Fourth Circuit Decides “Non-Ink-to-Paper” Agreement Among Defense Contractors May Toll Statute of Limitations for Antitrust Claims

On May 9, 2025, the U.S. Court of Appeals for the Fourth Circuit published a significant decision in Scharpf v. General Dynamics Corp., reviving a dormant class action lawsuit against a group of the country’s largest naval defense contractors. The plaintiffs, two former naval engineers, alleged that the defendants maintained an unwritten “no-poach” agreement not to recruit each other’s employees, thereby suppressing labor mobility and wages for over two decades. While the district court dismissed the claims as time-barred under the Sherman Act’s four-year statute of limitations, the Fourth Circuit reversed, holding “that an agreement that is kept ‘non-ink-to-paper’ to avoid detection can qualify as an affirmative act of concealment” sufficient to toll the statute of limitations.

The case is notable for both its subject matter – a purported industry-wide, decades-long no-poach conspiracy among the largest players in the $40 billion shipbuilding industry – as well as its reaffirmation and arguable expansion of a relatively plaintiff-friendly fraudulent concealment standard. In adopting a practical view of what constitutes an “affirmative act” of concealment, the Fourth Circuit aligns itself with a growing consensus among federal courts and signals that unwritten antitrust conspiracies cannot escape judicial scrutiny merely because they were designed to leave no paper trail.

Background

The plaintiffs, Susan Scharpf and Anthony D’Armiento, are former naval engineers who worked for various naval shipbuilding companies between 2002 and 2013. In 2023, they brought a putative class action against “many of the largest shipbuilders and naval-engineering consultancies in the country,” alleging that the defendants had entered into an unwritten agreement to not actively recruit each other’s employees. This alleged no-poach conspiracy, which the plaintiffs claim “began as early as 1980 and was ubiquitous by 2000,” purportedly suppressed wages and prevented labor mobility across the industry.

The plaintiffs only discovered the alleged conspiracy in April 2023, following an investigation centered on insider witness accounts. According to the complaint, the conspiracy was deliberately concealed through a “non-ink-to-paper agreement,” which consisted of verbal agreements, passed down through oral instruction and enforced through coded language and informal executive communications. The plaintiffs argued that such tactics justified tolling the statute of limitations under the doctrine of fraudulent concealment.

The district court disagreed. In granting the defendants’ Rule 12(b)(6) motion, the court held that merely keeping an agreement unwritten did not constitute an affirmative act of concealment and dismissed the suit as barred by the statute of limitations. The plaintiffs appealed.

Fourth Circuit Decision

The Fourth Circuit reversed and remanded. Writing for the majority, Judge James Wynn concluded that the district court misapplied the standard for fraudulent concealment. Under “cornerstone” Fourth Circuit precedent in Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, a plaintiff can toll the statute of limitations by alleging that the defendants engaged in affirmative acts intended to conceal their illegal conduct. In Scharpf, the majority held that maintaining a “non-ink-to-paper” agreement specifically for the purpose of avoiding detection qualified as such an affirmative act.

The court rejected the defendants’ argument that “a secret agreement… is not an affirmative act of concealment” and emphasized that “neither logic nor our precedent supports distinguishing between defendants who destroy evidence of their conspiracy and defendants who carefully avoid creating evidence in the first place.” Indeed, the latter may be even more effective at concealing misconduct. According to the court, the defendants’ alleged strategy of enforcing the no-poach agreement exclusively through oral instruction, euphemistic language (such as referring to other firms as “friends”), and private phone calls amounted to a deliberate scheme to avoid scrutiny. These tactics, if proven, reflected more than mere silence or passive nondisclosure and instead amounted to affirmative efforts to suppress evidence of the conspiracy.

