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In Re: High-Tech Employee Antitrust Litigation

April 4, 2013

IN RE: HIGH-TECH EMPLOYEE ANTITRUST LITIGATION


The opinion of the court was delivered by: Lucy H. Koh United States District Judge

ORDER GRANTING IN PART, DENYING IN PART MOTION FOR CLASS CERTIFICATION THIS DOCUMENT RELATES TO: ALL ACTIONS

United States District Court For the Northern District of California

Plaintiffs Michael Devine, Mark Fichtner, Siddarth Hariharan, Brandon Marshall, and Daniel Stover (collectively, "Plaintiffs"), individually and on behalf of a class of all those similarly 21 situated, allege antitrust claims against their former employers, Adobe Systems Inc. ("Adobe"), 22 Apple Inc. ("Apple"), Google Inc. ("Google"), Intel Corp. ("Intel"), Intuit Inc. ("Intuit"), Lucasfilm 23 Ltd. ("Lucasfilm"), and Pixar (collectively, "Defendants"), all of whom are high-tech companies 24 with a principal place of business in the San Francisco-Silicon Valley area of California. Plaintiffs 25 challenge an alleged overarching conspiracy among Defendants to fix and suppress employee 26 compensation and to restrict employee mobility. 27

Before the Court is Plaintiffs' Motion for Class Certification. See Pls.' Mot. Class Cert. 20 ("Mot."), ECF No. 187. Defendants oppose this motion and move to strike the expert report of Dr. Edward E. Leamer ("Leamer Rep."), which Plaintiffs submitted in support of their Motion for 2 Class Certification. See Defs.' Opp'n to Pls.' Mot. for Class Cert. ("Opp'n"),ECF No. 209;Defs.' 3 Mot. to Strike Rep. of Dr. Edward E. Leamer ("Mot. to Strike"), ECF No. 210. Plaintiffs similarly 4 move to strike the expert report of Dr. Kevin M. Murphy, which Defendants submitted in 5 opposition to Plaintiffs' Motion for Class Certification, as well as certain employee declarations 6 upon which Dr. Murphy relies. See Pls.' Consolidated Reply in Supp. Mot. for Class Cert. & 7 Opp'n to Defs.' Mot. to Strike ("Reply"), ECF No. 247, at 38-40. Finally, Defendants seek to 8 supplement the record in support of their opposition to class certification. See Defs.' Joint Admin. 9 Plaintiffs oppose. ECF No. 270.*fn1 The Court held a hearing on these motions on January 17, 2013.

Having considered the parties' submissions, arguments, and the relevant law, the Court Mot. for Leave to Supplement the Rec. in Supp. of Defs.' Opp'n to Class Cert., ECF No. 263.

GRANTS in part and DENIES in part Plaintiffs' Motion for Class Certification with leave to 13 amend. The Court DENIES Defendants' Motion to Strike and GRANTS in part and DENIES in 14 part Plaintiffs' request to strike Defendants' expert report and certain employee declarations. 15

Finally, the Court DENIES Defendants' Joint Administrative Motion for Leave to Supplement the 16 Record in Support of Defendants' Opposition to Class Certification. 17

I.BACKGROUND

A.Factual Background

Plaintiffs are software engineers who were employed formerly by Defendants. Mr. Devine worked for Adobe in the State of Washington from October of 2006 through July of 2008. See Decl. Ann B. Shaver In Supp. Pls.' Mot. for Class Cert. ("Shaver Decl."), Ex. 6 ¶ 1, ECF No. 188;

Consolidated Amended Complaint ("CAC") ¶ 16, ECF No. 65. Mr. Fichtner worked for Intel in Arizona from May of 2008 through May of 2011. See Shaver Decl., Ex. 7 ¶ 1; CAC ¶ 17. Mr. Hariharan worked for Lucasfilm in California from January of 2007 through August of 2008. See Shaver Decl., Ex. 8¶ 1; CAC ¶ 18. Mr. Marshall worked for Adobe in California from July of 2006 through December of 2006. See Shaver Decl., Ex. 9 ¶ 1; CAC ¶ 19. Finally, Mr. Stover worked for Intuit in California from November of 2006 through December of 2009. See Shaver 2 Decl., Ex. 10 ¶ 1; CAC ¶ 20. 3

