Siddharth Hariharan, et al v. Adobe Systems, Inc., et al
Filing
10
Filed (ECF) Respondents Michael Devine, Mark Fichtner, Siddharth Hariharan, Brandon Marshall and Daniel Stover answer to 23f petition. Date of service: 11/18/2013. [8867390] (BPG)
No. 13-80223
In the
United States Court Of Appeals
For the
Ninth Circuit
__________________________
IN RE HIGH-TECH EMPLOYEE ANTITRUST LITIGATION
_________________________
Response to petition for permission to appeal
from the United States District Court
Northern District of California
The Honorable Lucy H. Koh, Presiding
Case No. 5:11-2509-LHK
PLAINTIFFS’ RESPONSE TO PETITION
FOR LEAVE TO APPEAL A CLASS CERTIFICATION ORDER
PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 23(f)
LIEFF CABRASER HEIMANN
& BERNSTEIN, LLP
Kelly M. Dermody
Brendan P. Glackin
Dean M. Harvey
275 Battery Street, 29th Floor
San Francisco, CA 94111-3339
Telephone: 415.956.1000
Facsimile: 415.956.1008
JOSEPH SAVERI LAW FIRM
Joseph R. Saveri
Joshua P. Davis
Lisa J. Leebove
James G. Dallal
505 Montgomery Street, Suite 625
San Francisco, California 94111
Telephone: 415.500.6800
Facsimile: 415.500.6803
Co-Lead Class Counsel
1140286.10
TABLE OF CONTENTS
Page
I.
PRELIMINARY STATEMENT..........................................................1
II.
STANDARD FOR GRANTING A RULE 23(f) PETITION..............4
III.
THE DISTRICT COURT DID NOT COMMIT “MANIFEST
ERROR”...............................................................................................4
A.
IV.
The District Court Properly Applied Rule 23(b)(3) ..................5
THE DISTRICT COURT SCRUTINIZED AND PROPERLY
FOUND PERSUASIVE PLAINTIFFS’ ECONOMIC AND
STATISTICAL EVIDENCE OF IMPACT .......................................10
A.
Economic Framework..............................................................12
B.
Quantitative Proof of the Operation of these Principles..........13
C.
The Court Considered and Properly Rejected The
Criticisms of Defense Expert Dr. Kevin Murphy....................15
V.
THE DISTRICT COURT’S ORDER DID NOT VIOLATE
THE RULES ENABLING ACT OR DEFENDANTS’ DUE
PROCESS RIGHTS ...........................................................................18
VI.
CONCLUSION ..................................................................................20
-i1140286.10
TABLE OF AUTHORITIES
Page
CASES
Amchem Prods., Inc. v. Windsor,
521 U.S. 591 (1997).............................................................................................6
Amgen Inc. v. Connecticut Retirement Plans and Trust Funds,
133 S. Ct. 1184 (2013).................................................................................3, 5, 7
Carrera v. Bayer Corp.,
727 F.3d 300 (3d Cir. 2013) ..............................................................................20
Comcast Corp. v. Behrend,
133 S. Ct. 1426 (2013)...................................................................................3, 20
Ellis v. Costco Wholesale Corp.,
657 F.3d 970 (9th Cir. 2011) .......................................................................11, 16
In re Graphics Processing Units Antitrust Litig.,
253 F.R.D. 478 (N.D. Cal. 2008) ......................................................................16
In re Scrap Metal Antitrust Litig.,
527 F.3d 517 (3d Cir. 2008) ..............................................................................20
Kohen v. Pac Inv. Mgmt. Co.,
571 F.3d 672 (7th Cir. 2009) .............................................................................19
Leyva v. Medline Industries, Inc.,
716 F. 3d 510 (9th Cir. 2013) ..............................................................................3
Lindsey v. Normet,
405 U.S. 56 (1972).............................................................................................20
McLaughlin v. Am. Tobacco Co.,
522 F.3d 215 (2d Cir. 2008) ..............................................................................20
Messner v. Northshore Univ. Healthsystem,
669 F. 3d 802 (7th Cir. 2012) ............................................................................19
Paige v. California,
291 F.3d 1141 (9th Cir. 2002) ...........................................................................16
Peterson v. Highland Music,
140 F.3d 1313 (9th Cir. 1998) ...........................................................................18
Walmart v. Dukes,
131 S. Ct. 2541 (2011)...............................................................................3, 6, 20
OTHER AUTHORITIES
2 NEWBERG ON CLASS ACTIONS § 10.05 (3d Ed. 1992) .........................................20
FEDERAL JUDICIAL CENTER REFERENCE MANUAL ON SCIENTIFIC
EVIDENCE (3d ed. 2011) at 305..........................................................................14
Joseph E. Stiglitz, Information and the Change in the Paradigm in
Economics, 92 Amer. Econ. Rev. 460 (2002) ...................................................12
-ii1140286.10
RULES
Rule 23 ....................................................................................................................19
Rule 23(a)..................................................................................................................2
Rule 23(a)(2).............................................................................................................5
Rule 23(b)(3).............................................................................................................6
Rule 23(f) ............................................................................................................4, 16
-iii1140286.10
I.