Importantly, the court also applied a relaxed pleading standard under Rule 9(b), which governs fraud allegations. Recognizing the challenges plaintiffs face in pleading fraud-by-omission claims without access to discovery, the court held that the plaintiffs’ detailed factual allegations, “the bulk of [which] are quotes from interviews with industry insiders,” constituted particularity sufficient to survive a motion to dismiss.

Context in Federal Antitrust Law

Scharpf reinforces the Fourth Circuit’s alignment with the intermediate “affirmative-acts standard” for fraudulent concealment – a standard increasingly favored by federal courts. The First, Fourth, Fifth, Sixth, and Ninth circuits have adopted this standard holding that concealment need not be separate from the underlying antitrust violation, so long as the defendants undertook deliberate acts to keep the conspiracy hidden. For instance, the Fourth Circuit cited for support Texas v. Allan Construction Co., in which the Fifth Circuit held that covert price-fixing meetings could qualify as acts of fraudulent concealment, and Conmar Corp. v. Mitsui & Co., in which the Ninth Circuit emphasized that plaintiffs need not show additional deception beyond the conspiracy itself if the antitrust violation was secretly executed.

The Fourth Circuit again declined to adopt the “inapplicable” “self-concealing standard” enforced in the Second, Eleventh, and D.C. circuits, which allows tolling whenever “deception or concealment is a necessary element of the antitrust violation.” The court also declined to follow the Tenth Circuit’s lonely adherence to the restrictive “separate-and-apart” standard that allows tolling only on a showing of active concealment distinct from the underlying misconduct. Scharpf explained that the self-concealing standard is “inapplicable” to cases involving alleged price-fixing because “price-fixing is not inevitably deceptive or concealing.” Without discussion, the majority summarily dismissed the separate-and-apart standard as “too stringent and indeterminate.”

Notably, the Fourth Circuit also distinguished its ruling from its earlier, arguably more defendant-friendly decisions in Pocahontas Supreme Coal Co. v. Bethlehem Steel and Robertson v. Sea Pines Real Estate, in which the court had rejected tolling arguments based on an alleged “failure to admit wrongdoing” despite little to no initiative by plaintiffs to uncover such wrongdoing. In Scharpf, by contrast, the court held that defendants engaged in active concealment through coordinated non-documentation, covert verbal policies, and indirect enforcement mechanisms, all of which are hallmarks of intentional secrecy rather than mere passive non-disclosure.

Diaz Dissent

Chief Judge Albert Diaz dissented, arguing that the majority effectively adopted the lenient self-concealing standard rather than applying the Fourth Circuit’s established affirmative acts standard for fraudulent concealment. He contended that the plaintiffs failed “to allege discrete and particularized acts by the defendants to conceal the conspiracy” beyond “general descriptions” of the conspiracy itself. According to the dissent, simply labeling the no-poach agreement as unwritten or secret was insufficient to constitute an affirmative act of concealment, as the concealment was inherent in the alleged unlawful conduct. Diaz warned that the majority’s approach risks collapsing the distinction between conspiratorial conduct and concealment, thereby undermining the statute of limitations and permitting time-barred claims to proceed based solely on the inherently secretive nature of the original violation.

The Impact

The Scharpf decision is poised to create ripple effects in antitrust and employment litigation, particularly as courts and enforcers increasingly scrutinize collusion in labor markets.

Most immediately, the decision reinforces that the statute of limitations will not shield conspirators who hide their agreements through sophisticated concealment tactics. Employers in high-skill or high-security industries – especially those with limited pools of specialized labor – should pay close attention to this ruling. “Gentlemen’s agreements” and “non-ink-to-paper agreements” among competitors, even if never memorialized or acknowledged publicly, may still allow tolling for actionable antitrust claims.

More broadly, the ruling validates plaintiffs’ reliance on insider testimony and circumstantial evidence to plead fraudulent concealment in complex conspiracies. In practical terms, the Fourth Circuit may have lowered the procedural barriers for employees and other would-be plaintiffs to challenge long-running but unwritten anticompetitive arrangements.