Last Friday Judge Lucy H. Koh issued an unusual ruling in a somewhat unusual case. The ruling was unusual in that the court rejected a proposed settlement in the hi-tech wage collusion class action case. Judge Koh denied a request to preliminarily approve a $324.5 million deal to end the antitrust class action against Google Inc., Apple Inc., Intel Corp. and Adobe Systems Inc. The suit alleged the companies agreed to not compete for each others’ high-tech employees such as software engineers and computer scientists. The court found the proposed settlement too low and indicated it should be at least $55 million more. The civil case followed a similar suit by the Antitrust Division charging a per se violation for agreeing not to compete, but the Division’s case was brought as a civil action.
Judge Koh was troubled by the fact that the settlement called for disproportionately less from the defendants than settlements reached earlier with Intuit Inc., Lucasfilm Ltd. and Pixar Animation Studios Inc. This didn’t seem right to the court because the $324.5 agreement was reached after the court had granted class certification, which should have upped the ante for the hold out defendants. The court explained: “Counsel’s sole explanation for this reduced figure is that there are weaknesses in plaintiffs’ case such that the class faces a substantial risk of non-recovery. However, that risk existed and was even greater when plaintiffs settled with the settled defendants a year ago, when class certification had been denied.” More details about the case and settlement rejection can be found here: (NY Times); here (WSJ); and here (Reuters).
The Class Action Followed USDOJ Antitrust Division’s Earlier Civil Suits
The plaintiffs’ case followed a civil lawsuit filed by the Antitrust Division in 2011 that was settled by consent decree The defendants were perhaps fortunate that the Division chose to proceed civilly for collusion that in other contexts might have resulted in criminal prosecutions. The complaint charged a per se violation of the Sherman Act stating: “These no cold call agreements are facially anticompetitive because they eliminated a significant form of competition to attract high-tech employees, and, overall, substantially diminished competition to the detriment of the affected employees who were likely deprived of competitively important information and access to better job opportunities.” One example from the complaint of the agreements reached is the Apple-Google agreement:
17. Beginning no later than 2006, Apple and Google agreed not to cold call each other’s employees. Senior executives at Apple and Google reached an express no cold call agreement through direct and explicit communications. The executives actively managed and enforced the agreement through direct communications.
18. The Apple-Google agreement covered all Google and all Apple employees and was not limited by geography, job function, product group, or time period. Moreover, employees were not informed of and did not agree to this restriction.