In the latest sequel to the ongoing legal drama, DreamWorks has agreed to pay $50 million to settle a class-action based on DreamWorks conspiring with other animation studios not to poach/hire one another’s employees.

As discussed in my prior blogs, there were two major class-actions regarding wage-fixing/anti-poaching agreements.  The first involved most of the major animation studios, including Pixar, LucasFilm, Walt Disney, Sony, Blue Sky and others.

The second class-action involved major Silicon Valley titans, like Google, Apple, Intel, Microsoft, Adobe, Oracle and Intuit. (Id.)

In both cases, defendants were alleged to have agreed not to poach one another’s employees, thereby quashing competition and keeping wages artificially low.

Most of the animation defendants agreed to pay settlements totaling $19 million when “smoking gun” emails came out which clearly showed collusion like the one from Pixar’s VP of Human Resources: “we have a gentlemen’s agreement not to directly solicit/poach from their employee pool.”

Most of the Silicon Valley defendants settled for $415 million when “smoking gun” emails came out which clearly showed collusion like a Google internal memo that we “will not pursue manager level and above candidates for Product, Sales or G&A [General and Administrative] roles –even if they have applied to Google.”

This latest DreamWorks proposed settlement is scheduled for hearing for Court approval in January 2017, leaving Disney/Pixar/LucasFilm as the last animation defendants that have not reached settlement.

I previously wrote about two wage-fixing class actions, where some of the largest high-tech and Hollywood companies conspired not to hire one another’s employees to keep wages low.  Google, Apple, Intel and Adobe attempted to settle the high-tech class action for $324 million, but the Court found the amount too low.  They ultimately settled for $415 million.

Meanwhile, the Hollywood wage-fixing case against Pixar, Dreamworks, Disney, LucasFilm and other studios continued to move towards trial when the Court denied the studios’ motion to dismiss.

Initial evidence indicated that Sony was clean; it had rebuffed the other studios’ efforts to recruit Sony into the “gentlemen’s agreement” not to hire one another’s employees. But apparently there was sufficient evidence against Sony that it decided to settle. Sony, which has given us such animated classics as the Smurf franchise, Cloudy with a Chance of Meatballs, and Hotel Transylvania, agreed to pay $13 million to settle its portion of the wage-fixing claims and further agreed to cooperate with Plaintiffs in their action against the other studios.

It will be interesting to see whether Sony’s settlement will inspire the other studio defendants to cut their losses and settle or fight on.

As discussed in my initial blog post on the topic, Google, Apple, Intel and Adobe stand accused of conspiring not to poach one another’s employees in order to keep wages down. And as discussed in my update, the Court rejected a proposed $324 million settlement as too low.

At the earlier hearing, one of the plaintiff’s objected and the Court agreed that the settlement was too low. At the most recent hearing there was no objection and the Court appeared to approve the settlement. However, there is still disagreement among the various plaintiffs and their respective counsel regarding allocation of the settlement. While it appears that the size of the pie has been decided, there question of how big the pieces will be is on the table.

The lessons for the defendants are (1) don’t conspire with your competitors not to poach one another’s employees and (2) don’t be dumb enough to refer to such conspiracies in writing.

As discussed in my prior blog post, Google, Apple, Intel and Adobe stand accused of conspiring not to poach one another’s employees in order to keep wages down. 

Attorneys representing the class-action employees agreed to settle the case for $324 million, but one of the employees objected that the settlement was too low, essentially accusing the plaintiff attorneys of selling out the class. The judge agreed and rejected the settlement.

Defendants have now increased the settlement offer to $451 million, but they will need to wait and see if any of the plaintiffs object or if the Court determines the offer is still insufficient. After all, plaintiffs claim defendants’ anti-poaching scheme cost the 64,000 class members a total of $3 billion in reduced wages, and a jury could treble that amount to $9 billion. The evidence, damning email and memos describing the anti-poaching conspiracy and a need to cover up the conspiracy, dictate that defendants must settle. The only question is how much they must pay for the court to determine the settlement is fair.

