Giordano v. Saks IncorporatedGiordano v. Saks Incorporated
MEMORANDUM & ORDER
MARGO K. BRODIE, United States District Judge:
Plaintiffs Susan Giordano, Angelene Hayes, Ying-Liang Wang, and Anja Beachum commenced the above-captioned putative
Defendants move to dismiss the Amended Complaint as time-barred and meritless, and Plaintiffs oppose the motion.2 For the reasons set forth below, the Court grants Defendants’ motion to dismiss and grants Beachum leave to file a second amended complaint within thirty days from the date of this Memorandum and Order.
I. Background
Plaintiffs worked as skilled luxury retail employees at Saks.3 (Am. Compl. ¶¶ 8-11.) They received “extensive training on service, selling, and product-knowledge” and helped to maintain the image of the brand by creating “an atmosphere of exclusivity and opulence.” (Id. ¶¶ 1, 32-34.) Plaintiffs allege that Saks and the Brand Defendants have entered into express agreements to suppress luxury retail employees’ compensation, (id. ¶¶ 2, 94), and further contend that these agreements artificially suppress their pay and decrease worker mobility in violation of Section 1 of the Sherman Act, (id. ¶ 3).
a. Defendants’ operations
Luxury brands portray themselves as distinct by “cast[ing] themselves as shaped by cultural and historical heritage, and market[ing] their luxury brands as rooted in longer-term traditions rather than constantly-changing fashions.” (Id. ¶¶ 22-24.) Defendants use “the customer service their sales staff supplies” to help make that impression. (Id. ¶¶ 27-28.) Luxury retail employees have “substantial skill and training” and are essential to maintaining the “aura of authenticity” necessary to luxury brands’ identity. (Id. ¶¶ 27-30.) They are “knowledgeable about the particular products each Defendant manufactures and/or sells, as well as current trends,” (id. ¶ 34), and they form personal relationships with repeat customers, (id. ¶ 35). Because luxury retail employees are essential to luxury brands, Defendants make significant efforts to provide them with specialized training. (Id. ¶ 32.) For example, Prada teaches employees about the brand and trains them in salesmanship
Defendants compete with each other for luxury retail employees and are “the dominant employers” of such employees. (Id. ¶¶ 39-51.) Saks “is part of a retail conglomerate that employs approximately 40,000 employees worldwide“; LVMH (the parent company of Louis Vuitton and Loro Piana) “has more than 32,000 employees in the United States, including thousands of Luxury Retail Employees who sell luxury retail goods to consumers at Louis Vuitton and Loro Piana“; Gucci “employs more than 14,000 employees worldwide,” including hundreds of luxury retail employees in the United States; Prada employs “more than 13,000 employees worldwide,” including hundreds of luxury retail employees;4 and Brunello Cucinelli “employs more than 1,800 employees worldwide,” including hundreds of luxury retail employees in the United States. (Id. ¶¶ 42-49.)
In a properly functioning market, Defendants would compete for luxury retail employees. (Id. ¶ 53.) Defendants “would save on training costs and receive the immediate benefit of a well-trained, motivated salesperson who knows how to cultivate relationships with customers and enhance the Defendant‘s brand.” (Id.) Luxury retail employees would also benefit from the ability to move to luxury retailers with a more attractive compensation package. (Id. ¶¶ 52-64.) In addition, Defendants would be motivated to improve Plaintiffs’ compensation and benefits if employees could freely leave for desirable positions. (Id. ¶¶ 65-76.) Because Defendants “carefully monitor and manage their respective internal compensation levels” to “[m]aintain[] approximate compensation parity” among employees with the same job titles and to maintain fixed compensation relationships between job titles, (id. ¶¶ 77-79), Defendants would hire skilled employees from their competitors with the effect of increasing overall compensation. (Id. ¶ 80.)
b. Allegations of no-hire agreements
The Brand Defendants maintain “no-hire” agreements with Saks, in which they agree not to cold-call Saks employees and offer to hire them. (Id. ¶¶ 80-85.) Plaintiffs contend that these no-hire agreements, which “have been in place since at least 2014,” are “an unreasonable restraint of trade,” and benefit Defendants at the expense of luxury retail employees. (Id. ¶¶ 86-91.) These agreements only permit a Brand Defendant to hire a current or former Saks employee if (1) managers from both companies agree, or (2) the employee left Saks at least six months prior. (Id. ¶¶ 89-92.)
c. Plaintiffs’ employment and attempts to work for the Brand Defendants
Giordano worked for Saks from November of 2012 until March of 2019, Hayes from August of 2013 until July 27, 2016, Wang from October of 2014 until April of 2016, and Beachum from February of 2016 until September of 2016 and from the summer of 2018 until December of 2019. (Id. ¶¶ 8-11.)
i. Giordano
In 2012, Saks hired Giordano as a sales associate in one of its New York stores. (Id. ¶ 155.) Giordano spent the first eighteen months of her employment working at the Loro Piana boutique within that
Giordano continued to work at Saks, Saks promoted her, and she gained experience with additional luxury brands such as Brunello Cucinelli but remained unhappy with her compensation. (Id. ¶¶ 162-164.) She applied online for an open sales position at the Brunello Cucinelli boutique “in or around 2016,” and when she did not receive a response, met with a store manager “who agreed that [she] was indeed qualified” and accepted her resume. (Id. ¶¶ 165-169.) Giordano “never heard back from the manager or from Brunello Cuccinelli.” (Id. ¶ 170.) Between 2014 and 2017, Giordano “sent dozens of resumes and job applications to the other Brand Defendants and numerous other unnamed co-conspirators,” but was unable “to secure even an interview with the Brand Defendants.” (Id. ¶¶ 170-171.) Giordano sought the help of two recruitment agencies that specialized in the luxury retail industry, and they explained that she was qualified but “they would be unable to place her with any brand carried by Saks” unless she resigned her position at Saks and then waited several months. (Id. ¶¶ 173-183.) Giordano eventually obtained a position at a smaller luxury retailer not carried by Saks, but her compensation and her opportunities for upward mobility were affected by her inability to obtain employment at the Brand Defendants. (Id. ¶¶ 184-186.)
ii. Hayes
On August 3, 2013, Saks hired Hayes to work at its Beachwood, Ohio store, where she earned seventeen dollars an hour. (Id. ¶¶ 106, 109.) She had previously held positions at Gucci and Louis Vuitton and knew that she was qualified to earn a higher salary as well as commission. (Id. ¶¶ 108-110.) Hayes also believed that she was qualified for a promotion to management at either of those companies. (Id. ¶¶ 111-112.) “Shortly after” Hayes was hired by Saks, she applied to work at Gucci. (Id. ¶ 113.) A store manager at Gucci told her that the company was “not allowed to hire Saks employees.” (Id. ¶ 115.) In December of 2014, Hayes asked the director of human resources at Saks whether she was free to seek a position with Louis Vuitton or other Brand Defendants. (Id. ¶¶ 116-117.) The director told Hayes she could not and explained that under no-hire agreements between Saks and the Brand Defendants, Hayes “must first resign from Saks and wait six months before the Brand Defendants would be allowed to hire [her],” unless Saks and a Brand Defendant mutually agreed to allow her to be hired earlier. (Id. ¶¶ 118-120.)
