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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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: [phone]
Facsimile: [phone]

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Interim Lead Counsel for Plaintiff Class

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[Additional counsel listed on signature page]

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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IN RE: HIGH-TECH EMPLOYEE
ANTITRUST LITIGATION
THIS DOCUMENT RELATES TO:
ALL ACTIONS

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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

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(UNREDACTED)

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955792.11

JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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The parties to these consolidated actions hereby submit this joint statement in advance of

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the January 26, 2011 Case Management Conference.

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I.

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Case Progress
Since the Parties’ October 19, 2011 Amended Joint Case Management Conference

Statement, the case has progressed as follows.

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On October 19, 2011, Plaintiffs served a subpoena on Hewlett-Packard Company,

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regarding documents relevant to the alleged communications between Steve Jobs of Apple and Ed

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Colligan, Palm Inc.’s then CEO (Hewlett-Packard subsequently acquired Palm). Counsel for

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Hewlett-Packard requested that Plaintiffs withdraw the subpoena as to Hewlett-Packard and serve

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it instead on Palm, which continues to exist as a separate entity. On November 30, 2011,

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Plaintiffs agreed to withdraw the subpoena, and told counsel for Hewlett-Packard that Plaintiffs

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would serve a subpoena on Palm upon modification of the Court’s October 26, 2011 Minute

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Order and Case Management Order (Dkt. No. 88). Counsel for Hewlett-Packard agreed to

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preserve responsive documents and to accept service of a subpoena on Palm.

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On November 30, 2011, the Parties filed a Stipulated Proposed Protective Order. (Dkt.
No. 95.)

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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.

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Plaintiffs have completed an initial review of Defendants’ productions. As explained

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below, in Plaintiffs’ view, the documents Defendants produced demonstrate that Defendants’

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Joint Motion To Dismiss the Consolidated Amended Complaint (“Joint Motion”; Dkt. No. 79) is

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without merit and should be withdrawn. Plaintiffs asked Defendants to withdraw their Joint

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Motion and stipulate to lifting the stay of discovery. Defendants declined. As explained below,

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in Defendants’ view, Plaintiffs’ assertions are improper for a CMC statement, and erroneous.

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On December 5, 2011, the Parties filed a Stipulation and Proposed Order Concerning

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Testifying Expert Discovery. (Dkt. No. 99.)

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On December 16, 2011 and thereafter, Defendants produced privilege logs related to their
document productions. Plaintiffs are reviewing the privilege logs.
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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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On January 11, 2012, Plaintiffs wrote several third parties and asked them to preserve

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documents relevant to this case, pending the Court’s review of the discovery stay. Several of the

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third parties have responded and taken the position they are under no obligation to preserve

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relevant documents unless and until they are served with a subpoena.

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II.

Defendants’ Document Productions

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A.

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Defendants’ productions demonstrate that this case should move beyond the pleadings

Plaintiffs’ Statement

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without further delay. In Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007), the Supreme

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Court articulated a pleading standard that “simply calls for enough fact to raise a reasonable

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expectation that discovery will reveal evidence of illegal agreement.” Here, a motion to dismiss

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under Twombly is improper and pointless: the limited documents produced to date confirm that

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Defendants’ senior executives, including their CEOs, entered into the multi-faceted illegal

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agreement Plaintiffs allege. The evidence includes:

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

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.

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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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

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.

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The evidence further shows that Defendants implemented their agreement throughout

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their respective companies, policed them, and punished violations. For example, Mr. Jobs

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emailed Mr. Schmidt on March 7, 2007, forwarding an attempt by a Google employee to recruit

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an Apple engineer. (GOOG-HIGH TECH-00008476.) Mr. Jobs wrote: “I would be very pleased

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if your recruiting department would stop doing this.” Mr. Schmidt forwarded Mr. Jobs’s email to

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undisclosed recipients, writing: “I believe we have a policy of no recruiting from Apple and this

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is a direct inbound request. Can you get this stopped and let me know why this is happening? I

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will need to send a response back to Apple quickly so please let me know as soon as you can.”

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(GOOG-HIGH TECH-00008476.) Mr. Geshuri told Mr. Schmidt that the employee “who

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contacted this Apple employee should not have and will be terminated within the hour.” Mr.

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Geshuri further wrote: “Please extend my apologies as appropriate to Steve Jobs. This was an

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isolated incident and we will be very careful to make sure this does not happen again.” Three

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days later, Shona Brown, Google’s Senior Vice President for Business Operations, replied to Mr.
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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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Geshuri, writing: “Appropriate response, thank you. Please make a public example of this

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termination with the group.”

