The New York Times / Technology

Court Rejects Deal on Hiring in Silicon Valley

SAN FRANCISCO — There is “ample evidence” that Silicon Valley was engaged in “an overarching conspiracy” against its own employees, a federal judge said on Friday, and it should either pay dearly or have its secrets exposed at trial.

Judge Lucy H. Koh of the United States District Court in San Jose rejected as insufficient a proposed $324 million settlement in a class-action antitrust case that accused leading tech companies of agreeing not to poach one another’s engineers.

In addition, her decision immediately resuscitated a public relations nightmare for Google, Apple and other top tech companies while vindicating a range of observers — including one of the plaintiffs in the suit — who said Silicon Valley was escaping justice.

With the case once again heading to trial, it threatens to expose to further scrutiny the business practices of Steve Jobs of Apple. The blunt emails of Mr. Jobs, an unquestioned genius, could prove to be his company’s undoing.

The anti-poaching agreements at issue in the case stem from the 1980s, but, the plaintiffs say, the practice became widespread in the middle of the last decade, when Google was expanding and the demand for engineers was greater than ever.

In April, lawyers for the 64,000 class members and the companies reached a tentative deal. But the judge said the money did not fall “within the range of reasonableness.” After the plaintiffs’ lawyers took their 25 percent cut, the settlement would have given about $4,000 to every member of the class.


Judge Koh said that she believed the case was stronger than that, and that the plaintiffs’ lawyers were taking the easy way out by settling. The evidence against the defendants was compelling, she said. And she labeled Mr. Jobs, revered in the modern history of technology, as “a, if not the, central figure in the alleged conspiracy.”

The case will now go to trial unless the parties cobble together another settlement that meets the judge’s approval. Lawyers for the plaintiffs earlier cited damages of $3 billion to the class members. If a jury awarded that amount, it would be automatically tripled.

While judges often fine-tune proposed class-action settlements, it is unusual for one to be entirely thrown out in favor of a trial.

“I cannot recall a judge saying in a class-action case that the amount of settlement is too low and you need to go back and go for broke at trial,” said Daniel Crane, who teaches antitrust law at the University of Michigan Law School. “This is very striking.”

The rejection of the settlement is a victory for one of the five original plaintiffs, Michael Devine, who had raised objections to the deal.

“I am pleased that this case again has the opportunity to achieve real justice for the members of the class,” Mr. Devine said in an interview. “My hope is that the companies will pay at least as much back to their employees as they gained from these illegal agreements. Only then will there be real incentive to them, and others, to respect the law.”

Three of the defendants — Google, Apple and Adobe — declined to comment. A spokesman for the fourth company, Intel, said, “We are disappointed that the court has rejected preliminary approval of an agreement that was negotiated at arm’s length over many months.”

Settlements were reached last year against three other defendants in the suit — Lucasfilm, Pixar and Intuit.

Joseph R. Saveri, a lawyer for the plaintiffs, said he could not comment because he was traveling and had not had a chance to review the order. Another plaintiff’s lawyer, Dean Harvey of the firm Lieff Cabraser Heimann & Bernstein, did not respond to a message requesting comment.

The case, which has been underway for three years, has mesmerized Silicon Valley.


“Every time a new piece of evidence comes out, people get more shocked than they did the last time,” said Sam Altman, president of Y Combinator, a technology accelerator that has funded hundreds of start-ups. “You don’t need a law degree to know that what the companies were doing was deeply wrong.”

Judge Koh’s rejection of the settlement did not come out of the blue. At a hearing in late June, she sharply questioned the lawyers about the size of their cut and whether they were undervaluing their case. She noted the abundance of incriminating material from Mr. Jobs and other executives.

For instance, court papers showed, Google wanted in 2005 to hire a group of Apple engineers. Mr. Jobs’s response: “If you hire a single one of these people, that means war.”

A jury, Judge Koh noted, “would have found these documents very significant and pretty compelling.”

In the world depicted in the court papers, the valley executives feared Mr. Jobs, who died in 2011, and did their best to placate him, even at the expense of their own businesses.

For instance, Sergey Brin, Google’s co-founder, was quoted as testifying that Mr. Jobs’s view seemed to be that people shouldn’t upset him.

Things that appeared to upset him, Mr. Brin said, “would be hiring, you know — whatever.” And Eric Schmidt, then Google’s chief executive, said: “Steve was unhappy, and Steve’s unhappiness absolutely influenced the change we made in recruiting practice.” At one point, Mr. Jobs got a Google recruiter terminated for attempting to hire from Apple.

Appointed to the federal court in 2010, Judge Koh is the first Asian-American district judge in the Northern District of California. Before becoming a federal judge, she was a judge for the Superior Court of California for Santa Clara County. She also worked in Washington for the Senate Judiciary Committee and later for the Justice Department.

She has overseen many of the most prominent tech-related cases, including the big patent fights between Apple and Samsung Electronics. She has built a reputation for keeping strict control of her courtroom, showing no hesitation to challenge even the most powerful lawyers when she feels they are involved in shenanigans.

If the companies wish to forestall a trial, they will have to come up with enough to satisfy the judge that justice is being done.

“A settlement that is more in the billion-dollar ballpark would likely be viewed by the court as within the zone of reasonableness,” said Orly Lobel, a professor of employment and labor law at the University of San Diego. “Such a figure would be closer to one-third of the potential win in trial.”


The New York Times / National

Medical Marijuana Research Hits Wall of U.S. Law


The New York Times / World

As ISIS Militants Exert Their Control, U.S. Pursues a Military Middle Road


The New York Times / Business

Does Hosting the Olympics Actually Pay Off?


The New York Times / Sports

Fowler Tones DoWardrobe and Lets His Play Do the Talking


The New York Times / Technology

Court Rejects Deal on Hiring in Silicon Valley


The New York Times / Science

Tracing Ebola’s Breakout to an African 2-Year-Old


The New York Times / Politics

UK aid deliveries in Iraq ‘imminent’


The New York Times / Arts

Dance Review: An Old Love Story, Tinkered for the Times


The New York Times / Travel

10 of the world’s best hotels