On June 24, 2015, Hayes applied by email to work at Louis Vuitton, and a store manager told her via email that “we have an agreement with Saks that we cannot take their employees and have to wait [six] months before hiring.” (Id. ¶¶ 121-123; Emails between Store Manager Hope Frate and Hayes 2-3, annexed to Am. Compl. as Ex. A, Docket Entry No. 44-1.) Hayes spoke to a Prada store manager “[s]hortly thereafter,” who also explained that she “could not be considered for employment until she [left] Saks and wait[ed] for a period of six . . . months” and confirmed that all the Brand Defendants followed this policy. (Am. Compl. ¶¶ 126-127.)
iii. Wang
In October of 2014, Saks hired Wang to work at its Beachwood, Ohio store, where she proved to be a top salesperson in the shoe department. (Id. ¶¶ 140-142.) Wang had multiple conversations with a Gucci store manager who wanted to recruit her. (Id. ¶ 143.) In January of 2015, the store manager told Wang that she could not “technically recruit” Wang, a Saks employee, but believed that she was a “perfect fit.” (Id. ¶¶ 144-145.) The store manager informed Wang “that she would have to wait a ‘six-month cooling off period’ after leaving Saks in order to be hired by Gucci.” (Id. ¶ 146.) In February of 2015, Wang spoke with a Prada store manager who told her “Prada has an agreement with Saks not to recruit Saks [l]uxury [r]etail [e]mployees,” and nobody with hiring authority at Prada could “initiate contact” with Wang. (Id. ¶¶ 148-149.) Because the no-hire agreements prohibited interested Brand Defendants from hiring Wang, her salary “stagnated” for the remainder of her time at Saks. (Id. ¶¶ 150-154.)
iv. Beachum
Saks hired Beachum to work at its Troy, Michigan stores during two periods: from February to September of 2016, and from the summer of 2018 to December of 2019. (Id. ¶ 187.) While employed at Saks, Beachum sold brands including Chanel and Prada and developed some knowledge of other brands sold at the store. (Id. ¶ 189.) Beachum wanted to seek employment at Louis Vuitton, but it was “common knowledge” at Saks that the Louis Vuitton concession within the Troy, Michigan Saks would not hire Saks employees, therefore she “did not even bother” to apply to the concession. (Id. ¶¶ 188, 190.) However, she left her resume at a Louis Vuitton boutique “in the same Troy, Michigan mall in which her Saks store was located” and did not hear back. (Id. ¶ 190.) Beachum left the luxury retail field “[b]ecause she was unable to obtain other employment as a [l]uxury [r]etail [e]mployee.” (Id. ¶ 191.)
d. Plaintiffs’ antitrust allegations
Plaintiffs allege that the no-hire agreements between Saks and the Brand Defendants decreased their compensation and mobility and violate Section 1 of the Sherman Act whether viewed as per se illegal horizontal restraints on competition, analyzed under the “quick look” test, or examined
II. Discussion
a. Standard of review
In reviewing a motion to dismiss under
b. Claims by Giordano, Hayes, and Wang are barred by the statute of limitations
Defendants argue that claims by Giordano, Hayes, and Wang are barred by the Sherman Act‘s four-year statute of limitations. (Defs.’ Mem. in Supp. 9-19 (“Defs.’ Mem.“)). They argue that the “continuing violation” exception to the statute of limitations does not apply since Plaintiffs fail to allege an “overt act” within the limitations period. (Defs.’ Reply in Supp. 4-5 (“Defs.’ Reply“)).
Plaintiffs argue that the “continuing violation” doctrine applies to their claims. (Pls.’ Mem. in Opp‘n 40-50 (“Pls.’ Mem.“)). They contend that Defendants engaged in ongoing misconduct beginning in at least 2014 and that each time Defendants (1) paid Plaintiffs “subcompetitive compensation” or (2) “enforce[ed] the anticompetitive no-hire agreements by refusing to hire [Saks employees],” Defendants “committed overt acts that injured Plaintiffs” and that restart the limitations clock. (Id. 41.) Plaintiffs maintain that since Defendants took both these actions within four years of the date they filed their Complaint, their claims are timely.
In the antitrust context, a “continuing violation” is one that “inflict[s] continuing and accumulating harm” on a plaintiff. Hanover Shoe v. United Shoe Mach. Corp., 392 U.S. 481, 502 n.15 (1968); see also DXS, Inc. v. Siemens Med. Sys., 100 F.3d 462, 467 (6th Cir. 1996) (“A continuing antitrust violation is one in which the plaintiff‘s interests are repeatedly invaded.” (citation omitted)). In such a case, “each overt act that is part of the violation and that injures the plaintiff . . . starts the statutory period running again, regardless of the plaintiff‘s knowledge of the alleged illegality at much earlier times.” Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997) (quoting P. Areeda & H. Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 338b); see also Zenith, 401 U.S. at 338 (“In the context of a continuing conspiracy to violate the antitrust laws . . . [a “continuing violation“] has usually been understood to mean that each time a plaintiff is injured by an act of the defendants a cause of action accrues to him to recover the damages caused by that act and that, as to those damages, the statute of limitations runs from the commission of the act.“). In the Second Circuit, “[a]n overt act that restarts the statute of limitations is characterized by two elements: (1) it must be a new and independent act that is not merely a reaffirmation of a previous act; and (2) it must inflict new and accumulating injury on the plaintiff.” US Airways, Inc. v. Sabre Holdings Corp., 938 F.3d 43, 68 (2d Cir. 2019) (quoting DXS, Inc., 100 F.3d at 467); see also O.E.M. Glass Network, Inc. v. Mygrant Glass Co., 436 F. Supp. 3d 576, 589 (E.D.N.Y. 2020) (citations omitted) (same).
i. Plaintiffs Giordano, Hayes, and Wang‘s claims are prima facie untimely
Plaintiffs Giordano, Hayes, and Wang filed their Complaint on February 14, 2020. (Compl.) They contend that the conspiracy involving Defendants commenced
Defendants appear not to challenge that the Amended Complaint alleges a continuing injury to Plaintiffs’ interests,8 and accordingly the Court addresses only whether Plaintiffs have committed an “overt act” within the limitations period.