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In addition, Defendants often implemented their express agreements so that they operated

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as de facto “no-hire” or “no-poach” agreements, whereby Defendants did not recruit an employee

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of another company, even if that employee affirmatively applied for a position. For example, on

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December 23, 2005, an employee of Apple initiated contact with Pixar, and attempted to apply

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for a “Mac Tools Programming position.” (PIX00003629.) The Pixar employee responded:

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“Only problem - we can’t poach from Apple.” Mr. Otellini, CEO of Intel, referred to Intel’s

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illegal agreement with Google as an “unofficial no poaching policy.” (76526DOC000007.) The

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documents also demonstrate that Defendants did not extend an offer to an employee of another

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Defendant without prior approval from the candidate’s current employer, regardless of whether

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the candidate applied without being solicited first. (See, e.g., GOOG-HIGH TECH-00007690;

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231APPLE002151; 76576DOC000001.)

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The documents show that the explicit purpose of the agreement was to eliminate

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competition for talent, suppress employee compensation, and lower wages. For example, Lori

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McAdams, Pixar’s Vice President of Human Resources, wrote in a December 11, 2007 email that

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Pixar had agreed with Lucasfilm that: “We just won’t get into bidding wars” for employees.

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(PIX00004051.) In an April 17, 2007 email, Sharon Coker, a Lucasfilm employee, wrote: “We

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have agreed we want to avoid bidding wars,” and explained the terms of the illegal agreement

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between Lucasfilm and Pixar designed to accomplish that objective. (LUCAS00013507.) Other

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Defendants understood this as well. For example, in a November 5, 2003 email exchange

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between Shona Brown (Google’s Senior Vice President for Business Operations) and Jonathan

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Rosenberg (Google’s Senior Vice President for Product Management), both Ms. Brown and Mr.

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Rosenberg discussed ways to “never get into bidding wars” for talent by imposing restrictions on

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recruiting. (GOOG-HIGH TECH-00000001.) Both Mr. Schmidt, Google’s CEO, and Mr.

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Campbell, Intuit’s Chairman of the Board and Apple board member, were copied on the

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exchange.

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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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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.

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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.)

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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.)

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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.)

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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.

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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.

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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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Further, the documents demonstrate that, while each of the Defendants joined the
conspiracy, some at different times, none withdrew from it.

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In light of these documents, Plaintiffs asked Defendants to withdraw their Joint Motion

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and stipulate to lifting the stay of discovery. Defendants refused. Defendants’ motions to dismiss

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have wasted the time and resources of the parties and the Court, and have delayed the progress of

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this litigation. The Court should deny Defendants’ motions, lift the discovery stay, and permit

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Plaintiffs “to secure the just, speedy, and inexpensive determination” of this action. Fed. R. Civ.

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P. 1.

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B.

Defendants’ Response

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Plaintiffs’ attempt to use this CMC statement as a supplemental opposition to the motion

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to dismiss is both objectionable and meritless. This Court’s Local Rules provide that subsequent

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CMC statements should report on the progress of the case; those Rules do not authorize using a

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CMC statement to reargue a motion. If plaintiffs could cure the defects in their complaint (which

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they cannot), an amended complaint would have been the proper vehicle. No rule of procedure

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permits a plaintiff to avoid dismissal based on purported evidence the plaintiff has declined to set

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forth in a proper pleading. Because plaintiffs’ statement is improper, the Court should disregard

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it.

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But in the event that plaintiffs’ statement is considered, defendants respond briefly.

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Stripped of plaintiffs’ mischaracterization and read in context, the cited documents only confirm

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that the complaint should be dismissed for the reasons stated in defendants’ motion to dismiss.

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After having obtained all the documents produced to the Department of Justice, plaintiffs cannot

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identify any evidence showing an overarching conspiracy as alleged in the complaint. After

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reviewing these same documents, the DOJ declined to allege any overarching conspiracy . While

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plaintiffs distort and misconstrue the documents, the most that can be said of those documents is

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that they refer to bilateral business arrangements, conceived at different times in the

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individualized context of each company’s unique collaborations and corporate relationships.

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The alleged bilateral arrangements provide no support for the overall conspiracy that

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plaintiffs have alleged in order to name the defendants in a class action. As defendants have
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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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demonstrated (Doc. 79, pp. 10-16; Doc.97, pp. 4-9), to allege an overarching conspiracy,

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plaintiffs must do more than simply point to separate bilateral relationships among different

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companies. But, just like plaintiffs’ complaint itself, the documents plaintiffs now cite show at

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most only the alleged separate business arrangements. Plaintiffs cite no evidence that the alleged

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agreement, for example, between Pixar and Lucasfilm (which began as the same company and

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closely collaborated on numerous projects) had anything to do with a purported business

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arrangement between Apple and Adobe or the alleged arrangement two years later between

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Google and Intel, each of which had their own separate (and pro-competitive) collaborations/joint

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ventures. The unique circumstances and timing of the various alleged relationships belie any such

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connection. And plaintiffs cannot avoid the absence of any connection by using the collective

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term “defendants” as they regularly do.

