Labor & Employment Law Daily Wrap Up, CONTRACT CLAIMS—2d Cir.: No-poach agreement between Saks and luxury brands did not violate Sherman Act, (Mar 17, 2025)

By Seth Abrams, J.D., M.A.

No poach agreement was neither a per se violation of Section 1 nor an unreasonable restraint under rule of reason analysis.

The U.S. Court of Appeals in New York City affirmed the dismissal of a putative class action brought by four luxury retail employees (“LREs”) in favor of defendant-appellees Saks Incorporated, Saks & Company LLC, and Saks Fifth Avenue LLC (collectively, “Saks”) and defendant-appellees Louis Vuitton USA Inc., Loro Piana & C. Inc, Gucci America, Inc., Prada USA Corp., and Brunello Cucinelli USA, Inc. (collectively, “the Brand Defendants.”) The LREs had asserted that a “no-hire” or “no poach” agreement between the parties violated Section 1 of the Sherman Act. The court disagreed, holding that the (1) violation alleged was not a per se violation of Section 1 of the Sherman Act; and (2) any restraint on trade was not unreasonable under rule of reason analysis. The court summarily found the LREs remaining arguments without merit (Giordano v. Saks & Co. LLC, No. 23-600-cv (2d Cir. Mar. 13, 2025)).

Background. The LREs had alleged that Saks and the Brand Defendants had agreed not to compete for employees in the luxury retail industry. To accomplish this, they agreed to not hire LREs who worked at Saks within the six months prior. The LREs had alleged this noncompete agreement depressed LRE compensation and prevented them from advancing their careers and obtaining greater compensation in the industry. The district court had dismissed the claim as untimely in regard to three of the four LREs. As to the fourth, which was timely, it found that per se treatment was inapplicable because they were not “naked” agreements between independent firms. Applying rule of reason analysis, the district court had found that LREs failed to show market wide effect and the assertion that suppressing LRE compensation at a large LRE employer removed significant competitor pressure on the Brand Defendants’ LRE pay was conclusory.

The Justice Department Antitrust Division filed an amicus brief, arguing that the court misapplied the ancillary-restraints doctrine in determining a per se violation and that the LREs claims were timely due to the continuing violation doctrine. The states of New York, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, Oklahoma, Oregon, Pennsylvania, Rhode Island, Washington, and the District of Columbia also filed an amicus brief. The states argued that no-hire agreements are typically anticompetitive and have the effect of depressing wages, limiting worker mobility, and negatively affecting employment benefit packages.

Per seanalysis. The LREs argued on appeal that the “no-hire agreements are per se unlawful because they amount to a horizontal market allocation, dividing LREs among luxury department stores and brands.” The court found that this argument failed for two reasons. First, the amended complaint does not adequately allege the agreement at issue here is a horizontal price-fixing agreement. Instead, it describes a vertical restraint with Saks selling Brand Defendants products in its stores. The court added that the LREs directly participate in the “vertical arrangement” between Saks and the Brand Defendants, “enabling Saks to effectively sell Brand Defendants’ products within its stores.” The “restraint at issue... primarily concerns the vertical relationship between” Saks and the Brand Defendants. The “largely vertical arrangement” between Saks as a retailer and Brand Defendants as suppliers does not bring about per se review, even though Saks and the Brand Defendants also compete horizontally. The court also added that this is not the type of arrangement in which courts have “considerable experience.” As a result, it cannot “readily determine whether the no-hire agreements invariably suppress competition or whether they have procompetitive benefits.” Thus, the court held that per se treatment was inappropriate in this matter.

Rule of reason analysis. The LREs alleged that “Saks is part of a retail conglomerate that employs approximately 40,000 employees worldwide, including thousands of [LREs] at Saks stores in the United States.” Based on this, the LREs assert that the relevant market for Sherman Act purposes is the “national market for luxury retail employees.” However, the court pointed out that the LREs fail to plausibly allege anti-competitive effects on the national LRE market. The amended complaint fails to contain specific allegations regarding the suppression of compensation or mobility among all businesses—nationally—employing LREs. It explained further that the LREs “tacitly acknowledge” that there are “numerous luxury brands and department stores participating in the nationwide LRE market other than Saks” and the Brand Defendants. The complaint lacks a specific allegation that other participants in the relevant market are affected by this arrangement. The LREs fail to allege “an adverse effect on competition market-wide.” In addition, the complaint fails to allege facts to which the court can infer that “the agreements inflict sufficiently substantial harm even on the Saks LREs directly covered by them.” It provides “no meaningful information about the LRE positions at other retailers remaining open to covered LREs.”

The Case is No. 23-600-cv.

Judge: Leval, P.

Attorneys: Innessa Melamed Huot (Faruqi & Faruqi, LLP) for Susan Giordano. Mark Andrew Perry (Weil, Gotshal & Manges LLP) for Saks & Co. LLC. Robert E. Shapiro (Barack, Ferrazzano, Kirschbaum & Nagelberg LLP) for Louis Vuitton USA Inc. Mark H. Hamer (Baker & McKenzie LLP) for Prada USA Corp.

Companies: Susan Giordano; Saks & Co. LLC; Louis Vuitton USA Inc.; Prada USA Corp.

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