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Nitsch v. DreamWorks Animation SKG, Inc.

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

April 24, 2015

ROBERT A. NITSCH, et al., Plaintiffs,
v.
DREAMWORKS ANIMATION SKG INC., et al., Defendants

For Robert A. Nitsch, Jr., Plaintiff: Daniel A. Small, LEAD ATTORNEY, Jeffrey Benjamin Dubner, PRO HAC VICE, Brent W Johnson, Cohen Milstein Sellers and Toll PLLC, Washington, DC; Matthew W Ruan, LEAD ATTORNEY, Cohen Milstein Sellers & Toll, New York, NY; Richard L. Grossman, PILLSBURY & COLEMAN, LLP, PILLSBURY & COLEMAN, LLP, San Francisco, CA; Steven Gerald Sklaver, Susman Godfrey LLP, Los Angeles, CA; Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA.

For David Wentworth, Plaintiff: Ashley A Bede, Steve W. Berman, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Seattle, Wa; Jeff D Friedman, Shana E. Scarlett, Hagens Berman Sobol Shapiro LLP, Berkeley, CA; Jeffrey Benjamin Dubner, Cohen Milstein Sellers and Toll PLLC, Washington, DC; Steven Gerald Sklaver, Susman Godfrey LLP, Los Angeles, CA.

For Georgia Cano, Plaintiff: Marc M. Seltzer, LEAD ATTORNEY, Steven Gerald Sklaver, Susman Godfrey LLP, Los Angeles, CA; Ari Nathan Cherniak, HammondLaw, PC, Baltimore, MD; Craig Justin Ackermann, Ackermann & Tilajef, P.C., Los Angeles, CA; Jeffrey Benjamin Dubner, Cohen Milstein Sellers and Toll PLLC, Washington, DC; John Edward Schiltz, Jordan Lee Talge, PRO HAC VICE, Matthew Robert Berry, Susman Godfrey LLP, Seattle, WA; Julian Ari Hammond, HammondLaw, PC, Los Angeles, CA; Kalpana Srinivasan, Steven Gerald Sklaver, Susman Godfrey LLP, Los Angeles, CA; Polina Pecherskaya, Brooklyn, NY; Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, Wa.

For Dreamworks Animation SKG Inc., Defendant: Daniel Glen Swanson, Shannon Edward Mader, Gibson Dunn and Crutcher LLP, Los Angeles, CA; Rodney Joseph Stone, Gibson, Dunn & Crutcher, Los Angeles, CA.

For Pixar, Lucasfilm Ltd. LLC, The Walt Disney Company, ImageMovers Digital, Defendants: Emily Johnson Henn, LEAD ATTORNEY, Covington & Burling LLP, Redwood Shores, CA; Cortlin Hall Lannin, Covington & Burling LLP, San Francisco, CA; Deborah A. Garza, Thomas A. Isaacson, PRO HAC VICE, Covington and Burling LLP, Washington, DC.

For ImageMovers, Defendant: Emily Johnson Henn, LEAD ATTORNEY, Covington & Burling LLP, Redwood Shores, CA.

For Sony Pictures Animation, Sony Pictures Imageworks, Defendant: Stephen V. Bomse, LEAD ATTORNEY, Orrick Herrington & Sutcliffe, San Francisco, CA; David Mark Goldstein, Esq., Orrick, Herrington & Sutcliffe LLP, San Francisco, CA; Paul Francis Rugani, PRO HAC VICE, Orrick, Herrington Sutcliffe, Seattle, WA.

For Blue Sky Studios, Inc., Defendant: Jonathan Bradley Pitt, Williams and Connolly LLP, Washington, DC; William Faulkner, McManis Faulkner, San Jose, CA.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL ARBITRATION

LUCY H. KOH, United States District Judge.

