Law360: Shipbuilders Accused Of No-Poach 'Gentlemen's Agreement'

Oct 11, 2023

By Craig Clough ·

Law360 (October 10, 2023, 9:00 PM EDT) -- A pair of former warship designers filed a proposed class action in Virginia federal court against two major shipbuilders for the U.S. military, General Dynamics and Huntington Ingalls Industries, and other companies allegedly involved in a decades-long conspiracy to suppress their wages through a no-poach "gentlemen's agreement."

Plaintiffs Susan Scharpf and Anthony D'Armiento are seeking to represent a class of all people employed as naval architects, marine engineers or both in the United States by most of the defendants from Jan. 1, 2000, through "such date as defendants' unlawful conduct ceases," arguing that a no-poach conspiracy the companies have unofficially engaged in violates the Sherman Antitrust Act.

"Confidential witnesses have confirmed that, for decades, these companies and a close-knit, 'incestuous' community of their executives and managers have maintained an illegal agreement not to actively recruit, or 'poach,' each other's employees," the plaintiffs said Friday. "This unwritten 'gentlemen's agreement' suppressed wages for naval engineers below competitive levels, depriving plaintiffs and the class of hundreds of millions of dollars in compensation."

The defendants include General Dynamics and Huntington, which operate the only five shipyards in the country used to build large military vessels, as well as midsize shipbuilders Bollinger Shipyards and Marinette Marine, according to the suit.

Defendants Gibbs & Cox, JJMA/Serco, BMT Group, CSC/CACI, The Columbia Group, Thor Solutions, Tridentis, and a subsidiary of Huntington Ingalls are specialized engineering consultancies, and defendant Faststream Recruitment is a recruitment agency, according to the suit.

"Behind closed doors, these consultants refer to themselves as the 'Beltway Bandits,'" the suit said. "Most have offices along a single one-mile stretch of M Street Southeast in Washington, D.C., next to the Washington Navy Yard; all have headquarters in northern Virginia, convenient to each other and the Pentagon."

Scharpf was employed as a naval architect at Alion Science & Technology Corp. from 2007 to 2009, as a naval marine engineer with Computer Sciences Corp. from 2009 to 2011, and as a marine engineer with Gibbs & Cox from 2011 to 2013, according to the suit.

D'Armiento was employed as a naval architect by Northrop Grumman Ship Systems at Ingalls Shipyard from 2002 to 2004. NGSS is a former division of Northrop Grumman Corp., which spun off its shipbuilding operations into a new entity, Huntington Ingalls Industries Inc., in 2011, according to the suit.

"Naked 'no-poach' agreements such as the one alleged in this complaint are unlawful per se under the nation's antitrust laws," the workers said in the suit. "The purpose and effect of such agreements is to cheat the highly skilled workers who design the most powerful military fleet in the world out of the competitive wages they deserve."

The plaintiffs also said that "[m]any of defendants' former executives and managers provided direct evidence of the conspiracy. Several former managers directly confirmed that they had a standing 'gentlemen's agreement' not to poach naval engineers from other conspirators (using exactly those words)."

"One industry veteran bluntly admitted that his firm did not 'go after people at other companies,'" the complaint continued. "And a former insider from Huntington Ingalls said that the company maintained a 'do not hire list' — a list of companies from which Huntington Ingalls would not poach naval engineers. Every defendant has been tied to the no-poach agreement by at least one confidential witness."

Instead of recruiting from each other, the defendants instead focus their recruiting efforts on recent college graduates and recently discharged military personnel, according to the suit. This agreement was not put in writing but was understood by all participants in the conspiracy, the plaintiffs said in the suit.

"Defendants' no-poach agreement is a classic per se unlawful restraint of trade in violation of the Sherman Act, 15 U.S.C. [Section] 1," the workers said. "Together, defendants' unlawful and anticompetitive conduct has cost thousands of highly skilled naval engineers hundreds of millions of dollars in compensation."

The suit seeks unspecified damages and that the defendants be enjoined from continuing the no-poach agreement, among other relief.

General Dynamics, Huntington Ingalls Industries and counsel for the plaintiffs did not immediately respond to requests for comment.

The workers are represented by Brent W. Johnson, Robert W. Cobbs, Alison S. Deich and Zachary R. Glubiak of Cohen Milstein Sellers & Toll PLLC, Rio S. Pierce, Steve W. Berman and Elaine T. Byszewski of Hagens Berman Sobol Shapiro LLP, and Rebecca P. Chang, Nicholas Jackson, William H. Anderson and Simon Wiener of Handley Farah & Anderson PLLC.

Counsel information for the defendants was not immediately available.

The case is Susan Scharpf et al. v. General Dynamics Corp. et al., case number 1:23-cv-01372, in the U.S. District Court for the Eastern District of Virginia.

--Editing by Daniel King.

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