In re: High-Tech Employee Antitrust Litigation

Filing 109

JOINT CASE MANAGEMENT STATEMENT filed by Michael Devine, Mark Fichtner, Siddharth Hariharan, Brandon Marshall, Daniel Stover. (Harvey, Dean) (Filed on 1/27/2012)

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1 6 Joseph R. Saveri (State Bar No. 130064) Eric B. Fastiff (State Bar No. 182260) Brendan P. Glackin (State Bar No. 199643) Dean M. Harvey (State Bar No. 250298) Anne B. Shaver (State Bar No. 255928) Katherine M. Lehe (State Bar No. 273472) LIEFF CABRASER HEIMANN & BERNSTEIN, LLP 275 Battery Street, 29th Floor San Francisco, CA 94111-3339 Telephone: (415) 956-1000 Facsimile: (415) 956-1008 7 Interim Lead Counsel for Plaintiff Class 8 [Additional counsel listed on signature page] 2 3 4 5 9 10 IN THE UNITED STATES DISTRICT COURT 11 FOR THE NORTHERN DISTRICT OF CALIFORNIA 12 SAN JOSE DIVISION 13 14 15 16 17 IN RE: HIGH-TECH EMPLOYEE ANTITRUST LITIGATION THIS DOCUMENT RELATES TO: ALL ACTIONS 18 Master Docket No. 11-CV-2509-LHK JOINT CASE MANAGEMENT CONFERENCE STATEMENT Date: January 26, 2012 Time: 1:30 p.m. Courtroom: 8, 4th Floor Judge: The Honorable Lucy H. Koh 19 20 21 (UNREDACTED) 22 23 24 25 26 27 28 955792.11 JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 The parties to these consolidated actions hereby submit this joint statement in advance of 2 the January 26, 2011 Case Management Conference. 3 I. 4 5 Case Progress Since the Parties’ October 19, 2011 Amended Joint Case Management Conference Statement, the case has progressed as follows. 6 On October 19, 2011, Plaintiffs served a subpoena on Hewlett-Packard Company, 7 regarding documents relevant to the alleged communications between Steve Jobs of Apple and Ed 8 Colligan, Palm Inc.’s then CEO (Hewlett-Packard subsequently acquired Palm). Counsel for 9 Hewlett-Packard requested that Plaintiffs withdraw the subpoena as to Hewlett-Packard and serve 10 it instead on Palm, which continues to exist as a separate entity. On November 30, 2011, 11 Plaintiffs agreed to withdraw the subpoena, and told counsel for Hewlett-Packard that Plaintiffs 12 would serve a subpoena on Palm upon modification of the Court’s October 26, 2011 Minute 13 Order and Case Management Order (Dkt. No. 88). Counsel for Hewlett-Packard agreed to 14 preserve responsive documents and to accept service of a subpoena on Palm. 15 16 On November 30, 2011, the Parties filed a Stipulated Proposed Protective Order. (Dkt. No. 95.) 17 18 On November 30, 2011 and thereafter, Defendants produced documents they produced to the United States Department of Justice pursuant to the Court’s October 26, 2011 Order. 19 Plaintiffs have completed an initial review of Defendants’ productions. As explained 20 below, in Plaintiffs’ view, the documents Defendants produced demonstrate that Defendants’ 21 Joint Motion To Dismiss the Consolidated Amended Complaint (“Joint Motion”; Dkt. No. 79) is 22 without merit and should be withdrawn. Plaintiffs asked Defendants to withdraw their Joint 23 Motion and stipulate to lifting the stay of discovery. Defendants declined. As explained below, 24 in Defendants’ view, Plaintiffs’ assertions are improper for a CMC statement, and erroneous. 25 On December 5, 2011, the Parties filed a Stipulation and Proposed Order Concerning 26 Testifying Expert Discovery. (Dkt. No. 99.) 27 28 On December 16, 2011 and thereafter, Defendants produced privilege logs related to their document productions. Plaintiffs are reviewing the privilege logs. 955792.11 -1- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 On January 11, 2012, Plaintiffs wrote several third parties and asked them to preserve 2 documents relevant to this case, pending the Court’s review of the discovery stay. Several of the 3 third parties have responded and taken the position they are under no obligation to preserve 4 relevant documents unless and until they are served with a subpoena. 5 II. Defendants’ Document Productions 6 A. 7 Defendants’ productions demonstrate that this case should move beyond the pleadings Plaintiffs’ Statement 8 without further delay. In Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007), the Supreme 9 Court articulated a pleading standard that “simply calls for enough fact to raise a reasonable 10 expectation that discovery will reveal evidence of illegal agreement.” Here, a motion to dismiss 11 under Twombly is improper and pointless: the limited documents produced to date confirm that 12 Defendants’ senior executives, including their CEOs, entered into the multi-faceted illegal 13 agreement Plaintiffs allege. The evidence includes: 14  Both Pixar and Lucasfilm produced the same document that was drafted by Pixar: an outline of the “Lucasfilm candidate process” that describes, in detail, the “gentleman’s agreement with the Lucas companies.” (PIX00000400; LUCAS00009252.) The written terms of the agreement mirror, in every respect, the agreement Plaintiffs allege. (See Compl. ¶¶ 58-61.) Pixar produced a video in which its general manager, Jim Morris, admitted to the illegal “anti-poach” agreement between “the Lucas companies” and Pixar, and said that the “gentlemen’s agreement” has been “honored pretty well here for the last many years.” (PIX00005296; 21:58-22:15.)  