PRELIMINARY STATEMENT
Defendants’ petition should be denied. The conspiracy here, and the
overwhelming, common evidence of that conspiracy, is not in doubt. From
2005 to 2009, the leaders of Northern California’s largest and most powerful
companies agreed to reduce competition for workers by entering into an
interconnected web of secret, bilateral agreements not to solicit (“cold call”)
each other’s workforces. ER 829-832 (26-29). In the case of Pixar and
Lucasfilm, the agreement struck by Edward Catmull and George Lucas went
back 20 years. ER 828-829 (25-26). As the district court observed, the
seven Defendants here agreed to consent decrees ending this illegal conduct
after the United States Department of Justice found out about it. ER 808 (5).
This conduct reduced the compensation of Defendants’ workers—as
the DOJ found in its Competitive Impact Statement. SER 687, 689.
Although Defendants play up “manager discretion” and “differentiation” of
Class member pay, the data and evidence show otherwise. In reality, Class
member pay was almost entirely determined by their job title and other
objective common factors, and Defendants administered their pay systems
according to that job title structure. ER 843-846, 852, 863-866, 874 (40-43,
49, 60-63, 71). By reducing competition among them, Defendants kept their
compensation down. Indeed, the overwhelming record of emails and
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deposition testimony by Defendants’ senior executives—dismissed by
Defendants as “anecdotal”—shows that this was the whole point of the
agreements. ER 828-833 (25-30, 35-38). As the person who struck the first
such agreement with George Lucas admitted, cold calling “messes up the
pay structure. It does. It makes it very high. . . . That’s just the reality
we’ve got. And I do feel strongly about it.” ER 854 (51).
Plaintiffs’ class certification motion included two rounds of briefs, six
expert reports, and tens of thousands of pages of documents and deposition
testimony. On April 5, 2013, the district court found in a 53-page order that
Plaintiffs had satisfied the elements of Rule 23(a) and also shown they could
prove class-wide damages. ER 890-942 (87-139). However, the district
court expressed frustration that Defendants had failed to complete document
production, and refused to schedule the depositions of the architects of the
scheme (e.g., George Lucas, Eric Schmidt, Bill Campbell, Bruce Chizen,
and Paul Otellini) until after submission of the briefs, so it did not have the
benefit of a complete evidentiary record. ER 936 (133). See also Jan. 17,
2013 Hr’g Tr., SER 243-246. The court also requested more comprehensive
statistical analysis of the question of class-wide impact. ER 933-34 (130131). Plaintiffs supplied this analysis and also narrowed the class by
approximately 40%, limiting it to an identified set of technical employees at
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the core of Defendants’ conspiracy.
After careful consideration, the district court issued a second, 86-page
order certifying the narrower class. ER 804-889 (1-86). The court reviewed
all of the evidence from both rounds of briefing and its own prior findings.
