Overview
On January 23, 2023, a federal district court approved a pretrial diversion agreement between the Department of Justice (DOJ) and Ryan Hee, a former regional manager for a healthcare staffing company. The deal, which will likely result in Hee walking away without a conviction, is yet another lackluster result for DOJ’s thus-far largely unsuccessful effort to criminally prosecute alleged anticompetitive conduct in the labor markets.
Indeed, despite a spate of victories at the motion to dismiss stage (covered in our previous posts here, here, and here), DOJ has yet to secure a labor-side Sherman Act conviction at trial. Years after its initiation, DOJ’s effort has yielded only two convictions.1 The pretrial diversion agreement with Hee does little to change this.
VDA’s 2022 Guilty Plea
United States v. Hee has two defendants: VDA OC LLC (formerly Advantage On Call LLC), a healthcare staffing company, and Ryan Hee, a former regional manager for the same. Pursuant to an agreement with DOJ, VDA pleaded guilty in October 2022 to “knowingly entering into and engaging in a conspiracy to suppress and eliminate competition for the services of nurses in the District of Nevada and elsewhere, by agreeing to allocate nurses assigned to the Clark County School District (‘CCSD’) and to fix the wages of those nurses, in violation of Section 1 of the Sherman Act (15 U.S.C. § 1).”2 Under the plea agreement, VDA agreed to pay a $400 special assessment, a $62,000 fine, and $72,000 in restitution, with the latter two amounts being derived from the “volume of commerce corresponding to the wages paid to the affected nurses.”3
The case is unusually straightforward, and it’s no great surprise that VDA opted to plead guilty rather than fight the charges before a jury. As set forth in the plea agreement:
During the relevant period, the Defendant, through one of its employees, participated in a conspiracy with another contract healthcare staffing firm to suppress and eliminate competition for the services of nurses by agreeing to allocate nurses and fix the wages of those nurses. In furtherance of the conspiracy, an employee of the Defendant engaged in a conversation and an email communication with a competitor. During this conversation and email communication, which both occurred on October 21, 2016, an agreement was reached to (1) allocate nurses between the Defendant and the competitor by not recruiting or hiring each other’s nurses, and (2) fix the wages of those nurses by refraining from raising wages of those nurses.4
Thus, the case involves both a no-poach agreement and a wage-fixing agreement, and it appears that the unlawful agreements were cemented during a single phone call and a follow-up email communication that took place on the same day. The company’s decision to enter into the plea was also made easier by the fact that it was at the time no longer in operation.
Courts have held that both no-poach and wage-fixing agreements can constitute per se criminal violations of the Sherman Act, under certain circumstances. No jury however, has so found, and the guilty plea denied DOJ a prime opportunity to demonstrate that it could, if given the right fact set, convince a jury to hand it a Sherman Act conviction. The company’s guilty plea was a win for DOJ, nonetheless.
Hee’s Pretrial Diversion Agreement
Around the same time that VDA pleaded guilty, Hee entered into a pretrial diversion agreement with DOJ. The agreement was signed in November 2022, but the court did not hold a hearing to ratify it until January 23, 2023, and it was not made available on the case docket until then.5
The pretrial diversion agreement is essentially a deferred prosecution agreement — in fact, it defers prosecution of Hee for a period of six months and requires that he complete 180 hours of community service. If he abides by the terms of the agreement, including the community service requirement and other requirements (such as not violating any law), the charges against Hee will be dismissed.6 The court entered the agreement with an effective date of September 12, 2022, meaning that Hee is already more than two-thirds of the way through the deferral period.7 The agreement concerns the same conduct that was the subject of the VDA guilty plea – a phone conversation and subsequent email communication with a competitor in which an agreement to allocate nurses and fix nurses’ wages was reached.8
The VDA case has likely left nobody completely pleased: Hee will likely walk away without having been convicted but with his name tarnished by the prosecution; VDA, a now-defunct company, will have paid a relatively small fine for Hee’s conduct; and DOJ notched its first labor-side Sherman Act conviction (against VDA), but has still not convinced a jury to convict an individual or business for a labor-side Sherman Act violation. DOJ will have other opportunities to pursue such a result, including in the Patel case that we wrote about in December 2022. But as we argued then, it is far from clear that DOJ will be able to accomplish in Patel what it failed to accomplish in two similar prior trials. Meanwhile, as we predicted, the Biden administration appears to be “pursu[ing] additional methods of fighting anticompetitive conduct in the labor markets,” with the FTC proposing a rule in January that would ban companies from requiring workers to sign noncompetes.
1 United States v. Jindal, No. 4:20-CR-00358 (E.D. Tex.) (won at trial for obstruction of justice; the Sherman Act charges resulted in acquittals) and United States v. Hee, 2:21-cr-00098 (D. Nev.) (guilty plea by defendant VDA OC LLC to a Sherman charge).
2 Plea Agreement, ECF No. 106 at 3.
3 Id. at 4, 6-9; see also United States’ Sentencing Memorandum, ECF No. 103 at 4-5.
4 Plea Agreement, ECF No. 106 at 4.
5 See Minutes of Proceedings, ECF No. 116 (noting that the Court filed the pretrial diversion agreement during a January 23, 2023 hearing); Pretrial Diversion Agreement as to Ryan Hee, ECF No. 115 (entered January 23, 2023 but dated as of November 2022).
6 Pretrial Diversion Agreement as to Ryan Hee, ECF No. 115 at 3-5.
7 See Minutes of Proceedings, ECF No. 116 (“The Court confirms and accepts the Pretrial Diversion with an effective date of September 12, 2022 for this Pretrial Diversion Agreement.”).
8 Pretrial Diversion Agreement as to Ryan Hee, ECF No. 115 at 2-3.
