By Dan Levine
SAN FRANCISCO (Reuters) – Four Silicon Valley companies including Apple and Google failed to persuade a U.S. judge to sign off on a $324.5 million settlement to resolve a lawsuit by tech workers, who accused the firms of conspiring to avoid poaching each other’s employees.
In a ruling on Friday, U.S. District Judge Lucy Koh in San Jose, California, said the class action settlement was too low, given the strength of the case against the companies. Intel and Adobe were also part of the proposed deal.
There is “substantial and compelling evidence” that late Apple Inc co-founder Steve Jobs “was a, if not the, central figure in the alleged conspiracy,” Koh wrote. The judge provided details in evidence of anecdotes involving Jobs and other Valley executives to show why she thought the workers deserved more.
Representatives for Apple and Google Inc declined to comment. Intel spokesman Chuck Mulloy said the company is disappointed Koh rejected an agreement “that was negotiated at arm’s length over many months,” but appreciates that Koh provided additional information on her views.
Lawyers for the workers, along with an Adobe representative, were not immediately available to comment.
In their 2011 lawsuit, the tech employees said the conspiracy had limited their job mobility and, as a result, kept a lid on salaries. The case has been closely watched because of the possibility of big damages being awarded and for the opportunity to peek into the world of some of America’s elite tech firms.
The case was based largely on emails in which Apple’s Jobs, former Google Chief Executive Officer Eric Schmidt and some of their rivals hatched plans to avoid poaching each other’s prized engineers.
Koh referred to one email exchange which occurred after a Google recruiter solicited an Apple employee. Schmidt told Jobs that the recruiter would be fired. Jobs then forwarded Schmidt’s note to a top Apple human resources executive with a smiley face.
Koh also disclosed a 2006 exchange over Google’s plans to open an engineering center in Paris. Google sought to hire three former Apple engineers for the project, but Jobs objected. Jobs wrote that his company would “strongly prefer that you not hire these guys.” Google then told Jobs it had scrapped plans for the Paris center, “based on your strong preference.”
The four companies agreed to settle with the workers in April shortly before trial. The plaintiffs had planned to ask for about $3 billion in damages at trial, which could have tripled to $9 billion under antitrust law.
Plaintiff attorneys argued Koh should approve the deal because the workers faced serious risks on appeal had the case gone forward. Some tech workers filed objections to the settlement, however, saying both sides should go back to the negotiating table in the hopes of obtaining a larger amount.
Daniel Girard, a lawyer for one of the objectors, said he is “very pleased that the court agreed with his position.” It is unclear whether objectors would be included in any future settlement negotiations.
In her ruling, Koh repeatedly referred to a related settlement last year involving Disney and Intuit. Apple and Google workers got proportionally less in the latest deal compared to the one involving Disney, Koh wrote, even though plaintiff lawyers have “much more leverage” now than they did a year ago.
To match the earlier settlement, the latest deal “would need to total at least $380 million,” Koh wrote.
The judge also said the plaintiffs had strong evidence to prove how the no-poaching deals impacted wages. In response to hiring pressure from Facebook, Google co-founder Sergey Brin announced a policy in 2007 of making counteroffers “within one hour” to any Google employee approached by the social networking company.
Google then tried to entice Facebook into a no-poaching deal, Koh wrote, but Facebook refused. The Facebook threat eventually led Google to alter its salary structure and increase all salaries by 10 percent, Koh wrote.
A further hearing in the case is scheduled for September 10.
The case is In Re: High-Tech Employee Antitrust Litigation, U.S. District Court, Northern District of California 11-cv-2509.
(Additional reporting by Noel Randewich; Editing by Paul Simao and Grant McCool)