The “No Poaching” Antitrust Litigation Case Against Several High-Tech Companies Continues

In late 2011, a group of software engineers filed antitrust lawsuits against seven behemoths of the high-tech industry. The high-tech company defendants—Apple, Pixar, Google, Intel, Intuit, Lucasfilm, and Adobe—utilized a policy known as “Do not cold call,” whereby each pair of defendant companies entered into bilateral “Do not cold call” agreements that shared “the names of the other company’s employees on a ‘Do not cold call’ list and instructed recruiters not to cold call the employees of the other company.” In re High-Tech Employee Antitrust Litigation, No. 11-CV-02509, 2012 U.S. Dist. LEXIS 55302, at *11 (N.D. Cal. Apr. 18, 2012). Prior to this class action, between 2009 and 2010, the Department of Justice investigated the defendants’ recruiting practices. The DOJ concluded that the agreements were “facially anticompetitive” and that they “were naked restraints of trade that were per se unlawful under the antitrust laws.” Id. at *6–7. In the instant action, the defendants filed a motion to dismiss. And this past April, the Honorable Lucy Koh, sitting in the Northern District of California, denied the defendants motion to dismiss as to the Sherman Act § 1 violation allegations.

Between 2007 and 2010, the high-tech companies each entered into nearly identical bilateral agreements with the intent to stabilize compensation and to eliminate or greatly reduce the mobility of their highly skilled employees. See id. at *12–13. According to the court, “[e]ach bilateral agreement in this case applied to all employees of a given pair of Defendants; was not limited by geography, job function, product group, or time period; and was not related to a collaboration between that pair of Defendants.” Id. at *12. At one point, Apple’s CEO at the time, Steve Jobs, contacted the CEO of Palm in order to propose the same “do not cold call” agreement between the two companies. The consolidated amended complaint purports that the Palm CEO, Edward Colligan, refused Steve Jobs’s offer and told him, “Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.” Id. at *16.

Section 1 of the Sherman Act prohibits “[e]very contract, combination . . . , or conspiracy, in restraint of trade.” 15 U.S.C. § 1. And the defendants moved to dismiss on the usual Twombly and Iqbal grounds, claiming that plaintiffs failed to allege sufficient facts that would support an “overarching conspiracy” among the defendants. See id. at *21. In denying their motion to dismiss, the court examined “who, did what, to whom (or with whom), where, and when?”—as is typically done in the Ninth Circuit for Section 1 Sherman Act claims. See Kendall v. Visa U.S.A., Inc., 518 F.3d 1042 (9th Cir. 2008). In the instant case, there were overlapping board members who simultaneously sat on multiple defendants’ boards. The court noted that this fact was sufficient to raise plausible grounds to support a conspiracy claim, i.e., “a unity of purpose or a common design and understanding.” High-Tech Employee, 2012 U.S. Dist. LEXIS 55302, at *37; see also Am. Tobacco Co. v. United States, 328 U.S. 781, 810 (1946).

Notably, the court concluded, “In light of Plaintiffs’ specific allegations concerning the industry-wide procompetitive effects of cold calling recruiting practices, it is plausible to infer that even a single bilateral agreement would have the ripple effect of depressing the mobility and compensation of employees of companies that are not direct parties to the agreement. Plaintiffs’ allegations of six parallel bilateral agreements render the inference of an anticompetitive ripple effect that much more plausible.” High-Tech Employee, 2012 U.S. Dist. LEXIS 55302, at *44 (emphasis added).

This case is particularly interesting because these “No Poaching” agreements were purportedly secret and possibly worldwide. The agreements were not limited to specific geographic regions, job types, or time periods. See id. at 29. Because of the breadth of these agreements, the court noted that “it is reasonable to infer that such significant wide-ranging, company-wide, and worldwide policies would have been approved at the highest levels.” Id.

David Brown is 2012 graduate of New York Law School. He was Executive Editor of the Law Review. He will be a law clerk to the Honorable Robert L. Vining, US District Court, Northern District of Georgia in the Fall of 2012 and has interned at the US Attorney’s Office for the Eastern District of New York.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.