Apple, Google settle $349 million no-poaching lawsuit

Four major tech companies including Apple and Google have agreed to settle a lawsuit accusing them of conspiring to hold down salaries in Silicon Valley, just weeks before a high profile trial had been scheduled to begin.

The settlement was disclosed in a court filing on Thursday, which did not spell out terms. Sources put the settlement cost at US$324 million (A$349 million). 

The case has been closely watched due to the potentially high damages award and a steady disclosure of emails in which Apple's late co-founder Steve Jobs, former Google CEO Eric Schmidt and some of their Silicon Valley rivals hatched plans to avoid poaching each other's prized engineers.

Tech workers filed a class action lawsuit against Apple, Google, Intel and Adobe Systems in 2011, alleging they conspired to refrain from soliciting one another's employees in order to avert a salary war. Trial had been scheduled to begin at the end of May on behalf of roughly 64,000 workers in the class.

In one email exchange after a Google recruiter solicited an Apple employee, Schmidt told Jobs that the recruiter would be fired, court documents show. Jobs then forwarded Schmidt's note to a top Apple human resources executive with a smiley face.

Another exchange shows Google's human resources director asking Schmidt about sharing its no-cold call agreements with competitors. Schmidt, now the company's executive chairman, advised discretion.

"Schmidt responded that he preferred it be shared 'verbally, since I don't want to create a paper trail over which we can be sued later?'" he said, according to a court filing. The HR director agreed.

The companies had acknowledged entering into some no-hire agreements but disputed the allegation that they had conspired to drive down wages.

Spokespeople for Apple, Google and Intel declined to comment on the settlement, and an Adobe representative was not immediately available for comment. An attorney for the plaintiffs, Kelly Dermody of Lieff Cabraser Heimann & Bernstein, in a statement called the deal "an excellent resolution."

Corporate defendants in antitrust cases often agree among themselves what portion each will contribute towards a settlement, said Daniel Crane, a professor at the University of Michigan Law School. One likely formula would be to divide the damages based on how many employees each company has in the class, he said.

Apple, Google, Adobe and Intel in 2010 settled a US Department of Justice probe by agreeing not to enter into such no-hire deals in the future. The four companies had since been fighting the civil antitrust class action.

Walt Disney's Pixar and Lucasfilm units and Intuit had already agreed to a settlement, with Disney paying about US$9 million and Intuit paying US$11 million.

Had the case against Apple, Google, Intel and Adobe gone to trial, plaintiffs would have asked a jury to award roughly US$3 billion in damages, according to court filings. Under antitrust law, that could have then been tripled to US$9 billion.

Any settlement must be approved by US District Judge Lucy Koh in San Jose, California. A hearing on final approval of the Intuit and Disney deals is scheduled for next week.

The plaintiffs and the companies will disclose principal terms of the settlement by May 27, according to the court filing on Thursday, though it is unclear whether that will spell out what each company will pay.

Some Silicon Valley companies refused to enter into no-hire agreements. Facebook chief operating officer Sheryl Sandberg, for instance, rebuffed an entreaty from Google in 2008 that they refrain from poaching each other's employees.

Additionally, Apple's Jobs threatened Palm with a patent lawsuit if Palm didn't agree to stop soliciting Apple employees. However, then Palm CEO Edward Colligan told Jobs that the plan was "likely illegal," and that Palm was not "intimidated" by the threat.