Overview
On October 6, 2023, Cohen Milstein and co-counsel filed an antitrust class action on behalf of naval architects and marine engineers employed by the nation’s largest military shipbuilders and naval engineering consultancy firms, including General Dynamics, Huntington Ingalls Industries, and Gibbs & Cox, against those Defendants and Faststream Recruitment, a recruiting firm that served these companies and aided in their anticompetitive behavior.
Plaintiffs, who are highly skilled and specialized professionals responsible for the architectural and engineering design of all manner of U.S. Navy and Coast Guard vessels and onboard ship systems, allege that starting in at least 2000, and likely dating back to the 1980s, Defendants adhered to an informal “gentlemen’s agreement” among themselves not to recruit each other’s naval engineers. Faststream allegedly abided by these “no poach” rules and helped facilitate unlawful information exchanges among the Defendants that helped them enforce their no-poach conspiracy. As a result, Defendants effectively suppressed the compensation of Plaintiffs and potential class members in violation of antitrust law.
Plaintiffs seek to enjoin Defendants from continuing their unlawful agreement and to recover hundreds of millions of dollars in actual, compensatory, and treble damages.
Case Background
Naval architects and marine engineers (collectively, “naval engineers”) design and build the nation’s warships and other “public fleet” vessels. While some naval engineers work directly for the federal government, most are employed by a group of private contractors and consulting firms who are hired by the Navy, the Coast Guard, and other federal and state entities.
Naval architects are responsible for naval vessels’ design, including the form, structure, and stability of hulls. These responsibilities require specialized knowledge of hydrostatics, hydrodynamics, vessel motion physics, mechanics, strength of materials, and design of structures. Marine engineers design onboard ship systems, including those related to propulsion, power generation, air conditioning, ventilation, water distillation, cargo handling, steering, and fuel. Marine engineers include workers with some variation of the job title “marine engineer” as well as specialized electrical, HVAC, structural, and other engineers whose work focuses on marine applications.
In addition to developing the technical skills and experience necessary to perform this highly specialized work, naval engineers generally must also possess at least a bachelor’s degree in engineering, a security clearance, and U.S. citizenship.
Numbering fewer than 10,000 naval engineers nationwide, they frequently work together on the same projects, and are geographically concentrated—primarily in the Washington, D.C./Northern Virginia metro area and the Norfolk/Newport News area.
Plaintiffs allege that starting in at least 2000, and likely dating back to the 1980s, Defendants adhered to an informal “gentlemen’s agreement” among themselves not to recruit each other’s naval engineers.
This no-poach conspiracy imposed clear rules on its participants:
- Defendants were prohibited from affirmatively recruiting from one another—with some going so far as maintaining “do not hire” lists—but were permitted to hire naval engineers who initiated contact.
- Defendants concealed their agreement throughout the conspiracy period by never committing it to writing and instead maintaining it as an unwritten “gentlemen’s agreement” among themselves and their executives.
When working on the same project, Defendants did enter into explicit written agreements not to recruit from rivals—usually as a provision of “teaming agreements” delineating Defendants’ work on a particular contract.
Furthermore, Plaintiffs allege that many Defendants maintain offices for senior managers practically side-by-side on the same street abutting the Washington Navy Yard. The “incestuous” relationships among industry managers enables Defendants to monitor each other’s hiring practices, reinforce the agreement in direct communications, and punish firms who violated the agreement.
As a result, Defendants’ no-poach arrangement has caused a persistent shortage of qualified naval engineers. In a competitive labor market, strong demand for a small pool of qualified workers invariably drives up compensation. The persistent shortage of qualified naval engineers, and Defendants’ failure to respond to that shortage with substantial increases in compensation, is strong economic evidence of a conspiracy.
Defendants’ no-poach agreement is a classic per se unlawful restraint of trade in violation of the Sherman Act, 15 U.S.C. § 1. Together, Defendants’ unlawful and anticompetitive conduct has cost thousands of highly skilled naval engineers hundreds of millions of dollars in compensation. Plaintiffs, on their own behalf and on behalf of the Class, bring this antitrust action to enjoin Defendants from continuing their unlawful agreement and to recover actual, compensatory, and treble damages, as well as costs, attorneys’ fees, and interest. Plaintiffs bring this lawsuit to vindicate their rights to have their compensation determined by a competitive market.
Case name: Scharpf, et al. v. General Dynamics Corp., et al., Case No. 1:23-cv-013272, United States District Court for the Eastern District of Virginia