Re: Dkt. No. 71

Defendants DreamWorks Animation SKG, Inc.; The Walt Disney Company; Lucasfilm Ltd., LLC; Pixar; ImageMovers, LLC.; Two Pic MC LLC (f/k/a ImageMovers Digital); Sony Pictures Animation Inc.; Sony Pictures Imageworks Inc.; and Blue Sky Studios have filed a joint motion to compel arbitration and stay proceedings. (" Mot." ), ECF No. 71. Having considered the parties' submissions, the relevant law, and the record in this case, the Court GRANTS in part and DENIES in part Defendants' motion.

I. BACKGROUND

This is a consolidated class action brought by former employees alleging antitrust claims against their former employers, various animation studios with principal places of business in California.[1] Plaintiffs contend that Defendants engaged in a conspiracy to fix and suppress employee compensation and to restrict employee mobility.

A. Factual Background

The Court draws the following factual background from the uncontroverted allegations in the Consolidated Amended Complaint (" CAC" ), and from judicially noticed documents. Unless otherwise noted, Plaintiffs' allegations are presumed to be true for purposes of ruling on Defendants' motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

1. The Parties

Defendants include the following animation and visual effects studios: Blue Sky Studios, Inc. (" Blue Sky" ), a Delaware corporation with its principal place of business in Greenwich, CT; DreamWorks Animation SKG, Inc. (" DreamWorks" ), a Delaware corporation with its principal place of business in Glendale, CA; ImageMovers LLC, a California corporation with its principal place of business in Los Angeles, CA; ImageMovers Digital LLC, a Delaware corporation with its principal place of business in Burbank, CA; Lucasfilm Ltd., LLC (" Lucasfilm" ), a California corporation with its principal place of business in San Francisco, CA; [2] Pixar, a California corporation with its principal place of business in Emeryville, CA; [3] Sony Pictures Animation, Inc. and Sony Pictures Imageworks, Inc. (collectively, " the Sony Defendants" ), California corporations with their principal places of business in Culver City, CA; and The Walt Disney Company (" Disney" ), a Delaware corporation with its principal place of business in Burbank, CA.[4] CAC ¶ ¶ 21-29.

Plaintiffs Robert A. Nitsch, Jr., Georgia Cano, and David Wentworth (collectively, " Plaintiffs" ), are artists and engineers that were previously employed by four of the named Defendants. Id. ¶ ¶ 18-20. Nitsch worked for Sony Picture Imageworks in 2004 and DreamWorks from 2007 to 2011. Id. ¶ 18. Cano worked for Walt Disney Feature Animation from 2004 to 2005, ImageMovers Digital in 2010, and at various other visual effects and animation studios. Id. ¶ 19. Wentworth worked at ImageMovers Digital from 2007 to 2010. Id. ¶ 20. Nitsch is a resident of Massachusetts, and Cano and Wentworth are residents of California. Id. ¶ ¶ 18-20.

Plaintiffs seek to represent the following class:

All persons who worked at any time from 2004 to the present for Pixar, Lucasfilm, DreamWorks Animation, Walt Disney Animation Studios, Walt Disney Feature Animation, Blue Sky Studios, Digital Domain, ImageMovers Digital, Sony Pictures Animation or Sony Pictures Imageworks in the United States. Excluded from the Class are officers, directors, senior executives and personnel in the human resources and recruiting departments of the Defendants.

Id. ¶ 113.[5]

2. In re High-Tech Employees Litigation and the Department of Justice Investigation

There is significant factual overlap between Plaintiffs' allegations and the related action In re High-Tech Employees Litigation, No. 11-CV-02509-LHK, as well as the civil complaints filed by the Department of Justice (" DOJ" ) against several Silicon Valley technology companies, Pixar, and Lucasfilm. As both the factual and procedural history of the related action, In re High-Tech, and the DOJ investigations and complaints are relevant to the substance of Defendants' motion to dismiss, 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 Employee 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 Northern District of California 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, defendants in both High-Tech and the instant action, 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.