ii. Plaintiffs Giordano, Hayes, and Wang fail to allege the “overt act” necessary to satisfy the “continuing violation” exception
Prior to US Airways, courts in this Circuit took different approaches “as to whether and when the performance of a contract constitutes an overt act.” US Airways, 938 F.3d at 68 (citation omitted); see also Rite Aid Corp. v. Am. Express Travel Related Servs. Co., Inc., 708 F. Supp. 2d 257, 269 (E.D.N.Y. 2010) (“Performance during the limitations period pursuant to an illegal prelimitations contract can constitute an overt act if resulting damages were speculative [at the time of contracting].“); In re Ciprofloxacin, 261 F. Supp. 2d at 229 (“[T]he performance of an allegedly anticompetitive, pre-existing contract is not a new predicate act.“).9
In US Airways, the Second Circuit resolved these differences, holding that “performance of a contract [is] a manifestation of the . . . the decision to enter the contract, rather than an independent overt act of its own.” Id. at 69. US Airways involved a Section 1 claim arising from two substantially similar contracts between US Airways and Sabre Holdings Corp., a company that offered a platform used by travel agents to book flights. Id. at 49-51. US Airways subsequently challenged as anticompetitive several of the provisions in these contracts, which it had entered in 2006 and 2011. Id. at 51-52. At trial, the jury found for US Airways and awarded the company treble damages. Id. at 53. On appeal by both parties, among other things, US Airways challenged the district court‘s decision not to award damages flowing from the 2006 contract on the grounds that it fell outside the Sherman Act‘s four-year statute of limitations. Id. at 67. US Airways argued that the district court incorrectly applied the “continuing violation” doctrine because, although US Airways had indeed entered into the 2006 contract prior to the statute of limitations, it had suffered injury flowing from that contract throughout the limitations period. Id. Relying on Hanover Shoe, 392 U.S. 481, US Airways argued that “an antitrust plaintiff may recover damages suffered during the limitations period as the result of an anticompetitive contract, regardless [of] when that contract first took effect, because conduct or forbearance from conduct pursuant to the terms of an anticompetitive contract is itself a continuing violation.” Id.
The Second Circuit disagreed. It found no authority “to support the proposition that each act taken in performance of a contract necessarily constitutes an overt act for purposes of the continuing-violation rule.” Id. at 68. The Court acknowledged the split among the district courts and among other Circuits as to when performance under a contract constitutes an “overt act” sufficient to reset the statute of limitations clock in the context of a “continuing violation.” Id. at 68-69. The Court concluded that performance under a contract is a “manifestation of the ‘overt act,’
Consistent with the Second Circuit‘s decision in US Airways, Plaintiffs fail to allege a continuing violation exception to the statute of limitations. “[T]he decision to enter the contract” the no-hire agreement is the overt act that starts the limitations period. Actions taken by Defendants in performance of the no-hire agreement — such as the Brand Defendants’ alleged refusal to hire Plaintiffs within six months of their being employed by Saks — are “manifestation[s] of the ‘overt act,’ the decision to enter the contract, rather than . . . independent overt act[s] of [their] own.” Id. at 69. Likewise, artificially suppressed wages paid by Defendants as a result of the no-hire agreement do not “constitute[] an overt act for purposes of the continuing-violation rule.” Id. at 68. Accordingly, Giordano, Hayes, and Wang were first injured under the no-hire agreement at or around the time they were first employed by Saks — i.e. prior to the limitations period.10 Because they have not alleged an “overt act” within the limitations period — as such is defined under US Airways — Plaintiffs cannot rely on the continuing violation doctrine to make their otherwise untimely claims timely.
Plaintiffs unconvincingly argue that US Airways is not controlling because it applies only to cases where (1) “the plaintiff and defendant were parties” to the challenged agreement and (2) where defendants’ performance is limited to “mere passive receipt of payments stemming from the challenged agreements between the parties.” (Pls.’ Mem. 45.) Plaintiffs argue that instead of relying on US Airways, the Court should apply the reasoning of Klehr, 521 U.S. 179, to conclude that their claims are timely. (Pls.’ Mem. 41-42.) In Klehr, two dairy farmers commenced a civil RICO action against a business whom they alleged sold them a silo that was falsely represented to limit the amount of oxygen that would come into contact with grain, thus preventing mold and fermentation. 521 U.S. at 183-84. The plaintiffs commenced the action twenty years after they first purchased the silo and defendants challenged the action as untimely. Id. at 184. The plaintiffs argued that the defendants had taken several steps to hide the flaws in the silo, including installing a device to hide mold and providing false information indicating that any discoloration to the resulting feed did not indicate the presence of mold. Id. In determining whether the RICO claim was time-barred, the Supreme Court analogized to the Clayton Act. Id. at 189. The Court noted that in the context of a “price-fixing conspiracy that brings about a series of unlawfully high priced sales over a period of years . . . each sale to the plaintiff [is an overt act that] starts the statutory period running again . . . .” Id. (internal citations omitted).
Plaintiffs argue that their claims are similar to the price-fixing or “overcharge” cases discussed in Klehr — cases where the defendants conspire to inflate prices to the detriment of competitors and consumers. (See Pls.’ Mem. 41-42.) They argue that their claim is analogous to that of a plaintiff challenging a price-fixing scheme because just as each sale to a plaintiff under such a scheme constitutes an “overt act,” each instance where Saks paid Plaintiffs an artificially suppressed wage constitutes an “overt act.” (See id. (“Klehr‘s reasoning has been extended to antitrust actions that allege the payment of suppressed
Plaintiffs’ reliance on Klehr and similar overcharge cases is misplaced. First, Klehr involved a civil RICO claim. 521 U.S. at 183-84. In analyzing defendants’ statute of limitations challenge, the Supreme Court compared the RICO statute to the Clayton Act because of the similarity between the two statutes. See id. at 188-90. However, the Supreme Court did not specifically analyze the antitrust laws, nor were the specific facts of Klehr relevant to a Section 1 claim. The Court is therefore not persuaded that it should rely on dicta from a factually distinguishable case, particularly in view of the Second Circuit‘s binding precedent that addresses a factually similar circumstance. Moreover, price-fixing or “overcharge” cases are fundamentally conceptually different from the facts of this case. As the Second Circuit noted in Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 295 (2d Cir. 1979), price-fixing conspiracies have two different accrual rules to account for the two classes of injured party: competitors and consumers. Id. “Although the business of a monopolist‘s rival may be injured at the time the anticompetitive conduct occurs, a purchaser, by contrast, is not harmed until the monopolist actually exercises its illicit power to extract an excessive price.” Id. The Second Circuit noted that “at the time a monopolist commits anticompetitive conduct it is entirely speculative how much damage that action will cause its purchasers in the future,” id., thus it makes sense to apply a rule where “a purchaser suing a monopolist for overcharges paid within the previous four years” may base their claim on “anticompetitive actions taken before the limitations period,” id. at 296. As the district court explained in Rite Aid Corp.: “[t]he purchaser-competitor distinction is based on differences in when a monopolization scheme injures each plaintiff.” 708 F. Supp. 2d at 264 (discussing Berkey Photo). While a price fixing consumer plaintiff may raise a claim within four years of the date she made a purchase at an inflated price, even where a defendant‘s “anticompetitive actions [took place] before the limitations period,” Berkey Photo, 603 F.2d at 296, the competitor plaintiff has four years from the moment of the defendant‘s initial anticompetitive conduct to bring a claim, Rite Aid Corp., 708 F. Supp. 2d at 264. The law is thus structured so that both classes of plaintiff — consumers and competitors — are provided with a four-year period during which they may bring their claims. Plaintiffs, however, are neither consumers nor competitors and the price-fixing analogy is thus inapposite.
