A U.S. district judge in California rejected a proposed settlement in a class action lawsuit that accuses multiple technology companies of colluding to suppress wages, saying that “the total settlement amount falls below the range of reasonableness.” In re High-Tech Employee Antitrust Litigation, No. 5:11-cv-02509, order at 6 (N.D. Cal., Aug. 8, 2014). The proposed settlement agreement with the defendants Adobe, Apple, Google, and Intel included over $300 million in damages, far short of the $9 billion in damages estimated by the defendants earlier this year. The plaintiffs originally filed suit in California state court for alleged violations of state antitrust law. After the defendants removed the case to federal court, they amended the complaint to add a cause of action under the federal Sherman Act, 15 U.S.C. § 1 et seq.
The plaintiffs are employees of major technology companies, including the four parties to the proposed settlement as well as Intuit, Lucasfilm, and Pixar. The U.S. Department of Justice (DOJ) began investigating many of these companies in 2009, based on allegations that they had entered into agreements with each other not to recruit or hire each other’s employees. The purpose of these schemes was to avoid competition for employees and thereby keep salaries low. As the Wall Street Journal noted at the time, hiring a competitor’s employees, sometimes known as “poaching,” is common in the technology industry. In 2010, the DOJ settled its claims against many of the companies named in the current lawsuit, but the settlement did not include compensation or damages for employees affected by the schemes.
Five software engineers filed suit against the defendants in Alameda County Superior Court in May 2011. The defendants removed the case to federal court several weeks later, and in September 2011 the plaintiffs amended the complaint to include federal antitrust claims. The lawsuit alleged a class of salaried employees who worked for the defendants during the time period from 2005 through 2009, but not retail employees or corporate officers or directors.
The plaintiffs settled with Intuit, Lucasfilm, and Pixar in 2013 for a total of about $20 million. In October 2013, the court certified the class, allowing the case to proceed on behalf of over 60,000 class members against the remaining four defendants of Adobe, Apple, Google, and Intel. The defendants reportedly claimed that damages could be greater than $9 billion, based on a jury demand for $3 billion and treble damages under federal antitrust law.
The remaining defendants entered into a settlement agreement with the plaintiffs, as reported in April 2014, several weeks before the trial had been scheduled to start. The proposed settlement amount totaled $324 million. Federal class action rules require the judge’s approval of any proposed settlement. While the judge approved the 2013 settlement with Intuit, Lucasfilm, and Pixar, she rejected this settlement. She held that the average amount each class member would be likely to receive, roughly $3,750, went against the weight of the evidence presented in the case so far, noting that “the case has progressed consistently in the Class’s favor” since the 2013 settlement. High-Tech, order at 7. She also noted that a $380 million settlement would be proportional to the earlier settlement but expressed concern because the course of the case since then “should have increased, not decreased, Plaintiffs’ leverage.” Id. at 31.
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Photo credit: By Michael from San Jose, California, USA (Santa Clara Valley – California) [CC-BY-2.0], via Wikimedia Commons.