Opinion
Case No.: 17cv205-MMA (MDD)
2020-05-12
AYA HEALTHCARE SERVICES, INC., and Aya Healthcare, Inc., Plaintiffs, v. AMN HEALTHCARE, INC., et al., Defendants.
William A. Markham, Law Offices of William Markham, P.C., Kenneth M. Fitzgerald, Fitzgerald Knaier LLP, San Diego, CA, for Plaintiffs. Amanda Catherine Fitzsimmons, Noah A. Katsell, DLA Piper LLP, San Diego, CA, David Henry Bamberger, Pro Hac Vice, DLA Piper LLP, Washington, DC, for Defendant AMN Healthcare, Inc. Noah A. Katsell, Amanda Catherine Fitzsimmons, DLA Piper LLP, San Diego, CA, for Defendants AMN Healthcare Service, Inc., AMN Services, LLC., MEDEFIS, Inc., Shiftwise, Inc.
William A. Markham, Law Offices of William Markham, P.C., Kenneth M. Fitzgerald, Fitzgerald Knaier LLP, San Diego, CA, for Plaintiffs.
Amanda Catherine Fitzsimmons, Noah A. Katsell, DLA Piper LLP, San Diego, CA, David Henry Bamberger, Pro Hac Vice, DLA Piper LLP, Washington, DC, for Defendant AMN Healthcare, Inc.
Noah A. Katsell, Amanda Catherine Fitzsimmons, DLA Piper LLP, San Diego, CA, for Defendants AMN Healthcare Service, Inc., AMN Services, LLC., MEDEFIS, Inc., Shiftwise, Inc.
The Court has implemented the parties' proposed redactions in substantial part.
ORDER GRANTING DEFENDANTS' DAUBERT MOTION; AND
GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
MICHAEL M. ANELLO, United States District Judge Defendants AMN Healthcare, Inc., AMN Healthcare Services, Inc., AMN Healthcare Services LLC, Medefis, Inc. ("Medefis"), and Shiftwise Inc. ("Shiftwise"), (collectively, "Defendants" or "AMN") move to exclude certain opinions proffered by Plaintiffs Aya Healthcare Services, Inc. and Aya Healthcare, Inc.'s (collectively, "Plaintiffs" or "Aya") expert Patricia G. Donohoe. See Doc. No. 99 (hereinafter " Daubert motion"). Defendants also move for summary judgment on each of the claims asserted by Plaintiffs. See Doc. No. 98. For the reasons set forth below, the Court GRANTS AMN's Daubert motion and GRANTS IN PART and DENIES IN PART AMN's motion for summary judgment. The Court also ORDERS the parties to show cause as to whether summary judgment should be granted in AMN's favor with respect to Aya's Sherman Act Sections 1 and 2 claims for exclusionary damages in light of the Court's findings with respect to market power and harm to competition.
These material facts are taken from the parties' separate statements and responses thereto, as well as the supporting declarations and exhibits. Disputed material facts are discussed in further detail where relevant to the Court's analysis. Facts that are immaterial for purposes of resolving the current motions are not included in this recitation.
Aya brings this action against AMN asserting claims pursuant to Sections 1 and 2 of the Sherman Antitrust Act of 1890 ("Sherman Act"), 15 U.S.C. §§ 1 - 7, as amended by the Clayton Act of 1914 ("Clayton Act"), 15 U.S.C. §§ 12 - 27, California's Cartwright Act, Cal. Bus. & Prof. Code § 16750(a) and Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. , as well as a common law claim of tortious interference with prospective economic relations. See Doc. No. 37 ("TAC").
The case involves non-solicitation provisions in AMN's agreements with other healthcare staffing agencies, including Aya, as well as AMN's termination of the parties' collaborating relationship. The parties are companies that operate agencies for different types of temporary healthcare employees, the most relevant type here being travel nurses. Travel nurses are nurses and nurse technicians who perform temporary, medium-term assignments in understaffed hospitals and other healthcare facilities ("hospitals") that cannot have the assignments performed by their own nurses. See Doc. No. 150-2 ("Braynin Decl.") at 1. The only other kind of temporary nurses are per diem nurses, who are generally unavailable to perform medium-term assignments. Hospitals will use the services of travel nurses only when they lack any alternative. Id.
Unless the Court indicates otherwise, the Court's citations to electronically filed documents refer to the pagination assigned by the document's author, rather than the pagination assigned by the CM/ECF system.
Healthcare staffing agencies employ travel nurse recruiters to find, screen, and recruit travel nurses, and maintain relationships with the travel nurses and work with other company personnel, particularly account managers, to place the travel nurses on temporary assignments. Id. at 8. The agencies place the travel nurses at hospitals several ways: by directly placing the travel nurses at the agencies' hospital accounts and by indirectly placing the travel nurses at hospitals through either an agency that manages the hospitals' travel nurse needs ("managed service provider" or "MSP") or electronic platforms that facilitate the placements. See id. at 2. In 2017, agencies placed approximately 31 percent of travel nurse services directly and approximately 15 and 54 percent indirectly via platforms and MSPs, respectively. See Doc. 150-22 ("Markham Decl."), Ex. 81 at 12-16.
AMN has been a leader in the healthcare staffing industry for over thirty years. See id. at 3. In 2009, in addition to providing travel nurses to hospitals on direct placements, AMN started to become the MSP of an increasing number of hospitals. Later in 2013 and 2015, AMN acquired two electronic platforms, Shiftwise and Medefis, respectively, and began to place temporary travel nurses through the platforms. See id. at 3.
Aya is a younger healthcare staffing company that was founded in 2009 by Alan Braynin. See id. at 1. Braynin merged Aya with another healthcare staffing company that he founded in 2001, Access Nurses, Inc., by having Aya purchase its assets and operations. Id. Since its founding, Aya has been placing nurses directly in hospitals, and it has also been Aya's "mainstay" to take advantage of subcontracting opportunities, placing nurses in hospitals indirectly through MSP programs, such as those of AMN. See id. at 3-4.
As AMN grew its MSP programs, it was not always able to fulfill the demand of its hospital customers for travel nurse assignments. In these circumstances, AMN referred these "spillover assignments" to its network of subcontractors, or "associate vendors" ("AVs"), which were other healthcare staffing agencies, such as Aya. See id. at 4. These spillover assignments offered Aya and other healthcare staffing agencies a valuable source of income, which was also attractive to travel nurses because AMN's customer network was known generally to offer better opportunities in terms of pay and healthcare experience. See id. Aya later introduced its own MSP program, see Doc. 150-1 at 12, as have other healthcare staffing agencies. See Markham Decl., Ex. 81 at 20-21.
To obtain the spillover assignments from AMN, Aya first had to satisfy AMN that Aya was competent to provide travel nurses to AMN's customer network. In 2010, Aya provided information about its company to AMN at its request and met its criteria to become a subcontractor and receive spillover assignments. See id. Thereafter, AMN explained to Aya that to complete the process, Aya had to agree to AMN's [Redacted] that AMN allowed Aya to serve for spillover assignments. Id. at 4-5; Braynin Decl., Exs. 1, 2. The AV agreements include certain non-solicitation provisions. See Braynin Decl., Exs. 1, 2. Aya signed its first AV agreement in 2010, becoming AMN's AV for subcontracting opportunities to provide travel nurses to AMN's customers upon its request. See Braynin Decl. at 5. AMN and Aya experienced a mutually beneficial relationship going forward as Aya became AMN's largest AV and AMN continued to provide Aya with opportunities to grow its young company. See id. at 5-6.
In 2013, when AMN acquired Shiftwise, AMN utilized the electronic platform like its MSP programs and fulfilled the demand of its customers for travel nurses through placements on Shiftwise. See id. at 5. AMN made spillover assignments available to its AVs via Shiftwise, and later via Medefis when AMN acquired that platform in 2015. Aya has made temporary placements of its travel nurses through both platforms since AMN acquired them and continues to do so. See id. at 17.
Around May 2015, Aya began actively soliciting AMN's travel nurse recruiters. See Braynin Decl. at 9-12. Aya had not previously solicited AMN's travel nurse recruiters. See id. at 10-11. Since then, the parties' business relationship has soured. Around late September 2015, AMN temporarily terminated Aya's access to AMN's platform. See Braynin Decl. at 14. This took place while Aya still had travel nurses on assignments through the platform at some of AMN's hospital accounts. Aya experienced difficulty with monitoring the travel nurses that remained on assignments until it successfully negotiated with AMN to restore limited access for Aya to the platform. See id. AMN no longer provided Aya with spillover assignments through its MSP programs, and the parties later memorialized the termination of their prior AV agreements in December 2015. See id. at 15; Doc. No. 98-2 ("Fitzsimmons Decl."), Ex. 1.