1.Alleged Conspiracy

Plaintiffs allege that Defendants engaged in an "overarching conspiracy" to eliminate 5 competition amongst them for skilled labor, with the intent and effect of suppressing the 6 compensation and mobility of Defendants' employees. CAC¶¶ 1, 2, 55. 7 In a properly functioning and lawfully competitive labor market, each Defendant would 8 compete for employees by soliciting current employees from the other Defendants. CAC¶ 41. 9

This method of recruiting, to which Defendants refer as "cold calling," includes communicating 10 directly in any manner-including orally, in writing, telephonically, or electronically-with another company's employee who has not otherwise applied for a job opening. Id. Plaintiffs allege that the use of cold calling among Defendants commonly increases total compensation and 13 mobility for all of Defendants' employees. CAC¶¶ 48, 50. 14 15 compete for each other's employees. CAC ¶ 55.*fn2 Plaintiffs maintain that the agreements "were 16 developed to prevent a 'bidding war' for talent that would drive up wages across the Defendants." 17 Mot. at 2. Defendants memorialized these nearly identical agreements in CEO-to-CEO emails and 18 other documents, including "Do Not Call" lists, putting each firm's employees off-limits to other 19 Defendants. Mot. at 1. The bilateral agreements applied to all employees of a given pair of 20 Defendants. CAC¶¶ 63, 76, 81, 88, 100, 105. They were not limited by geography, job function, 21 product group, or time period. Id. They also were not related to any specific collaboration among 22 Defendants. Id. 23

According to Plaintiffs, these anti-solicitation agreements "centered around three of the Here, each pair of Defendants allegedly entered into an express bilateral agreement not to 24 most important figures in Silicon Valley: Apple CEO Steve Jobs, Google CEO Eric Schmidt, and 25 Intuit Chairman Bill Campbell, all of whom served on Apple's Board of Directors throughout the 26 conspiracy." Mot. at 2. Allegedly, these three individuals, as well as senior executives from each 27 Defendant, actively participated in negotiating, executing, monitoring compliance with, and 2 policing violations of the bilateral agreements. CAC ¶¶ 55, 108. Plaintiffs also allege that 3 Defendants' senior executives actively concealed each bilateral agreement, and Defendants' 4 employees generally were not informed of, nor did they agree to, the terms of any of the 5 agreements. Id. 6

Plaintiffs contend that Defendants' anti-solicitation agreements eliminated competition for 7 employees and suppressed employees' compensation and mobility, thereby inflicting class-wide 8 harm. CAC¶ 110. 9 From 2009 through 2010, the Antitrust Division of the Department of Justice ("DOJ")

2.DOJ Investigation

conducted an investigation into Defendants' employment and recruitment practices. CAC¶¶ 3, 111. After receiving documents produced by Defendants and interviewing witnesses, the DOJ concluded that Defendants reached "facially anticompetitive" agreements that "eliminated a significant form of competition to the detriment of the affected employees who were likely deprived of competitively important information and access to better job opportunities." CAC ¶ 112; see also ECF No. 93, Ex. A, at ¶¶ 2, 14 (Dep't of Justice Compl. Against Adobe, et al.); ECF No. 93, Ex. D, at ¶¶ 2, 15, 22 (Dep't of Justice Compl. Against Lucasfilm). The DOJ also determined that the agreements "were not ancillary to any legitimate collaboration," "were broader than reasonably necessary for the formation or implementation of any collaborative effort," and "disrupted the normal price-setting mechanisms that apply in the labor setting." DOJ Adobe Compl. ¶ 16; DOJ Lucasfilm Compl. ¶ 17; CAC ¶ 112.The DOJ concluded that Defendants entered into agreements that were naked restraints of trade that were per se unlawful under the antitrust laws. DOJ Adobe Compl. ¶ 35; DOJ Lucasfilm Compl. ¶ 3; CAC ¶ 112.

Following its investigation, the DOJ filed complaints in federal court against Defendants.