It also gave extensive consideration to recent Supreme Court and Ninth
Circuit authority, including Walmart v. Dukes, 131 S. Ct. 2541 (2011),
Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S. Ct.
1184 (2013), Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), and Leyva
v. Medline Industries, Inc., 716 F. 3d 510 (9th Cir. 2013). ER 822-827 (1924). Before certifying the narrowed class, it addressed and rejected every
single objection and argument advanced by Defendants.
Unable to challenge the court’s actual reasoning, Defendants now
mischaracterize the Order. They claim the court “refused to resolve disputed
issues about plaintiffs’ conduct [damages] regression,” but do not identify a
single such issue. Pet. 7. There are none. They say the court found that
Plaintiffs’ evidence “could not generate a common answer” on the question
of antitrust impact, when the court plainly found the opposite. Compare Pet.
10 with ER 827-887 (24-84). They advance novel arguments that they never
adequately raised below. Defendants fail to articulate a valid basis for their
petition. It should be denied.
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II.
STANDARD FOR GRANTING A RULE 23(f) PETITION
In Chamberlan, the Ninth Circuit identified three highly unusual
situations in which interlocutory review of a class certification order may be
justified. Defendants invoke only one of them: “the district court’s class
certification decision is manifestly erroneous.” See Pet. 1 (quoting
Chamberlan, 402 F.3d at 959). However, they ignore Chamberlan’s further
explanation that:
It is difficult to show that a class certification order is
manifestly erroneous unless the district court applies an
incorrect Rule 23 standard or ignores a directly controlling case.
Class certification decisions rarely will involve legal errors,
however, simply because class actions typically involve
complex facts that are unlikely to be on all fours with existing
precedent.
Id. at 962 (citations omitted). “The error in the district court’s decision must
be significant; bare assertions of error will not suffice.” Id. at 959. Given
these standards, Rule 23(f) petitions are granted only “sparingly.” Id.
III.
THE DISTRICT COURT DID NOT COMMIT “MANIFEST
ERROR”
Defendants have done worse than rely on bare assertions; they rely on
false ones.1 They claim that the district court required Plaintiffs to show this
action involves only common questions, not common answers. Pet. 10. The
Court, however, found Plaintiffs’ common evidence of harm to the class as a
1
Amicus merely repeat the errors.
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whole means that “Plaintiffs’ case rises and falls with their common
evidence.” ER 888 (85). In other words, the trial court concluded the
answers in this litigation would be common, not just the questions.
Similarly, Defendants imply that the district court found the common issue
of whether there was an antitrust violation sufficient for common issues to
satisfy predominance by itself, even though proving antitrust impact would
give rise to individualized issues. Pet. 11. Untrue. The district court held a
second certification hearing precisely to assess common impact and found
impact to be an issue common to the class. ER 812; 834-881 (9, 31-78). The
fact that Defendants do not even honestly describe the order demonstrates,
as further explained below, why they have no meaningful challenge to it.
A.
The District Court Properly Applied Rule 23(b)(3)
Defendants first claim the court applied a less rigorous standard to
predominance than for commonality by insisting only on common questions,
not common answers. Pet. 10-11. To the contrary, Judge Koh applied a
more stringent—not a less stringent—standard in assessing predominance
than commonality. She recognized Rule 23(b)(3) requires common issues to
predominate, ER 823 (20) (citing Amgen, 133 S. Ct. at 1191, 1194, 1196),
whereas Rule 23(a)(2) requires only a single common issue. ER 818 (15)
(citing Dukes, 131 S. Ct. at 2250-51, 2256); see also ER 899 (96) (April 5,
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2013 Class Cert. Order) (“The predominance criterion of Rule 23(b)(3) is
‘far more demanding’ than satisfying the commonality requirement…’”)
(quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 624 (1997)). After
analyzing commonality—and based, inter alia, on Defendants’ concession
of common legal and factual issues, ER 817-818 (14-15)—Judge Koh
conducted a rigorous analysis and found that common issues predominated
not only in the case as a whole but as to each element of Plaintiffs’ claims.
ER 887 (84).
