US naval shipbuilders must face employees’ wage claims, judge rules

By Mike Scarcella

WASHINGTON, Dec 1 (Reuters) - Shipbuilding giants General Dynamics (GD.N), Huntington Ingalls (HII.N) and others have failed to convince a U.S. judge to dismiss allegations that they conspired for years to suppress compensation for naval architects and marine engineers.

Alexandria, Virginia-based U.S. District Judge Anthony Trenga ruled on November 26 that a proposed class action can move forward accusing the shipbuilders of keeping wages low through a long-running agreement not to recruit each other’s employees.

Trenga had earlier dismissed the 2023 antitrust lawsuit, saying it was filed too late to comply with a four-year statute of limitations for antitrust claims. The judge at the time had not yet ruled on the substance of the allegations. A U.S. appeals court in May overturned Trenga’s decision, reviving the lawsuit.

Huntington had no immediate comment, and General Dynamics did not immediately respond to a request for comment. The lead attorneys for the plaintiffs declined to comment.

The plaintiffs, a pair of naval architects, contend the companies collectively control about 75% of the U.S. naval engineering market, and had agreed since at least 2000 not to “affirmatively recruit” rivals’ engineers.

The complaint said the alleged pact, involving several other builders and consulting firms, stifled competition for talent and depressed pay in a $30 billion industry employing some 10,000 naval engineers.

The lawsuit claimed the employment scheme cost workers hundreds of millions of dollars in lost compensation.

The shipbuilders and other defendants countered that the plaintiffs lacked evidence to bolster their allegations, and had not shown they were harmed.

Trenga ruled that the allegations, including insider statements and executive interactions, plausibly suggest a wage-fixing conspiracy.

The case is Scharpf v. General Dynamics, U.S. District Court for the Eastern District of Virginia, No. 1:23-cv-01372.

For plaintiffs: Steven Toll and Brent Johnson of Cohen Milstein Sellers & Toll; Shana Scarlett of Hagens Berman Sobol Shapiro; and George Farah of Handley Farah & Anderson

For General Dynamics: David Barger of Greenberg Traurig; and Douglas Litvack and Michael Doornweerd of Jenner & Block

For Huntington Ingalls Industries: Adam Schwartz of A&O Shearman; Sima Namiri-Kalantari and Chahira Solh of Crowell & Moring

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(Reporting by Mike Scarcella)