On May 28, 2005, Mr. Chizen, Adobe’s CEO, emailed Mr. Jobs, then CEO of Apple, forwarding an internal Adobe email from Theresa Townsley, Adobe’s Senior Vice President for Human Resources, to others at Adobe, regarding “Recruitment of Apple Employees.” In that email, Ms. Townsley wrote: “Bruce and Steve Jobs have an agreement that we are not to solicit ANY Apple employees, and vice versa. . . . Please ensure all your worldwide recruiters know that we are not to solicit any Apple employee. I know that Jerry is soliciting one now, so he’ll need to back off.” (231APPLE002145.)  On March 7, 2007, Danielle Lambert, then Apple’s Vice President of Human Resources, wrote Mr. Jobs and confirmed the “agreement” with Google. (231APPLE002166.) Mr. Jobs stated he would follow-up with Eric Schmidt, Google’s CEO. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 955792.11 -2- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1  On April 30, 2007, Lori McAdams of Pixar wrote an internal email to others at Pixar regarding the “Apple Gentleman’s agreement.” Ms. McAdams wrote: “I just got off the phone with Danielle Lambert, and we agreed that effective now, we’ll follow a Gentleman’s agreement with Apple that is similar to our Lucasfilm agreement.” (PIX00003419.)  On August 24, 2007, Ed Colligan, then CEO of Palm, Inc., wrote to Mr. Jobs, refusing Mr. Jobs’s request to enter into an illegal agreement with Apple. Mr. Colligan wrote: “Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.” (231APPLE002153.)  Intel discussed internally its “global gentleman agreement with google[sic].” (See, e.g., 76526DOC000008; 76526DOC000011.) On September 6, 2007, Paul Otellini, CEO of Intel and a Google board member, wrote: “Let me clarify. We have nothing signed. We have a handshake ‘no recruit’ between eric [sic] and myself. I would not like this broadly known.” (76526DOC000011.)  On June 6, 2007, Arnnon Geshuri, Google’s director of staffing, emailed Mr. Schmidt, copying others at Google. (GOOG-HIGH TECH-00009764.) Mr. Geshuri wrote that Bill Campbell, Intuit’s Chairman of the Board and Apple board member, “requested that Intuit be added fully to the Do Not Call list. . . . Please confirm that you are okay with the modification to the policy.” Afterward, Google contacted Mr. Campbell for permission before making employment offers to Intuit employees, even if the Intuit employee contacted Google first. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 The evidence further shows that Defendants implemented their agreement throughout 16 17 their respective companies, policed them, and punished violations. For example, Mr. Jobs 18 emailed Mr. Schmidt on March 7, 2007, forwarding an attempt by a Google employee to recruit 19 an Apple engineer. (GOOG-HIGH TECH-00008476.) Mr. Jobs wrote: “I would be very pleased 20 if your recruiting department would stop doing this.” Mr. Schmidt forwarded Mr. Jobs’s email to 21 undisclosed recipients, writing: “I believe we have a policy of no recruiting from Apple and this 22 is a direct inbound request. Can you get this stopped and let me know why this is happening? I 23 will need to send a response back to Apple quickly so please let me know as soon as you can.” 24 (GOOG-HIGH TECH-00008476.) Mr. Geshuri told Mr. Schmidt that the employee “who 25 contacted this Apple employee should not have and will be terminated within the hour.” Mr. 26 Geshuri further wrote: “Please extend my apologies as appropriate to Steve Jobs. This was an 27 isolated incident and we will be very careful to make sure this does not happen again.” Three 28 days later, Shona Brown, Google’s Senior Vice President for Business Operations, replied to Mr. 955792.11 -3- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 Geshuri, writing: “Appropriate response, thank you. Please make a public example of this 2 termination with the group.” 3 In addition, Defendants often implemented their express agreements so that they operated 4 as de facto “no-hire” or “no-poach” agreements, whereby Defendants did not recruit an employee 5 of another company, even if that employee affirmatively applied for a position. For example, on 6 December 23, 2005, an employee of Apple initiated contact with Pixar, and attempted to apply 7 for a “Mac Tools Programming position.” (PIX00003629.) The Pixar employee responded: 8 “Only problem - we can’t poach from Apple.” Mr. Otellini, CEO of Intel, referred to Intel’s 9 illegal agreement with Google as an “unofficial no poaching policy.” (76526DOC000007.) The 10 documents also demonstrate that Defendants did not extend an offer to an employee of another 11 Defendant without prior approval from the candidate’s current employer, regardless of whether 12 the candidate applied without being solicited first. (See, e.g., GOOG-HIGH TECH-00007690; 13 231APPLE002151; 76576DOC000001.) 14 The documents show that the explicit purpose of the agreement was to eliminate 15 competition for talent, suppress employee compensation, and lower wages. For example, Lori 16 McAdams, Pixar’s Vice President of Human Resources, wrote in a December 11, 2007 email that 17 Pixar had agreed with Lucasfilm that: “We just won’t get into bidding wars” for employees. 18 (PIX00004051.) In an April 17, 2007 email, Sharon Coker, a Lucasfilm employee, wrote: “We 19 have agreed we want to avoid bidding wars,” and explained the terms of the illegal agreement 20 between Lucasfilm and Pixar designed to accomplish that objective. (LUCAS00013507.) Other 21 Defendants understood this as well. For example, in a November 5, 2003 email exchange 22 between Shona Brown (Google’s Senior Vice President for Business Operations) and Jonathan 23 Rosenberg (Google’s Senior Vice President for Product Management), both Ms. Brown and Mr. 24 Rosenberg discussed ways to “never get into bidding wars” for talent by imposing restrictions on 25 recruiting. (GOOG-HIGH TECH-00000001.) Both Mr. Schmidt, Google’s CEO, and Mr. 26 Campbell, Intuit’s Chairman of the Board and Apple board member, were copied on the 27 exchange. 