In doing so, Judge Koh found Plaintiffs’ claims would give rise not
only to common questions but to common answers, including with respect to
injury and damages. Plaintiffs offered abundant evidence common to the
class that Defendants’ conduct suppressed the wages of the class as a whole,
evidence that Judge Koh analyzed with extraordinary rigor. ER 834 -881
(31-78). In conducting that analysis, Judge Koh properly recognized that the
issue is not whether Plaintiffs will win on common impact—a matter to be
resolved at trial—but whether their claims would succeed or fail together.
The merits only matter to the extent a failure of common proof leads to
individualized proof. The Supreme Court made that clear in Amgen, a case
that Defendants pretend never issued. ER 823 (20) (“‘Rule 23(b)(3) requires
a showing that questions common to the class predominate, not that those
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questions will be answered, on the merits, in favor of the class.’”) (quoting
Amgen, 133 S. Ct. at 1191). Judge Koh found that “Plaintiffs’ case rises and
falls with their common evidence.” ER 888 (85).
That finding relied on abundant documentary and deposition
evidence. The court “could not identify a case at the class certification stage
with the level of documentary evidence Plaintiffs have presented in the
instant case.” ER 872 (69). With respect to the antitrust violation, the court
found that “Plaintiffs have set forth copious common evidence in the form of
Defendants’ internal work documents, deposition transcripts, and email
exchanges between Defendants’ CEOs as well as other directors, officers,
and senior managers, all of which support Plaintiffs’ allegations that
Defendants entered into express agreements not to compete for one
another’s employees.” ER 828 (25).
The court explained that “Plaintiffs marshal substantial evidence,
including documentary evidence and expert reports using statistical
modeling, economic theory, and data, to demonstrate that common questions
will predominate over individual questions in determining the impact of the
antitrust violations.” ER 834 (31). Plaintiffs provided “significant evidence
that cold calling was an important part of Defendants’ recruitment practices
and contend that the elimination of such recruitment through cold calling
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had adverse effects on all Technical Class members.” ER 836 (33).
Defendants’ business records and senior executives confirmed that
“throughout the class period, Defendants viewed recruitment, particularly of
‘passive candidates’—that is, employees who were not actively looking for a
new job—as crucial to their growth and development.” ER 836, 836838 (33, 33-35).
“While Defendants dispute that this absence of cold calling due to
their anti-solicitation agreements had any effect on job opportunities or flow
of information to the class members, . . . Defendants’ own documents
created during the alleged conspiracy tell a different story.” ER 838 (35).
See also ER 838-841 (summarizing evidence). “Plaintiffs’ evidence supports
their claim that these anti-solicitation agreements, enforced by Defendants’
top officers, stifled recruitment efforts of Technical Class members.”
ER 841 (38). The evidence “suggests not only that the anti-solicitation
agreements eliminated a key tool of recruitment, cold calling, but also that
the impact of this elimination affected the entire Technical Class.”
ER 842 (39).
The Court also reviewed and relied upon extensive documentary and
expert evidence that “shows that Defendants maintained formal
compensation structures and made significant efforts to maintain internal
1140286.10
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equity within those structures.” ER 843, 843-850 (40, 40-47). Defendants
attempt to dismiss as “unremarkable” this “evidence that defendants
generally paid employees within base-salary ranges and tried to compensate
similarly performing employees similarly under ‘internal equity’ policies.”
Pet. 13. But this admission describes structural forces at work that
commonly impact the Class. ER 850 (47).
According to Defendants, the “undisputed evidence shows that each
class member’s compensation is determined by highly individualized
factors,” Pet. 2, and that each Defendant “set each class member’s pay on a
case-by-case basis,” Pet. 5. In fact, the evidence is overwhelmingly to the
contrary: “Defendants each employed company-wide compensation
structures that included grades and titles, and that high-level management
established ranges of salaries for grades and titles, which left little scope for
individual variation.” ER 860 (57).