During its AV relationship with AMN, Aya grew its business. According to Staffing Industry Analysts ("SIA"), the leading research and trade organization for the U.S. staffing industry, Aya ranked [Redacted] between 2013 and 2017. See Doc. No. 150-1 at 1 (referring to Fitzsimmons Decl., Ex. 4 at 40:7-41:6, 42:16-19 and Fitzsimmons Decl., Ex. 2). SIA also reported that between 2014 and 2017, Aya's travel nurse revenues [Redacted]; its travel nurse market share [Redacted]; and it rose from [Redacted]. See id. at 2 (referring to Fitzsimmons Decl., Ex. 5).
Aya disputes that AMN's market share [Redacted] as shown by an SIA report because [Redacted]. See id. This dispute, however, is not material since the market share is measured nationally, while Aya's proposed geographic markets for its federal antitrust claims are regional. See Doc. No. 37 ¶¶ 331, 360.
[Redacted] [Redacted]. See id. at 4 (referring to Fitzsimmons Decl., Ex. 9). Aya grew at a compound annual growth rate of 85% between 2012 and 2017 and by an average of 90% between 2013 and 2018. See id. at 5 (referring to Fitzsimmons Decl., Ex. 4 at 83:17-22, 116:12-117:4, 117:22-118:13). Aya has also reported truthfully to its customers that in 2016 to 2017, "it added more travel nurses than its top two competitors combined (one of them being AMN);" "it has a consistent ‘fill rate’ for all of its MSP programs of 99% and can fill those travel nurse positions within one to five days;" and "it has tens of thousands of travel nurse candidates for recruitment each year." Id. at 7-9 (referring to Fitzsimmons Decl., Ex. 4 at 83:17-22, 88:23-89:15, 90:1-13, 115:2-10).
Aya's fiscal year begins on October 1st of the preceding year and ends on September 30th of the fiscal year in question. For example, for Aya's fiscal year 2017, it began on October 1, 2016, and ended on September 30, 2017. See Fitzsimmons Decl., Ex. 7 at 45:7-13.
Aya commenced this action on February 2, 2017. See Doc. No. 1. Aya claims that it suffered "exclusionary damages" as a result of AMN's non-solicitation covenant in the parties' AV agreements and "retaliatory damages" as a result of AMN's decision to terminate its AV relationship with Aya. See Opp. at 19, 22-24. Aya claims that these business practices unreasonably restrain trade and interfere with Aya's prospective business opportunities in violation of federal, state, and common law. See Doc. No. 1. The non-solicitation provision applicable to Aya in the parties' AV agreement is set forth below:
[Redacted]
Braynin Decl. Ex. 1; see also Braynin Decl. Ex. 2.
DEFENDANTS' DAUBERT MOTION
AMN moves pursuant to Rules 403 and 702 of the Federal Rules of Evidence to exclude certain opinions proffered by Aya's putative industry expert, Patricia G. Donohoe. AMN objects to Donohoe's opinions regarding (1) "how certain restraints would be interpreted by industry participations," and (2) "how these restraints would impact the relevant industry participants." Doc. No. 99 at 1 (quoting 99-1 at 50). AMN argues that Donohoe's proposed testimony should be excluded to the extent (1) she proffers legal interpretations of certain contractual provisions between AMN and its employees, customers, and other healthcare staffing agencies; (2) she opines as to the purported competitive impact of such contractual provisions; (3) she opines as to how industry participants might react to or feel about such contractual provisions; and (4) opines as to AMN's reputation for enforcing such contractual provisions. See Doc. No. 99 at 2-6. Aya opposes AMN's Daubert motion, primarily arguing that the opinions at issue should not be excluded because Donohoe "does not tell the jury what legal conclusions to reach on the ultimate issues before it ...." Doc. No. 110 at 5.
1. Legal Standard
Rule 702 of the Federal Rules of Evidence provides that expert opinion evidence is admissible if: "(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case." Fed. R. Evid. 702. Expert opinion testimony is reliable if such knowledge has a "basis in the knowledge and experience of [the relevant] discipline." Daubert v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579, 592, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). "Knowledge" requires more than a subjective belief or an unsupported speculation; it requires an appropriate level of validation. See id. at 593, 113 S.Ct. 2786. As the Ninth Circuit has explained:
Under Daubert and its progeny, including Daubert II, a district court's inquiry into admissibility is a flexible one. Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc. , 738 F.3d 960, 969 (9th Cir. 2013). In evaluating proffered expert testimony, the trial court is "a gatekeeper, not a fact finder." Primiano v. Cook , 598 F.3d 558, 565 (9th Cir. 2010) (citation and quotation marks omitted).
"[T]he trial court must assure that the expert testimony ‘both rests on a reliable foundation and is relevant to the task at hand.’ " Id. at 564 (quoting Daubert v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579, 597, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) ). "Expert opinion testimony is relevant if the knowledge underlying it has a valid connection to the pertinent inquiry. And it is reliable if the knowledge underlying it has a reliable basis in the knowledge and experience of the relevant discipline." Id. at 565 (citation and internal quotation marks omitted). "Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion." Id. at 564 (citation omitted). The judge is "supposed to screen the jury from unreliable nonsense opinions, but not exclude opinions merely because they are impeachable." Alaska Rent-A-Car , 738 F.3d at 969. Simply put, "[t]he district court is not tasked with deciding whether the expert is right or wrong, just whether his testimony has substance
such that it would be helpful to a jury." Id. at 969-70.
City of Pomona v. SQM N. Am. Corp. , 750 F.3d 1036, 1043-44 (9th Cir. 2014). "Challenges that go to the weight of the evidence are within the province of a fact finder, not a trial court judge. A district court should not make credibility determinations that are reserved for the jury." Id. at 1044.
2. Discussion
a. Qualifications
As an initial matter, the parties do not dispute that Donohoe has extensive experience in the healthcare staffing industry. See Doc. No. 134 at 1. Nor has AMN moved to exclude Donohoe's proffered testimony on the ground that she is not qualified.
Rule 702 recognizes that witnesses gain expertise in a variety of ways, including training and experience. Experience-based experts may testify on matters within their expertise. See, e.g., Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., Inc. , 618 F.3d 1025, 1043 (9th Cir. 2010) (admitting proffered expert's industry testimony where his expertise "is one based on experience"); Hangarter v. Provident Life and Accident Ins. Co. , 373 F.3d 998, 1016 (9th Cir. 2004) ("Given [expert's] significant knowledge of and experience within the insurance industry, the district court did not abuse its discretion in concluding that he was qualified to testify as an expert witness.")
Donohoe has gained extensive experience and specialized knowledge in the healthcare staffing industry since 1980. See Doc. Nos. 99-3 at 7; 110 at 2. She details this extensive experience in the beginning of her report. See Doc. No. 99-3 at 7-9. Accordingly, the Court finds that Donohoe is qualified under Rule 702 to opine on matters within her experience in the healthcare staffing industry.
There are two sets of page numbering with respect to Defendants' Exhibit A (Doc. No. 99-3) in support of its Daubert motion. The Court's citations refer to the page numbering of the filed exhibit, located directly beneath the page number of the actual report.
b. Opinions as to the Industry Participants' Interpretations of or Reactions to Contract Provisions
The parties dispute whether Donohoe has inappropriately opined as to industry participants' interpretations of and reactions to certain of AMN's contract provisions. AMN contends that Donohoe's opinions regarding the legal interpretations of contract provisions are "inappropriate and would be confusing to a jury ...." Doc. No. 99-1 at 3. AMN further argues that Donohoe may neither opine as to the legal interpretations of the contractual provisions nor to industry participants' interpretations of or reactions to the same. See id. at 3-5. Aya responds that Donohoe "does not offer any ultimate conclusion of law at issue in this antitrust case" and permissibly "provides [an] analysis on the basis of her extraordinary experience and knowledge in the travel-nurse industry." Doc. 110 at 4.
Unless a contract is deemed ambiguous or there is a term of the contract that requires an expert's explanation, it is improper for an expert to interpret or construe a contract in his opinion. McHugh v. United Serv. Auto. Ass'n , 164 F.3d 451, 454 (9th Cir. 1999) (holding that "although experts may disagree in their conclusions; their testimony cannot be used to provide legal meaning or interpret the policies as written."). Such matters of law are "inappropriate subjects for expert testimony." Aguilar v. Int'l Longshoremen's Union Local No. 10 , 966 F.2d 443, 447 (9th Cir. 1992). Moreover, "the opinions of [expert] witnesses on the intent, motives, or states of mind of corporations, regulatory agencies and others have no basis in any relevant body of knowledge or expertise." Stone Brewing Co., LLC v. MillerCoors LLC , No. 18-CV-331, 2020 WL 907060, at *4 (S.D. Cal. Feb. 25, 2020) (quoting In re Rezulin Prods. Liab. Litig. , 309 F. Supp. 2d 531, 546 (S.D.N.Y. 2004) ).
