Denver-based DaVita, Inc., and its ex-CEO and chairman, Kent Thiry, have lost their attempt to dismiss the criminal conspiracy charges against them.

On Friday, a federal judge agreed the U.S. Department of Justice had sufficiently alleged that DaVita entered into agreements with competitors that made it more difficult for employees to move between companies. If true, that would violate the century-old Sherman Antitrust Act, which outlaws agreements that unreasonably restrict the market.

The defendants had argued that there was no precedent for using the Sherman Act to criminally prosecute entities for agreements not to solicit each other’s employees. But U.S. District Court Senior Judge R. Brooke Jackson found such alleged conduct clearly fit within existing prohibitions on horizontal market allocation – meaning uncompetitive agreements between rival companies.

“The fact that defendants allegedly allocated the market in a novel way – by using a non-solicitation agreement – does not matter. Defendants had ample notice that entering a naked agreement to allocate the market would expose them to criminal liability, however they did it,” Jackson wrote in a Jan. 28 order.

Cliff Stricklin, an attorney for Thiry, said the defense continues to believe the indictment represents overreach by federal prosecutors.

“It is exceptionally rare for a court to grant a motion to dismiss an indictment, especially since the law requires the court to assume all the allegations in the indictment are true,” he said. “We will show the jury the facts that prove our innocence.”

The penalties for DaVita, a Fortune 500 kidney dialysis company, could be up to $100 million for each count. Thiry could face up to 10 years in prison and a $1 million fine for each offense.

Thiry was the head of DaVita for nearly two decades, beginning in 1999. His political involvement in Colorado has included mulling a run for governor in 2018 and promoting the independent redistricting commissions that redrew congressional and state legislative district boundaries this year. Kaiser Health News reported that in total, Thiry has given at least $5.9 million toward Colorado ballot initiative campaigns since 2011.

Under the prosecution’s narrative, DaVita had agreements with competitors not to solicit or recruit each other’s employees. Allegedly, workers were required to tell their employer if they intended to seek a job with one of the other companies subject to the agreement.

A companion case involving DaVita’s alleged co-conspirator, Surgical Care Affiliates, is pending in a federal court in Texas. Prosecutors referenced an email from an SCA human resources executive to a recruiter saying that DaVita was “off limits.” The CEO of another, unidentified company also reportedly emailed Thiry to say Thiry has “my commitment we discussed that I’m going to make sure everyone on my team knows to steer clear of anyone at DVA [DaVita].”

“If you were looking for a job and you didn’t wanna jump through hoops that the CEOs decided you must jump through to get an offer, all competition ceased,” Justice Department attorney William J. Vigen argued to Jackson in November.

The government charged DaVita and Thiry with “per se” violations of the Sherman Antitrust Act, meaning the alleged actions were so clearly anticompetitive that they fell alongside other established illegal activities, like price fixing. Organizations including the U.S. Chamber of Commerce, Colorado Chamber of Commerce and the National Association of Criminal Defense Lawyers weighed in on behalf of the defendants, pointing out that neither courts nor Congress had clearly defined non-solicitation agreements as unlawful.

“Defendants are right that there are no cases perfectly analogous to this case,” Jackson conceded in his order. “But that is the nature of Section 1 of the Sherman Act: as violators use new methods to suppress competition by allocating the market or fixing prices these new methods will have to be prosecuted for a first time.”

The judge clarified that the government, at trial, will need to prove that the defendants actually had such a non-solicitation agreement, and to prove beyond a reasonable doubt that its purpose was to restrict competition in the labor market.

The case is United States v. DaVita Inc. et al.