Defendants also assert, without evidence, that they did not compete
for employees. Pet. 4. But the evidence showed “Defendants viewed each
other as competitors for the same employees,” ER 850, 850-854 (47, 47-51)
(summarizing evidence), and exchanged confidential information about each
other’s planned company-wide compensation increases. ER 852 (49).
Defendants also misstate Plaintiffs’ theory of class-wide impact,
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claiming the theory Plaintiffs advance is that information from one recipient
of a cold call would spread to others via word-of-mouth, causing a “‘ripple’
effect” across the Class. Pet. 15; see also id. 6-7. In fact, “there is
compelling evidence that in the absence of the anti-solicitation agreements,
Defendants would have had to make structural preemptive or reactive
changes” in response to greater levels of competition. ER 877, 877-881 (74,
74-78) (summarizing evidence). Google did exactly that—increased
compensation to all of its employees—in response to Facebook refusing to
agree not to solicit Google employees. ER 879-881 (76-78).
The voluminous evidence, including business records and testimony,
all lead to the same conclusion: common violation, common impact, and
damages to the class as a whole. Such evidence is “likely to be among the
most persuasive to a jury as it illustrates and confirms many of the actual
dynamics at play within Defendants’ firms.” ER 869 (66).
IV.
THE DISTRICT COURT SCRUTINIZED AND PROPERLY
FOUND PERSUASIVE PLAINTIFFS’ ECONOMIC AND
STATISTICAL EVIDENCE OF IMPACT
Defendants accuse the district court of relying on “meaningless
aggregated and averaged statistical analyses,” Pet. 12, that it “failed to
carefully scrutinize,” id. at 14, and about which it refused to “resolve
evidentiary disputes,” id. In fact, Judge Koh recognized that “when there is
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a battle of the experts on class certification, ‘rigorous analysis’ requires
district courts to determine not only admissibility of the experts’ statements,
but also the ‘persuasiveness of the evidence presented.’” ER (20) (citing
Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011)).
Defendants do not identify a single issue on which the court failed to make
the appropriate findings—no citation to the record follows any of these bald
assertions. Instead, they argue that the court must not have applied the right
standards for the simple reason that they disagree with its conclusions. Pet.
14 (“Had the district court taken the requisite ‘hard look’ at plaintiffs’
statistics, it could not have found… [etc.].”). This is the most naked form of
sophistry.
The district court spent 20 pages (and significant time at oral
argument) carefully scrutinizing all of the economic statistical evidence. ER
854-863 (51-60), ER 872-878 (69-75); Aug. 8, 2013 Hr’g Tr., SER 89-152.
On every issue, the district court found for Plaintiffs, specifically concluding
that “the methodological deficiencies in Defendants’ expert reports
render[ed] the[ir] criticisms unpersuasive.” ER 855 (52) (emphasis added).
The court further found that Plaintiffs aggregated data at the right level—job
title—because job title overwhelmingly drives compensation in Defendants’
workforces. The court therefore properly found that Plaintiffs’ economic
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and statistical evidence “demonstrate[s] that common questions are likely to
predominate over individual questions.” ER 855(52).
A.
Economic Framework
To analyze the effect of these agreements Plaintiffs engaged Professor
Edward E. Leamer, the Chauncey J. Medberry Professor of Management,
Professor of Economics and Professor of Statistics at the University of
California at Los Angeles. ER 854, n.11 (51). Dr. Leamer first explained the
well-accepted economic principle that labor markets do not display perfect
competition. See ER 856-858 (discussing price discovery). A worker’s
ability to demand higher compensation depends on, among other things,
information; and even a small amount of information, or a small restriction
on information, can have a “profound effect” on worker pay. ER 858 (55)
(quoting Joseph E. Stiglitz, Information and the Change in the Paradigm in
Economics, 92 Amer. Econ. Rev. 460, 461 (2002)). Another principle,
internal equity, helps explain why any effect of this restriction on
information would have been broadly felt across Defendants’ workforces.
ER 858-860 (55-57). High-tech companies must ensure their employees feel
fairly treated. Id. That is why, as demonstrated by the record here, see supra
1-2, 7-10, Defendants set pay through incremented salary systems that hold
employees’ compensation together in a semi-rigid structure. See also ER
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854, 866-868 (51, 63-65) (discussing testimony of Plaintiff expert Prof.
