Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Animation companies allegedly conspired to suppress compensation through non-solicitation agreements, (Sep 19, 2014)

By Linda O’Brien, J.D., LL.M.

A group of technology and digital animation companies engaged in a conspiracy to suppress the compensation of their employees by agreeing on wage and salary ranges and entering into non-solicitation and wage-fixing agreements, according to a class action complaint filed in the federal district court of San Jose, California (Cano v. Pixar, September 17, 2014).

Pixar, DreamWorks, Animation SKG, Lucasfilm, The Walt Disney Company, Digital Domain, ImageMovers, Sony, and Blue Sky are in the business of creating visual effects and animation for motion pictures, which is dependent upon the labor of thousands of skilled animators, graphic artists, software engineers, and other technical and artistic workers. Georgia Cano worked as a digital artist involved in lighting, as well as lighting and special effect software, for a variety of animation companies, including Sony, The Walt Disney Company, and ImageMovers.

The complaint alleges that, in the mid-1980s, the executives of Lucasfilm and Pixar reached an express agreement to restrain competition for the workers of the two companies. The executives agreed that (1) they would not “cold call” each other’s employees, (2) they would notify the other company when making an offer to an employee of the other company, and (3) the company making such an offer would decline to increase that offer if the current employer made a counteroffer. This non-solicitation agreement allegedly became widely adopted by other companies in the visual effects and animation industry.

The defendants’ conspiracy was not limited to their non-solicitation agreements. It also included activities that were designed to fix compensation for workers. Senior human resource personnel met at least once per year to discuss common job positions in order to set parameters of a compensation survey, the plaintiff claimed. In addition, they met at social gatherings or elsewhere to set compensation for their workers for the ensuing year. The defendants’ top executives also communicated throughout the year to implement and enforce the non-solicitation and wage-fixing agreements while keeping them secret from their workers.

Active solicitation affects compensation practices by employers who learn whether their offered compensation is sufficient to attract their competitor’s employees and may increase its salaries to make them more competitive in the marketplace. Information exchanges between recruiters of one firm and employees of another naturally tend to increase employee compensation. The agreements among the defendants against active recruitment made higher paying opportunities less transparent to workers and allowed to keep compensation lower that they would otherwise have been absence such agreements.

Any applicable statute of limitations has been tolled by the defendants’ concealment of their conspiracy. The plaintiff had no actual or constructive knowledge of the relevant facts and could not have discovered through the exercise of due diligence of the existence of the conspiracy until late 2010 when the U.S. Department of Justice revealed that its investigation into non-solicitation agreements among high-tech companies included visual effects and animation company, Pixar. The defendants’ conspiracy was concealed and carried out in a manner to avoid detection. The defendants consciously avoided discussing the agreements in written documents that might be disseminated beyond the individuals involved in the conspiracy. Moreover, the defendants attempted to create the false impression that their decisions were independent and provided pretextual, false, and misleading explanations for hiring, recruiting, and compensation decisions, the complaint alleged.

The plaintiff asserts claims for unfair competition, unlawful business practices, and violations of Section 1 of the Sherman Act and California’s Cartwright Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, disgorgement, restitution, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 5:14-cv-04203-PSG.

Attorneys: Steven G. Sklaver and Mathew R. Berry (Susman Godfrey L.L.P.), Julian Hammond (HammondLaw, PC), and Craig Ackermann (Ackermann & Tilfajef PC) for Georgia Cano.

Companies: DreamWorks Animation SKG, Inc.; Pixar; Lucasfilm Ltd., LLC; The Walt Disney Company; Digital Domain 3.0, Inc.; ImageMovers; ImageMovers Digital; Sony Pictures Animation; Sony Pictures Imageworks; Blue Sky Studios, Inc.

News: Antitrust CaliforniaNews