Wednesday, May 02, 2012

Conspiracy Allegations Adequately Alleged Against High-Tech Firms

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Software engineers adequately alleged claims against Google, Pixar, and other high-tech companies headquartered in the San Francisco-Silicon Valley area of California for conspiring to fix and suppress employee compensation and to restrict employee mobility through bilateral “Do Not Cold Call” agreements, the federal district court in San Jose, California, has ruled.

The suit follows Department of Justice Antitrust Division civil actions against the firms, which were resolved by consent decrees ( 2011-1 Trade Cases ¶77,477, 2011-1 Trade Cases ¶77,483).

The complaining employees detailed the actors, effect, victims, location, and timing of the six bilateral agreements between the defending employers. They alleged that the employers had the means, the motive, and the opportunity to implement a conspiracy to restrain competition for employees. The defendants’ senior executives allegedly negotiated, executed, monitored, and policed the agreements.

Opportunity to Conspire

The court also noted that overlapping board membership provided an opportunity to conspire and an opportunity for transfer of the requisite knowledge and intent regarding the bilateral agreements. The fact that the identical agreements were reached in secrecy among seven defendants in a span of two years suggested that the agreements resulted from collusion, and not from coincidence.

Antitrust Injury

In addition, the employees plausibly alleged an antitrust injury resulting from the conspiracy, according to the court. Under Ninth Circuit precedent, where an employee is the direct and intended object of an employer’s anticompetitive conduct, that employee has standing to sue for antitrust injury. Thus, the defending employers’ motion to dismiss for failure to plead antitrust injury was denied.

Federal Enclave Doctrine

A California Cartwright Act claim was not dismissed based on the federal enclave doctrine. One of the defendants, Lucasfilm, has been located on the Presidio—a federal enclave ceded to the U.S. government by the State of California in 1897—since July 2005. Lucasfilm argued that the Cartwright Act claim failed because, under the federal enclave doctrine, the Act did not apply to conduct on the Presidio.

The doctrine applied to a claim when the locus in which the claim arose was the federal enclave itself, the court explained. The doctrine did not apply simply because some of the alleged events occurred on the federal enclave, as the defendants contended. The court noted that the federal enclave defense would be more appropriately addressed when class certification was considered, because the doctrine might extinguish the Cartwright Act claims of a putative subclass of plaintiffs.

The decision is In Re: High-Tech Employee Antitrust Litigation, 2012-1 Trade Cases ¶77,866.

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