3. Alleged Conspiracy in the Instant Action

Here, Plaintiffs allege that Defendants conspired to suppress compensation in two ways. First, Defendants allegedly entered into a scheme not to actively solicit each other's employees. CAC ¶ 41. Second, Defendants allegedly engaged in " collusive discussions concerning competitively sensitive compensation information and agreed upon compensation ranges," which would artificially limit compensation offered to Defendants' current and prospective employees. Id.

a. Anti-Solicitation Scheme

According to Plaintiffs, " Defendants agreed not to contact their coconspirators' employees to inform them of available positions unless that individual employee had applied for a job opening on his or her own initiative." Id. ¶ 42. This solicitation, also known as " cold calling," is " a key competitive tool in a properly functioning labor market, especially for skilled labor." Id. ¶ 42. Plaintiffs aver that employees of competitor studios represent " one of the main pools of potential hires," and that employees of competitor studios that are not actively searching for new employment are " more likely to be among the most sought after employees." Id. ¶ 43. Hiring an employee from a competitor studio " can save costs and avoid risks." Id. Absent active solicitation, these employees are also difficult to reach. Id. Defendants' anti-solicitation scheme also allegedly included " notifying each other when an employee of one Defendant applied for a position with another Defendant, and agreeing to limit counteroffers in such situations." Id. ¶ 44. Moreover, Defendants allegedly " often refrained from hiring other Defendants' employees at all without the permission of the current employer," and would sometimes decline to make offers of employment to an unemployed prospective hire if that individual had an outstanding offer from another Defendant. Id. ¶ 45.

Pixar and Lucasfilm:

According to Plaintiffs, " the roots of the conspiracy reach back to the mid-1980s," when George Lucas, the former Lucasfilm Chairman of the Board and CEO, sold Lucasfilm's " computer division" to Steve Jobs, who had recently left Apple. Id. ¶ 46. Jobs named his new company Pixar. Id. Pixar's President, Ed Catmull, Lucas, and " other senior executives, subsequently reached an agreement to restrain their competition for the skilled labor that worked for the two companies." Id. Pixar drafted the terms of the agreement, which both Defendants communicated to their senior executives and " select human resources and recruiting employees." Id. Lucas stated in an email that Pixar and Lucasfilm " have agreed that we want to avoid bidding wars," and that the agreement prevented the two companies from " raid[ing] each other's companies." Id. Pixar and Lucasfilm allegedly agreed to the following terms: (1) not to cold call each other's employees; (2) to notify each other when making an offer to the other company's employee; and (3) that any offer by the other company would be " final," i.e., neither Pixar nor Lucasfilm would engage in counteroffers. Id. ¶ ¶ 46-48 (citing internal Pixar email sent on January 16, 2006).

Plaintiffs further allege that while the conspiracy originated with Pixar and Lucasfilm, Catmull brought additional studios into the fold. Id. ¶ 49. In a 2005 email, then Vice President of Human Resources at Pixar, Lori McAdams, wrote " With regard to ILM, Sony, Blue Sky, etc., we have no contractual obligations, but we have a gentleman's agreement not to directly solicit/poach from their employee pool." Id. ¶ 50. Pixar also drafted an internal " competitors list" that " listed anti-solicitation rules for each of the Defendants . . . ." Id. According to Plaintiffs, Blue Sky, DreamWorks, ImageMovers Digital, Sony Pictures Imageworks, and Walt Disney Animation Studios were " all listed with directions not to 'recruit directly' or 'solicit or poach employees.'" Id. Plaintiffs' allegations as to each Defendants' alleged role and participation in the anti-solicitation scheme is detailed below.

DreamWorks:

Jobs and DreamWorks CEO, Jeffrey Katzenberg, " personally discussed DreamWorks joining into the conspiracy." Id. ¶ 52. In a February 18, 2004 email from Catmull to Jobs, Catmull stated that the mutual agreement " worked quite well." Id. A January 14, 2007 email from Catmull to Disney's Chairman Dick Cook, also provided that " we have an agreement with DreamWorks not to actively pursue each other's employees." Id. In further emails between Catmull, McAdams, and DreamWorks' head of human resources, Kathy Mandato, Pixar and DreamWorks reiterated their " non-poaching practices." Id. ΒΆ 53. When a Pixar recruiting email was sent to a ...


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