Silicon Valley no poaching lawsuit settles

Published On 02/05/2014 | By Donny Low | Cartels, Litigation

The class action lawsuit against some of Silicon Valley’s biggest companies alleging a conspiracy to not “cold call” employees has been settled for a reported US$324 million.

The lawsuit followed a DOJ investigation and enforcement actions against companies including Google, Adobe, Intel, Intuit and Pixar. The DOJ cases were settled in 2010 with no admissions of liability nor monetary penalties. Each company undertook to not enter into agreements preventing recruiting or hiring of employees for 5 years.

The case revolved around agreements in 2005 to 2007 said to have been made between various pairs of the companies. The agreements are said to have been that each company would not “cold call” the other’s employees. The companies are alleged to have kept lists reflecting the agreements such as a “Do Not Cold Call” list for Google and a “Companies that are off limits” list in the case of Adobe.

The case has been closely watched as it involves agreements made directly between senior executives including Steve Jobs, Eric Schmidt and Sergey Brin. The emails and evidence in the case have been fascinating, drawing a lot of attention by revealing the personalities and personal relationships of those involved.

Brin’s evidence was that Jobs had threatened him, saying “if you [Brin] hire a single one of these people that means war”, with “war” referring to patent litigation. There was evidence that Google sought Jobs’ permission to hire a senior executive and engineering team in Paris. When Jobs emailed, saying “We’d strongly prefer that you not hire these guys”, Google abandoned the hires.

Emails were also revealed showing Jobs complaining to Schmidt about Google which resulted in a Google recruiter being fired. When Jobs was told of this, Jobs forwarded the email with a smiley face. When shown this email during his deposition, Brin is reported to have said “Wow, Steve used a smiley. God, I never got one of those.” There was also evidence from Sheryl Sandberg that, shortly after leaving Google to become CEO of Facebook in 2008, she refused to enter into any agreement to limit recruiting from Google despite being urged to do so.

The class action lawsuit was comprised of about 64,000 high tech employees. The trial was scheduled to begin on 27 May 2014 and the plaintiffs were reportedly claiming damages of US$3 billion. The plaintiffs had already reached settlement with Pixar and Lucasfilm for US$9 million and Intuit for US$11 million. The most recent settlement covers the remaining defendants and will be presented to the US District Court for the Northern District of California for approval.

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About The Author

Donny is a Senior Associate in the Sydney office of King & Wood Mallesons. He's practised antitrust law in the US, still follows American politics and plays cricket on the weekends.

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