AMN primarily relies on Wells Fargo Bank N.A. v. LaSalle Bank Nat. Ass'n in support of its position that Donohoe's interpretations of their contractual provisions should be excluded. In that case, the defendant's industry expert opined as to the defendant's liability pursuant to an exculpatory provision of the contract at issue and the lack of any basis for the plaintiff's claim under the contract. See Wells Fargo Bank N.A. v. LaSalle Bank Nat. Ass'n , No. 08-CV-1448, 2011 WL 743748, at *3 (D. Nev. Feb. 23, 2011). The court held that such opinions based on the expert's contract interpretation were inappropriate and excluded. Here, AMN is correct that Donohoe interprets the contract, as she expressly states in her report that her assignment was in part to "opine on how certain restraints imposed by AMN would be interpreted by participants in the travel nurse staffing industry ...." Doc. No. 99-3 at 10; see also id. at 56.
Aya does not contend that Donohoe opines as to any purportedly ambiguous provisions of AMN's contracts. Nor does Aya proffer any reason as to why Donohoe was opined as to the interpretation of such contract provisions, other than to "explain[ ] her understanding of what those restraints purport to do, how those are bound by them are affected by them in practice, and what has been their likely effect on agencies, staffing professionals, and travel nurses." Doc. No. 110 at 4. Aya primarily relies on dicta from the Tenth Circuit's Specht v. Jensen decision, arguing that such opinions are proper. See id. In Specht , the court excluded an attorney expert witness's testimony regarding his views of the applicable law and opinion as to whether defendants' conduct violated the law. See Specht v. Jensen , 853 F.2d 805, 806 (10th Cir. 1988). In dicta, the court stated that an expert's testimony is proper "if the expert does not attempt to define the legal parameters within which the jury must exercise its fact-finding function," but is improper "when the purpose of testimony is to direct the jury's understanding of the legal standards upon which their verdict must be based ...." Id. at 809-10.
Aya's reliance on Specht is unpersuasive, as the court there did not speak to an expert's attempt to interpret any contract provision. Moreover, "[t]he question of interpretation of [a] contract is for the jury and the question of legal effect is for the judge. In neither case do we permit expert testimony." Loeb v. Hammond , 407 F.2d 779, 781 (7th Cir. 1969) (citing 3 Corbin on Contracts, § 554, 226-27 (1960)); see also Marx & Co. v. Diners' Club Inc. , 550 F.2d 505, 509 (2d Cir. 1977) (excluding expert opinion "as to the meaning of the contract terms at issue"). Accordingly, Donohoe's interpretations of the contracts must be excluded because "it is improper for an expert to interpret or construe the [unambiguous] contract in h[er] opinion." Wells Fargo , 2011 WL 743748, at *3 (citing McHugh , 164 F.3d at 454 ). Further, Donohoe's proffered testimony is speculative as to how the "restraints would be interpreted by industry participants." Doc. No. 99-3 at 56. This constitutes impermissible testimony regarding the states of mind of third parties that has "no basis in any relevant body of knowledge or expertise." Stone Brewing Co. , 2020 WL 907060, at *4. Lastly, the Court excludes Donohoe's testimony under Rule 403 as substantially more prejudicial than probative, since the testimony would intrude on the jury's role of interpreting the contract provisions at issue.
c. Opinions as to the Competitive Impact of Contractual Restraints
AMN next contends that Donohoe's testimony as to the competitive impact of certain of AMN's contract provisions should be excluded. See Doc. No. 99-1 at 3-4. AMN argues that such testimony is speculative, unreliable, confusing, and highly prejudicial, and in any event the testimony should come from percipient witnesses. See id. Aya maintains that such testimony is admissible. See Doc. No. 110 at 4-5.
"Expert testimony is inadmissible if it addresses lay matters which a jury is capable of understanding and deciding without the expert's help." In re Novatel Wireless Sec. Litig. , No. 08-CV-1689, 2011 WL 5827198, at *4 (S.D. Cal. Nov. 17, 2011) (internal quotations omitted, citing Highland Capital Mgmt., L.P. v. Schneider , 379 F. Supp. 2d 461, 468 (S.D.N.Y. 2005) ). As such, expert testimony cannot be presented to the jury solely for the purpose of constructing a factual narrative based upon record evidence. See Johns v. Bayer Corp. , No. 09-CV-1935, 2013 WL 1498965, at *28 (S.D. Cal. Apr. 10, 2013) (excluding proffered expert testimony that "offer[ed] nothing more than a factual narrative of [ ] documents") (citing In re Rezulin , 309 F. Supp. 2d at 551 (rejecting portions of plaintiffs' expert's testimony that was "a narrative reciting selected regulatory events" because "[s]uch material, to the extent it is admissible, is properly presented through percipient witnesses and documentary evidence")).
The Court finds that under the circumstances, such testimony is unhelpful to the jury. Donohoe sets out her interpretations of certain contractual provisions and then concludes that such provisions "make it more difficult" for other healthcare staffing agencies to compete and "discourage" AMN's employees from leaving to other healthcare staffing agencies. See, e.g. , Doc. 99-3 at 55 ("AMN's non-solicitation restraint makes it more difficult for an associate vendor to hire employees ...."), 62 ("AMN's confidentiality restraint would discourage an AMN employee from leaving for a competitor ...."). In other words, after Donohoe impermissibly interprets the contractual provisions at issue in this case, she forms conclusions as to their effects on competition and states of mind of industry participants. Such testimony intrudes on the province of the jury, who is capable of evaluating the same evidence and drawing conclusions without Donohoe's proffered testimony. Donohoe's experience in the healthcare staffing industry does not render her specially situated, or any better situated than lay persons on a jury, to observe and draw conclusions from evidence regarding any effects of the different types of contractual provisions at issue on healthcare staffing agencies and AMN's employees. See In re Novatel Wireless Sec. Litig. , 2011 WL 5827198, at *4 (excluding proffered expert testimony forming conclusions based on a reading of record evidence because "no specialized or technical knowhow is required to read and draw conclusions" from the documents and testimony cited by the expert); Andrews v. Metro N. Commuter R.R. Co. , 882 F.2d 705, 708 (2d Cir. 1989) (expert testimony is inadmissible when it addresses "lay matters which a jury is capable of understanding and deciding without the expert's help"). And as discussed above, an expert may not testify regarding the states of mind of third parties. See Stone Brewing Co. , 2020 WL 907060, at *4. Therefore, her opinions that certain industry participants are "discouraged" by AMN's contracts are likewise inadmissible.
The Court further agrees with AMN that Donohoe is simply providing a narrative of Aya's theory of the case, which "is properly presented through percipient witnesses and documentary evidence." Rezulin , 309 F. Supp. 2d at 551 ; see also LinkCo, Inc. v. Fujitsu Ltd. , 2002 WL 1585551, at *1-*2 (S.D.N.Y. July 16, 2002) (where expert's report was based on a review of, inter alia , "documents, computer documents, computer files, deposition transcripts and exhibits," the "testimony by fact witnesses familiar with those documents would be far more appropriate ... and renders [the expert witness'] secondhand knowledge unnecessary for the edification of the jury") (citation and internal quotation marks omitted) (alterations in original); Taylor v. Evans , No. 94-CV-8424, 1997 WL 154010, at *2 (S.D.N.Y. Apr. 1, 1997) (rejecting portions of expert report on the ground that the testimony consisted of "a narrative of the case which a lay juror is equally capable of constructing").
Thus, for the foregoing reasons, Donohoe's proffered testimony as to the competitive impact of the contractual provisions is excluded.
d. Opinions as to Defendants' Reputation
AMN lastly argues that Donohoe's opinions as to AMN's reputation for enforcing their contracts with its employees and other healthcare staffing agencies should be excluded. See Doc. No. 99-1 at 5-6. Specifically, AMN argues that such testimony "is vague, confusing, irrelevant and prejudicial." Id. at 6. As AMN recognizes, Aya's failure to oppose the Daubert motion on this issue constitutes a waiver or abandonment in regard to this uncontested issue. See Luat v. Mabus , No. 11-CV-0496, 2011 WL 6152285, at *4 (S.D. Cal. Dec. 12, 2011) (citing Stichting Pensioenfonds ABP v. Countrywide Fin. Corp. , 802 F. Supp. 2d 1125, 1132 (C.D. Cal. 2011) ("[I]n most circumstances, failure to respond in an opposition brief to an argument put forward in an opening brief constitutes waiver or abandonment in regard to the uncontested issue")).
