We previously discussed here the antitrust case involving several high-tech companies who allegedly entered into bilateral agreements in which they agreed not to solicit each other’s employees. These companies settled with the U.S. Department of Justice and were subsequently sued by a class of software engineers. Early on, Intuit and Pixar/Lucasfilm settled, and recently the plaintiffs and the remaining tech companies reached an agreement to settle the case for $324.5 million. Or maybe they thought they had, but guess what? The federal judge overseeing the case rejected that settlement, finding that it did not provide adequate monetary compensation.
U.S. District Judge Lucy Koh rested her decision primarily on the fact that, in the present settlement, the plaintiffs would recover proportionally less than the plaintiffs in the earlier settlements. The settling parties argued that the settlement was fair because the plaintiffs had “weaknesses in [their] case such that [they] face a substantial risk of nonrecovery . . . .” But, the judge found this explanation dubious, at best. In fact, the judge found that the plaintiffs had overcome substantial hurdles such as achieving class certification and overcoming dispositive motions. As the judge saw it, achieving class certification and beating dispositive motions provided greater settlement leverage, which the earlier settling defendants lacked, and thus should result in a larger settlement. Plus, and this should really scare the remaining defendants, the judge wrote that she believed that the plaintiffs had presented overwhelming documentary evidence in support of their antitrust claims. Thus, about the only remaining risk faced by the plaintiffs would be the unpredictability of trial. Yet, for the remaining defendant tech companies, they faced the potential of $9 billion in damages exposure.
The judge did throw a bone to the defendants by noting what settlement offer she would approve. She stated that the plaintiffs should receive at least $380 million—a mere $59.5 million raise—as that figure would be proportionate to the recovery against the earlier settling companies.
Now, the parties go back to settlement negotiations where the plaintiffs clearly have the momentum and leverage on their side given the judge’s favorable decision. It will be interesting to see what settlement results from those negotiations and how much the remaining tech companies will need to pay to resolve the civil claims by their software engineers.