Antitrust Law Daily Wrap Up, ANTITRUST—9th Cir.: DreamWorks denied appeal in anticompetitive wage suppression suit, (Aug 31, 2016)

By Greg Hammond, J.D.

DreamWorks Animation SKG, Inc. was denied permission by the U.S. Court of Appeals in San Jose to appeal an order granting class action certification in an action by former employees, who alleged that the studios conspired to suppress employee compensation to artificially low levels (Nitsch v. DreamWorks Animation SKG, Inc., August 29, 2016, per curiam).

Former employees of Blue Sky Studios, Inc., DreamWorks Animation SKG, Inc., Two Pic MC LLC, Lucasfilm Ltd., LLC, Pixar, Sony Pictures Animation Inc., Sony Pictures Imageworks, Inc., and The Walt Disney Company (collectively, the studios) claimed that the studios conspired to suppress, and actually did suppress, employee compensation to artificially low levels. The studios purportedly accomplished this by: (1) entering into a scheme not to actively solicit each other’s employees; and (2) engaging in "collusive discussions in which the studios exchanged competitively sensitive compensation information and agreed upon compensation ranges," which would purportedly artificially limit compensation offered to the studios’ current and prospective employees. The former employees alleged violations of Section 1 of the Sherman Act, and California’s Cartwright Act and Unfair Competition Law.

The district court granted class certification in May 2016, concluding that the former employees met the requirements of Federal Rule of Civil Procedure 23(a) and that questions common to the class were likely to predominate over any individual questions.

DreamWorks’ petition for permission to appeal asked: under what circumstances is class certification appropriate where, as here, all class members’ claims are time-barred unless they can establish tolling through fraudulent concealment? The district court erroneously concluded that individualized issues concerning fraudulent concealment would not predominate, even though determining whether and when class members knew about or suspected the challenged agreements among the defendants would require individualized questioning of the approximately 10,000 class members, DreamWorks argued. In addition, the class members had actual knowledge of their claims years before this action was filed, the petition asserted, because the alleged conspiracy was openly discussed in an "extraordinary record of meetings, blog posts, and emails."

DreamWorks also argued that review was warranted because the district court accepted the former employees’ vague assurances that any individualized issues concerning fraudulent concealment could be manageably adjudicated, without assessing how that was so, or explaining what such adjudication would entail. This relieving of the employee plaintiffs’ burden of proving that Federal Rule of Civil Procedure 23 was satisfied contradicted settled case law and constituted manifest error, the petition claimed.

The case is No. 16-80077.

Attorneys: Daniel A. Small (Cohen Milstein Sellers & Toll PLLC) for Robert A. Nitsch. Theodore J. Boutrous, Jr. (Gibson Dunn & Crutcher LLP) for DreamWorks Animation SKG, Inc. Emily Johnson Henn (Covington & Burling LLP) and Cody S. Harris (Keker & Van Nest LLP) for The Walt Disney Co., Lucasfilm Ltd. LLC, and Two Pic MC LLC.

Companies: DreamWorks Animation SKG, Inc.; The Walt Disney Co.; Lucasfilm Ltd. LLC; Two Pic MC LLC

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