Kevin F. Hallock). Defendants’ expert, Professor Kevin M. Murphy, did not
contest these basic principles, ER 868-869 (65-66), nor do Defendants now.
B.
Quantitative Proof of the Operation of these Principles
Dr. Leamer provided quantitative evidence that these principles
explain the compensation of Defendants’ workers, providing further proof
that the impact of the agreements would have been real and broadly felt. Dr.
Leamer “first performed an analysis to show that employees who changed
[between Defendant] firms received higher compensation than those who
stayed, reflecting the economic theory of price discovery at work.” ER 858
(55) (bracketed material added). This confirms the proposition, which
Defendants concede, that competition for Defendants’ workers is not
“perfect” and restrictions on information affect worker compensation.
Dr. Leamer also analyzed the factors that determine worker pay, to
test Defendants’ implausible assertion that worker pay is completely
committed to manager discretion, not an administrative pay system. The
court relied on the fact that “[a]ccording to Dr. Leamer, approximately 90
percent of the variation in any individual employee’s compensation can be
explained by common factors ‘such as age, number of months in the
company, gender, location, title, and employer.” ER 861 (58) (quoting ¶ 128
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of Oct 1, 2012 Leamer Report, SER 775-776 (373)). Of these, worker
compensation is driven “primarily by job title.” ER 874-875 (71-72).
Dr. Leamer performed a multiple variable regression to analyze the
effect on the class of the anti-solicitation agreements, ER 862 (59), a
standard method for proving damages. FEDERAL JUDICIAL CENTER
REFERENCE MANUAL ON SCIENTIFIC EVIDENCE (3d ed. 2011) at 305. The
court found that in addition to being a valid proof of damages, this
regression “show[ed] that the anti-solicitation agreements had a general
impact on class members.” ER 863 (60). Defendants contend that “when the
same model is run defendant by defendant it falls apart, showing
overcompensation by various defendants.” Pet. 15 (emphasis omitted).
However, the court specifically considered and rejected this criticism in its
April 5, 2013 Class Certification Order. ER 928 (125). Even Defendants’
own expert did not create “truly disaggregated models for each Defendant.”
Id.
Having established that job title “primarily” determines worker
compensation, Dr. Leamer then analyzed whether a structure holds together
compensation of different titles. He analyzed the correlation of job title
compensation to class compensation over time and the correlation of yearby-year changes in job title and class compensation. ER 863-864 (60-61).
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With respect to both, Dr. Leamer found that the “vast majority”
of [class] employee job titles (weighted by number of employee
years) at each firm correlated positively over time with the
compensation of the overall set of [class] employees at that
firm.
ER 864 (61) (bracketed material added). He used multiple regression
analysis to examine the degree to which overall compensation to the class
explains each job title’s compensation. ER 864-865 (61-62).
The regressions indicated that the “vast majority” of employees
fall within titles or groups that show: (1) that gains for the titles
or groups are shared broadly at the same time and (2) that gains
for some are shared with others in different job titles in a
subsequent year.
ER 865 (62). Dr. Leamer found these analyses to support his opinion that
“all or almost all Defendants’ employees would have been impacted by the
non-compete agreements,” ER 865 (62) (quoting SER 909 (468)); he further
“opined that the fact that gains were shared over time strongly indicated that
an internal sharing force, rather than only external market forces, drove the
structure of class member compensation.” ER 865 (62). This structure, in
turn, spread the effects of the violation throughout the Class.
C.
The Court Considered and Properly Rejected The
Criticisms of Defense Expert Dr. Kevin Murphy
Defendants seem to argue that any data analysis that averages
individual transactions must be rejected. Defendants are wrong. The Ninth
Circuit has held—in yet another controlling decision that they simply choose
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to ignore—that “it is a generally accepted principle that aggregated
statistical data may be used where it is more probative than subdivided
data.” Paige v. California, 291 F.3d 1141, 1148 (9th Cir. 2002) (citations
omitted); see also In re Graphics Processing Units Antitrust Litig., 253
F.R.D. 478, 491 (N.D. Cal. 2008) (“This order agrees that such methods,
where plausibly reliable, should be allowed as a means of common proof.
