Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Animation companies argue that employee wage-fixing, non-solicitation claims are time-barred, (Jan 13, 2015)

By Linda O’Brien, J.D., LL.M.

Claims by former employees that seven animation companies conspired to suppress compensation through non-solicitation agreements are barred by the statutes of limitations and lack sufficient evidentiary support of a wage-fixing conspiracy, according to a motion filed by the defendants in the federal district court in San Jose, California (In re Animation Workers Antitrust Litigation, January 9, 2015).

Three former employees of animation and visual effects studios filed class action complaints against Pixar, Lucasfilm, Sony Pictures, Walt Disney Company, DreamWorks Animation, ImageMovers, and Blue Sky Studios, alleging that the companies engaged in a conspiracy to suppress the compensation of their employees by agreeing on wage and salary ranges and entering into non-solicitation agreements.

Statute of limitations. The U.S. Department of Justice (DOJ) launched an investigation in 2009 into the recruiting practices among technology companies, including defendants Pixar, Lucasfilm, Sony Pictures, DreamWorks Animation, and Blue Sky Studios. The investigation led to the filing of the High-Tech Employee Antitrust Litigation in 2011. According to the motion, the plaintiffs did not bring litigation in response to the DOJ investigation or after the High-Tech cases were filed. Instead, they waited nearly five years after the commencement of the DOJ investigation.

It is the plaintiffs’ burden to allege specific anticompetitive conduct that occurred within the limitations period. The plaintiffs have obtained extensive pre-complaint discovery, acquired the public record of the High-Tech litigation, and interviewed over 80 former industry employees. However, the plaintiffs alleged no facts that the challenged conduct continued beyond the DOJ investigation, consent decrees with some defendants, or the High-Tech litigation. In addition, they cite no alleged wrongful communications or actions within the past five years.

Moreover, the plaintiffs cannot use the doctrine of fraudulent concealment to excuse their failure to timely bring suit. Allegations of fraudulent concealment must meet the heightened standard of Fed. Rule of Civil Pro. 9(b). The plaintiffs’ complaint failed to plead facts with specificity regarding “time, place, and specific content of the false representations as well as the identities of the parties to the representations.” Furthermore, the plaintiffs failed to plead that they exercised reasonable diligence in investigating their claims, which is a prerequisite to the application of equitable tolling.

An agreement on wages. The defendants contend that the plaintiffs failed to state a per se antitrust claim based on wage-fixing agreements. Their allegations of the defendant companies’ participation in industry meetings and compensation surveys and isolated exchanges of information on compensation issues do not support a reasonable inference that the defendants reached an agreement on wages. Additionally, the plaintiffs allege no facts suggesting that the companies’ actual wages reflect a wage-fixing agreement.

Failure to state a claim. The plaintiffs must allege the participation of each defendant in the alleged conspiracy. However, the plaintiffs fail to state plausible claims against Sony, ImageMovers, and Blue Sky regarding an alleged anti-solicitation conspiracy. Sony, ImageMovers, and Blue Sky were not charged with any wrongdoing in the DOJ investigation. Although there was extensive discovery in the High-Tech litigation, the three companies were not named as defendants in that case. Despite the availability of the extensive pre-complaint discovery, the plaintiffs have failed to plead facts that suggest that Sony, ImageMovers, and Blue Sky agreed to join in the alleged anti-solicitation scheme. Therefore, the consolidated amended complaint should be dismissed, the defendants conclude.

Attorneys: Emily Johnson Henn (Covington & Burling LLP) for The Walt Disney Company, Lucasfilm Ltd., LLC, ImageMovers, L.L.C., and Pixar. Stephen V. Bomse and David M. Goldstein (Orrick, Herrington & Sutcliffe LLP) for Sony Pictures Animation, Inc. Daniel G. Swanson and Rod J. Stone (Gibson, Dunn & Crutcher LLP) for DreamWorks Animation SKG, Inc. John E. Schmidtlein and Jonathan B. Pitt (Williams & Connolly LLP) for Blue Sky Studios, Inc.

Companies: The Walt Disney Company; Lucasfilm Ltd.; LLC; ImageMovers, L.L.C.; Pixar; Sony Pictures Animation, Inc.; DreamWorks Animation SKG, Inc.; Blue Sky Studios, Inc.

News: Antitrust CaliforniaNews