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Ryan v. Microsoft Corp.

United States District Court, N.D. California, San Jose Division

April 10, 2015

DESERAE RYAN, et al., Plaintiffs,
v.
MICROSOFT CORPORATION, Defendant.

ORDER DENYING MOTION TO TRANSFER VENUE; GRANTING MOTION TO DISMISS Re: Dkt. No. 26, 32

LUCY H. KOH, District Judge.

Before the Court are Defendant Microsoft Corporation's motions to transfer venue and to dismiss. ECF Nos. 26, 32. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court hereby DENIES Defendant's motion to transfer venue and GRANTS Defendant's motion to dismiss.

I. BACKGROUND

A. Factual Background

1. The Parties

Plaintiff Deserae Ryan ("Ryan") and Plaintiff Trent Rau ("Rau"), (collectively, "Plaintiffs"), bring this putative class action against Defendant Microsoft Corporation ("Defendant" or "Microsoft") for alleged violations of state and federal antitrust laws. Plaintiff Ryan, an individual, is a resident of the State of California. Compl. ¶ 16. Plaintiff Ryan worked for Microsoft as a "Senior Product Manager" from April 2007 to September 2012 in Redmond, Washington. Id. ¶ 16. Plaintiff Rau, an individual, is a resident of the State of Washington. Id. ¶ 19. Plaintiff Rau worked for Microsoft as a "Lead Systems Engineer Senior" from June 2006 to June 2010.

Defendant Microsoft is a Washington corporation with its principal place of business in Redmond, Washington. Id. ¶ 20.

B. In re High-Tech Employees Litigation

Here, Plaintiffs allege that Defendant Microsoft conspired with "several other technology companies" in both a "Do Not Cold Call" agreement and a "Restricted Hiring" agreement. There appears to be significant factual overlap between Plaintiffs' allegations and the related action In re High-Tech Employees Litigation, No. 11-CV-02509-LHK. As both the factual and procedural history of the related action, In re High-Tech, and the DOJ investigations and complaints are relevant to this action; the Court briefly summarizes the background of that litigation below.

From 2009 to 2010, the Antitrust Division of the DOJ investigated the employment and recruitment practices of various Silicon Valley technology companies, including Adobe Systems, Inc., Apple, Inc., Google, Inc., Intel Corp., and Intuit, Inc. See In re High-Tech Employees Litig., 856 F.Supp.2d 1103, 1109 (N.D. Cal. 2012). In September of 2010, the DOJ then filed civil complaints against the above-mentioned technology companies, in addition to Pixar and Lucasfilm. Id. The DOJ filed its complaint against Adobe, Apple, Google, Intel, Intuit, and Pixar on September 24, 2010. Id. On December 21, 2010, the DOJ filed another complaint against Lucasfilm and Pixar. CAC ¶ 94. The defendants, including Pixar and Lucasfilm, stipulated to proposed final judgments in which they agreed that the DOJ's complaints had stated claims under federal antitrust law and agreed to be "enjoined from attempting to enter into, maintaining or enforcing any agreement with any other person or in any way refrain from... soliciting, cold calling, recruiting, or otherwise competing for employees of the other person. 856 F.Supp.2d at 1109-10. (quoting Adobe Proposed Final Judgment at 5). The D.C. District Court entered the stipulated proposed final judgments in March and June of 2011. Id.

The High-Tech plaintiffs filed five separate state court actions between May and July of 2011. Following removal, transfer to San Jose to the undersigned judge, and consolidation, the High-Tech plaintiffs filed a consolidated amended complaint on September 13, 2011. Id. at 1113. In their complaint, the High-Tech plaintiffs alleged antitrust claims against their employers, claiming that the defendants had conspired "to fix and suppress employee compensation and to restrict employee mobility." Id. at 1108. More specifically, the High-Tech plaintiffs alleged a conspiracy comprised of "an interconnected web of express bilateral agreements." Id. at 1110. One agreement, the "Do Not Cold Call" agreement involved one company placing the names of the other company's employees on a "Do Not Cold Call" list and instructing its recruiters not to cold call the employees of the other company. Id. In addition to the "Do Not Cold Call" agreements, the High-Tech plaintiffs also alleged that Pixar and Lucasfilm entered into express, written agreements to (1) not cold call each other's employees, (2) to notify the other company whenever making an offer to an employee of the other company, and (3) not to engage in "bidding wars." Id. at 1111.