To rule otherwise would allow antitrust violators a free pass in many
industries.”). The district court recognized here “that aggregation may
provide ‘a [more] robust analysis and yield more reliable and more
meaningful statistical results.’” ER 882 (79) (quoting Ellis v. Costco
Wholesale Corp., 285 F.R.D. 492, 523 (N.D. Cal. 2012)) (edits in original).2
As the court found, to assess whether a relationship exists among job titles
the data must be aggregated to the job title level. ER 874 (71). Dr. Murphy
agrees: “The reason you do the averaging is so that you are left with a more
systematic part and the idiosyncratic parts get averaged out.” ER 874 (71)
(Murphy Dep. 553:18-20).
2
In Ellis v. Costco, this Court remanded with an instruction to weigh the
persuasiveness of the aggregate data and make a determination as to whether
it amounted to significant proof. 657 F.3d at 982. After the district court
granted the plaintiffs’ motion for class certification, finding, among other
things, that aggregate data could yield more meaningful and robust statistical
proof, Ellis v. Costco, 285 F.R.D. at 523, this Court denied a subsequent
Rule 23(f) petition. SER 718.
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Defendants on appeal ignore the steps (explained above) that led Dr.
Leamer to run regressions at the job title level. And, of course, the
Defendants themselves regularly aggregate and analyze their compensation
data at the job title level for business purposes. ER 875 (72). Defendants
also monitored and analyzed each other’s aggregated compensation data
through market surveys in which all of the Defendants participated in
various combinations—an additional method of propagating pay
suppression. ER 867 (64) (citing ¶ 240 of Hallock Report, SER 1079-80
(636-637)); see ER 867:23-27 (64:23-28). Indeed, when determining the
competitiveness of their own pay practices, the court found that Defendants
“often aggregated their entire compensation budget and compared it to the
budgets of other firms, or matched job title compensation within the
company to similar titles across multiple companies.” ER 875 (72).
Furthermore, “that Defendants differentiated pay is not inconsistent
with Dr. Leamer’s finding that the Defendants maintained compensation
structures that restrained that differentiation.” ER 876 (73). Dr. Leamer’s
analysis shows that job title accounts for the vast majority of a worker’s pay,
not all of it. Thus, Defendants’ administrative pay systems allowed a
limited amount of differentiation while including controls that kept workers’
pay together over time, i.e., a “semi-rigid pay structure,” with the
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overwhelming majority of all employers—97%—paid by design within
their jobs’ annual, centrally pre-set salary ranges. SER 982, 1002-1006
(541, 561-565) (July 12, 2013 Leamer Report, ¶¶ 31, 68 & figs. 6-9); see ER
843-850, 863-872:6-9 (40-47, 60-69:6-9). The court understood that
Plaintiffs never argued that the impact of the agreements would have been
“lockstep.” ER 877 (74). Rather, “by shielding their employees from waves
of recruiting, Defendants not only avoided individual raises, they also
avoided having to make across-the-board preemptive increases to
compensation.” ER 877 (74) (internal quotation marks omitted), such as
Google did in response to recruiting by Facebook. SER 1071, 1074 (628,
631) (Hallock Report, ¶¶ 205, 213-214); SER 976-980 (535-539) (July 12,
213 Leamer Report, ¶¶ 18-25).
V.
THE DISTRICT COURT’S ORDER DID NOT VIOLATE THE
RULES ENABLING ACT OR DEFENDANTS’ DUE PROCESS
RIGHTS
Defendants assert that Judge Koh’s Order violates the Rules Enabling
Act (“the REA”) and the Due Process Clause by abridging their substantive
rights. Pet. 17-20. Defendants only ever made this argument in a footnote
below; this Court should not consider it as a basis for granting interlocutory
review. See Peterson v. Highland Music, 140 F.3d 1313, 1321 (9th Cir.