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Trying to manufacture a connection, plaintiffs assert that defendants entered “identical

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writings” confirming their “mutual agreement.” But they do not cite any “identical writings” or

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any other evidence of any such agreement. Instead, they rely on an internal Intel document

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describing only the manner in which Intel would handle making employment offers to Pixar

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employees. Plaintiffs offer no evidence that this arrangement was the same as the alleged

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arrangements between other companies, or that any other company was even aware of Intel’s

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policy. Indeed, plaintiffs’ description of the documents reveal that the alleged arrangements were

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far from identical. Plaintiffs describe some arrangements as prohibiting any hiring at all, while

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others allegedly only restricted solicitation and still others allegedly permitted hiring only after

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the employee’s current employer was notified.

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Likewise unfounded is plaintiffs’ assertion that “senior executives communicated directly

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and regularly regarding their illegal agreements.” The only communications cited by plaintiffs

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are bilateral communications between specific companies. Plaintiffs refer to documents

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reflecting that some executives (such as Steve Jobs or Bill Campbell) had board member or

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similar roles at other companies. But as defendants showed in their motion to dismiss (Doc. 79,

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pp. 11-12, Doc. 97, pp. 6-7), those relationships are legitimate and pro-competitive, and provide

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no basis for inferring an illegal conspiracy.
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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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In short, plaintiffs’ latest, unauthorized submission cannot save their complaint. Even

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with discovery of the core relevant documents, plaintiffs do not offer any evidence of the

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overarching conspiracy on which their complaint depends. Instead, they merely repeat the same

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unsupported and conclusory assertions that are insufficient under Twombly. Their complaint

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should be dismissed.

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Contrary to plaintiffs’ assertion, the documents they cite do not warrant changing the

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partial stay of discovery entered on October 26, 2011. The partial stay should continue at least

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until the Court decides the motion to dismiss, which if granted will preclude the case from going

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forward on the existing complaint. The issue should then be revisited in light of what, if anything,

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is left of the case at that time.

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III.

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Document Production Issues
A.

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Plaintiffs’ Statement
1.

Improper Confidentiality Designations

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Defendants improperly designated many documents they produced as confidential or

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highly confidential. For example, nearly every document described above was originally so

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designated. These confidentiality designations are prohibited under multiple portions of the

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Stipulated Proposed Protective Order. (Dkt. No. 95; ¶¶ 2.2, 2.3, 5.1, 5.2, and 5.3.) Plaintiffs have

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challenged these improper designations and are meeting and conferring with Defendants,

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pursuant to Paragraph 6 of the Stipulated Proposed Protective Order. Defendants’ apparent

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“mass” and “indiscriminate” (id. ¶ 5.3) designations have improperly shifted the burden of

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addressing confidentiality designations to Plaintiffs.

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2.

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Defendants’ Productions Were Limited

Defendants produced documents they had previously produced to the DOJ. Certain

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Defendants refused to confirm whether additional documents exist that are responsive to

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Plaintiffs’ Document Requests Nos. 1-7.1

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Defendants expressly limited their disclosures to Plaintiffs at individual Rule 26(f) conferences
on the basis that the Court has stayed discovery.
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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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3.

Google’s Production of Emails

Google confirmed that certain documents it produced are drafts of emails that Google’s

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email system auto-saved before transmission of the final email. It does not appear possible to

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determine, from the face of these documents, whether a particular email was a draft that was not

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sent, or a final version that was sent. It appears Google maintains information in its systems

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without distinguishing sent emails from unsent emails. Plaintiffs have requested confirmation of

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which emails it produced were in fact sent, and which were drafts that were not sent. Google has

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yet to respond. In addition, Google insisted that, in future productions, it be allowed to withhold

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drafts of responsive emails it has preserved and that are otherwise responsive. Google seeks to

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only produce final sent versions of emails. Plaintiffs have rejected this request, and seek

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production of both drafts and sent emails, and identification of which emails were drafts and

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which were in fact sent.

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B.

Defendants’ Response

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Defendants disagree with Plaintiffs’ characterization of the document production.

