Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Former Oracle employees’ compensation fixing claims time-barred, (Feb 3, 2016)

By Greg Hammond, J.D.

Allegations that one of the world’s largest software producers conspired with Google and other technology companies to fix and suppress employee compensation and impose unlawful restrictions on employee mobility were time-barred. The federal district court in San Jose, California, dismissed the Sherman Act and California Cartwright Act claims with prejudice, finding that the plaintiffs failed to adequately plead a continuing violation of the antitrust laws or that the software producer fraudulently concealed the conspiracy to toll the statute of limitations (Garrison v. Oracle Corp., February 2, 2016, Koh, L.).

Oracle Corp., the second largest software producer in the world by revenue, specializes in the development and marketing of computer hardware systems and enterprise software tools. Former employees filed suit against Oracle, alleging violations of the Sherman and Cartwright Acts and California’s Unfair Competition Law (UCL). In particular, the former employee plaintiffs claim that Oracle conspired with Google Inc. and other technology companies to fix and suppress employee compensation and impose unlawful restrictions on employee mobility by entering into a series of anti-solicitation “Secret Agreements,” including a “no hire” list, “gentlemen’s agreements,” and a “Restricted Hiring Agreement.” Oracle moved to dismiss the second amended complaint as time-barred under the applicable four-year statute of limitations.

As a preliminary matter, the court noted that the plaintiffs’ claims were untimely unless an exception to the default rules or a tolling doctrine applied.

Statutory tolling. The former employees alleged that the statutes of limitations were tolled by four Justice Department proceedings. Courts, however, use the date on which the government filed a complaint as the date on which statutory tolling begins. Because the Justice Department never filed a complaint against Oracle, the court concluded that the former employees were not entitled to statutory tolling based on the Justice Department’s investigation of Oracle. The government’s lawsuits against Adobe, Lucasfilm, and eBay, individually, could also not be the basis for statutory tolling because the conspiracies alleged in the government-filed complaints did not involve Oracle, demonstrating that the allegations of misconduct by Oracle in the instant suit were not “intertwined with and fundamentally the same as those alleged in the government actions.”

Continuing violation. The plaintiffs next claimed that the continuing violation doctrine should be applicable because Oracle entered into new “Secret Agreements” and added companies to the “no hire” list well into 2012; Oracle adhered to, enforced, and reaffirmed the secret agreements; and the plaintiffs were not solicited by other companies while working at Oracle and could not find employment outside of Oracle. The court noted, however, that the complaint failed to reveal any specific conduct by Oracle during the limitations period. In particular, all of the allegations concerning Oracle’s enforcement of the secret agreements were either undated or pre-dated 2009; the plaintiffs failed to allege any new and independent actions by Oracle to enforce any agreement during the limitations period; and allegations that the former employees could not find employment outside of Oracle were insufficient to demonstrate an overt act by Oracle after 2009. The continuing violation doctrine was consequently inapplicable.

Fraudulent concealment. The fraudulent concealment doctrine was also inapplicable, the court decided. The former employees asserted four categories of “affirmative acts” to demonstrate fraudulent concealment: (1) efforts by Oracle to limit access to and circulation of documents reflecting its secret agreements; (2) attempts by Oracle in Justice Department proceedings and private litigation to conceal portions of key documents from public scrutiny; (3) individual conversations about compensation where Oracle misled the plaintiffs; and (4) misleading oral and written statements issued by Oracle during the limitations period, including Oracle’s employee handbook and Securities and Exchange Commission filings.

The court rejected all four arguments, finding that there was no case law holding that agreements with the Justice Department to redact public versions of documents properly produced during a government investigation were acts of fraudulent concealment. The former employees provided no information concerning to whom the employees spoke at Oracle, where the conversations took place, the date or time of the alleged conversations, or the content of the alleged misleading conversations. The specific factual allegations concerning Oracle’s efforts at secrecy contradict the plaintiffs’ general allegations because emails demonstrated that Oracle employees spoke openly about the purported “no hire” list and the gentleman’s agreements. Lastly, the court was unaware of any case finding that a defendant’s statement in routine public filing that the defendant obeys antitrust laws and participates in a competitive market alone sufficed to demonstrate fraudulent concealment, absent other evidence that the defendant attempted to conceal its alleged antitrust behavior.

California discovery, continuous accrual rules. Finally, California’s discovery rule and continuous accrual rules could not be used to toll the statute of limitations. In particular the court found that the UCL claim did not mention fraudulent concealment or any alleged act of fraudulent concealment by Oracle as the basis for the alleged UCL violation. There was consequently no allegation of fraud to support the application of the discovery rule. In addition, the complaint failed to identify any “separate, recurring invasions” of the plaintiffs’ rights after 2009 for the continuous accrual rule to apply.

Finding that granting leave to amend would be futile, the court dismissed the antitrust and UCL claims with prejudice.

The case is No. 14-CV-04592-LHK.

Attorneys: Bonny E. Sweeney (Hausfeld LLP) for Greg Garrison. Daniel Murray Wall (Latham & Watkins LLP) for Oracle Corp.

Companies: Oracle Corp.; Google Inc.; Adobe Systems Inc.; eBay Inc.

Cases: Antitrust CaliforniaNews