Judge tosses Silicon Valley wage “conspiracy” settlement as too low

On Friday, a federal judge in San Jose rejected a proposed $324.5 million settlement that would have resolved a class-action antitrust lawsuit against Google, Apple and other high-tech companies. They are alleged to have conspired to lock technically skilled workers in their jobs by agreeing not to compete over them.

The settlement in the nearly three-year-old suit had been agreed upon by the companies and plaintiffs in April, a month before the class-action case was to go to trial. But U.S. District Judge Lucy Koh, to the surprise of many, ruled that the agreement's price tag was simply too low to fall "within the range of reasonableness."

The tech companies are said to have enforced their anti-poaching agreements not only through Do Not Call lists and targeted retaliatory strikes, but, stressed the judge, the far-reaching wrath of Steve Jobs, the late Apple CEO.

While Koh found that other tech company leaders, including then-Google CEO Eric Schmidt and Intuit chairman Bill Campbell were "key players" in the agreements, the judge singled out Jobs as "a, if not the, central figure in the alleged conspiracy."

Koh described Jobs as not merely an enforcer of the non-compete bans but, as a leader at both Apple and Pixar, someone responsible for helping them spread throughout the industry.

Jobs' influence seemed to matter a great deal to Koh. At issue in the over-arching case have been alleged bilateral agreements between Pixar and Lucasfilms, Apple and Adobe, Apple and Google, Apple and Pixar, Google and Intuit, and Google and Intel. In rejecting this settlement, the judge argued that given the likelihood that Jobs operated similarly at both Apple and Pixar, this agreement should have been commensurate with a settlement reached between the plaintiffs and Pixar, Lucasfilms and Intuit last July.

Had this settlement gone through, attorneys for the plaintiffs would have been awarded up to a quarter of the total, or about $81 million, with the class's representatives getting $80,000 for pursuing the case. The rest of those harmed would have received about $3,750.

Koh dedicated five pages of her 32-page ruling to detailing the widespread view in the industry that Jobs was the driving force behind the anti-poaching agreements. She cited Schmidt's deposition testimony that Jobs "believed that you should not be hiring each others', you know, technical people." The judge also pointed to the recollection by Google co-founder Sergey Brin of a threat made by Jobs: "[I]f you hire a single one of these people that means war."

And Jobs' style of corporate combat seemed to become company policy. Koh pointed to an e-mail from Apple's head of human resources: "Please add Google to your 'hands-off' list. We recently agreed not to recruit from one another so if you hear of any recruiting they are doing against us, please be sure to let me know."

The case is a remarkable one, in part because of the realization that Silicon Valley, so often talked about as an intensely meritocratic place where skilled workers are empowered to bring their talents to the most attractive bidder, seems to have been governed instead by the idea of limiting workers' options.

Indeed, what Koh describes are outcomes that were often less about merit than raw winning. She cites a comment made in 2005 by then-Adobe CEO Bruce Chizen: "If I tell Steve it's open season (other than senior managers), he will deliberately poach Adobe just to prove a point."

And Jobs, warned Chizen, knew exactly how to convince employees to come to his side -- by deploying "extraordinary packages and Steve wooing."

Nancy Scola is a reporter who covers the intersections of technology and public policy, politics, and governance.
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