The Court also agrees with AMN on the merits. Donohoe's testimony is irrelevant to any issue that the jury will decide in this case, and even if it had any relevance, such relevance is substantially outweighed by the likelihood of unfair prejudice to AMN. See, e.g., Napolitano v. Synthes, Inc. , No. 09-CV-828, 2014 WL 12867042, at *5 (D. Conn. Apr. 9, 2014) (excluding expert's opinion of the reputation of the defendant and its products as irrelevant to any issue in the case and unfairly prejudicial to the defendant). Moreover, Donohoe's testimony as to AMN's reputation lacks any basis in her experience or in any methodology and is therefore unreliable and unhelpful to the jury. See, e.g., Tajonera v. Black Elk Energy Offshore Operations, L.L.C. , No. 13-CV-0366, 2016 WL 8274173, at *8 (E.D. La. May 26, 2016) (excluding expert opinion as to defendant's "culture" and reputation because the expert lacked experience, expertise, and methodology to substantiate such opinions).
e. Conclusion
In sum, the Court finds that while Donohoe is qualified to testify as a healthcare staffing industry expert, her testimony as to industry participants' interpretations of and reactions to certain contract provisions, the competitive effect of such contract provisions, and AMN's reputation is impermissible. Accordingly, the Court finds the proffered opinions inadmissible and GRANTS AMN's Daubert motion.
DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
AMN moves for summary judgment on all of Aya's claims. See Doc. No. 98. AMN argues that Aya cannot establish the essential element of antitrust injury and therefore Aya's Sherman Act and Cartwright Act claims fail. AMN contends that Aya's additional claims lack any evidentiary basis upon which to establish a genuine factual issue for trial.
1. Legal Standard
"A party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought. The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The party seeking summary judgment bears the initial burden of establishing the basis of its motion and of identifying the portions of the declarations, pleadings, and discovery that demonstrate absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party has "the burden of showing the absence of a genuine issue as to any material fact, and for these purposes the material it lodged must be viewed in the light most favorable to the opposing party." Adickes v. S. H. Kress & Co. , 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). A fact is material if it could affect the outcome of the suit under applicable law. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute about a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party. See id.
2. Aya's Antitrust Claims
AMN argues that Aya's claims under Sections 1 and 2 of the Sherman Act and the California Cartwright Act fail because the undisputed record evidence shows Aya has suffered no antitrust injury, nor could it as a matter of law. See Doc. 98-1 ("MSJ Mem.") at 4-33.
The Court prioritizes its analysis of Aya's Sherman Act claims because the Court's subject matter jurisdiction hinges on the presence of a federal question pursuant to 28 U.S.C. § 1331. In any event, the Court's analysis under the Cartwright Act would be the same as the Court's analysis under the Sherman Act. See County of Tuolumne v. Sonora Cmty. Hosp. , 236 F.3d 1148, 1160 (9th Cir. 2001) (citing Cal. Bus. & Prof. Code § 16700 et seq. ).
a. Relevant Law
Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce." 15 U.S.C. § 1. To prove a Section 1 claim, a plaintiff must show (1) that there was a contract, combination, or conspiracy, i.e. , an agreement or concerted action toward a common goal, (2) that the agreement unreasonably restrains trade, under either a per se rule of illegality or a rule of reason analysis, and (3) that the restraint harmed competition, not just competitors. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n , 809 F.2d 626, 632 (9th Cir. 1987) ; McGlinchy v. Shell Chem. Co. , 845 F.2d 802, 812 (9th Cir. 1988).
Section 2 of the Sherman Act declares it unlawful to "monopolize" or "attempt to monopolize." 15 U.S.C. § 2. To prove monopolization under Section 2, a plaintiff must prove (1) that the defendant has monopoly power in the relevant market, and (2) that the defendant willfully acquired or maintained that power. See Transamerica Computer Co., Inc. v. International Business Machines Corp. , 698 F.2d 1377, 1382 (9th Cir.), cert. denied , 464 U.S. 955, 104 S.Ct. 370, 78 L.Ed.2d 329 (1983). To prove attempted monopolization under Section 2, a plaintiff must show (1) that the defendant specifically intended to control prices or to destroy competition, (2) that the defendant engaged in anticompetitive conduct directed to accomplishing that end, and (3) that the defendant has a dangerous probability of success. See id.
Section 4 of the Clayton Act authorizes a private right of action for private parties "injured in [their] business or property by reason of anything forbidden in the antitrust laws ...." 15 U.S.C. § 15. And as with all federal claims, a plaintiff must establish Article III standing, which requires proof of (1) injury-in-fact, (2) causation, and (3) redressability. Gerlinger v. Amazon.com Inc. , 526 F.3d 1253, 1255 (9th Cir. 2008). "For Article III purposes, an antitrust plaintiff establishes injury-in-fact when he has suffered an injury which bears a causal connection to the alleged antitrust violation." Id. (internal quotation marks and citation omitted). Private antitrust plaintiffs must make that showing of causal antitrust injury by demonstrating they suffered (1) "injury of the type the antitrust laws were intended to prevent" that also (2) "flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl–O–Mat, Inc. , 429 U.S. 477, 489, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977) ; In re Online DVD-Rental Antitrust Litig. , 779 F.3d 914, 921–22 (9th Cir. 2015).
b. Analysis
AMN moves for summary judgment on the singular issue of antitrust injury. See Doc. No. 98 at 1 ("[T]he undisputed material facts in the record and applicable law compel the conclusion that Aya has not suffered antitrust injury, whether in the form of ‘exclusionary’ or ‘retaliatory’ damages or otherwise, and therefore Aya cannot prevail on its claim for violation of the federal and state antitrust laws."); Reply at 1 (quoting the same). As noted above, Aya claims it "has suffered two kinds of antitrust injury because of AMN's antitrust violations: exclusionary harm and retaliatory harm." TAC ¶ 262. With respect to Aya's claim of exclusionary damages, AMN does not argue that Aya cannot demonstrate the other requisite Section 1 elements: (1) that there was a contract, combination, or conspiracy, i.e. , an agreement or concerted action toward a common goal, (2) that the agreement unreasonably restrains trade, under either a per se rule of illegality or a rule of reason analysis, and (3) that the restraint harmed competition, not just competitors. Regarding Aya's claim of retaliatory damages, AMN similarly does not address these elements expressly, though it does contest the existence of a " ‘cartel’ agreement among industry staffing companies" under the first element. MSJ Mem. at 16. Moreover, AMN does not expressly move for summary judgment on the other Section 2 elements for monopolization or attempted monopolization, though AMN does contest Aya's assertion that AMN was "acting as a monopolist or under circumstances where there was a danger of AMN becoming a monopolist." Id. at 17.
The Court provides this detail as a threshold matter to make clear that it will only address the express basis for AMN's motion for summary judgment: the issue of antitrust injury. To the extent AMN appears to challenge other elements of Aya's claims, the Court will address those arguments as they arise.
i. Exclusionary Damages
AMN first argues that Aya's claim for "exclusionary damages" is belied by the undisputed factual record, and in any event fails as a matter of law because (1) the parties' AV agreements containing the restraints at issue were easily terminable, and (2) Aya cannot disaggregate its damages attributable to the alleged anticompetitive conduct from losses flowing from lawful conduct. See MSJ Mem. at 4-13. The Court addresses each argument in turn. 1. Aya's Growth
First, AMN argues that the undisputed record evidence shows that Aya grew considerably from 2013 to mid-2015 when Aya was subject to the non-solicitation provisions at issue, and therefore, there is no genuine dispute of material fact that Aya has suffered no injury in fact or antitrust injury. See MSJ Mem. at 4-9. Aya responds that AMN is incorrect, because even a profitable plaintiff may suffer causal antitrust injury where a defendant's anticompetitive conduct causes the plaintiff lost profits. See Opp. at 20.
The Court agrees with Aya. Aya's undisputed growth during the time period in question is no doubt in tension with its theory that it suffered harm. However, AMN provides no authority that such evidence is dispositive on the issue of whether Aya suffered causal antitrust injury. Indeed, the argument is not responsive to Aya's theory that it would have earned greater profits but for the alleged anticompetitive conduct. See, e.g. , Opp. at 21. Controlling and persuasive case law show that even a profitable antitrust plaintiff may recover lost profits attributable to a defendant's anticompetitive conduct. See Image Tech. Servs., Inc. v. Eastman Kodak Co. , 125 F.3d 1195, 1222 (9th Cir. 1997) ("Juries may award damages to profitable businesses for lost sales as the result of anticompetitive behavior."); see also Pierce v. Ramsey Winch Co. , 753 F.2d 416, 436–37 (5th Cir. 1985) (plaintiff can establish antitrust injury by showing that it would have earned an even higher profit but for anticompetitive conduct). Accordingly, AMN is not entitled to summary judgment on this ground.
2. Easily Terminable Contracts
AMN next argues that because its AV agreements with Aya were easily terminable, Aya's purported claim for exclusionary damages fails as a matter of law. See MSJ Mem. at 9-10. Aya responds that "a party that enters into a contract offered by a counterparty with superior bargaining power can later challenge the contract on antitrust grounds." Opp. at 25 (citing Systemcare, Inc. v. Wang Labs. Corp. , 117 F.3d 1137, 1138 (10th Cir. 1997) and US Airways, Inc. v. Sabre Holdings Corp. , 938 F.3d 43, 48-49 (2d Cir. 2019) ). Aya adds that in any event, the non-solicitation restraints on AVs expressly [Redacted] Opp. at 26.
