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A conspiracy or a lawsuit all about money?


Google and Adobe are just two of the companies battling against claims that companies wouldn’t poach staff.

Google and Adobe are just two of the companies battling against claims that companies wouldn’t poach staff.

Google and Adobe are just two of the companies battling against claims that companies wouldn’t poach staff.

Evidence produced against Apple, Google and some Silicon Valley cohorts about an alleged conspiracy not to recruit each other’s employees has sparked new lawsuits claiming other tech and entertainment companies engage in the same anti-competitive conduct.

Pixar president Edwin Catmull acknowledged the use of such agreements when he was questioned by lawyers for thousands of employees who sued his company, along with Apple, Google and four others, in 2011. An unapologetic Catmull said he was trying to help the industry survive by stopping hiring raids, remarks that triggered a trio of complaints in the last three months against animation studios in California.

Likewise, a Google document revealed in the case from three years ago – the search engine owner’s 2007 “Restricted Hiring” and “Do Not Cold Call” lists of all the companies it agreed not to recruit from – has resurfaced as key evidence in complaints brought in the last two months against Oracle, Microsoft and IAC/InterActive.

The new complaints come as Apple, Google, Intel and Adobe Systems face a trial over the original lawsuit in April with potential damages of $9bn (€7.1bn) because they failed to win approval to settle the claims for $324.5m (€250m).

Litigation is “mushrooming,” Orly Lobel, a University of San Diego law professor, said. “Once there’s a visible test case, you look around to see where else it’s happening, and the next cases are easier to put together.”

 The Apple-Google case, in its novel application of traditional price-fixing claims to US labour markets, is serving as a template for a new wave of group lawsuits, according to Lobel.

Newer cases are assigned to US District Judge Lucy Koh in San Jose, California, who issued a critical ruling last year allowing the original one to advance as a class action. In August she took the unusual step of rejecting the proposed settlement amount as too small, citing “ample evidence of an overarching conspiracy.”

The first new complaint was filed a month later, naming DreamWorks Animation SKG, Walt Disney Company and three of its units and two Sony units as defendants. Employees of those companies alleged that Steve Jobs, who figures as a central player in the Silicon Valley case as co-founder of Apple, helped establish the animation industry no-poaching pact in his role as co-founder of Pixar.

The 64,000 workers covered by the original case include software and hardware engineers, programmers and other technical staff. The newer cases were filed on behalf of employees ranging from managers at Oracle, the database and enterprise-software maker, to digital artists at the animation studios.

Following a US Justice Department investigation, Apple, Google, Intel, Adobe, Intuit and Pixar agreed in 2010 to end illegal fixing and suppression of compensation.

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Walt Disney’s Pixar and Lucasfilm, which agreed along with Intuit to settle the 2011 case for $20m (€16m) last year, are the only companies being sued again.      The alleged conspiracy by the animation companies dates back to the mid-1980s, when George Lucas, the founder of Lucasfilm, sold his computer division to Jobs, who had left his position as Apple’s ceo and started Pixar.

Lucas, best known for producing the ‘Star Wars’ series with special effects created by his Industrial Light & Magic division, also known as ILM, reached an agreement with Jobs’s deputy, Catmull, to not solicit each other’s employees, according to the complaint.

The accord was eventually extended to other studios, according to the lawsuit. The animation companies contend the new lawsuits are “belated attempts to spin off fresh litigation from a Department of Justice investigation that began more than five years ago, is now well over” and never led to any government action against most of the employers now being targeted, according to a court filing.

Lawyers for the studios told Koh at a recent hearing they will seek to have the cases dismissed because the employees waited too long to sue. Koh questioned why the new cases are coming now. She asked plaintiffs’ lawyers if they were motivated by the “big number” in the proposed settlement of the original case, which included attorney fees of $81m (€65m).

While Rod Stone, a lawyer for DreamWorks, argued it’s significant that the Justice Department “took no action” against the company in 2010 after it turned over documents, Daniel Small, an attorney for employees, contended that “the Justice Department doesn’t prosecute every case”.

The attorney said there’s “strong evidence” from the original case that DreamWorks was involved in the conspiracy to suppress animators’ salaries.

“We have quoted documents that were produced that indicate in Mr Catmull’s view – the president of Pixar – that there was a conspiracy,” Small said. Mr Small was referring to a 2007 email Catmull wrote to former Disney Chairman Dick Cook. In the email, Catmull objected to film director Robert Zemeckis hiring employees from DreamWorks at a “substantial salary increase” for a new special effects company under Disney in San Rafael, California, because it “messes up the pay structure”.

“We have avoided wars up in Northern California because all of the companies up here – Pixar, ILM, DreamWorks, and a couple of small places – have conscientiously avoided raiding each other,” Catmull wrote to Cook.

Asked about the email during his January 2013 deposition, Catmull said he saw it as his duty to insulate Northern California film companies from salary bidding wars that drive costs up, move the animation jobs overseas, and destroy the US industry.

“Like somehow we’re hurting some employees? We’re not,” Catmull said. “While I have responsibility for the payroll, I have responsibility for the long term also,” Catmull said. “I don’t apologise for this. This was bad stuff.”

Matthew Lifson, a spokesman for Glendale, California-based DreamWorks, declined to comment on the lawsuits. Matt Kallman, a spokesman for Mountain View, California-based Google, and Charles Sipkins, a spokesman for Culver City, California-based Sony Pictures Entertainment, didn’t immediately respond to email and phone messages seeking comment.

Disney, which owned now-defunct ImageMovers, one of the defendants, didn’t immediately respond to phone and e-mail messages seeking comment.

 The lawsuits against Oracle and Microsoft reference an internal Google memo that “Google has agreed” to a “restricted hiring” protocol for Microsoft, Novell, Oracle and Sun Microsystems, which was acquired by Oracle in 2010.

The Google document, which lays out separate hiring restrictions for different tiers of employees, goes on to identify more than a dozen other companies on “Do Not Cold Call” and “Sensitive” lists.

Deborah Hellinger, a spokeswoman for Oracle, said the suit against the company is “beyond preposterous”.

“All the parties investigating the issue concluded there was absolutely no evidence that Oracle was involved,” Hellinger said. Microsoft argued in a court filing that the alleged “overarching conspiracy” in Silicon Valley didn’t involve the Redmond, Washington-based company and “lacks the nexus with Mr Jobs” that the original case depends on.

Apple, Google, Intel and Adobe are appealing Judge Koh’s rejection of their proposed settlement. If the case goes to trial, plaintiffs have said they would seek about $3bn (€2.4bn). Under federal antitrust law, damages awarded by a jury may be tripled.

Matthew Cantor, an antitrust lawyer not involved in the litigation, said he doesn’t believe the newer no-poaching cases will lead to a settlement as big as the one workers arrived at in the first case.

“You’d think that the class action lawyers have already gone after the largest pot,” he said. The more recent cases, going after “pockets here and pockets there”, are about lawyers seeking “more dollars with little effort”, he said.

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