SAN FRANCISCO — U.S. District Judge Lucy Koh in San Jose has rejected the controversial $324.5 million settlement in the Silicon Valley “no-poach” case, echoing arguments by a named plaintiff and other critics that the dollar amount ought to be higher.
Koh wants $50 million more for plaintiffs who claimed their wages were driven down by agreements between Google Inc., Apple Inc., Adobe Systems Inc. and Intel Corp. not to recruit each other’s employees.
“This court has lived with this case for nearly three years,” Koh wrote, “and during that time, the court has reviewed a significant number of documents in adjudicating not only the substantive motions, but also the voluminous sealing requests. Having done so, the court cannot conclude that the instant settlement falls within the range of reasonableness.”
Koh wants to bring the settlement in line with the value reflected in a $20 million settlement reached in 2013 with smaller defendants Pixar Animation Studios Inc., Lucasfilm and Intuit Inc.
The four larger defendants paid out 95 percent of the compensation given employees during the class period, and therefore should collectively pay about 19 times more than the three who settled last year, Koh wrote. That works out to about $380 million.
Koh’s order is exactly what named plaintiff Michael Devine was hoping for when he defected from class counsel Lieff Cabraser Heimann & Bernstein and the Joseph Saveri Law Firm and filed an opposition to the settlement. Devine’s new attorney, Girard Gibbs partner Daniel Girard, said he and Devine are weighing their next move.
“[Koh] obviously devoted a great deal of thought to the issues he raised, and Michael is happy that his decision to oppose the settlement will hopefully result in a more favorable outcome for class members,” Girard said.
Lawyers who drafted the deal argued in a June hearing the settlement value should reflect the percentage of the class employed by the different defendants, not the percentage of compensation they paid. That would result in a $230 million settlement. Koh rejected that calculation as an irrelevant benchmark never before used during the case.
Nor did she buy the argument that the size of this settlement is so much larger than the earlier one that it would be inappropriate to base one upon the other.
“This argument is premised on the idea that defendants who caused more damage to the class and who benefited more by suppressing a greater portion of class compensation should have to pay less than defendants who caused less damage and who benefited less from the allegedly wrongful conduct,” she wrote. “This argument is unpersuasive.”
That means the widely watched case could make it to trial after all, allowing damning evidence against Apple’s Steve Jobs, Google’s Eric Schmidt and Intel’s Paul Otellini, among others, to be paraded before a jury. The two sides reached a deal a month before the scheduled trial date, but not before the court unsealed pages of incriminating emails in which top executives discussed the alleged no-recruit agreements.
Koh devoted 15 pages of her 32-page order to discussion of that evidence, which, during class certification, she had called “substantial” and “extensive.” She highlighted several examples already well-publicized by the media: when Google fired a recruiter who went against Jobs’ orders not to recruit Apple employees; and when Schmidt sent an email saying he’d prefer to speak orally about the do-not-call list because, “I don’t want to create a paper trail over which we can be sued later.”
Intel spokesman Chuck Mulloy said the company hasn’t made a decision concerning its next step in the litigation.
“We are disappointed that the court has rejected preliminary approval of an agreement that was negotiated at arm’s length over many months,” he said in an email.
Intel is represented by Tolles & Olson in the suit. Google is represented by Keker & Van Nest and Mayer Brown; Apple is represented by O’Melveny & Myers; and Adobe is represented by Jones Day.
Plaintiffs attorneys Kelly Dermody with Lieff Cabraser and Joseph Saveri with the Joseph Saveri Law Firm didn’t respond to phone messages or emails Friday.
Koh also pointed out plaintiffs had a much stronger case when negotiating with Google, Apple, Intel and Adobe than they did when they settled with the first three defendants. When the first deal was proposed, the court had recently denied plaintiffs’ motion for class certification.
When plaintiffs lawyers negotiated the second settlement, they had class certification under their belts. The court also had denied five defense motions for summary judgment.
“This shift in the procedural posture,” Koh wrote, “which the court would expect to have increased plaintiffs’ bargaining power, makes the more recent settlements for a proportionally lower amount even more troubling.”
Koh has scheduled the next case management conference for Sept. 10.
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