Though AMN provides no authority for its position, the argument has some appeal. The pertinent inquiry in a Section 1 case such as this is whether the challenged agreement unreasonably restrains trade. See United States v. Standard Oil Co. , 221 U.S. 1, 60, 31 S.Ct. 502, 55 L.Ed. 619 (1911) (establishing the "rule of reason" standard that only those restraints upon interstate commerce which are unreasonable are proscribed by § 1 of the Sherman Act); see also Major League Baseball Props., Inc. v. Salvino, Inc. , 542 F.3d 290, 315 (2d Cir. 2008) (The Supreme Court "has not taken a literal approach to [ Section 1 ]," but instead "has long recognized that Congress intended to outlaw only unreasonable restraints.") (citing Texaco Inc. v. Dagher , 547 U.S. 1, 5, 126 S.Ct. 1276, 164 L.Ed.2d 1 (2006) (emphasis in Dagher )). In essence, AMN argues that no such unreasonable restraint exists here since Aya and other agencies can simply exercise their rights to terminate their agreements and free themselves of the non-solicitation provisions. An analogous argument has been made, sometimes successfully, in the exclusive dealing context. See, e.g., Omega Envtl., Inc. v. Gilbarco, Inc. , 127 F.3d 1157, 1163 (9th Cir. 1997) (granting summary judgment for defendant manufacturer where its agreements with customers were of short duration and easily terminable, thereby "negat[ing] substantially their potential to foreclose competition" from competing manufacturers); United States v. Dentsply Int'l, Inc. , 399 F.3d 181, 194 (3d Cir. 2005) (reversing judgment for defendant, finding that despite the legal ease with which customers can terminate contracts with defendant, the commercial realities showed that such terminations were not realistic).
Nevertheless, the Court finds that AMN's argument is insufficient for purposes of summary judgment. First, AMN provides no authority for its position, nor can the Court find any that holds a contract with a termination clause precludes a finding of an unreasonable restraint under Section 1. Rather, if there is an agreement that harms competition, and the counterparty suffers injury as a result, it may challenge the agreement as an unreasonable restraint under Section 1. See Copperweld Corp. v. Indep. Tube Corp. , 467 U.S. 752, 766, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984) (noting that the Court has previously found "each plaintiff could ‘clearly’ charge a combination between itself and the defendants") (citing Perma Life Mufflers, Inc. v. International Parts Corp. , 392 U.S. 134, 141-42, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968) ). Though the cases cited by Aya do not directly confront the issue, the cases are informative. In Systemcare , the court recognized that "a plaintiff ‘can clearly charge a combination between [the defendant] and himself, as of the day he unwillingly complied with the restrictive ... agreement[ ].’ " 117 F.3d at 1143 (citing Copperweld and Perma Life Mufflers ). Aya asserts that it is doing just that. See Braynin Decl. at 7-8. Similarly, US Airways involved a plaintiff airline customer challenging under Section 1 of the Sherman Act provisions in its contract with the defendant operator of a global distribution system. See 938 F.3d at 48-51. Like the plaintiff in US Airways , Aya here is challenging discrete provisions in its AV agreements that, according to Aya, harm competition by restricting the labor market for travel nurses and recruiters. See Braynin Decl. at 7-8.
Second, Aya correctly notes that the AV agreements have a [Redacted]. See Opp. at 26 (citing Markham Decl. Ex. 31, § VII.F.). AMN responds "that the language does not support that strained interpretation." Reply at 5. The parties' disagreement on the matter is a factual dispute regarding the interpretation of the AV agreements, which is within the province of the jury. Moreover, Aya's theory of exclusion, supported by some evidence, is that AMN will enforce its alleged scheme to restrict the employment mobility of its personnel by various threats and retaliatory actions, including cutting off MSP or platform access for noncompliant AVs, initiating baseless litigation against defecting employees and the agencies that the employees join, and publicizing its enforcement efforts to current employees. See Opp. at 12-18. Whether such actions harm competition generally is a separate question that AMN has not expressly addressed in its motion for summary judgment on Aya's claim for exclusionary damages; rather, AMN only addresses whether Aya can suffer exclusionary harm when the theory of exclusion is premised on an easily terminable contract.
The Court declines AMN's invitation to adopt a legal presumption that Aya suffered no such injury here because it could have simply terminated the AV agreements. "Legal presumptions that rest on formalistic distinctions rather than actual market realities are generally disfavored in antitrust law." Eastman Kodak Co. v. Image Tech. Servs., Inc. , 504 U.S. 451, 466–67, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). Accordingly, summary judgment is not appropriate on this basis. 3. Disaggregation
With respect to Aya's purported claim of exclusionary damages, AMN lastly argues that they are unavailable as a matter of law because Aya cannot disaggregate damages attributable to unlawful conduct from injury resulting from lawful conduct. See MSJ Mem. at 10-13. Aya replies that it has disaggregated its damages, and in any event AMN's argument is legally flawed. See Opp. at 20-21.
AMN relies on City of Vernon v. S. California Edison Co. , 955 F.2d 1361, 1371-72 (9th Cir. 1992), and ACT, Inc. v. Sylvan Learning Sys., Inc. , 296 F.3d 657, 670 (8th Cir. 2002), in support of its position. MSJ Mem. at 11. In City of Vernon , the Ninth Circuit affirmed summary judgment for a defendant because the plaintiff's damages study was "seriously flaw[ed]" in the sense that the plaintiff's expert failed to segregate damages flowing from each allegedly anticompetitive act complained of by the plaintiff. See 955 F.2d at 1373. Because the Ninth Circuit, earlier in the opinion, "had already found that many of those acts were proper," the jury had no basis to award damages as the expert failed to construct a model segregating damages resulting from those lawful acts from damages attributable to unlawful acts. Id.
Here, by AMN's own admission, Aya's economist expert, Dr. Rothman, "attributes all of Aya's ‘exclusionary’ damages solely to one particular type of ‘restraint:’ the so-called ‘no-poaching’ (non-solicitation) provisions in AMN's Associate Vendor (AV) agreements." Reply at 3 (emphasis in original, citations omitted); see also MSJ Mem. at 9 (same); Opp. at 20 ("AMN's No-Poaching Restraints prohibited Aya from soliciting any of AMN's travel-nurse recruiters .... That was the cause of Aya's harm during this period.") (emphasis in original). Therefore, City of Vernon is distinguishable as requiring disaggregation in a damages study where a plaintiff challenges various allegedly anticompetitive acts as causing its injury. Whereas here, it is undisputed that Aya is only challenging an allegedly anticompetitive non-solicitation provision in AMN's AV agreements with healthcare staffing agencies.
ACT is similarly distinguishable. There, the Eighth Circuit affirmed the district court decision granting a motion in limine to exclude evidence of purported damages, finding that "damages [plaintiff] claims from its failure to close a deal with [a third party] did not flow from conduct by [defendant] that violated § 2." 296 F.3d at 670. In other words, there was no finding that the defendant had harmed competition. Here, by contrast, AMN moves for summary judgment solely on the issue of "antitrust injury" in the form of "exclusionary damages" and "retaliatory damages," leaving it for the jury to determine whether its non-solicitation provisions have harmed competition generally.
4. Conclusion
For the aforementioned reasons, the Court DENIES AMN's motion for summary judgment on Aya's claim for exclusionary damages.
ii. Retaliatory Damages
AMN next argues that Aya's claim for retaliatory damages is not recoverable with respect to its Section 1 claim because there is no "cartel." MSJ Mem. at 13-17. Regarding Aya's Section 2 claim, AMN argues that retaliatory damages are unavailable for "at least three independent reasons: (1) AMN reserved the legal right to terminate the AV agreements, pursuant to their express terms; (2) there is no evidentiary showing that the alleged ‘retaliatory’ damages were the result of conduct by AMN acting as a monopolist or under circumstances where there was a danger of AMN becoming a monopolist; and (3) the Colgate doctrine preludes those damages." Id. at 17. The Court considers each argument in turn.
1. Cartel
AMN argues that Aya cannot recover retaliatory damages because there is no genuine dispute of material fact that there even is a cartel that retaliated against Aya. See MSJ Mem. at 13-17.
A cartel is defined as "[a] combination of producers or sellers that join together to control a product's production or price." Black's Law Dictionary (11th ed. 2019). "Competing firms form a cartel when they replace independent decisions with an agreement on price, output, or related matters." Philip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 405a, at 26 (2d ed. 2002). "Horizontal price fixing, output limitations, and market division are classic characteristics of a cartel." Freedom Holdings, Inc. v. Spitzer , 447 F. Supp. 2d 230, 251 (S.D.N.Y. 2004), aff'd , 408 F.3d 112 (2d Cir. 2005). The key feature of a cartel is the concerted action between competitors toward a per se illegal goal, such as the aforementioned trade restraints, "that would always or almost always tend to restrict competition and decrease output." Business Electronics Corp. v. Sharp Electronics Corp. , 485 U.S. 717, 723, 108 S.Ct. 1515, 99 L.Ed.2d 808 (1988).