28 955792.11 -4- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 2 Defendants’ productions also include direct evidence that Defendants entered into and continued to participate in the conspiracy knowing that the other Defendants had done so as well. 3  Defendants assisted each other in forming and policing the agreement. For example, on February 18, 2005 Mr. Campbell, Intuit’s Chairman of the Board and Apple board member, emailed Mr. Jobs regarding a conversation Mr. Campbell had with Mr. Schmidt, Google’s CEO. “I am heading out of town . . . and wanted to give you the latest of what I heard from Google after talking to Eric Schmidt.[] Eric told me he got directly involved and firmly stopped all efforts to recruit anyone from Apple.” (231APPLE002140.)  Defendants entered into additional and identical writings confirming their understanding and mutual agreement. A heavily-redacted Intel document describes the following “verbal” agreement with Pixar: “We cannot recruit (including calling up, emailing or enticing in any way) current Pixar employees to come to work for Intel. If a Pixar employee applies to Intel without being recruited by Intel, contact Pat Gelsinger [an Intel Senior Vice President] and explain to him a Pixar employee (provide the candidates [sic] name) has applied to Intel without being recruited and he will he will [sic] contact the CEO of Pixar for approval to hire.” (76576DOC000001.)  Defendants referred to their conspiracy using the same term: “gentleman’s agreements,” and confirmed their common understanding and commitment to a common purpose. For instance, Ms. McAdams of Pixar wrote that she “got off the phone with Danielle Lambert [Apple’s Vice President of Human Resources], and we agreed that effective now, we’ll follow a Gentleman’s agreement with Apple that is similar to our Lucasfilm agreement.” (PIX00003419. See also Intel’s “global gentleman agreement with google [sic]”: 76526DOC000008; 76526DOC000011.)  All of the documents memorializing the agreements evidence the common understanding and commitment to a common purpose. Each contains the identical provision: a ban on recruiting employees, and had the same (unlimited) scope: all employees worldwide, with no time limitation.  That Defendants’ senior executives communicated directly and regularly regarding their illegal agreements provides strong evidence that the companies knew about the other express agreements, patterned their own agreements off of them, and operated them concurrently with the others to accomplish the same objective: eliminate competition for talent and suppress compensation. Further, the senior executives who entered into the illegal agreements often sat on each other’s boards: Mr. Schmidt of Google sat on Apple’s board and entered into the illegal Google / Apple agreement; Mr. Campbell of Intuit sat on Google’s board and assisted Mr. Jobs in Apple’s illegal agreement with Google; and Mr. Otellini of Intel sat (and continues to sit) on Google’s board and entered into the illegal Google / Intel agreement. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 955792.11 -5- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 2 Further, the documents demonstrate that, while each of the Defendants joined the conspiracy, some at different times, none withdrew from it. 3 In light of these documents, Plaintiffs asked Defendants to withdraw their Joint Motion 4 and stipulate to lifting the stay of discovery. Defendants refused. Defendants’ motions to dismiss 5 have wasted the time and resources of the parties and the Court, and have delayed the progress of 6 this litigation. The Court should deny Defendants’ motions, lift the discovery stay, and permit 7 Plaintiffs “to secure the just, speedy, and inexpensive determination” of this action. Fed. R. Civ. 8 P. 1. 9 B. Defendants’ Response 10 Plaintiffs’ attempt to use this CMC statement as a supplemental opposition to the motion 11 to dismiss is both objectionable and meritless. This Court’s Local Rules provide that subsequent 12 CMC statements should report on the progress of the case; those Rules do not authorize using a 13 CMC statement to reargue a motion. If plaintiffs could cure the defects in their complaint (which 14 they cannot), an amended complaint would have been the proper vehicle. No rule of procedure 15 permits a plaintiff to avoid dismissal based on purported evidence the plaintiff has declined to set 16 forth in a proper pleading. Because plaintiffs’ statement is improper, the Court should disregard 17 it. 18 But in the event that plaintiffs’ statement is considered, defendants respond briefly. 19 Stripped of plaintiffs’ mischaracterization and read in context, the cited documents only confirm 20 that the complaint should be dismissed for the reasons stated in defendants’ motion to dismiss. 21 After having obtained all the documents produced to the Department of Justice, plaintiffs cannot 22 identify any evidence showing an overarching conspiracy as alleged in the complaint. After 23 reviewing these same documents, the DOJ declined to allege any overarching conspiracy . While 24 plaintiffs distort and misconstrue the documents, the most that can be said of those documents is 25 that they refer to bilateral business arrangements, conceived at different times in the 26 individualized context of each company’s unique collaborations and corporate relationships. 