See ECF No. 79-1, Ex. A, at 2 ("DOJ Adobe J."); United States v. Lucasfilm, Inc., No. 10-02220 26 (D.D.C. June 3, 2011), 2011 WL 2636850, at *1 ("DOJ Lucasfilm J."). The DOJ also filed stipulated proposed final judgments in each case. Id. In these stipulated proposed final judgments, Defendants did not admit any wrongdoing or violation of law, but they agreed to be "enjoined from attempting to enter into, maintaining or enforcing any agreement with any other person or in any 2 way refrain[ing] [from] . . . soliciting, cold calling, recruiting, or otherwise competing for 3 employees of the other person." DOJ Adobe J. at 5; ECF No. 79-1, Ex. B, DOJ Proposed Final J. 4 Against Lucasfilm, at 4; CAC¶ 115. The D.C. District Court entered the stipulated proposed final 5 judgments on March 17, 2011, and June 2, 2011, respectively. DOJ Adobe J. at 12, DOJ Lucasfilm 6 J. at 1; CAC¶ 115.*fn3 7

Plaintiffs contend that, although the DOJ ultimately put an end to these illegal agreements, 8 the government was unable to compensate the victims of the conspiracy. Plaintiffs now bring this 9 case as private attorneys general "to pick up where the DOJ left off, to seek damages for 10 themselves and for the Class." Mot. at 1.

B.Procedural Background

The original complaints in the five actions underlying this consolidated action were filed in 13 California state court. Hariharan v. Adobe Sys. Inc., Case No. 11574066 (Alameda Super. Ct. filed 14 May 4, 2011); Marshall v. Adobe Sys. Inc., Case No. 11-CV-204052 (Santa Clara Super. Ct. filed 15 June 28, 2011); Devine v. Adobe Sys. Inc., Case No. 11-CV-204053 (Santa Clara Super. Ct. filed 16 June 28, 2011); Fichtner v. Adobe Sys. Inc., Case No. 11-CV-204187 (Santa Clara Super. Ct. filed 17 June 30, 2011); Stover v. Adobe Sys. Inc., Case No. 11-CV-25090 (Santa Clara Super. Ct. filed July 14, 2011).*fn4 Defendants subsequently removed the five state court actions to the United States District Court for the Northern District of California. Hariharan v. Adobe Sys. Inc., Case No. 11- 20 2509 (removed May 23, 2011), ECF No. 1; Marshall v. Adobe Sys. Inc., Case No. 11-3538 21 (removed July 19, 2011), see ECF No. 41; Devine v. Adobe Sys. Inc., Case No. 11-3539 (removed 22 July 19, 2011), see ECF No. 41; Fichtner v. Adobe Sys. Inc., Case No. 11-3540 (removed July 19, 23 2011), see ECF No. 41; and Stover v. Adobe Sys. Inc., Case No. 11-3541 (removed July 19, 2011), 24 see ECF No. 41.

On June 1, 2011, the lead case, Hariharan v. Adobe Systems Inc., was reassigned from Magistrate Judge Spero to Judge Armstrong. ECF No. 24. On July 19, 2011, Intuit filed a motion 3 to relate the five underlying actions, ECF No. 41, which Judge Armstrong granted on July 27, 4 2011, ECF No. 52. On August 2, 2011, Plaintiff Siddharth Hariharan moved to transfer the five 5 underlying actions to the San Jose Division, ECF No. 56, which Judge Armstrong granted on 6 August 4, 2011, ECF No. 58. 7

On August 5, 2011, the underlying actions were reassigned to the undersigned judge. The Court consolidated the five underlying actions on September 12, 2011, ECF No. 64, and Plaintiffs 9 filed the Consolidated Amended Complaint on September 13, 2011. ECF No. 65. 10 Defendants filed a joint motion to dismiss on October 13, 2011, ECF No. 79, and, with leave of the Court, Lucasfilm filed its separate motion to dismiss on October 17, 2011, ECF No. 83. On April 18, 2012, the Court granted in part and denied in part Defendants' Joint Motion to 13 Dismiss and denied Lucasfilm's Motion to Dismiss. ECF No. 119. 14

