Tech companies admit wrong in antitrust hiring case

The workers of Silicon Valley have won an important victory over their bosses. What they did not win is a lot of money.
Four of the largest technology companies tentatively settled on Thursday a class action brought by 64,000 of their engineers, who accused them of agreeing not to solicit one another’s employees. The amount of the settlement was not released, but people with knowledge of the deal said it was in the neighborhood of $300 million.
The companies, which are some of the world’s richest, must think that is a bargain. At a moment when Silicon Valley is losing some of its luster even on its home territory, the antitrust case depicted the upper levels of the valley’s executive suites as a cozy old boys’ network. Private deals are made, and then the executives send emails saying they wanted everything to remain secret.
The defendants are Google, Apple, Adobe and Intel. Steven P. Jobs, the Apple co-founder, was portrayed in court papers as something of a bully, a man who would go nuclear when a competitor solicited his engineers. “If you hire a single one of these people, that means war,” Mr. Jobs warned Google in an email that became public.
Instead, they made a no-poaching deal.
As a result of all these machinations, the suit claimed, the mobility and income of the engineers suffered. A guilty verdict in a trial might have meant the defendants would have had to pay triple damages of as much as $9 billion. The settlement must be approved by the judge in the case.
Joseph Saveri, a lawyer for the plaintiffs, declined to confirm any settlement numbers, but said, “This was an excellent result, a fair result.”

Wall Street, however, did not appear to think this was a big deal. In after-hours trading, when news of a deal first became widely known, the stocks of the defendants barely reacted.
Originally there were seven defendants. Settlements with Lucasfilm and Pixar (both now owned by Disney) and Intuit were reached last year. Those companies agreed to pay a total of $20 million — small change in the valley. That was before the case was certified as a class action, though, which gave the plaintiffs much more leverage.
The obvious question is: Why settle now for any amount less than a fortune?
“We were confident in our case, but there still was a risk,” Mr. Saveri said. “The other side had an array of the best lawyers in the country.”
Intel issued a statement denying it had violated any laws, saying it “elected to settle this matter in order to avoid the risks, burdens and uncertainty of ongoing litigation.” Adobe, the smallest of the defendants, issued a statement saying the same thing.
Google declined to comment. Apple did not respond to a request for comment.
The settlement, which was widely expected, was revealed in a two-paragraph letter by both parties to the judge, Lucy H. Koh of the United States District Court in San Jose. It said the terms would be documented with the court by the end of May, when the trial had been due to begin.
With the earlier settlements, the plaintiffs’ lawyers asked for $5 million as a fee, which they said was a standard percentage, plus $3.7 million in expenses. The formula for distributing proceeds to the class members involves their salary and length of tenure. A rough calculation would give the average class member a few thousand dollars at best.
On Hacker News, the grumbling about the settlement was immediate. “I honestly do not understand why the plaintiffs would settle this case,” one poster wrote. But some saw another side: “What did the engineers risk with this lawsuit? Nothing. What did the law firm risk? Getting paid peanuts for hundreds of hours they spend on the case if they lose.”
The case shows a valley in which employees regularly flock to the hot new thing. In 2005, that was Google. It was growing tremendously, and wanted some members of Apple’s browser team. That was when Mr. Jobs threatened war.

A Justice Department investigation first brought the deals to light. That inquiry ended in 2010 with an antitrust complaint against Apple, Google, Intel, Intuit, Adobe and Pixar for banning cold-calling. The companies settled the complaint, but did not admit guilt. There were no financial penalties.
The defendants did not want that investigation brought up in any trial. They also sought to banish any evidence about Mr. Jobs’s personality, as well as the companies’ wealth and the wealth of their senior executives. Judge Koh had not ruled on that request.
One irony of the case was displayed in the executives’ emails. Silicon Valley might have made email a daily habit for hundreds of millions, but the suit showed that technology executives were sometimes careless of its ability to supply lawyers with evidence.
An Intel recruiter, for instance, asked Paul S. Otellini, then Intel’s chief executive, about a deal with Google.
“We have nothing signed,” Mr. Otellini wrote back. “We have a handshake ‘no recruit’ between Eric and myself. I would not like this broadly known.”
Eric E. Schmidt, then Google’s chief executive, wrote in another email in the case: “I don’t want to create a paper trail over which we can be sued later.”
Asked whether he thought Silicon Valley had learned a lesson about hiring or anything else, Mr. Saveri, the lawyer for the plaintiffs, was cautious.
“I hope so,” he said. “Time will tell.”

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