27 The alleged bilateral arrangements provide no support for the overall conspiracy that 28 plaintiffs have alleged in order to name the defendants in a class action. As defendants have 955792.11 -6- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 demonstrated (Doc. 79, pp. 10-16; Doc.97, pp. 4-9), to allege an overarching conspiracy, 2 plaintiffs must do more than simply point to separate bilateral relationships among different 3 companies. But, just like plaintiffs’ complaint itself, the documents plaintiffs now cite show at 4 most only the alleged separate business arrangements. Plaintiffs cite no evidence that the alleged 5 agreement, for example, between Pixar and Lucasfilm (which began as the same company and 6 closely collaborated on numerous projects) had anything to do with a purported business 7 arrangement between Apple and Adobe or the alleged arrangement two years later between 8 Google and Intel, each of which had their own separate (and pro-competitive) collaborations/joint 9 ventures. The unique circumstances and timing of the various alleged relationships belie any such 10 connection. And plaintiffs cannot avoid the absence of any connection by using the collective 11 term “defendants” as they regularly do. 12 Trying to manufacture a connection, plaintiffs assert that defendants entered “identical 13 writings” confirming their “mutual agreement.” But they do not cite any “identical writings” or 14 any other evidence of any such agreement. Instead, they rely on an internal Intel document 15 describing only the manner in which Intel would handle making employment offers to Pixar 16 employees. Plaintiffs offer no evidence that this arrangement was the same as the alleged 17 arrangements between other companies, or that any other company was even aware of Intel’s 18 policy. Indeed, plaintiffs’ description of the documents reveal that the alleged arrangements were 19 far from identical. Plaintiffs describe some arrangements as prohibiting any hiring at all, while 20 others allegedly only restricted solicitation and still others allegedly permitted hiring only after 21 the employee’s current employer was notified. 22 Likewise unfounded is plaintiffs’ assertion that “senior executives communicated directly 23 and regularly regarding their illegal agreements.” The only communications cited by plaintiffs 24 are bilateral communications between specific companies. Plaintiffs refer to documents 25 reflecting that some executives (such as Steve Jobs or Bill Campbell) had board member or 26 similar roles at other companies. But as defendants showed in their motion to dismiss (Doc. 79, 27 pp. 11-12, Doc. 97, pp. 6-7), those relationships are legitimate and pro-competitive, and provide 28 no basis for inferring an illegal conspiracy. 955792.11 -7- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 In short, plaintiffs’ latest, unauthorized submission cannot save their complaint. Even 2 with discovery of the core relevant documents, plaintiffs do not offer any evidence of the 3 overarching conspiracy on which their complaint depends. Instead, they merely repeat the same 4 unsupported and conclusory assertions that are insufficient under Twombly. Their complaint 5 should be dismissed. 6 Contrary to plaintiffs’ assertion, the documents they cite do not warrant changing the 7 partial stay of discovery entered on October 26, 2011. The partial stay should continue at least 8 until the Court decides the motion to dismiss, which if granted will preclude the case from going 9 forward on the existing complaint. The issue should then be revisited in light of what, if anything, 10 is left of the case at that time. 11 III. 12 Document Production Issues A. 13 Plaintiffs’ Statement 1. Improper Confidentiality Designations 14 Defendants improperly designated many documents they produced as confidential or 15 highly confidential. For example, nearly every document described above was originally so 16 designated. These confidentiality designations are prohibited under multiple portions of the 17 Stipulated Proposed Protective Order. (Dkt. No. 95; ¶¶ 2.2, 2.3, 5.1, 5.2, and 5.3.) Plaintiffs have 18 challenged these improper designations and are meeting and conferring with Defendants, 19 pursuant to Paragraph 6 of the Stipulated Proposed Protective Order. Defendants’ apparent 20 “mass” and “indiscriminate” (id. ¶ 5.3) designations have improperly shifted the burden of 21 addressing confidentiality designations to Plaintiffs. 22 2. 23 Defendants’ Productions Were Limited Defendants produced documents they had previously produced to the DOJ. Certain 24 Defendants refused to confirm whether additional documents exist that are responsive to 25 Plaintiffs’ Document Requests Nos. 1-7.1 26 27 28 1 Defendants expressly limited their disclosures to Plaintiffs at individual Rule 26(f) conferences on the basis that the Court has stayed discovery. 