Affirmative Acts Tolling Rule: Unwritten “No-Poach” Conspiracies and the Sherman Act Statute of Limitations

Introduction

This commentary examines the United States Court of Appeals for the Fourth Circuit’s decision in Susan Scharpf & Anthony D’Armiento v. General Dynamics Corporation, et al. (4th Cir. May 9, 2025). The case arose from a putative class action by two former naval engineers who alleged that the nation’s largest shipbuilders and naval-engineering consultancies entered into an unwritten “no-poach” gentlemen’s agreement to suppress wages by agreeing not to recruit each other’s employees. The district court dismissed their Sherman Act claims as time-barred, holding that a “non-ink-to-paper” agreement cannot toll the Act’s four-year statute of limitations through fraudulent concealment. On appeal, the Fourth Circuit reversed, establishing that unwritten conspiracies—when actively concealed—qualify as “affirmative acts” of fraudulent concealment sufficient to toll the statute of limitations.

Summary of the Judgment

The Fourth Circuit reversed the district court’s dismissal and remanded the case for further proceedings. The panel, led by Judge Wynn and joined by Judge Benjamin, held that:

• Under Fourth Circuit precedent, a plaintiff may toll the Sherman Act’s four-year statute of limitations if the defendants engaged in affirmative acts of fraudulent concealment.
• An unwritten, “non-ink-to-paper” conspiracy can constitute such an affirmative act, as conspirators who avoid creating documentary evidence are no less culpable than those who destroy written records.
• The plaintiffs satisfied Federal Rule of Civil Procedure 9(b) under a relaxed standard for alleged fraud by omission, providing quotes from industry insiders and describing how the no-poach agreement was transmitted orally and obliquely.
• At the pleading stage, the question of whether the plaintiffs exercised due diligence or were placed on inquiry notice turns on factual development rather than dismissal.

Chief Judge Diaz dissented, arguing that allegations of an unwritten conspiracy simply recite the existence of a self-concealing scheme and do not show separate affirmative acts of concealment beyond the conspiracy itself.

Analysis

1. Precedents Cited

• Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, Inc., 71 F.3d 119 (4th Cir. 1995): Adopted the intermediate “affirmative-acts” standard, requiring proof that defendants took active steps to hide their antitrust violations.
• Holmberg v. Armbrecht, 327 U.S. 392 (1946): Recognized the federal fraudulent-concealment tolling doctrine as a matter of equity.
• Texas v. Allan Construction Co., 851 F.2d 1526 (5th Cir. 1988): Exemplified the affirmative-acts standard by holding that “secret agreements and covert … sessions” can toll limitations.
• Pocahontas Supreme Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211 (4th Cir. 1987): Held that mere failure to admit wrongdoing in response to a vague inquiry is insufficient; did not establish a blanket bar on unwritten conspiracies.
• GO Computer, Inc. v. Microsoft Corp., 508 F.3d 170 (4th Cir. 2007): Distinguished between wrongdoing and outright fraud in responses to direct antitrust inquiries.

2. Legal Reasoning

The Fourth Circuit’s opinion rests on three pillars:

1. Fraudulent Concealment Framework
   The Sherman Act’s four-year limitations period may be tolled if a plaintiff shows (1) fraudulent concealment by the defendant, (2) failure to discover the concealed wrongdoing within the statutory period, and (3) exercise of due diligence. Marlinton adopted the intermediate “affirmative-acts” standard, under which concealment need not be separate from the conspiracy but must be active rather than passive.
2. Unwritten Agreements as Affirmative Acts
   Conspirators who “are careful not to write down evidence of their antitrust violations in the first place” are no different from those who write and then shred records. Permitting unwritten conspiracies to evade tolling would reward the most secretly organized wrongdoers, contrary to the purpose of fraudulent concealment.
3. Particularity and Intent under Rule 9(b)
   Although allegations of omission ordinarily require more exacting pleading, allegations of fraudulent concealment by omission or stealth proceed under a relaxed standard. Here, the complaint quoted multiple insiders who referred to a “gentlemen’s agreement,” described “non-ink-to-paper” transmissions, and detailed coded language and phone calls enforcing the no-poach regime. Taken cumulatively, these allegations put defendants on clear notice and support an inference of intent to conceal.

3. Impact on Future Cases

This ruling clarifies that:

• Courts must focus on whether defendants took affirmative steps to avoid detection, not on whether a conspiracy was memorialized in writing.
• Plaintiffs alleging long-running, secret conspiracies can toll the antitrust limitations period by showing that conspirators avoided leaving a paper trail and used coded or oral instructions.
• At the motion‐to‐dismiss stage, questions of due diligence and inquiry notice typically resist resolution and belong to fact-finders rather than dismissal.

The decision may encourage plaintiffs to gather contemporaneous witness accounts and insider testimony when writing is absent. It also alerts corporate counsel that avoiding paper trails will not insulate antitrust conspiracies from tolling doctrines.

Complex Concepts Simplified

• Statute of Limitations: A deadline (four years under the Sherman Act) after which enforcement actions are barred.
• Fraudulent Concealment: A legal doctrine that pauses the limitations clock when a defendant actively hides or misleads about wrongdoing.
• Affirmative-Acts Standard: Requires proof that defendants took specific steps—beyond mere silence—to hide their antitrust conspiracy.
• Rule 9(b) Relaxed Pleading: When alleging concealment, courts allow broader, narrative‐style allegations because documentary evidence usually lies with defendants.

Conclusion

The Fourth Circuit’s ruling in Scharpf v. General Dynamics establishes a new, clear precedent: an unwritten antitrust conspiracy, deliberately concealed by avoiding any written record, qualifies as an “affirmative act” of fraudulent concealment that can toll the Sherman Act’s statute of limitations. Plaintiffs who unearth secret, oral agreements through industry insiders may proceed past motions to dismiss, leaving the questions of due diligence and discovery to be resolved on the facts. This decision strengthens the tolling doctrine’s purpose—preventing cunning conspirators from hiding behind limitations periods—and provides crucial guidance for both antitrust plaintiffs and corporate defendants in evaluating the risks of secret, unwritten agreements.