1998) (this Court “appl[ies] a ‘general rule’ against entertaining arguments
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on appeal that were not presented or developed before the district court.”);
SER 716 (Opp. to Pls.’ Mot. for Class Cert. at 25:20-23). Defendants’ new
argument once again has no substance to it. It boils down to this:
Here, defendants are entitled to present evidence
that class members were not injured (or were
damaged less) through evidence of class members’
individual circumstances, such as tenure, skill set,
and job performance.
Pet. 19. Of course, Judge Koh has not limited their defenses in any way—so
this argument is illusory. Rather, Defendants seem to be saying that a class
can never be certified for damages purposes because there must always be
individual hearings on damages. In other words, it is Rule 23 itself that must
always violate the REA and the Due Process Clause.
Defendants cite no authority for this proposition because legions of
cases contradict it. First, there is no requirement that plaintiffs prove impact
using evidence individual to each class member—this is just like saying a
class cannot be certified for purposes of damages, which requires common
proof. Second, the possibility that a few class members might not have been
injured does not preclude class certification in antitrust cases. Messner v.
Northshore Univ. Healthsystem, 669 F. 3d 802, 825 (7th Cir. 2012); Kohen
v. Pac Inv. Mgmt. Co., 571 F.3d 672, 677 (7th Cir. 2009). Third, once
plaintiffs prove a violation and fact of damage, “damages ‘[c]alculations
1140286.10
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need not be exact’”. ER 881 (78) (quoting Comcast, 133 S. Ct. at 1433). It
is hornbook law that damages may be proven on an aggregate or average
basis in class cases. See 2 NEWBERG ON CLASS ACTIONS § 10.05 (3d Ed.
1992) (“aggregate computation of class monetary relief is lawful and
proper”); see, e.g., In re Scrap Metal Antitrust Litig., 527 F.3d 517, 534 (3d
Cir. 2008); see also n.2, supra. Defendants raise the red herring of “Trial by
Formula,” Dukes, 131 S. Ct. at 2561, i.e. the practice in some discrimination
cases of resolving some questions through representative samples of class
members. Defendants seem to interpret this as a ban on math. It is not, and
has no bearing on the practice of proving class damages on an aggregate
basis.3
VI.
CONCLUSION
For the foregoing reasons, Defendants’ petition should be denied.
3
The cases on which Defendants rely are inapposite. In McLaughlin v. Am.
Tobacco Co., 522 F.3d 215 (2d Cir. 2008), the Second Circuit denied class
certification because proof of individual reliance on the defendant’s
allegedly false advertisements about light cigarettes was an essential element
of plaintiffs’ claims that could not be proven using common evidence. 522
F.3d at 223-25. Nor, though they cite Carrera v. Bayer Corp., 727 F.3d 300
(3d Cir. 2013), do Defendants challenge the ascertainability requirement. Id.
at 303 (“The sole issue on appeal is whether the class members are
ascertainable.”). And, unlike in Dukes, and despite their reliance on Lindsey
v. Normet, 405 U.S. 56, 66 (1972) (due process entitles defendants to
“present every available defense”), Defendants have not identified any
purported individualized statutory defense available to them.
1140286.10
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Dated: November 18, 2013
By:
/s/ Brendan P. Glackin
LIEFF CABRASER HEIMANN
& BERNSTEIN, LLP
Kelly M. Dermody
Brendan P. Glackin
Dean M. Harvey
Anne B. Shaver
Lisa J. Cisneros
275 Battery Street, 29th Floor
San Francisco, CA 94111-3339
Telephone: 415.956.1000
Facsimile: 415.956.1008
By:
/s/ Joseph R. Saveri
JOSEPH SAVERI LAW FIRM
Joseph R. Saveri
Joshua P. Davis
Lisa J. Leebove
James G. Dallal
505 Montgomery Street, Suite 625
San Francisco, California 94111
Telephone: 415.500.6800
Facsimile: 415.500.6803
Co-Lead Class Counsel
1140286.10
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