c. Beachum‘s timely claim
Plaintiffs named Beachum as a Plaintiff in the Amended Complaint that was filed on May 1, 2020. (Am. Compl.) Thus, the four-year antitrust limitations period for Beachum‘s claim begins on May 1, 2016. Plaintiffs allege that Beachum “worked for Saks as a Luxury Retail Employee between approximately February 2016 and September 2016, and between the summer of 2018 and December 2019.” (Am. Compl. ¶ 11.) The Court construes the Amended Complaint in the light most favorable to Plaintiffs to find that Beachum‘s February through September 2016 employment with Saks (“2016 Employment“)12 and the summer 2018 through December 2019 employment (“2018 Employment“) constitute two distinct contractual periods of employment. Because an antitrust plaintiff acquires a cause of action at the moment she is injured by a defendant‘s anticompetitive scheme, the Court construes Beachum as alleging two causes of action, each of which accrued at or around the time she began her respective periods of employment. The second of these — the 2018 Employment, which began in “the summer of 2018” — falls within the limitations period. See US Airways, 938 F.3d at 51, 69 (affirming the district court‘s award of damages flowing from only one of two “substantially similar” contracts entered five years apart on the grounds that only the second had been entered into during the limitations period); Coffey v. Cushman & Wakefield, Inc., No. 01-CV-9447, 2002 WL 1610913, at *3 (S.D.N.Y. July 22, 2002) (where plaintiff was employed during two different periods separated by eight years, claims that accrued during the second period of employment were timely). This claim is timely.
The Court therefore addresses below the merits of Beachum‘s claim.
d. The antitrust claim
The parties do not appear to dispute that Plaintiffs’ allegations have an effect on interstate commerce. Accordingly, the Court addresses only (1) whether Beachum has plausibly alleged a contract, combination, or conspiracy, and (2) whether Beachum has sufficiently alleged that Defendants’ conduct restrains trade.
i. Beachum has plausibly alleged a contract, combination, or conspiracy between Saks and the Brand Defendants
“To allege an unlawful agreement” under Section 1 of the
The allegations in the Amended Complaint sufficiently support the existence of a plausible anticompetitive conspiracy.13 The Amended Complaint alleges that the director of human resources at Saks confirmed the existence of the no-hire agreements between Saks and each of the Brand Defendants and specified the key terms of the agreements. (Am. Compl. ¶ 118.) In addition, a store manager for Louis Vuitton and a store manager for Prada informed Hayes that they could not hire employees who had worked at Saks within the past six months, and the store manager for Prada confirmed that all the Brand Defendants were members of the agreements. (Id. ¶ 123, 126–127.) Further, the store managers at Gucci and at Prada informed Wang of their adherence to the no-hire agreement, (id. ¶¶ 146–148), a Gucci store manager told Hayes that “[w]e‘re not allowed to hire Saks employees,” (id. ¶ 115), and a Loro Piana store manager told Giordano “that because she was a current employee of Saks, ‘Loro Piana is never going to take you, and Saks is never going to let you go,‘” (id. ¶ 161). Plaintiffs have therefore pled specific facts establishing that no-hire agreements exist between Saks and each of the Brand Defendants.14 See Turner, 2020 WL 3044086, at *1–2 (holding that the plaintiff stated a claim
where the defendant contested the existence of a no-hire agreement, but the named plaintiff presented an e-mail supporting the existence of the agreement).
Finally, Plaintiffs’ allegations are economically plausible. The alleged no-hire agreements are similar in structure to no-hire agreements that other courts have found to plausibly give rise to a claim. See Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc., 2018 WL 3032552, at *16 (denying motion to dismiss Sherman Act claim concerning unilateral no-hire agreements that two large employers of traveling nurses and medical technicians imposed on their subcontractors); see also Turner, 2020 WL 3044086, at *1–2 (explaining that no-hire agreements benefit employers at the expense of employees by lowering employee mobility and depressing wages); Hunter v. Booz Allen Hamilton, Inc., 418 F. Supp. 3d 214, 222–23 (S.D. Ohio 2019) (denying motion to dismiss antitrust claim concerning no-poach agreements and concluding that the plaintiffs’ argument that the agreements suppressed compensation “pleaded . . . an injury of the type the antitrust laws were intended to prevent“); In re Papa John‘s Emp. and Franchisee Emp. Antitrust Litig., No. 18-CV-0825, 2019 WL 5386484, at *9 (W.D. Ky. Oct. 21, 2019) (“Plaintiffs contend that the [n]o-[h]ire provision is an agreement not to compete for labor and that the agreement had the purpose and effect of depressing wages and diminishing employment opportunities. Courts within the Sixth Circuit have found such allegations sufficient to satisfy the antitrust injury requirement.“).
Nor does the fact that Plaintiffs allege instances of employee mobility in the Amended Complaint, (Am. Compl. ¶¶ 108, 129, 185), undermine Plaintiffs’ argument that the no-hire agreements lower employee mobility by preventing Saks employees from working for the Brand Defendants. See In re High-Tech Emp. Antitrust Litig., 856 F. Supp. 2d 1103, 1120–23 (N.D. Cal. 2012) (holding that even though bilateral “do not cold call” agreements covered just six of twenty-one possible pairings between the defendants, the plaintiffs had sufficiently pledged facts alleging a plausible anticompetitive conspiracy). Indeed, as Plaintiffs note, the mobility they describe in the Complaint is entirely consistent with the no-hire agreement they allege.15
Plaintiffs have sufficiently alleged the existence of an anticompetitive agreement between Saks and the Brand Defendants.
ii. Restraint of trade
To successfully plead the second element of a Section 1 claim, “restraint
1. The per se standard is not applicable to Plaintiffs’ allegations
Defendants argue that per se treatment is inappropriate in this case because per se treatment is appropriate in the “no poach” context “only if it is a ‘naked’ restraint.” (Defs.’ Mem. 28; Defs.’ Rep. 8–12.)