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Defendants did not indiscriminately designate documents as confidential. They designated on a

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document-by-document basis. Defendants have been working with Plaintiffs over their

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challenges to designations on several documents and certain categories of documents. To date,

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Defendants have agreed to withdraw certain designations and are still working through the

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remaining documents. If the parties are unable to resolve the appropriate designation, Defendants

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intend to seek relief from Magistrate Judge Lloyd pursuant to the procedure set forth in the

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Protective Order.
In addition, Defendants have produced all documents that they produced to the DOJ that

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were also responsive to Plaintiffs’ Requests Nos. 1-7, as this Court ordered. (Doc. 88 (“[F]rom

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the documents Defendants produced to the United States Department of Justice in connection

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with United States v. Adobe Systems, Inc. and/or United States v. Lucasfilm Ltd, Defendants

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shall respond to and produce relevant, non-privileged documents responsive to Document

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Request Nos. 1-7….”). Plaintiffs have not moved to compel, and no basis exists for any such

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motion.
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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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Defendants have not refused to say whether additional documents exist that are responsive

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to requests 1-7 but that were not ordered to be produced. As several Defendants explained to

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Plaintiffs, Defendants have not searched their files to determine one way or the other whether any

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such documents exist.

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Google disagrees with Plaintiffs’ characterization of its email production or of the parties’

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meet and confer discussions. Most importantly, the emails produced by Google here are those

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that were produced to the Department of Justice, in compliance with the Court’s Order. Thus,

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Plaintiffs’ suggestion that Google’s production was somehow deficient is meritless. Moreover,

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Google indicated to Plaintiffs that a discussion regarding the current production should be part of

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the broader discussion regarding Defendants’ proposed ESI protocol, which Defendants recently

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sent to Plaintiffs. As the parties are in the midst of meeting and conferring regarding the details

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of the ESI protocol, Plaintiffs’ complaint is premature and unnecessary at this time.

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IV.

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Settlement And ADR Progress
Plaintiffs provided Defendants with a settlement demand. Defendants have not

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responded. The parties remain of the view that ADR would be premature at this time.

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V.

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Lucasfilm’s Separate Statement
Because it is central both to case management and the merits of this litigation, Lucasfilm

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Ltd. (“Lucasfilm”) wants to emphasize that plaintiffs’ allegations against Lucasfilm relate only to

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a single, alleged, bilateral agreement between Lucasfilm and one other party to the case—Pixar.

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Plaintiffs have alleged no facts suggesting Lucasfilm had any agreement of any kind with any of

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the other defendants, and no such facts exist. The Court should grant defendants’ pending motion

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to dismiss, both as to the purported overarching conspiracy and as to the insufficiently alleged

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bilateral agreements. But to the extent the Court concludes that plaintiffs’ allegations of a

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bilateral agreement between Lucasfilm and Pixar state a claim, and this case proceeds against

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Lucasfilm, up to and including trial, it should be decided independently of issues concerning the

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other alleged bilateral agreements among other named defendants.

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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.
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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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1.

Lucasfilm Ltd.

Lucasfilm is a privately-held entertainment company that produces movies and television

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programs, video games, and other creative content. Lucasfilm also creates cutting-edge visual

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and sound effects as a service provider to other studios, including Pixar, who produce full-length

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feature films. Lucasfilm’s contribution to these projects is never more than one piece of a larger

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and complicated puzzle. All of Lucasfilm’s projects require ongoing collaboration with artists

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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,

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Apple, Adobe, Intel, and Intuit, which sell hardware, software, and/or Web-based advertising.

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Lucasfilm does not compete in the markets served by these businesses, and, indeed, has limited or

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no business relationships with these defendants. Certainly Lucasfilm has never entered into any

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agreements regarding the recruiting of employees with those defendants. If any of those other

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defendants had any employment-related agreements with another defendant (or with any other

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company), Lucasfilm has no knowledge of such agreements. As a result, it would be both legally

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unsupportable and equitably unfair to hold Lucasfilm jointly and severally liable for alleged

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damages flowing from any purported agreement in which it was not involved. (Notably, even the

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Department of Justice (“DOJ”), in obtaining consent decrees from Lucasfilm and the other

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defendants, never contended that any of the defendants participated in an overarching conspiracy

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involving all the defendants, as plaintiffs now allege.)

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2.

