Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Settlement of California’s no-hire agreement suit against eBay preliminarily approved, (Sep 2, 2014)

By Greg Hammond, J.D.

The State of California has obtained preliminary approval of its proposed settlement with eBay, Inc. over allegations the e-commerce company violated the Sherman Act by entering into a non-solicitation and no-hire agreement with Intuit, Inc. In granting preliminary approval, the federal district court in San Jose determined that the following factors weighed in favor of settlement: the strength of California’s case; the risk, expense, complexity, and likely duration of further litigation; the amount offered in the settlement; the extent of discovery completed and the state of the proceedings; and the experience and views of counsel and absence of collusion (California v. eBay, Inc., August 29, 2014, Davila, E.).

Background. A no-solicitation agreement between eBay and Intuit was implemented in August 2006, restricting the hiring of each other’s employees. However, in April 2007, the no-solicitation agreement changed to a no-hire agreement, in which eBay was prohibited from hiring any Intuit employees, regardless of how the employees applied for the job. California subsequently filed suit, alleging that the agreements eliminated competition for employees and harmed them by reducing salaries, benefits, and employment opportunities that might otherwise have been earned.

A settlement agreement was reached between California and eBay in which: (1) eBay will be required to pay $3.75 million in restitution, civil penalties, attorney’s fees, and claims administration costs; (2) the company will be enjoined from entering into any other non-solicitation or no-hire agreement that violates existing law; (3) eBay must cooperate with California; and (4) California will release any and all claims against eBay in connection with the facts and events of this case. California moved for preliminary approval of the settlement, which eBay did not oppose.

Fairness. According to the court, a settlement may be approved only if it is “fair, reasonable, and adequate.” To determine whether a settlement is fair, the court considered a number of factors, including: the strength of California’s case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the state of the proceedings; the experience and views of counsel; and the absence of collusion between the parties.

In finding the settlement to be fair, reasonable, and adequate, the court found: (1) the settlement will provide a definite and rapid recovery to affected individuals; (2) the strength of California’s case is still uncertain; (3) the restitution award of $2.375 million is reasonable; (4) given the amount of discovery and information available, California is in a good position to evaluate the strengths and weaknesses of the case, and the case is still early in its proceedings; and (5) counsel on both sides are experienced in antitrust and class action litigation. The court also determined that the cy pres plan to distribute any remaining restitution funds to charitable organizations that support employment mobility in the high-tech industry is appropriate; the $675,000 in attorney’s fees and costs is reasonable; and the notice and opt-out procedures meet the standards of Federal Rule of Civil Procedure 23. Consequently, the motion for preliminary approval of settlement was granted.

The case number is 5:12-CV-05874-EJD.

Attorneys: Kathleen E. Foote, Office of the Attorney General, for the People of the State of California. Thomas Patrick Brown (Paul Hastings LLP) for eBay, Inc.

Companies: eBay, Inc.

Cases: Antitrust CaliforniaNews