Plaintiffs argue that their claim falls into that “limited class of cases” that are analyzed under the per se standard. Cap. Imaging, 996 F.2d at 542. They liken the alleged no-hire agreement to a “market division” or “market allocation” agreement and note that the Supreme Court has found such agreements to be per se violations. (Pls.’ Mem. 22.) In support, Plaintiffs cite to recent guidance from the Department of Justice which states that “[a]n agreement among competing employers to limit or fix the terms of employment for potential hires may violate the antitrust laws if the agreement constrains individual firm decision-making with regard to . . . job opportunities.”16 (Pls.’ Mem. 23.) Plaintiffs further rely on a leading antitrust treatise, which explains that “[a]n agreement among employers that they will not compete against each other for the services of a particular employee or prospective employee is, in fact, a market-division agreement and if such agreements are horizontal, naked, and among independent firms, they are unlawful per se.” Areeda & Hovenkamp ¶ 2013c. Plaintiffs argue that because Saks and the Brand Defendants are competitors, the no-hire agreement is a horizontal restraint that should be accorded per se treatment. (Pls.’ Mem. 10–26.)17
“Conduct considered illegal per se is invoked only in a limited class of cases where a defendant‘s actions are so plainly harmful to competition and so obviously lacking in any redeeming pro-competitive values that they are ‘conclusively presumed illegal without further examination.‘” Cap. Imaging, 996 F.2d at 542 (citations omitted). “Examples of per se illegal conduct include group boycotts, division of markets, and tying arrangements.” Bogan v. Hodgkins, 166 F.3d 509, 514 (2d Cir. 1999); see also Major League Baseball Props., Inc. v. Salvino, Inc., 542 F.3d 290, 306–08 (2d Cir. 2008) (“For conduct to be illegal per se, it must fall within the narrow range of behavior that is considered so plainly anti-competitive and so lacking in redeeming pro-competitive value that it is presumed illegal without further examination. Restraints such as price fixing, market divisions, tying arrangements, and group boycotts have all been found to be unreasonable in and of themselves.” (cleaned up)); Singh v. Am. Racing-Tioga Downs Inc., No. 21-CV-947, 2021 WL 6125432, *4 (S.D.N.Y. Dec. 28, 2021) (”Per se violations include, for example, horizontal and vertical price-fixing; division of a market into territories; certain tying arrangements; and some group boycotts involving concerted refusals to deal with a competitor.” (citation omitted)).
“Before characterizing an arrangement as a per se price-fixing agreement meriting condemnation, a court should determine whether it is a naked restraint of trade with no purpose except stifling of competition.” Ariz. v. Maricopa Cnty. Med. Soc., 457 U.S. 332, 362 (1982) (Powell, J., dissenting) (cleaned up); see also Freedom Holdings, Inc. v. Spitzer, 447 F. Supp. 2d 230, 249 (S.D.N.Y. 2004) (“[T]he per se rule should be ‘carefully limited to “naked” restraints, which are restraints that lack redeeming social benefits‘” (quoting Areeda & Hovenkamp ¶ 1509c)). A “naked” restraint is one where “the restriction on competition is unaccompanied by new production or products.” Major League Baseball Props., 542 F.3d at 339 (Sotomayor, J., concurring) (quoting Polk Bros., Inc. v. Forest City Enters., Inc., 776 F.2d 185, 188–89 (7th Cir. 1985); see also In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 345 (3d Cir. 2010) (explaining that a “naked” restraint is one “that is not an integral part of an arrangement with redeeming competitive virtues“). “Naked” restraints are contrasted with “ancillary restraints,” which are “part of a larger endeavor whose success they promote.”18 Major League Baseball Props., 542 F. 3d at 339 (Sotomayor, J., concurring) (citation omitted); see also Dagher, 547 U.S. at 6 (explaining that an “ancillary restraint” is one “imposed by a legitimate business collaboration, such as a business association or joint venture, on nonventure activities“). Ancillary restraints are “exempt[ed] . . . from the per se rule, such that the rule of reason applies.” United States v. Aiyer, 33 F.4th 97, 115 (2d Cir. 2022) (citations omitted). Accordingly, under the ancillary restraints doctrine, a court “must determine whether the nonventure restriction is a naked restraint on trade, and thus invalid, or one that is ancillary to the legitimate and competitive purposes of the business association, and thus valid.” (Id. at 115–16 (quoting Dagher, 547 U.S. at 7)). See also Major League Baseball Props., 542 F.3d at 339 (“A
court must distinguish between ‘naked’ restraints, those in which the restriction on competition is unaccompanied by new production or products, and ‘ancillary’ restraints, those that are part of a larger endeavor whose success they promote.” (quoting Polk Bros., 776 F.2d at 188–89)).
The no-hire agreements Plaintiffs allege are not “naked” agreements between independent firms. Plaintiffs state that Saks and the Brand Defendants are competitors, (see e.g., Am. Compl. ¶ 39), but they also acknowledge that Defendants collaborate, that the Brand Defendants “sell their goods and apparel through department stores (including Saks)” and through “concessions (including concessions at Saks stores),” (id. ¶ 21.) Such a relationship is not the same as one between “naked” competitors. Restraints that accompany such collaborative business relationships are generally not afforded per se treatment.19 See Aiyer, 33 F.4th at 115; Dagher, 547 U.S. at 6.
Plaintiffs rely on several “no-hire” cases to support their argument that per se (or “quick look“) treatment is appropriate, but the Court is not persuaded by these cases.20 Most of the cases Plaintiffs cite involve horizontal competitors whose conduct did not involve any sort of collaborative relationship. Moreover, in only two of the cases, Ebay and In re Ry. Indus. Emple. No-Poach Antitrust Litig., did the court address arguments that the challenged agreements were ancillary to a procompetitive business purpose. See Ebay, 968 F. Supp. 2d 1030 (N.D. Cal.
2013); In re Ry. Indus. Emp. No-Poach Antitrust Litig., 395 F. Supp. 3d 464 (W.D. Penn. 2019). However, in neither case did the pleadings include details of (1) a procompetitive collaboration between defendants and (2) details illustrating how the challenged agreement is related to that procompetitive collaboration. In contrast, Plaintiffs allege in the Amended Complaint that (1) the Brand Defendants sell their products and have concessions in Saks stores, (Am. Compl. ¶ 21), and (2) absent the no-hire agreement, there would be a continual risk that the Brand Defendants would use their concessions in Saks stores to recruit employees, (id. ¶¶ 56–57, 83).21 Ebay and In re Ry. Indus. Emple. No-Poach Antitrust Litig., as well as the other “no-hire” cases cited by Plaintiffs are thus distinguishable.
Accordingly, per se treatment is inappropriate for Beachum‘s claim.