On October 1, 2012, Plaintiffs filed their Motion for Class Certification. ECF No. 187. On 12 November 12, 2012, Defendants filed their opposition to Plaintiffs' Motion for Class Certification, 16 ECF No. 209, as well as a Motion to Strike the expert report submitted by Plaintiffs, ECF No. 210. 17 Plaintiffs then filed their Consolidated Reply in Support of Class Certification and in Opposition to 18 the Motion to Strike on December 10, 2012. ECF No. 247. On January 9, 2013, Defendants filed 19 a Joint Administrative Motion for Leave to Supplement the Record in Support of Defendants' 20 Opposition to Class Certification, ECF No. 263, to which Plaintiffs filed an opposition, ECF No. 21 270. The Court held a hearing on Plaintiffs' Motion for Class Certification on January 17, 2013. 22

Plaintiffs then filed a notice of new case law relevant to their Motion for Class Certification, see 23 ECF No. 339, and Defendants filed two similar notices, see ECF Nos. 343, 368. 24 Named Plaintiffs seek to certify a nationwide class of similarly situated individuals (the

C.Class Definition

"Class" or "All-Employee Class") defined as follows:

All natural persons employed on a salaried basis in the United States by one or more of the following: (a) Apple from March 2005 through December 2009; (b) Adobe from May 2005 through December 2009; (c) Google from March 2005 through December 2009; (d) Intel from March 2005 through December 2009; (e) Intuit from June 2007 through December 2009; (f) Lucasfilm from January 2005 through December 2009; or (g) Pixar from January 2005 through December 2009. Excluded from the Class are: retail employees; corporate officers, members of the boards of directors, and senior executives of all Defendants.

Notice of Mot. at 1. Plaintiffs contend that the All-Employee Class includes more than 100,000 5 members. Mot. at 5. According to Plaintiffs, the Class Definition is broad because Defendants 6 designed their agreements to restrict competition for "ANY" employee, and Defendants enforced 7 their agreements across a wide variety of employees to accomplish their goals. Mot. at 24. 8

Alternatively, Plaintiffs move the Court to certify the following class of salaried technical, 9 creative, and research and development employees (the "Technical Class"),*fn5 defined as follows: 10 All natural persons who work in the technical, creative, and/or research and development fields that are employed on a salaried basis in the United States by one or more of the following: (a) Apple from March 2005 through December 2009; (b) Adobe from May 2005 through December 2009; (c) Google from March 2005 through December 2009; (d) Intel from March 2005 through December 2009; (e) Intuit from June 2007 through December 2009; (f) Lucasfilm from January 2005 through December 2009; or (g) Pixar from January 2005 through December 2009 [the "Technical Employee Class"]. Excluded from the Class are: retail employees; corporate officers, members of the boards of directors, and senior executives of all Defendants.

Notice of Mot. at 1. Plaintiffs believe that their alternative Technical Class includes more than 17 50,000 people. Mot. at 5. 18

Plaintiffs also move the Court to appoint them as Class representatives and to confirm as 19 final the Court's prior interim appointment of Lieff, Cabraser, Heimann & Bernstein, LLP, and the 20 Joseph Saveri Law Firm as Co-Lead Counsel. See ECF No. 147. Finally, Plaintiffs move the 21 Court to appoint as Class Counsel the law firms that have served on the Executive Committee, 2 Berger & Montague, P.A. and Grant & Eisenhofer, P.A. Mot. at 2. 3

II.LEGAL STANDARDS

Class actions are governed by Rule 23 of the Federal Rules of Civil Procedure. Rule 23 5 does not set forth a mere pleading standard. To obtain class certification, plaintiffs bear the burden 6 of showing that they have met each of the four requirements of Rule 23(a) and at least one 7 requirement of Rule 23(b). Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186, amended 8 273 F.3d 1266 (9th Cir. 2001)). A party seeking class certification must affirmatively demonstrate 9 . . . compliance with the Rule." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ---, 131 S. Ct. 2541, 2551 10 (2011).

