Healthy Judicial Skepticism in Class Action over “Anti-Poaching” Agreement Among Tech Titans

Guest Commentary

Mark J. Botti, Akin Gump Strauss Hauer & Feld LLP

On January 26, 2012, a skeptical federal judge in California heard arguments in In Re High Tech Employee Antitrust Litigation, on why a follow-on class action alleging an “overarching conspiracy” to suppress employee wages between Apple, Inc., Google, Inc, and other high-tech companies regarding bi-laterally negotiated non-solicitation agreements should proceed.  The action was filed on the heels of civil settlements with the DOJ in which the Defendants admitted no wrongdoing.

DOJ had alleged that the Defendants entered into six separate bilateral agreements spread out over a 2 ½ year period agreeing not to “cold call” each others’ skilled high-tech employees.  In each instance, the alleged agreements involved only two companies, and with one exception DOJ pleaded nothing more than an agreement not to “cold call.”  The Defendants settled with DOJ, admitting no liability, and in essence agreed not to enter into these types of agreements and end any such relationships that might exist.

The Plaintiffs parroted the claims alleged in the DOJ complaint, but also went beyond it and alleged that the bilateral agreements formed an interconnected web of agreements to create an overarching conspiracy among all of the companies to eliminate competition for skilled labor and to reduce employees’ compensation and mobility.  They further alleged that common board representations between the companies – Google CEO Eric Schmidt on Apple’s board, along with Arthur D. Levinson, who sat on the boards of both Apple and Google –also facilitated the conspiracy.  Defendants moved to dismiss, arguing the implausibility of this theory.  The judge appears inclined to dismiss, albeit without prejudice.

This case is an example of the metamorphosis of the traditional antitrust “follow on” class actions from their well-rooted grounds seeking compensation for proven victims of a government prosecuted violation into a feeding frenzy of multi-district, often multi-class, actions launched at the slightest whiff of a government investigation.  U.S. competition laws are often enforced in the first instance by the DOJ and FTC – federal agencies charged with statutory authority to exercise discretion to investigate and prosecute substantive violations (DOJ alone investigates and prosecutes criminal violations) of the antitrust laws.  Historically, antitrust class actions mostly followed a successful government conviction for price-fixing.  The clear benefit to the private plaintiff is that if the antitrust defendant loses or admits the government case, the plaintiff is not required to prove the merits of the case because any judgment is admitted as prima facie evidence of an antitrust violation.

One can readily accept the soundness of an easily obtained civil remedy for the victims of an antitrust felony that the defendants has admitted or a civil antitrust violation the government has successfully litigated.   The filing of follow on private suits in these circumstances is clearly contemplated by the federal antitrust laws.  Today, however, mere DOJ and FTC antitrust investigations, even in their pendency, may set off a rush to file actions before charges have been made, much less proven.  This race to the courthouse is induced by the enticing lure of treble damages and attorney’s fees, class-wide damages, and other aspects of the federal antitrust laws that place financial pressure on defendants to settle these suits for large sums before adjudication.  The putative class action in the High Tech Employee litigation devolves the follow on class action species one step further to claims not even alleged in the government suits, much less admitted or litigated.

These new breeds of follow on antitrust cases are suspect because they do not carry with them any admission of liability or judicial imprimatur.   Fortunately, the Supreme Court in its Twombly decision has recognized that the courts cannot passively allow antitrust cases to proceed without serious judicial review early in the proceeding without unreasonably putting pressure on cost-conscious defendants to settle even “anemic cases.”  In Twombly, the Court charged trial courts to dismiss poorly grounded conspiracy charges:  “[O]only by taking care to require allegations that reach the level suggesting conspiracy that we can hope to avoid the potentially enormous expense of discovery in cases with no “ ‘reasonably founded hope that the [discovery] process will reveal relevant evidence’ to support a §1 claim.”  Subsequent to Twombly there are signs of federal district courts acting on the Supreme Court’s admonition.  And, in a non-antitrust case, Wal-Mart v. Dukes, the Court tightened class action certification standards.  In the High Tech Employee litigation, we see another positive sign of the courts accepting responsibility to respond to the rash of private follow-on suits in the court’s recognition that the plaintiff had in fact brought a different case than that which the DOJ had brought.

3 thoughts on “Healthy Judicial Skepticism in Class Action over “Anti-Poaching” Agreement Among Tech Titans

  1. Pingback: Judge Won’t Make FTC Enforce Google Buzz Settlement | FeSaadmag.com

  2. Pingback: Update: Federal Judge Refuses to Dismiss “Follow-on” Antitrust Class Action « The Legal Pulse

  3. Pingback: Update: U.S DOJ & California Pursue Antitrust Claim vs. eBay on “Anti-Poaching” Agreement « The Legal Pulse

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