust laws. The parties also dispute whether the allegations in the consolidated class action complaint are sufficient to show that it is possible for plaintiffs to satisfy their burden at the class certification stage with respect to the Federal Rule of Civil Procedure 23 requirements of typicality and predominance.

For the reasons set forth in this opinion, the motion to dismiss will be granted in part and denied in part. The court agrees with plaintiffs that the no-poach agreements as plead in the consolidated complaint, i.e., plead as market allocation agreements that were not ancillary to any other agreements with proper business purposes, may be considered per se violations of § 1. Thus, plaintiffs were not required to set forth factual allegations sufficient to show plausibly the relevant market in which the antitrust impact occurred. The motion to dismiss will be denied without prejudice with respect to this issue.

The court, however, agrees with defendants that plaintiffs failed to set forth factual allegations to show plausibly that all defendants were engaged in an overarching "no-poach" conspiracy from 2009. At best, plaintiffs plead three bilateral conspiracies, which plausibly culminated in an overarching conspiracy among all defendants beginning at the earliest in 2014 when Wabtec and Faiveley N.A. entered into the third bilateral no-poach agreement. Plaintiffs did not set forth factual allegations sufficient plausibly to show that Ricon or Bendix were participants in the overarching conspiracy or any of the bilateral conspiracies. The motion to dismiss will, therefore, be granted without prejudice with respect to plaintiffs' allegations that beginning in at least 2009 all defendants were engaged in a "no-poach" conspiracy in violation of the antitrust laws

395 F.Supp.3d 472

and with respect to all allegations against Ricon and Bendix.

With respect to defendants' motion to strike class allegations, plaintiffs in the consolidated class action complaint did not allege sufficient facts to make a prima facie showing that the predominance requirement of Rule 23 is satisfied or that discovery is likely to produce substantiation of plaintiffs' allegations with respect to predominance. Plaintiffs in the consolidated class action complaint allege that defendants conspired to restrict the hiring and soliciting of all their employees. Plaintiffs, however, did not set forth factual allegations sufficient to make a prima facie showing that defendants' agreements caused all employees of defendants harm (antitrust impact) that can be proven on a class-wide basis or that discovery will likely substantiate plaintiffs' conclusory allegations that the common issues in this case will predominate over the individual questions raised by plaintiffs' proposed class of all employees. Even if plaintiffs satisfied their burden at this stage with respect to the Rule 23 requirement of predominance, their class definition is overbroad and lacks precision. The motion to strike class allegations will, therefore, be granted without prejudice to plaintiffs filing a motion for leave to file an amended consolidated class action complaint.

II. Procedural History

On October 12, 2018, plaintiffs filed a one-count consolidated class action complaint against defendants. (ECF No. 88.) On November 27, 2018, all defendants filed a joint motion to dismiss for failure to state a claim and to strike class action allegations and a brief in support of the motion. (ECF Nos. 124, 129.) On January 11, 2019, plaintiffs filed a response in opposition to the motion to dismiss. (ECF No. 152.) On January 25, 2019, the United States Department of Justice ("DOJ" or the "government") filed a "Notice of Intent to File a Statement of Interest." (ECF No. 155.) On February 8, 2019, the government filed its statement of interest. (ECF No. 158.) On February 13, 2019, defendants file a reply brief in support of their motion. (ECF No. 165.) On February 22, 2019, plaintiffs filed a notice of supplemental authority. (ECF No. 172.)

On February 25, 2019, the court held a hearing on the joint motion to dismiss and strike class action allegations. (Hearing Transcript ("H.T.") 2/25/2019 (ECF No. 176).) The government with leave of court participated in the hearing. (Id.; ECF Nos. 168, 171.) The court heard from the parties and the government, ordered the transcript at the joint cost of the parties, and took the matter under advisement.

On June 3, 2019, plaintiffs filed a second notice of supplemental authority. (ECF No. 189.) On June 5, 2019, defendants filed a response to plaintiffs' notice of supplemental authority. (ECF No. 190.)

III. Factual Allegations in the Consolidated Class Action Complaint which are Accepted as True for the Purpose of Resolving the Motion to Dismiss

A. General Allegations

The named plaintiffs are former employees of defendants. (ECF No. 88 ¶ 1.) Plaintiffs allege that defendants were "among the world's dominant rail equipment suppliers" and members of a conspiracy "to restrain competition and reduce compensation for railway industry employees." (Id. ) Wabtec, Knorr, and their respective co-defendant subsidiaries "are the largest suppliers of rail equipment used in freight and passenger rail applications." (Id. ¶ 2.)

395 F.Supp.3d 473

B. Plaintiffs

Baldassano was employed by defendant Knorr Brake from approximately March 1998 to December 2012, and from approximately January 2017 to October 2017. (ECF No. 88 ¶ 12.) Baldassano performed his duties as a Project Manager and Manager of Systems and Sales for Knorr Brake in Maryland. (Id. )

Brand was employed by defendant NY Air Brake, a wholly-owned subsidiary of Knorr, as a Senior Manager of Systems and Software Engineering from approximately May 2013 to August 2016. (Id. ¶¶ 13, 26.) Brand performed his duties as a NY Air Brake employee in Texas. (Id. )

Escalera was employed by Wabtec as a Field Service Technician from approximately July 2011 to January 2015, in California. (Id. ¶ 14.)

Lara was employed by Wabtec as a Machinist from approximately November 2011 to January 2017. (ECF No. 88 ¶ 15.) Lara performed his duties as a Wabtec employee in Pennsylvania. (Id. )

Longergan was employed by Wabtec as a Positive Train Control Manager from approximately October 2013 to April 2015. (Id. ¶ 16.) Lonergan performed her duties as a Wabtec employee in Colorado. (Id. )

C. The Wabtec Defendants

Wabtec has more than 100 subsidiaries and more than 18,000 employees. It is the world's largest provider of rail equipment and services with global sales of $3.9 billion in 2017. (ECF No. 88 ¶ 17.) Wabtec Passenger Transit is a business unit of Wabtec that develops, manufactures, and sells rail equipment and services for passenger rail applications. (Id. ) Wabtec Global Services is a business unit of Wabtec that offers maintenance, repair, and support services. (Id. )

Wabtec Railway Electronics, Inc. is a wholly-owned subsidiary of Wabtec that designs, develops, manufactures, and repairs electronic products used to improve railroad operations and safety. (ECF No. 88 ¶ 18.)

Ricon is a wholly-owned subsidiary of Wabtec that designs and manufactures wheelchair lifts and ramps for commercial, paratransit, transit, motorcoach, and passenger rail vehicles. (Id. ¶ 19.)

Railroad Controls, L.P. is a wholly-owned subsidiary of Wabtec and one of the largest railroad signal construction companies in the United States. (Id. ¶ 20.)

Xorail Inc. is a wholly-owned subsidiary of Wabtec and provides railroad signal engineering and design services. (Id. ¶ 21.)

On November 30, 2016, Faiveley was acquired as a wholly-owned subsidiary of Wabtec. (ECF No. 88 ¶ 22.) Before the acquisition, Faiveley was the world's third-largest rail equipment...