2. The “quick look” standard is not applicable to Plaintiffs’ allegations
Defendants argue that “quick look” is inappropriate for Beachum‘s claim and the Court should apply rule of reason analysis. (Defs.’ Mem. 30 n.2.) In support, they argue that the no-hire agreements are ancillary to a “broad, legitimate, and procompetitive
Plaintiffs contend that if the Court declines to apply per se treatment to their claim, it should instead apply “quick look” analysis. (Pls.’ Mem. 33–34.) In support, Plaintiffs note that in the franchisor-franchisee context, courts have tended to apply either per se or “quick look” treatment to no-hire agreements. (Pls.’ Mem. 34.) They contend that although the no-hire
agreements in this case are horizontal and thus “distinguishable from . . . vertical franchisor-franchisee restraints . . . at a minimum, if Defendants’ no-hire agreements are not per se unlawful, they should be subject to quick look.” (Id.)
“‘Quick look’ is essentially an abbreviated form of rule of reason analysis, to be used in cases in which the likelihood of anticompetitive effects is so obvious that ‘an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.‘” Madison Square Garden, L.P. v. NHL, 270 F. App‘x 56, 58 (2d Cir. 2008) (quoting Cal. Dental Ass‘n, 526 U.S. at 770); see also Bd. of Regents of Univ. of Okla., 468 U.S. at 110 (holding that a “naked restraint on price and output requires some competitive justification even in the absence of a detailed market analysis“); Apple, 791 F.3d at 339 (Lohier, J. concurring in part) (per se analysis “clearly applie[d]” to horizontal agreement to raise consumer-facing ebook prices, but the majority performed a quick look analysis “in response to the dissent“); In re Polygram Holding, 416 F.3d 29, 35, 37 (D.C. Cir. 2005) (an “elaborate market analysis” is unnecessary where the “deleterious effect upon consumers” is easily ascertainable). “‘Quick look’ [review] effectively relieves the plaintiff of its burden of providing a robust market analysis by shifting the inquiry directly to a consideration of the defendant‘s procompetitive justifications.” Apple, 791 F.3d at 330.
However, the Supreme Court has clarified that “[m]ost restraints challenged under the Sherman Act — including most joint venture restrictions — are subject to the rule of reason . . . .” NCAA v. Alston, 141 S. Ct. 2141, 2155 (2021). The Court explained that while the anticompetitive effects of some restraints may be ascertained “in the twinkling of an eye,” id. (citations omitted), most restraints fall “in the great in-between” and warrant rule of reason analysis, id. The Court further clarified that quick look should not be applied in cases where courts have not “amassed considerable experience with the type of restraint at issue and can predict with confidence that it would be invalidated in all or almost all instances.” Id. at 2156 (cleaned up).
The Court cannot unequivocally “conclude that the [no-hire agreement between Defendants] would have an anticompetitive effect on customers and markets.” Madison Square Garden, 270 F. App‘x at 58 (quoting Cal. Dental, 526 U.S. at 770). As described in Section II.d.ii.1, the Amended Complaint indicates that the no-hire agreements are part of a larger “legitimate business collaboration” between Saks and the Brand Defendants, Dagher, 547 U.S. at 6. Thus, “quick look” treatment is not appropriate since the challenged restraints
the type of restraint challenged in this case. Alston, 141 S. Ct. at 2156 (citation omitted). The parties do not cite, and the Court has not found, any case where the quick look standard was applied to the merits of a no-hire agreement. Accordingly, this is not a situation where “in case after case [courts have] reach[ed] identical conclusions,” Cal. Dental, 526 U.S. at 781, such that the Court can determine the no-hire agreements’ effect on competition in “the twinkling of an eye,” Alston, 141 S. Ct. at 2155. See also Nostalgic Partners, 2022 WL 14963876, at *6 (declining to apply quick look review in light of Alston).
Plaintiffs rely on several franchisor no-hire cases where courts declined to choose which standard to apply at the pleadings stage to argue that “determination of whether Plaintiffs’ claims should be analyzed under a standard other than the per se rule should not be resolved at the pleading stage.”23 (Pls.’ Mem. 4.). While the franchisor cases have both horizonal and vertical elements similar to those in this case, they are not sufficiently factually similar that the Court finds them persuasive. In addition, several of the franchisor cases Plaintiffs rely on underscore the wisdom of applying the rule of reason to claims that combine vertical and horizontal
elements.24 For example, in Deslandes v. McDonald‘s USA, LLC, 2018 WL 3105955, at *1 (N.D. Ill. June 25, 2018),25 the plaintiff challenged a provision in the McDonalds franchise agreement that prevented McDonalds franchises from recruiting or hiring the employees of other McDonalds franchises. The court applied “quick look” at the pleading stage, finding that the plaintiff had alleged conduct that “might be unlawful under quick-look analysis, [but] the evidence at a later stage may not support it.” Id. at *8. The court allowed the plaintiff to proceed with her claim under the quick look standard and permitted her to amend her complaint to “include a claim under the rule of reason” if she so chose. Id. The plaintiff did not amend her complaint to include a rule of reason claim and, after discovery, the court concluded that the plaintiff‘s claims required rule of reason analysis and were therefore insufficiently pleaded. Deslandes v. McDonald‘s USA, LLC, No. 17-CV-4857, 2022 WL 2316187, at *7 (N.D. Ill. June 28, 2022) (finding that plaintiff “failed to allege plausibly that the restraint is unlawful under rule-of-reason analysis“). While the facts of Deslandes are not identical to those before the Court, given (1) the collaborative elements of the relationship between Saks and the Brand
Defendants, (2) the uncertainty of the ultimate anticompetitive effect of the challenged agreement, and (3) the lack of judicial experience with no-hire agreements that have both horizontal and vertical elements, quick look treatment is inappropriate for Beachum‘s claim. See Cal. Dental, 526 U.S. at 770 (“[Q]uick-look analysis carries the day when the great likelihood of anticompetitive effects can easily be ascertained . . . .“).
Accordingly, the Court addresses whether Beachum has pleaded sufficient facts to allow the Court to conduct a rule of reason analysis.
iii. The “rule of reason” applied to Beachum‘s claim
“Rule of reason” analysis requires Courts to consider “all of the circumstances of a case,” including “specific information about the relevant business and the restraint‘s history, nature, and effect,” in deciding whether the challenged restraint on trade violates Section 1. Leegin, 551 U.S. at 885–86 (citation omitted). Under the standard rule of reason analysis, courts apply a three-step burden-shifting framework. United States v. Am. Express Co., 838 F.3d 179, 194 (2d Cir. 2016). First, the plaintiff must demonstrate that the defendant‘s actions “had an actual adverse effect on competition as a whole in the relevant market.” Id. (citing Cap. Imaging, 996 F.2d at 543 (emphasis in original)). In the antitrust context, “a market has two components: a product market and a geographic market.” Concord Assocs., L.P. v. Entm‘t Props. Trust, 817 F.3d 46, 52 (2d Cir. 2016) (citation omitted). To satisfy the initial burden,
1. Beachum has plausibly defined a relevant product market
Defendants argue that Plaintiffs’ definition of the market for luxury retail labor is deficient because it does not address “cross-elasticity of demand or the interchangeability of [defendants’ employees] with one another, with other skilled luxury retail labor, with other skilled retail labor, or even with other labor generally.” (Defs.’ Mem. 32.)
