Companies Face Antitrust Injury Liability Under Compensation Collusion Class Action

Seven technology employers must address claims that they conspired to illegally fix employee compensation through the use of secret agreements, a federal district court ruled (In re High-Tech Emp. Antitrust Litig., N.D. Calif., 5:11-cv-02509, 4/18/12).

In a class action lawsuit, a group of software engineers claimed that the California companies conspired to fix and suppress employee compensation over a two-year period and to restrict employee mobility through an “interconnected web of express bilateral agreements.”

The employers named in the lawsuit were Adobe Systems Inc., Apple Corp., Google Inc., Intel Corp., Intuit Inc., Lucasfilm Ltd., and Pixar Animation Studios Inc.

The lawsuit follows a Justice Department investigation and civil lawsuit involving the same issues. Department officials said the employers had reached agreements that eliminated a form of competition and that were were unlawful restraints of trade under federal antitrust laws. The alleged agreements were bilateral and involved a company under the control of the late Steve Jobs at Apple or a company with a board that shared at least one member of Apple's board of directors, the employees' lawsuit said.

Coincidence or Collusion?

The companies filed a joint motion to dismiss the employees' class action. Overlapping board members and the existence of multiple agreements were not evidence of a conspiracy, the companies said. In addition, the claim lacked evidence to describe how the alleged conspiracy occurred, the firms said.

The court, in rejecting the companies' arguments, said the employees had sufficiently supplied facts to suggest a unity of purpose, common design and understanding in an unlawful arrangement, and that the secrecy with which the agreements were reached suggested collusion rather than coincidence.

The overlapping board membership increased the plausibility of the claim because it “provided an opportunity to conspire and an opportunity for transfer of the requisite knowledge and intent regarding the bilateral agreements,” the court said, noting that the significant influence that Jobs had over four of the companies also increased the claim's plausibility.

The nearly identical alleged agreements, purportedly reached in secret, and the fact that they were not limited by geography, job function, product or time period support the inference that senior executives played a significant role in shaping the agreements. Inferring that such policies “would have been approved at the highest levels” was reasonable, the court said.

Addressing the conspiracy claim's plausibility, the court said that the employees had adequately alleged the ripple effect that cold calling can have on compensation by posing a “plausible scenario as to how, in light of basic economic principles, these agreements formed an overarching conspiracy that resulted in artificially lowered salaries,” which could “commonly impact all salaried employees of the participating companies.” The court denied the companies' motion to dismiss the employees' claim.