Rule 23(a) provides that a district court may certify a class only if: "(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law and fact 13 common to the class; (3) the claims or defenses of the representative parties are typical of the 14 claims or defenses of the class; and (4) the representative parties will fairly and adequately protect 15 the interests of the class." Fed. R. Civ. P. 23(a). That is, the class must, at a minimum, satisfy the 16 requirements of numerosity, commonality, typicality, and adequacy of representation in order to 17 maintain a class action. Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012); 18 see Fed. R. Civ. P. 23(a). Further, while Rule 23(a) is silent as to whether the class must be 19 ascertainable, courts have held that the rule implies this requirement as well. See, e.g., Herrera v. 20 LCS Fin. Servs. Corp., 274 F.R.D. 666, 672 (N.D. Cal. 2011). 21

If all four prerequisites of Rule 23(a) are satisfied, the court must "satisfy through 22 evidentiary proof" at least one of the three subsections of Rule 23(b). Comcast Corp. v. Behrend,23 569 U.S. --- , 2013 WL 1222646, *4 (2013). Rule 23(b) sets forth three general types of class 24 actions. A class may be certified under Rule 23(b)(1) upon a showing that there is a risk of 25 substantial prejudice from separate actions. Fed. R. Civ. P. 23(b)(1). A class may be certified 26 under Rule 23(b)(2) if "the party opposing the class has acted or refused to act on grounds that 27 apply generally to the class, so that final injunctive relief or corresponding declaratory relief is 28 appropriate respecting the class as a whole." Fed. R. Civ. P. 23(b)(2). Finally, a class may be certified under Rule 23(b)(3) if the court finds that "questions of law or fact common to class 2 members predominate over any questions affecting only individual members, and that a class 3 action is superior to other available methods for fairly and efficiently adjudicating the 4 controversy." Fed. R. Civ. P. 23(b)(3). 5

"[A] court's class-certification analysis must be 'rigorous' and may 'entail some overlap 6 with the merits of the plaintiff's underlying claim.'" Amgen Inc. v. Connecticut Retirement Plans 7 and Trust Funds, 568 U.S. ---, 133 S.Ct. 1184, 1194 (2013) (quoting Dukes, 131 S.Ct. at 2551); see 8 also Mazza, 666 F.3d at 588 ("'Before certifying a class, the trial court must conduct a 'rigorous 9 analysis' to determine whether the party seeking certification has met the prerequisites of Rule 10 23.'") (quoting Zinser, 253 F.3d at 1186). This analysis applies to Rule 23(a) and Rule 23(b).

Comcast Corp., 569 U.S. --- , 2013 WL 1222646, *4. Nevertheless, "Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage." Amgen Inc., 133 S.Ct. 13 at 1194-95. "Merits questions may be considered to the extent-but only to the extent-that they 14 are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied." 15

Id. at 1195. 16

If a court concludes that the moving party has met its burden of proof, then the court has 17 broad discretion to certify the class. Zinser, 253 F.3d at 1186. 18

III.DISCUSSION

The Supreme Court has long recognized that class actions serve a valuable role in the 20 enforcement of antitrust laws. See Reiter v. Sonotone Corp., 442 U.S. 330, 344 (1979); Hawaii v. 21 Standard Oil Co., 405 U.S. 251, 262 (1972). Here, Plaintiffs allege that Defendants violated the 22 antitrust laws by entering into an overarching illegal conspiracy in order to suppress employee 23 compensation to artificially low levels. See Mot. at 1. 24

Plaintiffs assert that both of their proposed classes satisfy the elements of Rule 23(a), 25 numerosity, commonality, typicality, and adequacy of representation. Mot. at 4-6; see Fed. R. Civ. 26 P. 23(a). Defendants do not contest that Plaintiffs have satisfied these requirements. See Tr. of 27 Jan. 17, 2013 Class Cert. Hr'g ("Tr.") at 5:10-15. 28

Plaintiffs also contend that their proposed classes satisfy the requirements of Rule 23(b)(3).