Plaintiffs argue that, at the pleadings stage, they have sufficiently alleged that LREs’ “specialized training and institutional knowledge” makes it unlikely that they will “view jobs at non-luxury retailers . . . as viable substitutes.” (Pls.’ Mem. 37.) They further argue that “intensive analysis of the relevant market definition is inappropriate at the pleadings stage.” (Id.)
The determination of the relevant market is a “necessary predicate” to analyzing antitrust claims under the rule of reason. United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 593 (1957); see also Ohio v. Am. Express Co. (“Amex“), 138 S. Ct. 2274, 2285 (2018) (“[C]ourts usually cannot properly apply the rule of reason without an accurate definition of the relevant market.“); City of New York v. Grp. Health Inc., 649 F.3d 151, 155 (2d Cir. 2011) (“To state a claim under § 7 of the
“Market definition is ordinarily a deeply fact-intensive inquiry.” US Airways, 275 F.3d at 199 (internal quotations marks and
At the motion to dismiss stage, Beachum has adequately alleged the existence of a plausible market for luxury retail employees’ labor. See Todd, 275 F.3d at 203 (holding that the plaintiffs adequately defined the market for labor in the oil and petrochemical industry because employees’ industry training and experience, including that of employees in “less technical jobs,” raised their wages in the market and supported a plausible product market). Plaintiffs explain that luxury retail employees have specialized skills and training, (Am. Compl. ¶¶ 35–38), and that their skills are in demand because they have “service, selling, and product[ ]knowledge” specific to the luxury retail industry, (id. ¶ 32). Because at the pleading stage “‘[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims,‘” Todd, 275 F.3d at 198 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)), the Court accepts for purposes of a motion to dismiss that luxury retailer employees have a distinct and specialized skill set and that the market for their labor is distinguishable from that of other retail employees.
2. Beachum has plausibly defined a geographic market
Defendants argue that Plaintiffs have failed to allege a plausible geographic market because their definition of a nationwide market for luxury retail labor is too broad. (Defs.’ Mem. 36–39.) In support, Defendants argue that luxury retail employers compete locally, not nationally, for the skills of luxury retail employees. (Id. at 38–39.)
Plaintiffs argue that “intensive analysis of the relevant market definition is inappropriate at the pleadings stage” and that the national geographic market they allege accurately reflects the market in which Plaintiffs “may rationally look to sell [their] services.” (Pls.’ Mem. 38–40.)
“Courts generally measure a market‘s geographic scope, the ‘area of effective competition,’ by determining the areas in which the seller operates and where consumers can turn, as a practical matter, for supply of the relevant product.” Heerwagen v. Clear Channel Commc‘ns, 435 F.3d 219, 227 (2d Cir. 2006) (first quoting Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961); and then quoting United States v. Eastman Kodak Co., 63 F.3d 95, 104), overruled on other grounds by Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 203 (2d Cir. 2008); see also Concord Assocs., L.P. v. Entm‘t Props. Trust, 817 F.3d 46, 53 (2d Cir. 2016) (same). “The plaintiff may, but is not required to, allege a geographic market that is smaller than nationwide.” PharmacyChecker.com, LLC, No. 19-CV-7577, 2021 WL 1199363, at *25 (S.D.N.Y. March 30, 2021); see also United States v. Grinnell Corp., 384 U.S. 563, 575–76 (1966) (affirming the district court‘s holding “that the
Plaintiffs describe LREs as “highly skilled and well-trained salespersons,” (Pls.’ Mem. 1 n.3), and provide details of their specific training and skillset, (Am. Compl. ¶¶ 31–38). They maintain that “[s]elling luxury goods and apparel requires extensive training,” and that luxury brands invest in making sure LREs can provide “exceptional service” and create a “very deep connection” with customers. (Id. ¶¶ 32, 38.) Plaintiffs allege that $65,000 — the annual wage Saks paid Wang — undercompensated her and that she would have received a higher wage at one of the Brand Defendants. (Id. ¶¶ 151–154.) Given that even $65,000 per year is higher than the U.S. median salary,26 and that Plaintiffs provide specific allegations of the training and skillset possessed by LREs, the Court finds it plausible, for purposes of a motion to dismiss, that LREs sell their labor on a national market. See Jien v. Perdue Farms, Inc., No. 19-CV-2521, 2022 WL 2818950, at *10 (D. Md. July 19, 2022) (finding a national market for poultry workers plausible at the motion to dismiss stage; noting that although “defining the relevant geographic market to extend throughout the entire continental United States may be inconsistent with the practical realities of the low-skilled labor market,” because “alleging an overbroad market does not create deficiencies analogous to those that plague contradictory, undefined, or implausibly narrow markets, it does not warrant dismissal at the pleading stage” (citation omitted)).
Accordingly, the Court finds that Plaintiffs have plausibly defined a nationwide geographic market. See PharmacyChecker.com, LLC, 2021 WL 1199363, at *25.
3. Anticompetitive effect and market power
Defendants argue that because Plaintiffs have not made specific allegations that Defendants hold market power in the relevant market — a “fatal” omission — they have failed to show the requisite anticompetitive affect. (Defs.’ Mem. 41.)
Plaintiffs argue that they need not show market power since they allege “direct evidence of anticompetitive effects sufficient to satisfy their prima facie burden under the rule of reason.” (Pls.’ Mem. 36.)
“An antitrust plaintiff must allege not only cognizable harm to herself, but an adverse effect on competition market-wide.” Todd, 275 F.3d at 213. A successful antitrust plaintiff must show that the defendant‘s actions “diminish overall competition, and hence consumer welfare.” K.M.B. Warehouse Distribs. v. Walker Mfg. Co., 61 F.3d 123, 128 (1995) (citation omitted); see also Spinelli v. NFL, 903 F.3d 185, 212 (2d Cir. 2018) (an antitrust plaintiff must show that a defendant‘s actions “had an actual adverse effect on competition as a whole in the relevant market; to prove it has been harmed as an individual competitor will not suffice” (emphasis and citation omitted)); In re Bystolic Antitrust Litig., 583 F. Supp. 3d 455, 475 (S.D.N.Y. 2022) (a successful antitrust plaintiff must show that “defendant‘s conduct had an actual adverse effect on competition as a whole” (citation omitted)).
