MANHATTAN (CN) — Former employees of Saks & Company tried to sell the Second Circuit Monday on claims that the department store had no-poach agreements with luxury brands that created artificial labor demand and allowed Saks to pay them less.
The plaintiffs say Louis Vuitton, Loro Piana, Gucci, Prada, Brunello Cucinelli and Fendi conspired with Saks beginning in 2014. The brands agreed not to hire applicants who worked at Saks within the previous six months without permission from Saks management. Because of the lack of competition spurred by the conspiracy, the ex-employees say they received lower pay.
Chief U.S. District Judge for the Eastern District of New York Margo Brodie dismissed the case in March 2023, finding the four-year statute of limitations for federal antitrust claims had passed and that the employees failed to establish a claim on which relief could be granted.
Arguing the plaintiffs' appeal to the Second Circuit, attorney Daniel Walker of the Washington-based firm Berger Montague argued that competition among the luxury brands took a wage-lowering hit, too, thanks to the agreements.
“If there had been competition for Saks employees with the brand defendants, that would have caused Saks to raise their pay — which would have in turn caused the brand defendants to raise their pay,” Walker said, “perhaps to prevent employees from moving — or to prevent Saks from poaching those employees.”
Walker said Judge Brodie failed to apply the proper legal standard — the "per se" rule — to gauge whether Saks' no-poach agreements had an anticompetitive effect. To reject the standard, the court had to find that the employees’ complaint established the conspiracy was reasonably necessary to some pro-competitive collaboration among the luxury brands.
But the court didn't make that finding, the employees argue. “Rather, it concluded that the no-hire scheme was merely related to a potentially pro-competitive collaboration — here, brand appellants selling their products and maintaining concessions in Saks stores,” the employees say in their brief.
U.S. Circuit Judge Maria Araujo Kahn, a Joe Biden appointee, wondered if the luxury brands’ agreements to sell products in Saks stores had any effect on whether the “per se” rule should be applied.
“Does it matter that there was a vertical component — not just a horizontal agreement, between Saks and the name brands — but a vertical agreement in that they leased space in the Saks stores and have this leasing type of other arrangement?” Kahn asked Monday.
Walker said the deal to sell merchandise wasn't a factor in the labor dispute.
“The restraint is among the defendants to be horizontal competitors for labor in the market,” Walker said. “The verticality here doesn’t apply to the labor market.”
The luxury brands meanwhile said the court was right to apply the "rule of regal" legal standard examining both the positive and negative effects of an agreement before determining whether it violates antitrust laws — in other words, whether a practice's anticompetitive harm is outweighed by its effectiveness in promoting competition.
Attorney Mark Andrew Perry of Washington firm Weil, Gotshal & Manges said the collaboration among his clients was a positive outweighing any negative effect of the agreements with Saks.
“What did the brand defendants get? They got reduced rates within Saks’ doors and they got access to the Saks’ customers, those are vertical considerations,” Perry said. “And in exchange, they gave up the ability to recruit Saks employees. That is still part of the same vertical relationship that is in the same market.”
The U.S. government filed an amicus brief in support of the plaintiff employees and agreed that the lower court should have applied the per se rule.
“Each of the agreements between Saks and the brand defendants is horizontal,” Justice Department attorney Matthew Waring said Monday. “They are concededly competitors for these luxury retail employees and they are agreeing to a restraint that affects how they will compete for these workers.”
U.S. Circuit Judge Sarah A.L. Merriam, a Joe Biden appointee, and U.S. Circuit Judge Pierre N. Leval, a Bill Clinton appointee, also joined the panel.
Neither party's attorneys responded to a request for comment.
Follow @NikaSchoonover
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