2. Alleged Conspiracy in the Instant Action

Here, Plaintiffs allege that Microsoft conspired with unnamed "technology companies" to suppress compensation in two ways. First, Microsoft allegedly "was one of several parties to an Anti-Solicitation Agreement otherwise known as the Do Not Cold Call' list." Compl. ¶ 28. Second, Microsoft allegedly entered into a "Restrictive Hiring Agreement"[1] with "several other technology companies." Id. ¶ 36. According to Plaintiffs, the effect of both agreements was to restrict competition in the labor market and artificially depress compensation. Id. ¶¶ 33, 37, 40.

a. Anti-solicitation scheme

Plaintiffs allege that "[a]round May 2007, Microsoft agreed to be a party to the Anti-Solicitation Agreement, " which provided that Microsoft "and each of the other parties" to the agreement, would "[n]ot... directly cold call into those companies [or their respective subsidiaries.]'" Id. ¶ 28. According to Plaintiffs, "[c]old calling serves as an essential and effective recruiting method, " because current employees of competitors are "often the most highly qualified, " but also "often unresponsive to other recruiting strategies." Id. ¶ 30. Plaintiffs allege that restrictions on cold calling have the effect of "limit[ing] an employee's leverage when negotiating his or her salary with his or her current employer, " and, consequently, negatively "impact[s] all salaried employees of participating companies." Id. ¶ 32. More specifically, Plaintiffs contend that anti-solicitation agreements "alleviate[] pressure to retain good employees by paying higher salaries, " and "suppress[] wages because other rivals are not actively soliciting employees through promises of higher salaries and benefits." Id. ¶ 33.

b. Restricted Hiring Agreement

In addition to the alleged anti-solicitation agreement, Plaintiffs further allege that "around May 2007, Microsoft, along with several other technology companies, entered into a Restrictive Hiring Agreement." Id. ¶ 36. Under this alleged restricted hiring agreement, Microsoft and some number of unknown technology companies allegedly agreed "[n]ot to pursue manager level and above candidates for Product, Sales, or G&A roles - even if they have applied" to any of the other "parties to the Anti-Solicitation Agreement." Id. According to Plaintiffs, Microsoft entered into the restricted hiring agreement with "the intent and effect of suppressing the compensation and mobility of [its] employees." Id. ¶ 37. Other than "the most senior executives, managerial employees and above at these companies were not aware of, and did not agree to, these restrictions." Id.

3. Claims

Plaintiffs' complaint contains four claims for relief under the following statutes: (1) Section 1 of the Sherman Act, 15 U.S.C. § 1; (2) California's Cartwright Act, Cal. Bus. & Prof. Code § 16720; (3) California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200 et seq.; and (4) California Business & Professions Code § 16600 et seq. Plaintiffs seek damages, pre- and post-judgment interest, attorney's fees and expenses, and injunctive relief. Compl. at 18.

C. Procedural History

In light of the relationship between the instant case and the High-Tech case, the Court briefly summarizes the relevant procedural history in High-Tech in addition to the instant case.

1. High-Tech Procedural Background

The High-Tech defendants removed the first state-court action on May 23, 2011. No. 11-2509, ECF No. 1. On April 18, 2012, the Court granted in part and denied in part the High-Tech defendants' joint motion to dismiss and denied Lucasfilm's motion to dismiss. No. 11-2509, ECF No. 119. On April 5, 2013, the Court granted in part and denied in part the High-Tech plaintiffs' motion for class certification with leave to amend. No. 11-2509, ECF No. 382. The Court granted the High-Tech plaintiffs' supplemental motion for class certification on October 24, 2013. No. 11-2509, ECF No. 531. On November 13, 2013, the High-Tech defendants filed a Rule 23(f) petition before the Ninth Circuit, requesting permission to appeal this Court's October 24, 2013 class certification order. No. 13-80223, ECF No. 1. The Ninth Circuit denied the defendants' petition on January 14, 2014. No. 13-80223, ECF No. 18.

In the interim, three of the High-Tech defendants, Intuit, Lucasfilm, and Pixar, reached an early settlement with the plaintiffs. On September 21, 2013, the High-Tech plaintiffs filed a motion for preliminary approval of a proposed class action settlement as to defendants Intuit, Lucasfilm, and Pixar. No. 11-2509, ECF No. 501. On October 30, 2013, the Court preliminarily approved the proposed settlement with Intuit, Lucasfilm, and Pixar. No. 11-2509, ECF No. 540. The Court granted final approval as to that settlement on May 16, 2014. No. 11-2509, ECF No. 915. The Court entered a final judgment with regards to Lucasfilm, Pixar, and Intuit on June 9, 2014. No. 11-2509, ECF No. 936. At the request of Intuit, the Court entered an amended final judgment on June 20, 2014. No. 11-2509, ECF No. 947.

The remaining High-Tech defendants, Adobe, Apple, Google, and Intel, filed individual motions for summary judgment, and joint motions for summary judgment and to strike certain expert testimony on January 9, 2014. No. 11-2509, ECF Nos. 554 (Intel), 556-57 (joint motions), 560 (Adobe), 561 (Apple), 564 (Google). The Court denied the High-Tech defendants' individual motions for summary judgment on March 28, 2014. No. 11-2509, ECF No. 771. On April 4, 2014, the Court granted in part and denied in part the High-Tech defendants' motion to strike, and denied the defendants' joint motion for summary judgment. No. 11-2509, ECF No. 778.

