Bad News for Apple, Google: Judge Rejects $324.5M Anti-poaching Settlement

U.S. District Court Judge Lucy Koh shot down the proposed settlement agreement Apple, Google, Adobe, and Intel had hoped would bring an end to the class action lawsuit accusing them of agreeing to avoid poaching employees from each other. Silicon Valley workers claimed the agreement artificially limited their ability to get better jobs, and Judge Koh said the US$324.5 million settlement was far too low. She took the unprecedented move of pushing the trial forward, which could turn into an awkward and ugly mess for the companies.

Judge Koh rejects anti-poaching settlement, moves forward with trialJudge Koh rejects anti-poaching settlement, moves forward with trial

Typically, Judges will work with both sides to rework the settlement. Rejecting it completely and pushing forward with a trial, however, is all but unheard of. In this case, it means moving forward with a trial that could lead to upwards of $9 billion in damages.

Employees from several Silicon Valley tech companies filed a lawsuit over claims Apple, Google, Adobe, Intel, Intuit, Pixar, and Lucasfilm all agreed to not poach employees from each other. The agreement, they said, kept salaries artificially low and limited their ability to find better jobs.

Intuit, Pixar, and Lucasfilm agreed to a $20 million settlement, which was approved by Judge Koh. While $20 million may have been enough to please Judge Koh for those companies, it's clear she's expecting Apple, Google, and Intel to pay much more.

Judge Koh said there is plenty of evidence to show the companies engaged in a conspiracy to not hire away each other's employees, and that the settlement didn't land "within the range of reasonableness."

The Judge questioned the settlement agreement in June, saying, "I just have concerns about whether this is really fair to the class."

Revealing the communication between Google, Intel, and the other companies would be embarrassing at best, and could prove to be a public relations nightmare for Apple. Steve Jobs was running Apple at the time and apparently wrote emails to other CEOs with very clear threats should any of his engineers be hired away.

Rejecting the settlement deal doesn't mean the companies will have to go to trial, but does make it far moire likely. They could avoid a trial by agreeing to a much higher settlement amount, but that, too, would have to meet with Judge Koh's approval.

A settlement that Judge Koh might go for would have to top $1 billion, according to University of San Diego professor of employment and labor law Orly Lobel. He told the New York Times, "A settlement that is more in the billion-dollar ballpark would likely be viewed by the court as within the zone of reasonableness."

Whether or not the defendants think a billion dollars as reasonable, however, remains to be seen. Considering how embarrassing seeing the evidence against them out in public would be, it's likely they're already working on reworking their deal.

Agreeing to a $324.5 million settlement when more than $3 billion was at stake seems more like an easy out for the plaintiff's attorney's, and it looks like Judge Koh felt the same. Unless Apple, Google, Adobe, and Intel can come up with a deal Judge Koh likes, they're going to look pretty bad in court -- and that's something all of the companies are hoping to avoid.