Defendants disagree. Specifically, Defendants argue that Plaintiffs' proposed classes do not satisfy 3 Rule 23(b)(3)'s predominance requirement because neither antitrust impact nor damages can be 4 proved on a class-wide basis. Opp'n at 11. In addition, Defendants contend that Rule 23(b)(3)'s 5 superiority requirement is not satisfied. Opp'n at 25. This Order focuses exclusively on these 6 disputes. 7

For the reasons stated herein, the Court does not find that Plaintiffs have fulfilled the 8 requirements of Rule 23(b)(3). Plaintiffs shall have leave to amend. See Part IV. 9

A.Predominance

The predominance criterion of Rule 23(b)(3) is "far more demanding" than satisfying the commonality requirement set forth by Rule 23(a). See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 624 (1997). Courts have a duty to look closely at whether this requirement is satisfied. See 13 Comcast Corp., 569 U.S. ---, 2013 WL 1222646, *4. 14

The predominance analysis focuses on "the legal or factual questions that qualify each class 15 member's case as a genuine controversy" in order to determine "whether proposed classes are 16 sufficiently cohesive to warrant adjudication by representation." Amchen Prods., Inc., 521 U.S. at 17 623. As Justice Ginsburg recently emphasized in Amgen Inc. v. Connecticut Retirement Plans and 18 Trust Funds, "Rule 23(b)(3) requires a showing that questions common to the class predominate, 19 not that those questions will be answered, on the merits, in favor of the class." 133 S.Ct. at 1191 20 (emphasis in original). 21

Although "[t]here is no mathematical or mechanical test for evaluating predominance," Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 814 (7th Cir. 2012), Rule 23(b)(3) is 23 generally met "where common questions, which can be resolved for all members on a class-wide 24 basis, are such a significant aspect of the case that they present 'a clear justification for handling 25 the dispute on a representative rather than on an individual basis.'" Hanlon v. Chrysler Corp., 150 26 F.3d 1011, 1022 (9th Cir. 1998) (amended) (internal quotation marks and citation omitted). "'If, to 27 make a prima facie showing on a given question, the members of a proposed class will need to 28 present evidence that varies from member to member, then it is an individual question. If the same evidence will suffice for each member to make a prima facie showing, then it becomes a common 2 question.'" Messner, 669 F.3d at 815 (quoting Blades v. Monsanto Co., 400 F.3d 562, 566 (8th 3 Cir. 2005)). 4

"Considering whether questions of law or fact common to class members predominate 5 begins . . . with the elements of the underlying causes of action." Erica P. John Fund, Inc. v. 6 Halliburton Co., 131 S. Ct. 2179, 2184 (2011). A court must analyze these elements in order to 7 "determine which are subject to common proof and which are subject to individualized proof." In 8 re TFT-LCD (Flat Panel) Antitrust Litig., 267 F.R.D. 291, 311-13 (N.D. Cal. 2010), abrogated on 9 other grounds in In re ATM Fee Antitrust Litig., 686 F.3d 741, 755 n.7 (9th Cir. 2012). 10

In this case, Plaintiffs allege a violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, and Section 4 of the Clayton Antitrust Act, 15 U.S.C. § 15. See Compl. ¶¶ 119-135; Mot. at 1. "[T]o establish an antitrust claim, plaintiffs typically must prove (1) a violation of 13 antitrust laws, (2) an injury they suffered as a result of that violation, and (3) an estimated measure 14 of damages." In re New Motor Vehicles Canadian Export Antitrust Litigation ("In re New 15

Motors"), 522 F.3d 6, 19 n.18 (1st Cir. 2008). The Court will address each in turn. 16

1.Antitrust Violation

Regarding the first element of Plaintiffs' Section 1 antitrust claim, the parties agree, as does 18 the Court, that common issues predominate. See Tr. at 17:1-4 (Court: "Do you contest [the 19 antitrust violation] prong of the analysis?" Mr. Mittelstaedt for Defendants: "Not for purposes of 20 this motion."). 21

Plaintiffs assert that Defendants' conspiracy and agreements restrained trade and are per se 22 unlawful under Section 1 of the Sherman Antitrust Act. CAC ¶ 2; Mot. at 1; see 15 U.S.C. § 1 23 ("Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade 24 or commerce among the several States, or with foreign nations, is declared to be illegal."); see also 25 Rebel Oil Co., Inc. v. Atlantic Richfield Co., 51 F.3d 1421, 1431 (9th Cir. 1995) (explaining that 26 Section 4 of the Clayton Act allows private parties to sue antitrust violators for damages). 27

