Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Animators’ suit against Lucasfilm, Pixar over no-poach agreements time-barred, (Apr 6, 2015)

By Linda O’Brien, J.D., LL.M.

In a consolidated class action brought by three former employees against visual effects and animation studios for agreeing on wage and salary ranges and entering into non-solicitation agreements, the federal district court in San Jose, California has dismissed the employees’ antitrust claims as time-barred (In re Animation Workers Antitrust Litigation, April 3, 2015, Koh, L.).

DreamWorks Animation, The Walt Disney Company, Lucasfilm, Pixar, ImageMovers, Sony Pictures, and Blue Sky Studios are in the business of creating visual effects and animation for motion pictures. Robert A. Nitsch, Georgia Cano, and David Wentworth were artists and engineers previously employed by one or more of the animation studios. In 2014, Nitsch, Cano, and Wentworth filed a series a class action complaints, asserting violations of Section 1 of the Sherman Act and California’s Cartwright Act and Unfair Competition Law (UCL). Specifically, the employees alleged that the defendants conspired to suppress employee compensation by entering into non-solicitation agreements and agreeing on salary ranges. The defendant studios moved to dismiss the plaintiffs’ consolidated amended complaint (CAC).

Motion to dismiss. The court determined that the plaintiffs failed to allege that the defendant companies took affirmative steps to mislead the plaintiffs as to the factual basis of their claims. The plaintiffs’ claims under the Sherman Act, Cartwright Act, and UCL were all subject to a four-year statute of limitations. In rejecting the plaintiffs’ argument that the discovery rule applied to statutes of limitations in federal litigation, the court noted that, under U.S. Supreme Court authority in Klehr v. A.O. Smith Corp., 521 U.S. 178 (1997), antitrust claims begin to accrue at the time of injury.

The court noted that, in a related action—In re High Tech Employees Litigation, Case No. 11-CV-02509—the U.S. Department of Justice Antitrust Division (DOJ) filed civil complaints in September 2010 against various technology companies, including Lucasfilm and Pixar, over the companies’ employment and recruitment practices.

According to the court, the plaintiffs’ claims began to accrue as early as 2004, when Cano worked for Disney and Nitsch worked for Sony, or at the latest in 2007, when Nitsch worked for Dreamworks and Wentworth worked for ImageMovers. As a result, the four-year statute of limitations ran on the plaintiffs’ claims as early as 2008 and at the latest in 2011. Absent sufficient allegations that the defendants’ engaged in continuing violations after September 2010, four years prior to the first-filed complaint, the plaintiffs’ claims were time-barred.

The plaintiffs did not allege that the defendants took any overt acts that would restart the statute of limitations, in the court’s view. Their mere assertion that the defendants “repeatedly invaded the plaintiffs’ interests” was insufficient to show a continuing violation. The plaintiffs’ CAC contained no alleged wrongful communications or specific conduct during the limitations period. Specifically, the plaintiffs did not allege that any defendants attempted to enforce or reaffirmed the anti-solicitation scheme after September 2010 or that there were any new or independent actions taken by the defendants that caused the plaintiffs any new or accumulating injury.

The plaintiffs’ argument that they suffered an antitrust injury each time they received artificially depressed compensation was rejected. The court noted that the plaintiffs did not allege that their compensation was permanently depressed or continued to be affected by the defendants’ wrongful conduct after September 2010.

Additionally, the plaintiffs’ contention that the statute of limitations should be tolled under the doctrine of fraudulent concealment was rejected. To plead fraudulent concealment, a plaintiff must allege that (1) the defendant took affirmative steps to mislead the plaintiff; (2) the plaintiff did not have actual or constructive knowledge of the facts giving rise to its claim; and (3) the plaintiff acted diligently in trying to uncover the facts giving rise to its claim.

First, the court found that the plaintiffs’ allegation that “defendants engaged in a secret conspiracy” did not show that they took affirmative steps to mislead. Passively concealing material information was insufficient to toll the statute of limitations. Second, there were no allegations that the compensation information contained in an industry compensation survey was publicly accessible or that the plaintiffs' relied on the information in the survey.

Finally, the plaintiffs’ allegation that the defendants “provided pretextual, incomplete or materially false and misleading explanations for hiring, recruiting and compensation” offered no specific facts showing the “who, what, where, or when” of the alleged statements. Therefore, the allegation was insufficient to satisfy the heightened pleading standard in Federal Rule of Civil Procedure Rule 9(b). Since the plaintiffs failed to allege facts showing that the defendants did more than passively conceal information, an essential element of fraudulent concealment, their claims were time barred, the court concluded.

The case is No. 14-CV-04062-LHK.

Attorneys: Daniel A. Small (Cohen Milstein Sellers & Toll PLLC) for Robert A. Nitsch, Jr. Daniel Glen Swanson (Gibson, Dunn & Crutcher LLP) for DreamWorks Animation SKG Inc. Emily Johnson Henn (Covington & Burling LLP) for Pixar, Lucasfilm Limited LLC, The Walt Disney Company, and ImageMovers. Stephen V. Bomse (Orrick Herrington & Sutcliffe) for Sony Pictures Animation.

Companies: DreamWorks Animation SKG Inc.; Pixar; Lucasfilm Limited LLC; The Walt Disney Company; ImageMovers; Sony Pictures Animation

Cases: Antitrust CaliforniaNews