Plaintiffs argue that several of their allegations indicate direct evidence of adverse effect on competition. First, they argue that “by preventing Saks‘s LREs from gaining employment with Brand Defendants, the [c]onspiracy necessarily impairs Saks‘s LREs’ mobility” and this is “direct evidence of anticompetitive effects standing alone.” (Pls.’ Mem. 35.) Plaintiffs allege that, due to the no-hire agreement, Hayes was denied a job at the Brand Defendant Gucci for which she was “certainly qualified,” as well as the opportunity to be considered for positions at Louis Vuitton and Prada. (Am. Compl. ¶¶ 109–127.) They allege that due to the no-hire agreement, Wang was denied a position at Gucci for which she was “a perfect fit,” as well as the opportunity to be considered for a position with Prada, (id. ¶¶ 142–150), and that Giordano was denied positions at Loro Piana and Bruno Cucinelli for which she was qualified, (Am. Compl. ¶¶ 159–161, 165–170). Thus, collectively Plaintiffs allege that pursuant to the no-hire agreement, job mobility was restricted for LREs at Saks. However, while these allegations, accepted as true, indicate that Plaintiffs and those similarly situated suffered a certain amount of restricted job mobility as a result of the no-hire agreements, this does not lead to the conclusion that the no-hire agreements created “an adverse effect on competition market-wide.”27 Todd, 275 F.3d at 213; see also Cap. Imaging, 996 F.2d at 546 (where plaintiff conceded that prices would remain the same regardless of whether the challenged behavior was prohibited and failed
evidence of adverse effect on competition, Plaintiffs must “offer[] evidence of changed prices, output, or quality” in the relevant market, MacDermid, 833 F.3d at 183, which they define as the national “market for LRE services,” (Pls.’ Mem. 36, 39). However, Plaintiffs offer no facts to support the conclusory assertion that “suppressing LRE compensation at a large LRE employer like Saks removes significant competitive pressure on the Brand Defendants’ LRE pay as well.” (Pls.’ Mem. 18.) Even at the pleading stage, without supporting facts, such conclusory statements are insufficient. See, e.g., Tops Mkts., 142 F.3d at 96 (affirming dismissal and finding that plaintiff “failed to demonstrate an actual detrimental effect on competition” where plaintiff relied on an affidavit that discussed defendant‘s high market share and competitive advantages but “failed to provide sufficient proof that [the restraint on plaintiff] had, in fact, resulted in any decrease in . . . quality“); Watkins v. Smith, No. 12-CV-4635, 2012 WL 5868395, at *7 (S.D.N.Y. Nov. 19, 2012) (conclusory allegations of adverse effect were insufficient to survive a motion to dismiss where “[t]he only targeted business that is named in the amended complaint is the plaintiff‘s“); Frangipani v. HBO, No. 08-CV-5675, 2010 WL 1253609, at *4 (S.D.N.Y. Mar. 16, 2010) (“Plaintiff has not pled a factual basis for the conclusory assertion that [defendants‘] alleged anti-competitive conduct harms competition, separate from the alleged injury to Plaintiff alone.“). Accordingly, Plaintiffs have not pleaded facts to support the no-hire agreements’ direct “adverse effect on competition market-wide.” Todd, 275 F.3d at 213.
Plaintiffs also contend that the fact that “Saks pays LREs less than Brand Defendants” indicates that they hold market power, (Pls.’ Mem. 35–36), which constitutes indirect evidence of adverse effect on competition, see Amex, 138 S. Ct. at 2284. Plaintiffs rely on Tops Markets to support this proposition. 142 F.3d at 98 (market power “may be proven directly by evidence of the control of prices“). Plaintiffs’ reliance on Tops Markets is misplaced.28 In Tops Markets, the Court found plaintiff‘s allegations that defendant could control prices to be “speculative.” Id. at 98. Although the defendants held a market share of more than 70 percent
switch to substitutes or new sources of supply enter the market.” (quoting Cap. Imaging, 996 F.2d at 546)).
Plaintiffs have alleged insufficient facts to support a direct adverse effect on competition and have likewise failed to show that Defendants held market power in the relevant market, thus failing to allege indirect “adverse effect on competition as a whole in the relevant market.” Spinelli, 903 F.3d at 212. The Court therefore dismisses Beachum‘s claim.29
e. Leave to amend
Under
The Court notes that during the pendency of this motion there have been significant developments in the jurisprudence regarding no-poach and no-hire agreements,30 including the
Supreme
In her second amended complaint, Beachum must allege facts sufficient to permit the Court to assess the challenged no-hire agreement‘s “actual effect on competition” under the rule of reason standard. Amex, 138 S. Ct. at 2284 (citation omitted). Any second amended complaint must be filed within thirty days of the date of this Memorandum and Order. A second amended complaint will completely replace the Amended Complaint and must stand on its own without reference to the Amended Complaint and must contain all of the claims Beachum seeks to pursue. The second amended complaint must be captioned “Second Amended Complaint” and bear the same docket number as this Memorandum and Order. If Beachum elects not to file a second amended complaint or fails to file a second amended complaint within thirty days of this Memorandum and Order, the Court will direct the Clerk of Court to enter judgment.
III. Conclusion
For the reasons stated above, the Court grants Defendants’ motion to dismiss. The Court grants Plaintiffs thirty days from the date of this Memorandum and Order to file a second amended complaint as to Beachum.
Dated: January 31, 2023
Brooklyn, New York
SO ORDERED:
s/ MKB
MARGO K. BRODIE
United States District Judge
Notes
All persons in the United States employed by at least one of Defendants at any time from September 30, 2015 until the effects of Defendants’ conduct ceases (the “Class Period“) who: (i) work in any of Defendants’ respective stores and/or boutiques; and (ii) sell and/or manage the sale of luxury goods to consumers. Excluded from the Class are each of Defendants’ officers and directors, as well as employees in roles where they purchase luxury retail goods on behalf of any Defendant to display and sell in the Defendant‘s stores and/or on its website(s).(Id. ¶ 197.) They contend that class certification is warranted because the class is numerous, their claims are typical, and they can ably litigate questions of law common to the class. (Id. ¶¶ 198-207.)
Areeda & Hovenkamp ¶ 1904.The most useful classification scheme for antitrust analysis segregates so-called ‘naked’ and ‘ancillary’ agreements. This all-important classification largely determines the course of subsequent legal evaluation of any restraint. While not all naked restraints are unlawful, the presumption against them is very strong, and most are condemned either as illegal ‘per se’ or with only a truncated inquiry into power and effects. By contrast, while not all ancillary restraints are lawful, most are. More important, once a restraint is found to be ancillary, the court pursues its inquiry with a presumption of lawfulness and requires more elaborate proof of power and effects. The burden of proof is placed mainly on the plaintiff.