Bloomberg News

Ex-Adobe Computer Scientist Seeks to Undo Hiring Accord

June 19, 2014

Apple Inc. (AAPL:US), Google Inc. (GOOG:US), Intel Corp. (INTC:US) and Adobe Systems Inc. (ADBE:US) are seeking final approval of a $324.5 million settlement of claims they schemed to not recruit each other’s workers, as one ex-employee is set to tell a judge the companies are getting off too cheaply.

The objection by the former Adobe computer scientist, who was one of the lead plaintiffs in a group case representing 64,000 workers, is the last significant hurdle for the accord. The case, which began in 2011, had become an embarrassment for some of Silicon Valley’s biggest companies by revealing behind-the-scenes brokering among top executives at the expense of their workers.

The employees settled in May for about a 10th of the $3 billion they planned to seek at a trial that was set to start four days later. Under federal antitrust law, damages won at a trial might have been tripled. The settlement equals 0.4 percent of the four companies’ combined quarterly revenue.

Michael Devine, who left ex-Adobe in 2008, participated in mediation sessions to resolve the lawsuit. That was until about May 11, when he wrote a letter to U.S. District Judge Lucy H. Koh, who must approve the agreement, explaining that lawyers left him in the dark during the final negotiations that produced the accord. Koh is scheduled today to hear arguments over Devine’s objections.

Average Payout

Devine contends the settlement lets the companies off the hook too cheaply and is unlikely to reform their behavior, Daniel Girard, his lawyer, said in an interview. If workers hadn’t settled for an average payout of about $3,572, they could have won damages at trial of as much as $141,331 each, according to Girard.

“There is a tendency to approve these class settlements if they are not on their face egregiously unreasonable,” Orly Lobel, a law professor at the University of San Diego, said in an e-mail.

“On the other hand, there is a concern here that these were egregious practices that lasted for a long while, that the orchestrators of these agreements at the top of these strong companies were fully aware of their potential unlawfulness, so a judge might well feel that there should be another opportunity to look more closely at what was going on,” Lobel said.

The plaintiffs, who include software and hardware engineers, programmers, digital artists and other technical staff, alleged their employers conspired from 2005 to 2009 to suppress their pay.

E-Mails Cited

Among the e-mails cited as proof of collusion was one from Google Chairman Eric Schmidt to Apple co-founder Steve Jobs in 2007 explaining Google’s terminating “within the hour” a recruiter who contacted an Apple employee in violation of the companies’ “do not call policy.” Jobs responded to the message with a smiling emoticon.

“Apologies again on this and I’m including a portion of the e-mail I received from our head of recruiting,” Schmidt, who was then chief executive officer of Google and an Apple board member, wrote to Jobs. “Should this ever happen again please let me know immediately and we will handle. Thanks!! Eric.”

Adobe, based in San Jose, California, said in a statement it doesn’t think its recruiting policies have diminished competition for talent in the marketplace.

“Adobe strongly denies that it violated any laws or engaged in any wrongdoing,” the company said. “Nevertheless, we have elected to settle this matter in order to avoid the uncertainties, cost and distraction of litigation.”

The judge has approved a settlement with three companies named in the original complaint. Intuit Inc. pledged to pay $11 million, and Walt Disney Co. (DIS:US)’s animation studio Pixar and visual-effects specialist Lucasfilm Ltd. agreed to pay $9 million.

Devine figured the early settlements would “set the stage” to extract a much bigger agreement from the remaining defendants, Girard said. Lawyers for the class “would say that’s what happened, and Michael disagrees,” he said.

All of the companies agreed in 2010 to curtail anti-competitive practices as part of a settlement of an antitrust lawsuit brought by the U.S. Justice Department. Unlike the government’s case, in which no fines were paid, the employees’ lawsuit focused on monetary damages.

Lawyers for the plaintiffs argued in a court filing that Devine’s objection isn’t accounting for the risk, delays, and inevitable appeals involved with going to trial. The $324.5 million represents the second-largest such agreement ever of employee class-action claims, behind only one other case fought in Washington against the U.S. government which settled only after 23 years of litigation, according to the filing.

Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, and Matt Kallman, a spokesman for Mountain View, California-based Google, declined to comment on the settlement. Chuck Mulloy, a spokesman for Santa Clara, California-based Intel, also declined to comment.

The case is In re High-Tech Employee Antitrust Litigation, 11-cv-02509, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg


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