955792.11 -8- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 3. Google’s Production of Emails Google confirmed that certain documents it produced are drafts of emails that Google’s 2 3 email system auto-saved before transmission of the final email. It does not appear possible to 4 determine, from the face of these documents, whether a particular email was a draft that was not 5 sent, or a final version that was sent. It appears Google maintains information in its systems 6 without distinguishing sent emails from unsent emails. Plaintiffs have requested confirmation of 7 which emails it produced were in fact sent, and which were drafts that were not sent. Google has 8 yet to respond. In addition, Google insisted that, in future productions, it be allowed to withhold 9 drafts of responsive emails it has preserved and that are otherwise responsive. Google seeks to 10 only produce final sent versions of emails. Plaintiffs have rejected this request, and seek 11 production of both drafts and sent emails, and identification of which emails were drafts and 12 which were in fact sent. 13 B. Defendants’ Response 14 Defendants disagree with Plaintiffs’ characterization of the document production. 15 Defendants did not indiscriminately designate documents as confidential. They designated on a 16 document-by-document basis. Defendants have been working with Plaintiffs over their 17 challenges to designations on several documents and certain categories of documents. To date, 18 Defendants have agreed to withdraw certain designations and are still working through the 19 remaining documents. If the parties are unable to resolve the appropriate designation, Defendants 20 intend to seek relief from Magistrate Judge Lloyd pursuant to the procedure set forth in the 21 Protective Order. In addition, Defendants have produced all documents that they produced to the DOJ that 22 23 were also responsive to Plaintiffs’ Requests Nos. 1-7, as this Court ordered. (Doc. 88 (“[F]rom 24 the documents Defendants produced to the United States Department of Justice in connection 25 with United States v. Adobe Systems, Inc. and/or United States v. Lucasfilm Ltd, Defendants 26 shall respond to and produce relevant, non-privileged documents responsive to Document 27 Request Nos. 1-7….”). Plaintiffs have not moved to compel, and no basis exists for any such 28 motion. 955792.11 -9- JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 Defendants have not refused to say whether additional documents exist that are responsive 2 to requests 1-7 but that were not ordered to be produced. As several Defendants explained to 3 Plaintiffs, Defendants have not searched their files to determine one way or the other whether any 4 such documents exist. 5 Google disagrees with Plaintiffs’ characterization of its email production or of the parties’ 6 meet and confer discussions. Most importantly, the emails produced by Google here are those 7 that were produced to the Department of Justice, in compliance with the Court’s Order. Thus, 8 Plaintiffs’ suggestion that Google’s production was somehow deficient is meritless. Moreover, 9 Google indicated to Plaintiffs that a discussion regarding the current production should be part of 10 the broader discussion regarding Defendants’ proposed ESI protocol, which Defendants recently 11 sent to Plaintiffs. As the parties are in the midst of meeting and conferring regarding the details 12 of the ESI protocol, Plaintiffs’ complaint is premature and unnecessary at this time. 13 IV. 14 Settlement And ADR Progress Plaintiffs provided Defendants with a settlement demand. Defendants have not 15 responded. The parties remain of the view that ADR would be premature at this time. 16 V. 17 Lucasfilm’s Separate Statement Because it is central both to case management and the merits of this litigation, Lucasfilm 18 Ltd. (“Lucasfilm”) wants to emphasize that plaintiffs’ allegations against Lucasfilm relate only to 19 a single, alleged, bilateral agreement between Lucasfilm and one other party to the case—Pixar. 20 Plaintiffs have alleged no facts suggesting Lucasfilm had any agreement of any kind with any of 21 the other defendants, and no such facts exist. The Court should grant defendants’ pending motion 22 to dismiss, both as to the purported overarching conspiracy and as to the insufficiently alleged 23 bilateral agreements. But to the extent the Court concludes that plaintiffs’ allegations of a 24 bilateral agreement between Lucasfilm and Pixar state a claim, and this case proceeds against 25 Lucasfilm, up to and including trial, it should be decided independently of issues concerning the 26 other alleged bilateral agreements among other named defendants. 27 28 Moreover, even with respect to Lucasfilm’s relationship with Pixar, there is no basis for finding any violation of the antitrust laws or any antitrust injury to the putative class. 955792.11 - 10 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 1. Lucasfilm Ltd. Lucasfilm is a privately-held entertainment company that produces movies and television 2 3 programs, video games, and other creative content. Lucasfilm also creates cutting-edge visual 4 and sound effects as a service provider to other studios, including Pixar, who produce full-length 5 feature films. Lucasfilm’s contribution to these projects is never more than one piece of a larger 6 and complicated puzzle. All of Lucasfilm’s projects require ongoing collaboration with artists 7 and engineers who work for other companies and in a variety of creative and technical areas. Lucasfilm is differently situated from large, publicly-traded companies such as Google, 8 9 Apple, Adobe, Intel, and Intuit, which sell hardware, software, and/or Web-based advertising. 