On May 22, 2014, the High-Tech plaintiffs filed a motion for preliminary approval of class action settlement as to the remaining defendants. No. 11-2509, ECF No. 920. On August 8, 2014, the Court denied the High-Tech plaintiffs' motion for preliminary approval, concluding that the proposed settlement did not fall "within the range of reasonableness." No. 11-2509, ECF No. 974, at 30. On September 4, 2014, the High-Tech defendants filed a petition for a writ of mandamus with the Ninth Circuit. No. 14-72745, ECF No. 1. On January 13, 2015, the High-Tech defendants filed correspondence with the Ninth Circuit referring to a new proposed settlement agreement. No. 14-72745, ECF No. 21. On January 30, 2015, the defendants filed an unopposed motion to dismiss the petition, which the Ninth Circuit granted on February 2, 2015. No. 14-72745, ECF Nos. 23, 24.

On January 15, 2015, the High-Tech plaintiffs filed a motion for preliminary approval of class action settlement as to the remaining defendants. No. 11-2509, ECF No. 1032. In this second proposed class action settlement, the parties had reached a settlement amount exceeding the previously rejected settlement by approximately $90.5 million dollars. Id. at 1. Following a fairness hearing on March 2, 2015, the Court granted preliminary approval to the January 2015 settlement agreement on March 3, 2015. No. 11-1509, ECF Nos. 1051, 1054. A final approval hearing is scheduled for July 9, 2015.

2. Procedural Background in the Instant Action

Plaintiffs filed their complaint on October 16, 2014. ECF No. 1. The Court related this action to In re High-Tech Employees Litigation, No. 11-CV-2509-LHK, on November 19, 2014. ECF No. 24. Defendant Microsoft filed the instant motions to transfer venue and to dismiss on December 15, 2014. ECF Nos. 26, 31. Microsoft also filed a request for judicial notice in connection with its motion to dismiss.[2] ECF No. 33. Plaintiffs filed oppositions to Defendant's motions on January 15, 2015. ECF Nos. 37, 38. Defendant filed replies on January 28, 2015. ECF Nos. 40, 41.

II. MOTION TO TRANSFER VENUE

The Court begins by addressing Defendant's motion to transfer venue pursuant to 28 U.S.C. § 1404(a). The Court then turns to Defendant's motion to dismiss under Rule 12(b)(6).

In its motion to transfer venue, Microsoft contends that the Court should transfer this action to the Western District of Washington because (1) Plaintiffs' employment agreements "select the Western District of Washington forum" and (2) the convenience of the parties and witnesses, and the interest of justice favor transfer.

"For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). In the Ninth Circuit, the district court has discretion to transfer under § 1404(a), depending on a "case-by-case consideration of convenience and fairness." Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000) (internal citation and quotation marks omitted). The Court must consider public factors relating to "the interest of justice" and private factors relating to "the convenience of the parties and witnesses." See Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). Such factors may include: (1) the location where relevant agreements were negotiated and executed; (2) the state that is most familiar with the governing law; (3) the plaintiff's choice of forum; (4) the parties' contacts with the forum; (5) the contacts relating to the plaintiff's cause of action in the chosen forum; (6) the differences in the costs of litigation in the two forums; (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses; (8) the ease of access to sources of proof; (9) the presence of a forum selection clause; and (10) the relevant public policy of the forum state, if any. Jones, 211 F.3d at 498-99. The moving party bears the burden of showing that transfer is appropriate. Jones, 211 F.3d at 499.

Transfer under § 1404(a) is only appropriate if the action could properly have been brought in the transferee venue. When deciding whether to transfer venue, the Court "must balance the preference accorded plaintiff's choice of forum with the burden of litigating in an inconvenient forum." Id. Plaintiffs do not contest that this action could have been brought in the Western District of Washington. However, Plaintiffs have chosen to bring this action in this District because the alleged anti-solicitation and restricted hiring agreements were made and performed "in Silicon Valley, " and the related High-Tech action is currently being litigated in this District. Generally, the plaintiff's choice of forum is treated with great deference, and only significant inconvenience or unfairness will justify transfer. See Shultz v. Hyatt Vacation Mktg. Corp., No. 10-4568, 2011 WL 768735, at *3 (N.D. Cal. Feb. 28, 2011). As discussed below, however, Defendant contends that Plaintiffs' choice of forum warrants no deference.

A. Forum Selection Clause

Here, Microsoft contends that Plaintiffs' employment agreements contain valid forum selection clauses that require Plaintiffs to litigate the instant action in the Western District of Washington. A forum selection clause "may be enforced through a motion to transfer under § 1404(a)." Atl. Marine Const. Co., Inc. v. U.S. Dist. Ct. for W. Dist. of Tx., 134 S.Ct. 568, 579 (2013). Where a valid forum selection clause applies, it must "be given controlling weight in all but the most exceptional cases." Id. (internal quotation marks omitted). More specifically, where a valid forum selection clause preselects a different forum than the one selected by the plaintiff, the § 1404(a) analysis is altered in three ways: (1) the plaintiff's choice of forum "merits no weight, " and the burden shifts to the plaintiff to show why the action should not be transferred to the preselected forum; ...


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