Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Animator files suit against Lucasfilm, Pixar over no-poach agreements, (Sep 9, 2014)

By Linda O’Brien, J.D., LL.M.

Visual effects and animation companies engaged in a conspiracy to suppress the wages and salaries of their employees by agreeing on wage and salary ranges and entering into non-solicitation agreements, according to a class action complaint filed in the federal district court of San Jose, California (Nitsch v. DreamWorks Animation SKG, Inc., September 8, 2014).

DreamWorks, Pixar, Lucasfilm, The Walt Disney Company, Digital Domain, ImageMovers, and Sony are in the business of creating visual effects and animation for motion pictures. Creating such effects and animation required the labor of thousands of skilled animators, graphic artists, software engineers, and other technical and artistic workers. Robert Nitsch was a senior character effects artist at DreamWorks and a cloth/hair technical director at Sony.

The complaint alleges that, in 1986, the executives of Lucasfilm and Pixar reached an express agreement to restrain competition for the skilled labor that worked for the two companies. The executives allegedly 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. Lucasfilm and Pixar eventually formed similar non-solicitation agreements with DreamWorks, The Walt Disney Company, Digital Domain, ImageMovers, and Sony.

The defendants’ conspiracy extended beyond their illicit non-solicitation agreements to regular discussions and agreements on wage and salary ranges, according to Nitsch. At least once per year, some or all of the defendants allegedly met to discuss common job positions in order to set parameters of a compensation survey. In addition, the defendants’ human resources and recruiting personnel met at social gatherings or elsewhere to communicate about wages and salaries for their workers in order to implement the conspiracy more effectively. No studio acting in its independent self-interest would share such information in the absence of a conspiracy, the complaint claimed.

Soliciting a competing studio’s employees was an effective way of recruiting employees and a key competitive tool in a properly functioning labor market for skilled labor. The defendants were charged with agreeing to severely limit their competition by not actively solicit employees for other defendants. Through these agreements, the defendants harmed their respective workers by depriving them of the wages and salaries they would have received in a competitive market, the lawsuit alleged.

Any applicable statute of limitations has been tolled by as a result of the defendants’ fraudulent 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 September 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, with the defendants attempting to create the false impression that their decisions were independent and they were acting in accordance with the antitrust laws, the complaint alleged.

The plaintiff asserts claims for unfair competition, disgorgement, restitution, 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, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 3:14-cv-04062-VC.

Attorneys: Daniel A. Small, Brent W. Johnson, Jeffrey B. Dubner, George Farah, and Matthew Ruan (Cohen Milstein Sellers & Toll PLLC), Bruce Spiva (The Spiva Law Firm PLLC), and Richard L. Grossman (Pillsbury & Coleman LLP) for Robert A. Nitsch, Jr.

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 Imagesworks

News: Antitrust CaliforniaNews