In support of Plaintiffs' Section 1 claim, Plaintiffs have set forth evidence of Defendants' 28 anti-solicitation agreements, which were memorialized in CEO-to-CEO emails and other documents, such as "Do Not Call" lists putting each firm's employees off-limits to other 2

Defendants. These documents show that, while Steve Jobs was CEO of Apple, Apple entered into 3 explicit anti-solicitation agreements with Adobe, Pixar, and Google, and included on its Hands Off 4 (Do Not Call List) every Defendant in this case, including Intel, Intuit, and Lucasfilm. See Leamer 5

Rep. ¶¶ 21, 22; see also Shaver Decl., Exs. 17, 19, 55, 66. In addition to its anti-solicitation 6 agreement with Apple, Google also entered into anti-solicitation agreements with Intel and Intuit. 7

See, e.g., Shaver Decl., Ex. 56; Decl. Dean M. Harvey in Supp. Pls.' Consolidated Reply ("Harvey 8

Decl."), ECF No. 93, Ex. 25. Intel and Pixar agreed not to "proactively pursue" each other's 9 employees. See Leamer Rep. at 9, n.26. Pixar and Lucasfilm agreed not to compete for each 10 other's workers, not to make counteroffers, and to notify each other before extending an offer to an employee. Shaver Decl., Ex. 60. These agreements applied to all employees, regardless of job function, product group, or geography. 13

Plaintiffs allege that Defendants' senior executives concealed each bilateral agreement, and Defendants' employees generally were not informed of, nor did they agree to, the terms of any of 15 the agreements. For example, when discussing Google's protocol for "Do Not Cold Call" and 16

"Sensitive" companies, Google CEO Eric Schmidt stated, "I don't want to create a paper trail over 17 which we can be sued later? Not sure about this." Shaver Decl., Ex. 41. Intel CEO, Paul Otellini, 18 likewise stated: "[W]e have a handshake 'no recruit' between eric and myself. I would not like this 19 broadly known." Shaver Decl., Ex. 52. Similarly, when discussing Apple's anti-solicitation policy 20 with employees from Adobe, Ann Reeves and Brenda Everson of Apple reiterated that they did not 21 want anything "in writing." Harvey Decl., Ex. 21; but see Shaver Decl., Ex. 66 ("Any candidate 22 we bring in for interviews [at Pixar] should be told of our gentleman's agreement early on in the 23 process."). 24

Plaintiffs' allegations mirror the DOJ's findings following an investigation into Defendants' 25 alleged misconduct, to which Defendants stipulated in a Final Judgment. See Shaver Decl., Ex. 71, 26

United States v. Adobe Systems Inc., et al., No. 10-1629 (D.D.C. Sept. 24, 2010) (ECF No. 2) 27 ("DOJ Impact Statement") (finding these agreements to be a "naked restraint on trade that w[ere] 28 per se unlawful per Section 1 of the Sherman Act, 15 U.S.C. § 1").

Defendants contend that, if this action proceeds, Defendants will seek to "demonstrate that 2 the agreements should be evaluated under the rule of reason, were reasonable and lawful under that 3 standard, and could not have conceivably had any adverse effect on compensation in any relevant 4 labor market." Opp'n at 5, n.1. Nevertheless, during oral argument, Defendants conceded that the 5 question of antitrust liability is a common issue rather than an individual one. See Tr. at 18:2-8. 6

The Court need not resolve the issue of liability at this time. See, e.g., Reed v. Advocate

Health Care, 268 F.R.D. 573, 581 (N.D. Ill. 2009) ("[W]hether plaintiffs can prove that a 8 conspiracy existed is not an issue that we consider on class certification; rather, the question is 9 whether plaintiffs can prove a conspiracy with common proof, and the answer is yes.") (emphasis 10 in original). For purposes of evaluating predominance, it is sufficient that the adjudication of Defendants' alleged antitrust violation will turn on overwhelmingly common legal and factual issues. Defendants concede, and this Court finds, that Plaintiffs have satisfied this element of Rule 13 23(b)(3). See Tr. at 17:1-4. 14

