Apple, Google agree to settle lawsuit alleging hiring, salary conspiracy


Google, Apple, Intel and Adobe Systems announced Thursday, April 24, 2014, they have settled a class-action lawsuit alleging they conspired to prevent their engineers and other highly sought technology workers from getting better job offers from one another. (Alan Diaz/AP)
April 24

Just weeks before a high-profile trial was to begin, four major tech companies — including Apple and Google — have agreed to settle a lawsuit accusing them of conspiring to hold down salaries in Silicon Valley.

The settlement was disclosed in a court filing Thursday. It did not spell out terms, but people familiar with the deal later told Reuters that the companies agreed to pay a total of $324 million.

In 2011, tech workers filed a class-action lawsuit against Apple, Google, Intel and Adobe Systems, alleging that they conspired to refrain from soliciting one another’s employees to avert a salary war.

A trial had been scheduled to begin at the end of May on behalf of about 64,000 workers. Had the case gone to trial, plaintiffs would have asked a jury to award about $3 billion in damages, according to court filings. Under antitrust law, that could have then been tripled to $9 billion.

The case has been closely watched because of the potentially high damages award and a steady disclosure of e-mails in which Apple’s late co-founder Steve Jobs, former Google chief executive Eric Schmidt and some of their Silicon Valley rivals hatched plans to avoid poaching each other’s prized engineers.

In one e-mail exchange after a Google recruiter solicited an Apple employee, Schmidt told Jobs that the recruiter would be fired, court documents show. Jobs forwarded Schmidt’s note to a top Apple human resources executive with a smiley face.

Another exchange reveals Google’s human resources director asking Schmidt about sharing its no-cold-call agreements with competitors. Schmidt, now the company’s executive chairman, advised discretion.

“Schmidt responded that he preferred it be shared ‘verbally, since I don’t want to create a paper trail over which we can be sued later?’ ” he said, according to a court filing. The HR director agreed.

The companies had acknowledged entering into some no-hire agreements but disputed the allegation that they had conspired to drive down wages. Moreover, they argued that the employees should not be allowed to sue as a group.

Rich Gray, a Silicon Valley antitrust expert in private practice, said the companies had an incentive to avoid trial because their executives’ e-mails would make them look extremely unsympathetic to a jury. However, the plaintiffs’ attorneys risked an appeals court saying the engineers could not sue as a group at all.

“An appellate court could say, ‘Hey, we just don’t buy that,’ ” Gray said.

Spokespeople for Apple, Google and Intel declined to comment. An Adobe representative said the company denies engaging in any wrongdoing but settled “in order to avoid the uncertainties, cost and distraction of litigation.” In a statement, Kelly Dermody of Lieff Cabraser Heimann & Bernstein, an attorney for the plaintiffs, called the deal “an excellent resolution.”

Corporate defendants in antitrust cases often agree among themselves what portion each will contribute toward a settlement, said Daniel Crane, a professor at the University of Michigan Law School. One likely formula would be to divide the damages based on how many employees each company has in the class, he said.

Apple, Google, Adobe and Intel in 2010 settled a Department of Justice probe by agreeing not to enter into such no-hire deals in the future. The four companies had since been fighting the civil antitrust class-action.

Some of the aggrieved employees in the class-action lawsuit worked at software maker Intuit and two filmmakers now owned by Walt Disney — Pixar Animation and Lucasfilm. Intuit, Pixar and Lucasfilm previously negotiated a $20 million settlement of the claims. A hearing on final approval of the Intuit and Disney deals is scheduled for next week.

The plaintiffs and the companies will disclose principal terms of the settlement by May 27, according to Thursday’s court filing, although it is unclear whether that will spell out what each company will pay.

Some Silicon Valley companies refused to enter into no-hire agreements. Facebook Chief Operating Officer Sheryl Sandberg, for instance, rebuffed an entreaty from Google in 2008 that they refrain from poaching each other’s employees.

— Reuters

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