Judge Rejects $324.5 Million Settlement in Apple, Google Hiring Case

A federal judge has decided a $324.5 million settlement isn't enough to cover the damages done to more than 60,000 high-tech workers in a class-action lawsuit alleging Google and Apple conspired with other technology companies to block their top employees from getting better job offers.

The ruling Friday by U.S. District Judge Lucy Koh scotches a settlement reached in April, prolonging a 3-year-old case that paints a mean-spirited picture of late Apple Inc. founder Steve Jobs and other prominent Silicon Valley executives.

Koh estimated that the workers deserve at least $380 million, based on the evidence indicating their earning power was undermined by the collusion among their employers.

Attorneys representing the workers originally were seeking $3 billion in damages before settling for about 10 percent of that amount in a deal reached in April. If $3 billion in damages had been awarded in a trial, it could have been tripled to $9 billion under U.S. antitrust law.

A $9 billion award would have paid the affected workers an average of more than $140,000. Koh estimated that after subtracting lawyers' fees and other payments, the workers would have received an average of $3,750 had she approved the $324.5 million settlement. That amount "falls below the range of reasonableness," she wrote.

(Also See: Judge Koh Concerned About Approving Apple, Google Hiring Settlement)

The settlement would have been paid by Apple, Google Inc., Intel Corp. and Adobe Systems Inc. The lawsuit alleges they and three other companies - Intuit Inc., Pixar Animation and Lucasfilm - secretly agreed not to recruit each other's workers at various junctures from 2005 through 2009.

Apple and Google declined to comment on Koh's ruling. Intel spokesman Chuck Mulloy said the company was disappointed by the decision, but hadn't yet decided its next step. Adobe didn't immediately respond to requests for comment.

Kelly Dermody, a San Francisco attorney for the workers, also didn't immediately respond to requests for comment.

A $20 million settlement of the claims against Intuit, Pixar Animation and Lucasfilm was approved in June.

Koh indicated that the workers at Google, Apple, Intel and Adobe had built a strong case against their employers. "There is ample evidence of an overarching conspiracy," she concluded in her 32-page ruling.

In their arguments for approving the $324.5 million settlement, attorneys for the workers argued the conspiracy wouldn't have been easy to prove to a jury. The degree of difficulty raised the risk of the employees receiving little or nothing if the case were to go to trial, the lawyers said. If the settlement had been approved, the workers' attorneys' would have received $82 million in fees and expenses.

To illustrate why she believes the workers have a strong case, Koh referred to depositions and emails detailing some of the machinations that led to the no-poaching agreements. She depicted Jobs, who died in October 2011 after prolonged battle with cancer, as the ringleader of the scheme. The ruling also chastised Google and Adobe for following Jobs' wishes "out of fear and deference to him."

Koh pointed to evidence showing that Google scrapped plans for an engineering center in Paris staffed by former Apple employees after Jobs strenuously objected. In another instance cited by Koh, Google's then-CEO Eric Schmidt fired a recruiter who had contacted an Apple engineer in 2007, raising Jobs' ire. When Schmidt emailed the news that the recruiter had been fired, Jobs forwarded the note to Apple's personnel department with a smiley face above it, Koh noted.

(Also See: Apple, Google, Intel, Adobe to Pay $325 Million to Settle Hiring Lawsuit)

Not all Silicon Valley executives were so submissive. Koh's ruling cited an instance when Jobs tried to cajole now-defunct device maker Palm Inc. to join the no-poaching cartel. In an attempt to force the issue, Jobs threatened to sue Palm for patent infringement unless it agreed not to recruit Apple's employees.

Palm's then-CEO Edward Colligan warned Jobs that his no-poaching demand was "likely illegal" in an email recounted in Koh's ruling. "We can't dictate where someone will work, nor should we try," Colligan wrote. "I can't deny people who elect to pursue their livelihood at Palm the right to do so simply because they now work for Apple, and I wouldn't want you to do that to current Palm employees."

Palm never joined the no-poaching club and neither did Facebook Inc., despite Google's attempts persuade its rival to join in, according to evidence obtained in the lawsuit.

The U.S. Justice Department opened an investigation into Silicon Valley's no-poaching pacts in 2009, resulting in a 2010 settlement requiring the participating companies to stop the practice. The companies didn't acknowledge any wrongdoing.