2.Antitrust Impact

The second element of Plaintiffs' Section 1 antitrust claim is impact. "Antitrust 'impact'- 16 also referred to as antitrust injury-is the 'fact of damage' that results from a violation of the 17 antitrust laws." In re Dynamic Random Access Memory ("DRAM") Antitrust Litig., No. 02-1486, 18

2006 WL 1530166, *7 (N.D. Cal. June 5, 2006). "It is the causal link between the antitrust 19 violation and the damages sought by plaintiffs." In re New Motors, 522 F.3d at 19 n.18. 20

The question presented by this case is not whether Defendants' anti-solicitation agreements 21 had an impact on any employees. Defendants concede that some employees may have been 22 impacted. See Tr. at 144:11-12 ("And I admit at the start, we are not saying that nobody was 23 impacted."). The primary issue presented is whether Plaintiffs can show through common proof 24 that Defendants' alleged conspiracy suppressed wages across the entire All Employee Class or, 25 alternatively, Technical Class, or whether proof of injury is actually "an individual question that 26 would have to be resolved by mini-trials examining the particular circumstances of each class 27 member." In re Methionine Antitrust Litig., 204 F.R.D. 161, 165 (N.D. Cal. 2001). 28

In analyzing whether Plaintiffs have satisfied their burden of showing that common proof 2 will be able to demonstrate class-wide injury, the Court first considers whether Plaintiffs must 3 establish antitrust impact in light of the nature of Defendants' alleged conspiracy and, if so, how 4 persuasive Plaintiffs' proposed methodology for proving common impact must be to satisfy this 5 requirement. The Court then analyzes the parties' evidence to determine whether Plaintiffs have 6 satisfied Rule 23(b)(3)'s predominance requirement for the question of class-wide impact. 7

a.Whether Plaintiffs Must Show Common Impact to Satisfy Rule 23(b)(3)'s Predominance Requirement 9 antitrust conspiracy will be the predominant issue at trial, the Court may grant class certification on 10 that basis alone. See Mot. at 7. Specifically, Plaintiffs contend that because "the major factual and 11 legal issues of whether the Defendants entered into the agreements, their scope, their duration, and 12 their effect on compensation are overwhelmingly common, "th[is] case is no different than any 13 other price-fixing cartel." Mot. at 6; see also Reply at 6 ("Prices do not need to be identical in 14 order to be impacted by a common conspiracy; courts routinely certify class actions where, as here, 15 any individual negotiations-of which there is little evidence-were commonly impacted by 16

Defendants' misconduct."). The Court declines to make such a determination at this juncture. 17

As the Third Circuit stated in In re Hydrogen Peroxide Antitrust Litig., "[i]n antitrust cases,

Plaintiffs first contend that, should the Court determine that common proof of Defendants' 18 impact often is critically important for the purpose of evaluating Rule 23(b)(3)'s predominance 19 requirement because it is an element of the claim that may call for individual, as opposed to 20 common, proof." 552 F.3d 305, 311 (3d Cir. 2008). Notably, at least five circuit courts and at 21 least two district courts within this district have held that, for cases involving antitrust violations, 22 common issues do not predominate unless the issue of impact is also susceptible to class-wide 23 proof. See In re New Motors, 522 F.3d at 20 (1st Cir. 2008); In re Hydrogen Peroxide Antitrust 24 Litig., 552 F.3d 311-312 (3d Cir. 2008); Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th Cir. 25 2003); Messner, 669 F.3d at 816 (7th Cir. 2012); Monsanto Co., 400 F.3d at 566 (8th Cir. 2005); 26 California v. Infineon Technologies AG ("Infineon"), No. 06-4333, 2008 WL 4155665, at *5 (N.D. 27 Cal. Sept. 5, 2008); In re Graphics Processing Units Antitrust Litig., 253 F.R.D. at 500

Moreover, as the Ninth Circuit noted recently in Wang v. Chinese Daily News, --- F.3d ---, 2013 WL 781715, *5 (9th Cir. 2013), "[t]he main concern of the predominance inquiry . . . is the 3 balance between individual and common issues." Id. at 13 (internal quotation marks and citation 4 omitted). Therefore, "'a district court abuses its discretion in relying on an internal uniform . . . 5 ...


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