It's not easy for antitrust plaintiffs to get past a defense
motion to dismiss. Before the U.S. Supreme Court raised the
pleading standard for everyone in Ashcroft v. Iqbal in 2009, it
imposed that tough burden on antitrust claimants in Bell Atlantic v. Twombly, a 2007 opinion that held it's not enough
just to argue that alleged conspirators engaged in parallel
price-fixing. Under Twombly, antitrust complaints have to offer
detailed and specific facts to support a plausible argument that
defendants colluded to restrict competition.
On Wednesday evening, U.S. District Judge Lucy Koh of San
Francisco federal court ruled that software engineers in a
putative class action against Apple, Google, Intel, Intuit,
Lucasfilm, Adobe, and Pixar met that high standard. As the judge
explained in her 29-page opinion, it certainly helped the
plaintiffs that the defendants all entered consent decrees with
the Justice Department in 2010, agreeing to end their practice
of restricting cold calls to recruit one another's engineers.
But what really convinced the judge not to dismiss the
engineers' case was the "significant influence" of former Apple
CEO Steve Jobs; Google chairman and Apple board member Eric
Schmidt; and Apple and Google director Arthur Levinson.
At least one of those three men, Koh said, had a hand in
each of the six bilateral anti-poaching agreements among the
defendants. "Their overlapping board membership lends
plausibility to plaintiffs' allegations that each defendant
entered into this conspiracy 'with knowledge of the other
defendants' participation in the conspiracy, and with the intent
of . . . reduc(ing) employee compensation and mobility through
eliminating competition for skilled labor,'" the judge wrote.
The Apple board members' influence on all of the defendants
tied the six company-to-company anti-poaching agreements into a
broader price-fixing conspiracy, said class counsel Joseph
Saveri of Lieff Cabraser Heimann & Bernstein. Saveri told me he
was pleased that Koh also picked up on arguments that the
identical agreements lent weight to the plaintiffs' conspiracy
allegations. As the judge wrote, "The fact that all six
identical bilateral agreements were reached in secrecy among
seven defendants in a span of two years suggests that these
agreements resulted from collusion, and not from coincidence."
The plausible inference from the plaintiffs' evidence, Koh
said, is that "the agreements were negotiated, reached, and
policed at the highest levels of the defendant companies."
According to the judge, Jobs pushed particularly hard for
anti-poaching agreements and had a hand in four of the six
company-to-company deals. When, for instance, former Palm CEO Ed
Colligan balked at an agreement, Jobs allegedly told him, "'We
must do whatever we can' to stop cold calling each other's
employees and other competitive recruiting efforts between the
companies," Koh wrote.
My colleague Jon Stempel pointed out in his story on Koh's ruling that Jobs also personally reached out to Apple board
member Schmidt when Google was attempting to recruit an Apple
engineer. "I would be very pleased if your recruiting department
would stop doing this," Jobs wrote Schmidt. (The Google
recruiter in the incident was subsequently fired, Stempel
"Jobs was kind of thuggish," Saveri told me. "He was a tough
guy and a force of nature, and he ran over almost everyone,
including CEOs of big companies."
Saveri also said that thanks to Koh's October 2011 order
requiring defendants to turn over materials from the Justice
Department investigation, the plaintiffs already have stronger
evidence than what's in the complaint Koh declined to dismiss.
(She did dismiss California state-law business claims, but kept
alive all state and federal antitrust allegations.) The class
can now proceed with additional discovery.
I emailed Apple counsel George Riley and Michael Tubach of
O'Melveny & Myers, who submitted the joint defense motion to dismiss, but didn't hear back.
(Reporting by Alison Frankel)
Follow us on Twitter: @AlisonFrankel, @ReutersLegal