When you think of a monopoly you probably think of Rich Uncle Pennybags or oil tycoon John D. Rockefeller, but maybe you should think of Princess Elsa from Frozen or the iPhone 6 instead.  The largest Hollywood animation studios and leading Silicon Valley giants stand accused of wage-fixing in violation of the Sherman Antitrust Act. While nobody has proven he was the primary architect of these schemes, Steve Jobs of Pixar/Apple appears to be the common denominator between these two industries.

The Sherman Antitrust Act prohibits business activities that are deemed anti-competitive, including agreements that unreasonably restrain competition affecting interstate commerce. The prototypical case involves price fixing, where various competitors conspire not to compete so they can keep their prices high. In a 2012 case where LCD screen manufacturers conspired to fix prices world-wide, Hitachi, Sharp, Samsung, Toshiba, LG and AU Optronics collectively agreed to pay more than $1.1 billion to settle antitrust claims.

Unlike the typical restraint of trade cases, these Hollywood and Silicon Valley cases involve wage-fixing, not price-fixing. These two industries stand accused of colluding with their competitors not to hire each other’s employees, thereby driving down wages.

The Hollywood class action lawsuit, amended last week, alleges that most of the major animation studios entered secret agreements not to hire one another’s employees. The lawsuit alleges that Pixar, Lucasfilm, DreamWorks Animation, The Walt Disney Company, Sony Pictures, Blue Sky Studios [maker of Rio and Ice Age films], and ImageMovers, LLC, entered into agreements, some of which date back to the 1980’s, “not to actively recruit employees from each other…” While allegations in a complaint should generally be taken with a grain of salt, the studios’ own written documents may prove impossible to explain away. For example in 2005, Pixar’s VP of Human Resources wrote: “With regards to ILM, Sony, Blue Sky, etc., …we have a gentlemen’s agreement not to directly solicit/poach from their employee pool.” In 2007, after Disney acquired Pixar, a Pixar executive wrote a memo to his Disney colleague about “a serious problem brewing” in that Robert Zemeckis [director and creator of Back to the Future and Polar Express] “has hired several people away from Dreamworks at a substantial salary increase” and that the Northern California studios has “avoided wars” by “conscientiously avoiding raiding each other.” Steve Jobs owned the majority share of Pixar prior to the merger.

Meanwhile, in Silicon Valley there are two class actions alleging that Apple, Google, Dell, IBM, eBay, Microsoft, Comcast, Clear Channel, DreamWorks, Oracle, Sun Microsystems and others conspired not to recruit each other’s employees to keep wages down. Similar to the Hollywood case, defendants may find it difficult to overcome their own damning documents. In a Google memo titled “Special Agreement Hiring Policy,” the Google executive listed four Google competitors and explains that they will not “pursue manager level and above candidates for Product, Sales or G&A [General and Administrative] roles –even if they have applied to Google.” Steve Jobs was running Apple during the wage-fixing scheme. The parties in the larger Silicon Valley case reached a settlement of $324 million, but one of the plaintiffs objected that the amount was too low, given that the estimated lost wages was $3 billion and if defendants lose, those damages could be trebled to $9 billion. The Federal District judge agreed and rejected the settlement. The defendants asked the Ninth Circuit to reverse the judge’s decision and have her removed from the case. The parties have filed their initial briefs with the Ninth Circuit

The laws are clear: 1) you cannot conspire with a competitor to fix prices; 2) you cannot conspire with a competitor to fix wages, and 3) you cannot conspire with a competitor not to solicit/hire each other’s workers. These are obvious restraints of trade. But the shocking thing is how arrogant or just plain dumb the defendants were in memorializing their conspiracy in writing. With all the smoking guns, it’s clear the defendants failed to heed Google’s Eric Schmidt’s request that “I would prefer that [Google] do it verbally since I don’t want to create a paper trail over which we can be sued later?” These sophisticated companies committed the same sort of rookie mistake as the Billionaire Boys Club members, who mistakenly left a detailed “to do” list for committing the murder (“tape mouth, handcuff …kill dog”) at the murder site. That smoking gun helped secure their convictions. Similarly, in the wage-fixing class actions, the defendants’ smoking guns are likely to prove insurmountable. Having been caught red handed, the only likely remaining question is how much money the defendants will ultimately have to pay to their employees and the employees’ attorneys. Unfortunately for defendants, it won’t be Monopoly money.