10 Lucasfilm does not compete in the markets served by these businesses, and, indeed, has limited or 11 no business relationships with these defendants. Certainly Lucasfilm has never entered into any 12 agreements regarding the recruiting of employees with those defendants. If any of those other 13 defendants had any employment-related agreements with another defendant (or with any other 14 company), Lucasfilm has no knowledge of such agreements. As a result, it would be both legally 15 unsupportable and equitably unfair to hold Lucasfilm jointly and severally liable for alleged 16 damages flowing from any purported agreement in which it was not involved. (Notably, even the 17 Department of Justice (“DOJ”), in obtaining consent decrees from Lucasfilm and the other 18 defendants, never contended that any of the defendants participated in an overarching conspiracy 19 involving all the defendants, as plaintiffs now allege.) 20 2. Lucasfilm’s long-standing relationship with Pixar 21 Although plaintiffs have lumped Lucasfilm with a variety of large companies with which 22 Lucasfilm has no relationship, their only specific allegations against Lucasfilm concern a single, 23 bilateral agreement between Lucasfilm and Pixar. See Consolidated Amended Complaint 24 (“CAC”) ¶¶ 56-71 [Dkt. # 65]. In its investigation of Lucasfilm, DOJ asserted this arrangement 25 violated antitrust law. Lucasfilm chose to settle the DOJ proceeding, but made no admission of 26 liability. Although Lucasfilm has fully abided by the terms of the consent decree, it does not 27 concede that its former relationship with Pixar violated any law. Indeed, even in its consent 28 decree with Lucasfilm, DOJ recognized certain categories of conduct as legitimate under the 955792.11 - 11 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 antitrust laws. See United States v. Lucasfilm, Ltd., No. 1:10:-CV-02220-RBW (May 9, 2011) 2 (“Decree”) [Dkt. # 6]. Lucasfilm’s former relationship with Pixar fell within those categories. 3 Lucasfilm’s close relationship with Pixar dates back to 1986, when Lucasfilm spun off its 4 fledgling computer-graphics division into a new, independent company that became Pixar. The 5 40 Lucasfilm employees within that division, ranging from executives to engineers, joined the 6 new sister company, which remained located on the Lucasfilm campus for several years 7 afterward. Since its founding, Pixar has pursued a fundamentally different business model from 8 Lucasfilm. Pixar’s business initially centered on hardware used to create computer-generated 9 graphics; later, Pixar shifted focus to the production of the stylized, animated feature films for 10 which it is known today. Lucasfilm, by contrast, is organized into several largely independent 11 divisions: (1) Lucasfilm itself, which produces live-action feature films and television; (2) 12 Industrial Light & Magic (“ILM”), which provides photo-realistic visual effects for live-action 13 films and television; (3) Skywalker Sound, which provides sound engineering and effects; (4) 14 LucasArts, which designs and publishes video games; and (5) Lucasfilm Animation, which 15 produces television animation. Each of the Lucasfilm companies operates in a distinct market 16 from Pixar, and, unsurprisingly, in most instances focused its lateral recruiting on companies 17 more closely aligned with its distinct market segment (i.e., other live action film, visual effects, 18 sound effects, video game, and television animation companies). 19 Lucasfilm and Pixar have worked closely together on projects involving Pixar’s industry- 20 leading RenderMan digital effects software and Lucasfilm’s sound services work for Pixar. As 21 part of the sale of Pixar, Lucasfilm obtained a non-exclusive, perpetual, royalty-free license to 22 Pixar technology developed while the company was part of Lucasfilm—most importantly the 23 RenderMan software. Since then, Pixar has used RenderMan to create its animated features, 24 while ILM uses RenderMan to create its visual effects for live-action features. ILM is one of a 25 small number of vendors to whom Pixar has given access, and the right to make revisions, to the 26 RenderMan source code. ILM’s ability to update the RenderMan source code for its visual 27 effects work has proved crucial to ILM’s ability to deliver industry-leading visual-effects work 28 955792.11 - 12 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 for its clients. This pro-competitive result would not have been possible without the full 2 commitment of and long-term institutional input from both Pixar and Lucasfilm. 3 Lucasfilm’s Skywalker Sound division has also served as a sound design vendor for Pixar 4 for over 25 years, creating the soundtrack for every feature film Pixar has made, including award- 5 winning, international hit movies like Finding Nemo, Toy Story, and The Incredibles. This long- 6 term collaboration has been commercially successful for both parties, recognized by numerous 7 Academy Awards and yet more nominations. As Pixar’s production schedule has accelerated 8 from releasing a feature film every two to three years to releasing a feature film every year, the 9 working history, mutual trust, and creative experience involved in the longstanding Pixar- 10 Lucasfilm relationship has grown in importance to both companies. 11 3. 