Four major tech companies including Apple and Google have agreed to pay a total of $324 million to settle a lawsuit accusing them of conspiring to hold down salaries in Silicon Valley, sources familiar with the deal said, just weeks before a high-profile trial had been scheduled to begin.
Tech workers filed a class action lawsuit against Apple Inc., Google Inc., Intel Inc. and Adobe Systems Inc. in 2011, alleging they conspired to refrain from soliciting one another’s employees in order to avert a salary war. They planned to ask for $3 billion in damages at trial, according to court filings. That could have tripled to $9 billion under antitrust law.
The case has been closely watched due to the potentially high damages award and the opportunity to peek into the world of Silicon Valley’s elite.
The case was based largely on e-mails in which Apple’s late co-founder Steve Jobs, former Google CEO 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 then forwarded Schmidt’s note to a top Apple human resources executive with a smiley face.
Another exchange shows 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 plaintiff 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.
Trial had been scheduled to begin at the end of May on behalf of roughly 64,000 workers. Spokespeople for Apple, Google and Intel declined to comment.
An Adobe representative said that the company denies it engaged in any wrongdoing, but settled “in order to avoid the uncertainties, cost and distraction of litigation”. An attorney for the plaintiffs, Kelly Dermody of Lieff Cabraser Heimann & Bernstein, in a statement called the deal “an excellent resolution”.
Corporate defendants in antitrust cases often agree among themselves what portion each will contribute towards 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 US 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.
Any settlement must be approved by US District Judge Lucy Koh in San Jose, California. A hearing on final approval is scheduled for next week. (Reuters)