Aya argues that it is allowed to recover retaliatory damages under Hammes v. AAMCO Transmissions, Inc. "on policy grounds." Opp. at 22. Hammes involved two individuals (the "Cookseys") who were franchised by a transmissions company to operate a transmission repair center in Indianapolis. 33 F.3d 774, 777 (7th Cir. 1994). To obtain the franchise, the Cookseys had to join an unincorporated association, which included the company's other dealers. Id. The association purchased an advertisement in the yellow pages that lists each number of the association's members, and calls to each number were forwarded in accordance with a preexisting agreement to one of the association's dealers. Id. The other members wanted to stifle competition from the Cookseys, so they refused to include the Cooksey's dealership in the call-forwarding network, such that no calls were forwarded to the Cookseys. Id. When the Cookseys tried to advertise outside the association, the dealers sued and enjoined the Cookseys in state court for violating the association's agreement, then eventually the Cookseys "went belly-up." Id.
As an out-of-circuit case, Hammes is of course not binding on this Court. In any event, Aya is not entitled to retaliatory damages under Hammes for several reasons. First, it is undisputed that an overarching horizontal agreement amongst AMN and the other healthcare staffing agencies does not exist. Aya merely contends that it and other healthcare staffing agencies each entered into AV agreements with AMN that contain the non-solicitation provision at issue. Contrary to Aya's suggestion that the distinction is "meaningless," it is not because, as the Court has explained, cartels are formed when competitors agree to pursue ends "that would always or almost always tend to restrict competition and decrease output." Business Electronics , 485 U.S. at 723, 108 S.Ct. 1515. Aya admits that it is challenging the non-solicitation provisions in "bilateral staffing agreements," not some overarching agreement between AMN and agencies to refrain from soliciting or hiring each other's employees or to retaliate against Aya for not agreeing to do the same. See Doc. No. 150-1 at 21-23. Those non-solicitation provisions are not "naked" horizontal agreements to fix prices or achieve some other manifestly anticompetitive end, but rather they are admittedly part of a collaboration agreement to fulfill the demand of hospitals for travel nurses. See, e.g. , Braynin Decl., Exs. 1 and 2 (Aya's AV agreements with AMN). Simply put, there is no evidence here of a cartel of healthcare staffing agencies combining "to accomplish an unlawful purpose or to accomplish some purpose, not unlawful in itself, by unlawful means." Frackowiak v. Farmers Ins. Co. , 411 F. Supp. 1309, 1316 (D. Kan. 1976) ("[A] ‘conspiracy’ in violation of the Sherman Act is not established by mere proof of joint undertaking or concerted action.") (citations omitted).
Second, Aya fails to sufficiently dispute that "[t]here is no evidence that any companies other than AMN were involved in or even knew in advance about the termination of Aya's collaborations with AMN." Doc. No. 150-1 at 22; see also id. at 23 (not disputing that "AMN unilaterally determined not to continue extending to Aya the benefits of the AV relationship"). Aya offers evidence that AMN has taken measures to enforce its non-solicitation provisions, including by initiating "baseless" litigation. See id. at 22. But efforts by AMN to enforce the non-solicitation provisions against other agencies in the past have nothing to do with those agencies jointly agreeing to retaliate against Aya in any way. Hammes involved competitors agreeing to stifle competition from another competitor and is therefore distinguishable on this basis as well.
Third, neither the Supreme Court nor the Ninth Circuit has held so-called "no-poaching" agreements to be per se illegal under the antitrust laws. Moreover, this case involves no such thing. A non-solicitation agreement is not synonymous with a no-poaching agreement. A no-poaching agreement refers to an agreement between competing employers "not to solicit, recruit, hire without prior approval, or otherwise compete for employees." See Competitive Impact Statement at 1, United States v. Knorr-Bremse AG, et al. , No. 1:18-cv-00747, 2018 WL 2283110 (D.D.C. April 3, 2018), Doc. No. 3. In contrast, a non-solicitation agreement generally refers to an agreement between two parties not to solicit each other's employees or customers.
Aya erroneously cites United States v. eBay, Inc. , 968 F. Supp. 2d 1030, 1038-39 (N.D. Cal. 2013), and In re High-Tech Empl. Antitrust Litig. , 856 F. Supp. 2d 1103, 1122–23 (N.D. Cal. 2012), for the proposition that "a naked agreement among employers not to solicit one another's employees is a per se violation of Section 1." Opp. at 27. Both cases, confronted with motions to dismiss, deferred ruling on whether the per se rule applies until summary judgment. See eBay , 968 F. Supp. 2d at 1039 ; In re High-Tech Empl. Antitrust Litig. , 856 F. Supp. 2d at 1122.
The Court is mindful that the United States Department of Justice ("DOJ") has stated its intention "to bring criminal, felony charges against culpable companies and individuals who enter into naked No-Poach Agreements." Id. at 10-11 (citation omitted). However, DOJ's policy is not binding authority and the non-solicitation provisions that Aya challenges here are clearly not naked no-poach agreements, but rather are ancillary provisions in agreements between collaborating healthcare staffing agencies to meet customer demand. See, e.g. , Braynin Decl., Exs. 1 and 2 (Aya's AV agreements with AMN). Aya's own expert, Dr. Rothman, admits that such ancillary provisions can protect firms against risks that would otherwise be present and impede healthcare staffing agencies from collaborating to provide hospital customers with the travel nurse services that they demand. See Markham Decl., Ex. 81 at 87-88. Indeed, Aya's AV agreement with AMN clearly shows that AMN is subject to a similar non-solicitation provision [Redacted]. Braynin Decl., Ex. 1 at AMN0000102619. It is also noteworthy that Aya does not argue the non-solicitation provisions prevent it and other agencies from "conducting general advertising to which AMN employees may respond" or hiring AMN employees. Id. at AMN0000102620. Under these circumstances, the Court cannot conclude that the non-solicitation covenants that Aya complains of are agreements between competitors to pursue ends "that would always or almost always tend to restrict competition and decrease output." Business Electronics , 485 U.S. at 723, 108 S.Ct. 1515. See also infra at 1331–32.
In sum, Aya is not entitled to retaliatory damages under Hammes. Accordingly, summary judgment in favor of AMN is appropriate as to Aya's claim for retaliatory damages under Section 1 of the Sherman Act.
2. Easily Terminable Contracts
AMN next argues that retaliatory damages are not recoverable by Aya under Section 2 of the Sherman Act because AMN contractually reserved the right to terminate the AV agreements with Aya. See MSJ Mem. at 17-18. AMN further argues that without a contractual right to receive spillover assignments, Aya is left with a "dubious claim" for relief as a result of AMN's unilateral refusal to deal, see id. at 18-21, which does not meet an exception to the Colgate doctrine. See id. at 24-27. Aya contends that even if Hammes does not apply, " Aspen Skiing affords an independent ground for [retaliatory damages]." Opp. at 23.
The Sherman Act "does not restrict the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal ...." United States v. Colgate & Co. , 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992 (1919). This is referred to as the Colgate doctrine and it recognizes that "[t]he freedom to switch suppliers lies close to the heart of the competitive process that the antitrust laws seek to encourage." NYNEX Corp. v. Discon, Inc. , 525 U.S. 128, 137, 119 S.Ct. 493, 142 L.Ed.2d 510 (1998).
The Court finds that the Colgate doctrine bars Aya's request for retaliatory damages. For the reasons already discussed with respect to Aya's claim for exclusionary damages, the Court is not persuaded that retaliatory damages are unavailable as a matter of law because Aya's AV agreements have termination clauses. Rather, retaliatory damages are unavailable because the alleged damages do not flow from anticompetitive conduct in violation of the Sherman Act. AMN correctly notes that the Colgate doctrine protects the freedom of contract, even for firms with substantial market power. See MSJ Mem. at 24-25 (citing Colgate , 250 U.S. at 307, 39 S.Ct. 465 ). AMN argues that its refusal to deal with Aya by continuing their AV relationship is not anticompetitive, i.e. , such conduct has not harmed competition in a relevant market. The Court agrees.
Aspen Skiing Co. v. Aspen Highlands Skiing Corp. does not change the outcome that AMN lawfully refused to deal further with Aya. That case involved two ski companies that successfully offered skiers joint passes to both companies' ski mountains until the defendant ski company decided to end the relationship. 472 U.S. 585, 587-95, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). When the plaintiff ski company tried to recreate the multi-mountain pass by giving its customers vouchers equal to a price of a full day's lift ticket, the defendant refused to honor the vouchers. Id. at 593-94, 105 S.Ct. 2847. The Court held that termination of the relationship was anticompetitive, as the evidence supported an inference that the defendant "was not motivated by efficiency concerns and that it was willing to sacrifice short-run benefits and consumer goodwill in exchange for a perceived long-run impact on its smaller rival." Id. at 611, 105 S.Ct. 2847.