Lucasfilm’s long-standing relationship with Pixar

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Although plaintiffs have lumped Lucasfilm with a variety of large companies with which

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Lucasfilm has no relationship, their only specific allegations against Lucasfilm concern a single,

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bilateral agreement between Lucasfilm and Pixar. See Consolidated Amended Complaint

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(“CAC”) ¶¶ 56-71 [Dkt. # 65]. In its investigation of Lucasfilm, DOJ asserted this arrangement

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violated antitrust law. Lucasfilm chose to settle the DOJ proceeding, but made no admission of

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liability. Although Lucasfilm has fully abided by the terms of the consent decree, it does not

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concede that its former relationship with Pixar violated any law. Indeed, even in its consent

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decree with Lucasfilm, DOJ recognized certain categories of conduct as legitimate under the
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JOINT CASE MGMNT CONFERENCE STATEMENT
Master Docket No. 11-CV-2509-LHK

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antitrust laws. See United States v. Lucasfilm, Ltd., No. 1:10:-CV-02220-RBW (May 9, 2011)

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(“Decree”) [Dkt. # 6]. Lucasfilm’s former relationship with Pixar fell within those categories.

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Lucasfilm’s close relationship with Pixar dates back to 1986, when Lucasfilm spun off its

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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

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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

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divisions: (1) Lucasfilm itself, which produces live-action feature films and television; (2)

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Industrial Light & Magic (“ILM”), which provides photo-realistic visual effects for live-action

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films and television; (3) Skywalker Sound, which provides sound engineering and effects; (4)

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LucasArts, which designs and publishes video games; and (5) Lucasfilm Animation, which

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produces television animation. Each of the Lucasfilm companies operates in a distinct market

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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).

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Lucasfilm and Pixar have worked closely together on projects involving Pixar’s industry-

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leading RenderMan digital effects software and Lucasfilm’s sound services work for Pixar. As

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part of the sale of Pixar, Lucasfilm obtained a non-exclusive, perpetual, royalty-free license to

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Pixar technology developed while the company was part of Lucasfilm—most importantly the

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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

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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

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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-

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term collaboration has been commercially successful for both parties, recognized by numerous

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Academy Awards and yet more nominations. As Pixar’s production schedule has accelerated

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from releasing a feature film every two to three years to releasing a feature film every year, the

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working history, mutual trust, and creative experience involved in the longstanding Pixar-

10

Lucasfilm relationship has grown in importance to both companies.

11

3.

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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

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Defendants’ Reply in Support of Their Motion to Dismiss. Two companies who work together as

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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.

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1:10:-CV-02220-RBW (May 9, 2011) (“DOJ Decree”) [Dkt. # 6]. The consent decree prohibited
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Lucasfilm from entering into or enforcing agreements precluding solicitation, cold calling,

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recruitment or other competition for employees. Id. at 4. Lucasfilm agreed to this provision and

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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

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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
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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.

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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.

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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.

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Dated: January 19, 2012

LIEFF, CABRASER, HEIMANN & BERNSTEIN, LLP

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By:

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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: [phone]
Facsimile: [phone]

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Interim Lead Counsel for Plaintiff Class

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Dated: January 19, 2012

O’MELVENY & MYERS LLP

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By:

3
4

George Riley
Michael F. Tubach
Lisa Chen
Christina J. Brown
Two Embarcadero Center, 28th Floor
San Francisco, CA 94111
Telephone: [phone]
Facsimile: [phone]

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6
7
8

Attorneys for Defendant APPLE INC.

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10

/s/ Michael F. Tubach
Michael F. Tubach

Dated: January 19, 2012

KEKER & VAN NEST LLP

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By:

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13

John W. Keker
Daniel Purcell
Eugene M. Page
Paula L. Blizzard
710 Sansome Street
San Francisco, CA 94111
Telephone: [phone]
Facsimile: [phone]

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Attorneys for Defendant LUCASFILM LTD.

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/s/ Daniel Purcell
Daniel Purcell

Dated: January 19, 2012

JONES DAY

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21

By:

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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: [phone]
Facsimile: [phone]

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Attorneys for Defendant ADOBE SYSTEMS, INC.

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/s/ David C. Kiernan
David C. Kiernan

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Dated: January 19, 2012

JONES DAY

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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: [phone]
Facsimile: [phone]

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Attorneys for Defendant INTUIT INC.

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6
7

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Dated: January 19, 2012

MAYER BROWN LLP

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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: [phone]
Facsimile: [phone]

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17

Attorneys for Defendant GOOGLE INC.

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19

/s/ Lee H. Rubin
Lee H. Rubin

Dated: January 19, 2012

BINGHAM McCUTCHEN LLP

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21

By:

22

25

Donn P. Pickett
Frank M. Hinman
Zachary J. Alinder
Three Embarcadero Center
San Francisco, CA 94111
Telephone: [phone]
Facsimile: [phone]

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Attorneys for Defendant INTEL CORPORATION

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24

/s/ Zachary J. Alinder
Zachary J. Alinder

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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: [phone]

7

Attorneys for Defendant PIXAR

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8
9
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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.

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