12 13 Collaborative arrangements, such as the Lucasfilm-Pixar relationship, are permissible, and even encouraged, under antitrust law These are exactly the sorts of long-term, ongoing collaborative relationships that antitrust 14 law recognizes as justifying reasonable, ancillary restraints on trade that offer pro-competitive 15 benefits, such as greater output and productivity. See discussion of case law at pp. 11-12 of 16 Defendants’ Reply in Support of Their Motion to Dismiss. Two companies who work together as 17 regularly and intimately, and on crucial projects, as Lucasfilm and Pixar do, could reasonably 18 conclude that poaching one another’s star employees would severely hamper the productive, 19 collaborative relationship between them. In the course of their collaborations, both companies’ 20 managers form opinions about the qualifications of employees at the other company. But if the 21 companies were to actively raid one another’s best employees during the pendency of 22 collaborations, it could risk destabilizing production teams, thereby threatening missed deadlines 23 and disruption of the high-quality output their clients and the market demands. 24 Indeed, although DOJ contended—but never proved—that the alleged Lucasfilm-Pixar 25 agreement violated antitrust law, Lucasfilm will prove in this case that its arrangement with Pixar 26 was implemented in furtherance of the kind of collaborative work and vendor relationships 27 permitted by antitrust law and recognized by the DOJ. See United States v. Lucasfilm, Ltd., No. 28 1:10:-CV-02220-RBW (May 9, 2011) (“DOJ Decree”) [Dkt. # 6]. The consent decree prohibited 955792.11 - 13 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 Lucasfilm from entering into or enforcing agreements precluding solicitation, cold calling, 2 recruitment or other competition for employees. Id. at 4. Lucasfilm agreed to this provision and 3 has abided by it. But the DOJ Decree also recognized five broad categories of exceptions for 4 specific types of agreements that are concededly legitimate under antitrust law. Specifically, the 5 consent decree expressly recognized the legality of non-solicitation agreements that were 6 “reasonably necessary for contracts with consultants or recipients of consulting services, auditors, 7 outsourcing vendors, recruiting agencies or providers of temporary workers or contract 8 employees” or “reasonably necessary for … the function of a legitimate collaboration agreement, 9 such as joint development, technology integration, joint ventures, joint projects (including 10 teaming agreements), and the shared use of facilities.” Id. at 5. Thus, even under the DOJ’s own 11 logic, the conduct described in the consent decree should not violate the Sherman Act. 12 4. 13 14 Lucasfilm’s long-standing relationship with Pixar could not have caused antitrust injury or damages to the putative class. Not only was Lucasfilm’s arrangement with Pixar legal and pro-competitive, plaintiffs 15 will not be able to prove that the relationship caused any antitrust injury or damages to members 16 of the putative class, much less on a class-wide basis using common proof. In most cases, 17 employees could not have been harmed, either (in the case of a specialized Lucasfilm sound 18 engineer) because they would not have been qualified to move from one company to the other or 19 (in the case of an administrative assistant) because their relevant labor market included thousands 20 of potential employers beyond Lucasfilm and Pixar. Even with respect to the much smaller set of 21 employees that could have been affected by the alleged restriction on recruiting, the evidence will 22 show that employees routinely moved between the two companies in pursuit of new opportunities 23 following completion of time-sensitive collaborative projects. In other words, any practical effect 24 was limited to the timing of employee recruitment, for reasons that are wholly justified under 25 antitrust law. 26 First, as discussed above, Lucasfilm and Pixar are very different companies that operate in 27 distinct markets and provide different output. They require divergent skill sets from their 28 engineers. Pixar makes animated feature films, each of which share a particular, non-realistic 955792.11 - 14 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 visual style. By contrast, the various divisions of Lucasfilm do not make animated feature films 2 or use the stylized visual approach of Pixar films. ILM provides visual effects for live-action 3 films. Lucasfilm Animation creates an animated television series that uses a dramatically 4 different artistic style from any Pixar film and is produced on a much tighter, episodic schedule, 5 with two dozen episodes created per year (as opposed to Pixar’s animated features, which take as 6 long as three years to produce). Skywalker Sound provides sound design and mixing services. 7 LucasArts designs and publishes video games. The skill set that would cause Pixar to hire a 8 candidate might well exclude that candidate from consideration as a Lucasfilm employee. When 9 ILM is looking to hire a visual-effects engineer, it is much more likely to recruit from another, 10 competing company that does photo-realistic visual effects than to go after a Pixar animator. 11 Similarly, when Skywalker Sound is recruiting a sound engineer, it would have no reason to look 12 to Pixar, which does not employ any sound engineers. For the most part, the companies do not 13 compete in the same labor markets. 14 Second, in many cases where the companies are competing in the same labor market—for 15 example, for administrators and clerical employees—that labor market would be much broader 16 than just Lucasfilm and Pixar. There is no reason that Lucasfilm would be more inclined to 17 recruit or hire a secretary from Pixar, as opposed to a qualified secretary working at any of the 18 thousands of other companies throughout the country that employ secretarial personnel. 