This case does not involve a unilateral refusal to deal motivated by solely by the goal of stifling competition. At most, Aya claims that AMN refused to continue the AV relationship with Aya because Aya would no longer abide by the parties' non-solicitation provision in their AV agreements. See, e.g. , Opp. at 23 ("AMN, which holds monopoly positions, cut off Aya to retaliate against it and deter others from emulating its example."). But even Aya's expert, Dr. Rothman, recognizes that such contractual restraints are important to guiding a collaboration between otherwise competing healthcare staffing agencies. See Markham Decl., Ex. 81 at 87-88. Without being able to provide for such contractual restraints, the companies would likely be less willing or unwilling to deal with other agencies to supply travel nurses to hospitals which, as Aya also recognizes, already experience a "chronic shortage of nurses." Opp. at 31. The reason is because, as the undisputed facts clearly demonstrate, competitiveness in the healthcare staffing industry depends in large part on an agency's ability to establish networks that include recruiters, travel nurses, AVs, and of course, hospital customers. See Markham Decl., Ex. 81 at 59-61. AMN, a player in the industry for over thirty years, guards its investments and establishes AV relationships with only those agencies that agree, inter alia , not to abuse the relationship by proactively raiding AMN's employees, AVs, and customers. Aya is therefore not entitled to retaliatory damages under Aspen Skiing , as there is no dispute that AMN had a legitimate reason to refuse to deal further with Aya. See Novell, Inc. v. Microsoft Corp. , 731 F.3d 1064, 1075 (10th Cir. 2013) ("Put simply, the monopolist's conduct must be irrational but for its anticompetitive effect."). Accordingly, summary judgment in favor of AMN is appropriate as to Aya's claim for retaliatory damages under Section 2 of the Sherman Act.
Moreover, as discussed below, Aya is not entitled to retaliatory damages under Aspen Skiing because there is insufficient evidence from which a jury could find that AMN is a monopolist or even a near-monopolist in the relevant markets that Aya identifies for its Section 2 claims.
3. Monopolization and Attempted Monopolization
AMN next asserts that Aya is not entitled to retaliatory damages because Aya did not suffer those damages due to AMN acting as a monopolist or near-monopolist. See MSJ Mem. at 21-24. Aya responds that it has proffered evidence that shows it suffered damages as a result of AMN's exercise of monopoly or near-monopoly power in the market for travel nurses. See Opp. at 33-35.
In deciding whether a plaintiff was injured by a defendant's anticompetitive conduct, the focus is whether the injury results from harm to competition—not the elimination or reduction of competition with rivals, but harm to consumer welfare. See Rebel Oil Co., Inc. v. Atlantic Richfield Co. , 51 F.3d 1421, 1433 (9th Cir. 1995) ("[R]eduction of competition does not invoke the Sherman Act until it harms consumer welfare.") (citation omitted). Consumer welfare is maximized when economic resources are allocated to their best use and consumers are assured competitive prices and quality of goods or services. Id. (citations omitted). "Accordingly, an act is deemed anticompetitive under the Sherman Act only when it harms both allocative efficiency and raises the prices of goods above competitive levels or diminishes their quality." Id. (emphasis in original, citation omitted). For a firm unilaterally to raise prices above competitive levels, it must have sufficient market power to restrict its output, thereby restricting market-wide output and increasing market-wide prices. See id. (citing Phillip Areeda & Donald F. Turner, Antitrust Law ¶ 501, at 322 (1978)). "Market power" refers to a firm's "ability to raise prices above those that would be charged in a competitive market." National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma , 468 U.S. 85, 109 n.38, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984). "Monopoly power" generally refers to a firm's large degree of market power that allows it "to control prices or exclude competition." United States v. E.I. du Pont de Nemours & Co. , 351 U.S. 377, 391, 76 S.Ct. 994, 100 L.Ed. 1264 (1956). Market power can be demonstrated by "direct evidence of the injurious exercise of market power," such as restricting output and charging supracompetitive prices, or by circumstantial evidence: a well-defined relevant market, defendant's dominant share of that market, and the existence of significant barriers to entry and expansion. See Rebel Oil , 51 F.3d at 1434 (citations omitted).
The Court finds Aya has failed to show as a matter of law that it suffered retaliatory damages as a result of AMN exercising its monopoly or market power. First, as AMN correctly notes, Dr. Rothman computed Aya's retaliatory damages on a nationwide basis, even though he did not opine that AMN has a nationwide monopoly or even a high nationwide market share. See MSJ Mem. at 22 (citing Fitzsimmons Decl., Ex. 13 at 107:20-108:7). Aya does not specifically address this point other than to insist that it has offered sufficient evidence of AMN's monopoly power in several regional, not national, markets. See Opp. at 24, 34-35 (citing Markham Decl., Ex. 81 at 94-100, Table 3, in support of its argument that sufficient evidence supports that it "suffered compensable antitrust injury in the form of exclusionary and retaliatory losses because of AMN's attempted and actual monopolization").
Aya effectively concedes that Dr. Rothman has not attributed all of the retaliatory damages to AMN exercising its monopoly power in regional markets by refusing to deal with Aya. There is no nexus between, on one hand, AMN's alleged monopoly or near-monopoly market shares in certain regional markets, and on the other, Aya's lost profits resulting from AMN's termination of the AV relationship that covered their collaboration to provide travel nurses to hospitals around the nation. And Aspen Skiing is distinguishable, as that case involved a ski company suffering damages as a result of a larger ski company monopolizing the market for downhill skiing services in Aspen, Colorado by ending a long-standing collaboration for no legitimate business reason other than to stifle competition. Here, Aya is not seeking lost profits attributable to AMN ending its AV relationship with Aya in certain regional markets for the purpose of monopolizing travel nurse services in those markets.
Furthermore, the Court will not infer monopoly power or sufficient market power solely from Dr. Rothman's market share calculations for AMN. AMN again correctly points out that for Aya's Section 2 claim, Dr. Rothman calculates market shares for regions that are "far below anything that might be actionable." MSJ Mem. at 22-24. For the markets in which AMN is alleged to have monopoly power, see Doc. No. 37 at 75, AMN did not have a market share of even 50% according to Dr. Rothman. See Fitzsimmons Decl., Ex. 14, Exhibit V-2. Case law holds that a market share of less than 50 percent is presumptively insufficient for purposes of determining whether a firm has monopoly power. See Rebel Oil , 51 F.3d at 1438 (collecting cases). Similarly, the Court will not infer the requisite durable monopoly power here where there are low barriers to entry and expansion, for "[a] mere showing of substantial or even dominant market share alone cannot establish market power sufficient to carry out a predatory scheme." Id. at 1439 ("The plaintiff must show that new rivals are barred from entering the market and show that existing competitors lack the capacity to expand their output to challenge the predator's high price."). While Aya argues that market barriers are high, see Opp. at 34, Dr. Rothman identified only two barriers to entry and expansion: access to key inputs and brand recognition. See Markham Decl. Ex. 81 at 53-54. A nursing shortage may prove to be a peculiar market barrier, but the same cannot be said with respect to brand recognition, which is typically important in many industries.
In any event, evidence of Aya's tremendous success and dramatically increasing number of placements demonstrates that barriers to expansion are low. See Doc. No. 150-1 at 1-10. For example, it is undisputed that Aya has grown dramatically since 2013, as shown by its rapid growth in profits and travel nurse placements. See Doc. No. 150-1 at 1-9. On the other hand, Aya has come forward with no evidence of would-be rivals passing on opportunities to enter the market or existing rivals lacking the capacity to expand output to challenge AMN. Under these circumstances, there is insufficient evidence from which a reasonable juror could find that "new rivals are barred from entering the market and [ ] existing competitors lack the capacity to expand their output to challenge [AMN]." Rebel Oil , 51 F.3d at 1438.
Nor will the Court infer that AMN has sufficient market power for purposes of Aya's attempted monopolization claim or that AMN has harmed competition in any relevant market. In addition to the same list of states identified as relevant markets for purposes of Aya's monopolization claim, Aya identifies eight other states and five metropolitan service areas. See Doc. No. 37 at 71. AMN argues that its market share in the additional markets are too low, and that Dr. Rothman fails to consider some of these additional markets in analyzing any potential impact on competition. See MSJ Mem. at 23. Aya does not respond to this point other than to insist that the proffered evidence supports its monopolization claim. See Opp. at 34-35. Nor does Aya address any actual harm to competition, which would be direct evidence of AMN's market power. See Rebel Oil , 51 F.3d at 1433.
Even though AMN has over 30% market shares in some of the alleged markets, as a matter of law the Court cannot infer that AMN has market power due to such shares, for market shares alone do not demonstrate that a firm has durable market power. See id. at 1439. Rather, Aya must show that market barriers impede entry from new firms and obstruct the expansion of output from existing rivals, and that it has failed to do.
