Apple Hit with Shareholder Lawsuit Over Employee Anti-poaching Pact

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Apple's involvement in an agreement with other tech companies to not poach employees from each other has landed it in another lawsuit, this time from a shareholder claiming the deal cost the company value, and that executives misled investors. The class action lawsuit names current CEO Tim Cook, along with William Campbell, Millard Drexler, Arthur Levinson, Robert Iger, Andrea Jung, Fred Anderson, and the Estate of Steve Jobs.

Apple faces shareholder lawsuit over employee anti-poaching dealApple faces shareholder lawsuit over employee anti-poaching deal

R Andre Klein filed the lawsuit earlier this week on behalf of shareholders claiming Apple violated the U.S. Securities and Exchange Act and California laws related to fiduciary duty and honest business practices.

The lawsuit stemmed from an agreement between Apple, Google, Adobe, Intel, Intuit, Pixar, and Lucasfilm several years ago to not hire away employees from each other. That led to a lawsuit from Silicon Valley tech workers who claimed they were blocked from better paying jobs because of the agreement.

Intuit, Pixar, and Lucasfilm all agreed to a $20 million settlement, which was approved, but a separate $324.5 million settlement from Apple, Google, Intel, and Adobe was rejected. Judge Lucy Koh has been overseeing the case and felt the second settlement amount was unfair to employees and needed to be much higher.

According to Judge Koh, the evidence in the case strongly suggests former Apple CEO Steve Jobs was the ring leader in the anti-poaching agreement, which the new shareholder lawsuit points out as a point in the company's breach of trust with shareholders.

The lawsuit also notes that Apple failed to tell shareholders about the Department of Justice investigation into the anti-poaching allegations, or that a settlement had been reached as part of that case. The lawsuit states,

Despite the DOJ's investigation, Apple did not disclose to its shareholders the details of the DOJ's investigation. None of Apple's proxy statements, quarterly filings, and annual filings disclosed the DOJ investigation, the settlement reached in September of 2010, or the final judgment signed on March 17, 2011.

The DOJ found that the companies involved acted in an anti-competitive nature, and where in violation of Federal antitrust laws. The deal, the DOJ said, blocked competition and artificially barred workers from better paying jobs.

This new filing means Apple, Google, Intel, and Adobe are facing a potentially embarrassing trial from the class action lawsuit started by employees, and now Apple is looking at the prospect of a second trial brought by its own shareholders.

The shareholder case was filed in California Northern District Court in San Jose and was assigned to Judge Paul Singh Grewal. Apple hasn't commented on the case.

[Thanks to Patently Apple for the heads up]

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Comments

Lee Dronick

I can understand why a company wouldn’t want their people going to work for a competitor. I am not saying that the antipoaching agreement is okay, just that I understand why the agreement was made. Or maybe I am misunderstanding why.

Jeff Gamet

I think you’re getting it. The problem here is that it looks like Steve Jobs got far too aggressive in his efforts to keep other companies from hiring away his top talent.

geoduck

I had some sympathy for this suit, and usually I an absolutely cynical about the motives and ‘parentage’ of those that file these shareholder class action suits. After all as I said months ago a ham sandwich could have seen this was wrong, likely illegal, and a stupid course to try. But as I got into the article and saw that they included the estate of Steve Jobs I revert to my normal stance.

They are just a bunch of greedy SOB bastards.

JustCause

Let me get this straight, investors were hurt (n the way of corp reputation, value, ongoing litigation) by Apple anti-poaching behavior, so to rectify the situation those investors are suing the company causing further litigation further overall decrease in value. Yep that’s the right way to go, brilliant!

Note Apple stock value has increased during that period by a factor of 4x or 16x depending on where you measure….

ibuck

With the skyrocketing value of Apple stock over this period, and the dividends now being paid, I don’t see how AAPL shareholders, of which I’m one, have been harmed materially by anti-poaching. Would not doing this have increased the valuation of Apple stock over this period? Or prevented the decline from $703 to below $400? Maybe, but has Apple paid out anything on this yet? Has it affected Apple’s dividends, which has paid $1.88/share over the past year. making it one of the top 3 dividend paying stocks?

Even if this suit is successful, won’t this just diminish AAPL’s upcoming dividends by a similar amount? And since any payout includes the lawyers 1/3 cut, could this suit actually harm shareholders, because they’ll be getting 1/3 less of any payout?

RedOrbRising

Dealing with an anti-poaching settlement…half a billion dollars. Keeping your team intact to build game-changing products like the iPod, iPhone, and iPad…priceless.  Although the actions of Apple may have had the effect of artificially lowering the wages of key employees, I know it was not Apple’s motivation.  Their goal was, and still is, to do the kind of amazing work that only an intact team of geniuses could pull off.  Nobody at Apple, and none of their customers, should lose much sleep over this settlement.

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