19 Third, even where an employee did have a skill set that qualified him or her to work both 20 at Pixar and Lucasfilm, the record will show that—outside the context of time-sensitive projects 21 where both companies made efforts to keep teams together for the duration of the project— 22 employees routinely moved from one company to the other. Several Pixar executives and staff 23 members are former Lucasfilm employees, and vice versa. In addition, Lucasfilm had no general 24 practice of precluding counteroffers to Pixar employees above an initial offer. But even if such a 25 practice existed, it would not have barred the hiring firm from making an initial offer on any 26 terms it wished, or prevented the employing company from making a responsive, or preemptive, 27 counteroffer—or even multiple counteroffers. 28 955792.11 - 15 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 Given all of the above, even if plaintiffs could plead and prove antitrust liability arising 2 out of Lucasfilm’s pro-competitive collaborations with Pixar, it still would not be able to prove 3 antitrust injury or damages for the vast majority of the putative class. In any event, because the 4 trier of fact would have to engage in a separate, case-by-case factual analysis of each Lucasfilm 5 employee’s job, skill set, opportunities at Pixar and other companies, and probability of being 6 hired by those other potential employers, among many other issues, class treatment of such a case 7 would make no sense. 8 5. 9 Conclusion As defendants argued in their motion to dismiss, the Court should dismiss the complaint, 10 because plaintiffs have failed to plead any facts suggesting there was a single overarching 11 conspiracy among these defendants. Lucasfilm submits this statement in order to bring to the 12 Court’s attention important case-management issues that may arise later in this case, depending 13 on how the Court resolves that motion. Fundamentally, there is no justification for exposing 14 Lucasfilm, or any defendant, to joint and several liability for purported acts of unrelated parties. 15 16 Dated: January 19, 2012 LIEFF, CABRASER, HEIMANN & BERNSTEIN, LLP 17 By: 18 19 /s/ Joseph R. Saveri Joseph R. Saveri Joseph R. Saveri (State Bar No. 130064) Eric B. Fastiff (State Bar No. 182260) Brendan P. Glackin (State Bar No. 199643) Dean M. Harvey (State Bar No. 250298) Anne B. Shaver (State Bar No. 255928) Katherine M. Lehe (State Bar No. 273472) 275 Battery Street, 29th Floor San Francisco, CA 94111-3339 Telephone: (415) 956-1000 Facsimile: (415) 956-1008 20 21 22 23 24 Interim Lead Counsel for Plaintiff Class 25 26 27 28 955792.11 - 16 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 Dated: January 19, 2012 O’MELVENY & MYERS LLP 2 By: 3 4 George Riley Michael F. Tubach Lisa Chen Christina J. Brown Two Embarcadero Center, 28th Floor San Francisco, CA 94111 Telephone: (415) 984-8700 Facsimile: (415) 984-8701 5 6 7 8 Attorneys for Defendant APPLE INC. 9 10 /s/ Michael F. Tubach Michael F. Tubach Dated: January 19, 2012 KEKER & VAN NEST LLP 11 By: 12 13 John W. Keker Daniel Purcell Eugene M. Page Paula L. Blizzard 710 Sansome Street San Francisco, CA 94111 Telephone: (415) 381-5400 Facsimile: (415) 397-7188 14 15 16 17 Attorneys for Defendant LUCASFILM LTD. 18 19 /s/ Daniel Purcell Daniel Purcell Dated: January 19, 2012 JONES DAY 20 21 By: 22 26 Robert A. Mittelstaedt Craig A. Waldman David C. Kiernan Catherine T. Broderick Craig E. Stewart 555 California Street, 26th Floor San Francisco, CA 94104 Telephone: (415) 626-3939 Facsimile: (415) 875-5700 27 Attorneys for Defendant ADOBE SYSTEMS, INC. 23 24 25 /s/ David C. Kiernan David C. Kiernan 28 955792.11 - 17 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 Dated: January 19, 2012 JONES DAY 2 By: 3 4 /s/ Robert A. Mittelstaedt Robert A. Mittelstaedt 8 Robert A. Mittelstaedt Craig A. Waldman David C. Kiernan Catherine T. Broderick Craig E. Stewart 555 California Street, 26th Floor San Francisco, CA 94104 Telephone: (415) 626-3939 Facsimile: (415) 875-5700 9 Attorneys for Defendant INTUIT INC. 5 6 7 10 Dated: January 19, 2012 MAYER BROWN LLP 11 By: 12 13 Lee H. Rubin Edward D. Johnson Donald M. Falk Two Palo Alto Square 3000 El Camino Real, Suite 300 Palo Alto, CA 94306-2112 Telephone: (650) 331-2057 Facsimile: (650) 331-4557 14 15 16 17 Attorneys for Defendant GOOGLE INC. 18 19 /s/ Lee H. Rubin Lee H. Rubin Dated: January 19, 2012 BINGHAM McCUTCHEN LLP 20 21 By: 22 25 Donn P. Pickett Frank M. Hinman Zachary J. Alinder Three Embarcadero Center San Francisco, CA 94111 Telephone: (415) 393-2000 Facsimile: (415) 383-2286 26 Attorneys for Defendant INTEL CORPORATION 23 24 /s/ Zachary J. Alinder Zachary J. Alinder 27 28 955792.11 - 18 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK 1 Dated: January 19, 2012 COVINGTON & BURLING LLP 2 By: 3 4 /s/ Emily Johnson Henn Emily Johnson Henn 6 Robert T. Haslam, III Emily Johnson Henn 333 Twin Dolphin Drive, Suite 700 Redwood City, CA 94065 Telephone: (650) 632-4700 7 Attorneys for Defendant PIXAR 5 8 9 10 ATTESTATION: Pursuant to General Order 45, Part X-B, the filer attests that concurrence in the filing of this document has been obtained from all signatories. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 955792.11 - 19 - JOINT CASE MGMNT CONFERENCE STATEMENT Master Docket No. 11-CV-2509-LHK