Moreover, Aya's failure to identify any harm to competition in several of the relevant markets that it has identified for both its monopolization and attempted monopolization claim is another independent reason why its Section 2 claims for retaliatory damages fail as a matter of law. Evidence of harm to the competitive process would serve to make the requisite showing of AMN's market power, as well as the separate essential showing that AMN's conduct does not merely harm competitors, but competition generally. See id. at 1433. A review of Dr. Rothman's report supports this finding, as he identifies as purported harm to competition a few instances in which Aya won business away from AMN by offering customers lower rates after Aya reneged on its non-solicitation agreement with AMN. See Markham Decl., Ex. 81 at 77-82.
Isolated incidents of Aya's successful bidding do not demonstrate that AMN's prices were supracompetitive market-wide. Dr. Rothman repeatedly opines in his report that AMN imposes restraints that "make it more difficult for its rivals" to compete. See, e.g. , Markham Decl., Ex. 81 at 82-84. But Aya's "raising rivals' costs" theory of harm is insufficient, for the "reduction of competition does not invoke the Sherman Act until it harms consumer welfare." Rebel Oil , 51 F.3d at 1433 ; see also Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp. , 959 F.2d 468, 494 (3d Cir. 1992) (it is "no concern of the antitrust laws" that a practice may consign even an entire "class of competitors ... to competitive oblivion," unless "consumers [a]re also hurt because of diminished competition.").
In an effort to demonstrate harm to competition, Aya relies on Dr. Rothman's study that purportedly shows prices, or "bill rates," are higher in relevant markets in which AMN has a 30% or higher market share. See Opp. at 30 (citing Markham Decl., Ex. 82). Such markets include four of the six markets that Aya identified for both its monopolization and attempted monopolization claims, as well as four of the additional 12 markets that Aya identified for the attempted monopolization claim. See Doc. No 37 ¶¶ 331, 360. Aya therefore effectively concedes that it has failed to identify any harm to competition in 10 of the 18 geographic markets it has identified for its Sherman Act claims.
As for the eight markets in which AMN has a 30% market share or higher, the Court fails to see how any reasonable juror could find such evidence is indicative of harm to competition as a result of either the non-solicitation provisions in the AV agreements, or AMN's refusal to deal with Aya. Dr. Rothman calculates AMN's market share by referring to "all placements made directly by AMN, all placements made through AMN's MSPs, and all placements made through AMN's platforms if the placements are not made through another provider MSP." Markham Decl., Ex. 81 at 52. But neither Dr. Rothman nor Aya explains how this data is relevant later in analyzing the significance of bill rates increasing in markets where AMN has a 30% or higher market share. Aya's theory of harm to competitors and competition is that AMN's non-solicitation provisions in AV agreements raise rivals' costs so that AMN is able to charge supracompetitive prices in certain regional markets. See Opp. at 30 ("AMN's trade restraints have ... blocked rivals' access to key inputs ... and sales outlets ... result[ing] in less competitive pressure in the markets for travel-nurse services and higher prices for these service, and the effect is most pronounced in those markets where AMN has the strongest presence."); see also Markham Decl., Ex. 82 at 7 ("... AMN's trade restraints harm competition by making it more difficult for AMN's rivals to compete.").
There are a few problems fatal to Aya's theory of harm to competition. First, this theory of harm has no nexus with Aya's claim for retaliatory damages; the alleged harm to competition, i.e. , supracompetitive pricing, purportedly results from the effect of AMN's non-solicitation provisions, not the retaliation of AMN terminating Aya's AV relationship. See Opp. at 30-31. Second, Aya provides no support whatsoever that such non-solicitation provisions (or any contract provision for that matter) raise rivals' costs. Third, even crediting the unsupported assertion, AMN's direct placements have no bearing on Aya's theory of harm to competition by supracompetitive prices since those placements do not involve AMN collaborating with and imposing non-solicitation covenants on AVs; the same is true for the placements that AMN makes through its own MSP programs and platforms. Yet, Dr. Rothman does not account for this in his study, leading the Court to view his opinion on this issue unreliable under the Daubert standard and of marginal relevance without understanding the underlying data more clearly.
Fourth, the mere fact that market bill rates are higher in certain markets where AMN's market share is 30% or higher does not speak to whether AMN, the alleged monopolist or near-monopolist, is charging supracompetitive prices, as opposed to rivals charging higher prices. But that question is precisely what Section 2 concerns—the threat of monopolists or near-monopolists engaging in conduct unfairly allowing it to reap supracompetitive profits by charging high prices or restricting output, while successfully fending off competitors from expanding output to challenge the dominant firm and eat away at the monopoly profits. It is axiomatic that "[a]ntitrust claims must make economic sense." Adaptive Power Sols., LLC v. Hughes Missile Sys. Co. , 141 F.3d 947, 952 (9th Cir. 1998) (affirming summary judgment for defendants where plaintiff's "argument makes no economic sense") (citing Eastman Kodak , 504 U.S. at 468, 112 S.Ct. 2072 ). Aya's theory of harm to competition makes no "economic sense" upon closer examination and is unsupported by the evidence.
Also insufficient is Aya's argument that AMN's trade restraints, when aggregated, have a "marketwide reach" that hinder rivals from soliciting AMN's employees, AVs, and hospital customers. Opp. at 32. Still, Aya must demonstrate harm to competition, as the Court will not give Aya a pass on the requirement. Doing so would inappropriately condemn facially innocuous non-solicitation provisions as per se illegal under the Sherman Act or inherently anticompetitive.
Lastly, even where Aya has proffered some evidence that AMN has a market share of 30% or higher, AMN's refusal to deal with Aya is not actionable as anticompetitive conduct. AMN is correct that "even a monopolist ... is free to refuse to deal or cooperate with rivals for legitimate business reasons" because a refusal to deal is not actionable unless the refusal "would make no economic sense but for its tendency to eliminate or lessen competition." MSJ Mem. at 24 (emphasis omitted, citing Novell , 731 F.3d at 1075 ). As discussed supra , AMN's refusal to deal with Aya for not abiding by the agreed-upon non-solicitation provision qualifies as a legitimate business decision. Non-solicitation provisions like the types at issue serve to protect AMN from its collaborating AVs taking advantage of the relationship by pilfering AMN's employees, AVs, and customers.
4. Conclusion
In sum, no reasonable jury could find that Aya is entitled to retaliatory damages for its claims under Sections 1 and 2 of the Sherman Act. First, Aya is not entitled to relief under Hammes because there is no evidence of a cartel of healthcare staffing agencies that all agreed to refrain from soliciting or hiring each other's employees or to retaliate against Aya for reneging on such an agreement. Furthermore, Aya has failed to proffer evidence that AMN has sufficient market power in the various markets identified for Aya's Section 2 claims, or that AMN's conduct has harmed competition. Even where there may arguably be indicia of higher prices in markets where AMN has a 30% or higher market share relative to prices in markets where AMN's share is lower, Aya is still not entitled to retaliatory damages for its Section 2 claims because that evidence does not speak to whether AMN is charging supracompetitive prices in those markets, and in any event, AMN has not committed an actionable unilateral refusal to deal under Aspen Skiing.
Accordingly, the Court GRANTS AMN's motion for summary judgment on Aya's claim for retaliatory damages.
3. Order to Show Cause re: Exclusionary Damages and State Law Claims
The Court finds that Aya has not put forth evidence of AMN's market power or harm to competition sufficient to meet its burden on summary judgment. As such, Aya's claim for retaliatory damages under Sections 1 and 2 of the Sherman Act fail as a matter of law. Given the Court's conclusion that this case does not involve a cartel or a per se illegal agreement, the Court's findings of insufficient market power and harm to competition similarly appear fatal to Aya's claim for exclusionary damages, which the Court understands is redress that Aya seeks for both its Sherman Act Sections 1 and 2 claims. See Opp. at 33, 35. With no federal claim to provide this Court with subject matter jurisdiction under 28 U.S.C. § 1331, the Court would decline to exercise supplemental jurisdiction over Aya's remaining state law claims. Thus, the Court ORDERS the parties to submit supplemental briefing or otherwise show cause on or before June 1, 2020 as to whether summary judgment should be granted in AMN's favor with respect to Aya's Sherman Act Sections 1 and 2 claims for exclusionary damages. The supplemental briefing must be no more than ten pages in length and may cite to documents already filed with the Court, but must not include new exhibits not already filed with the Court.
CONCLUSION
Based on the foregoing, the Court GRANTS AMN's Daubert motion and GRANTS IN PART and DENIES IN PART AMN's motion for summary judgment. The Court also ORDERS the parties to submit supplemental briefing or otherwise show cause on or before June 1, 2020 as to whether summary judgment should be granted in AMN's favor with respect to Aya's Sherman Act Sections 1 and 2 claims for exclusionary damages in light of the Court's findings with respect to market power and harm to competition.