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Judge rejects Silicon Valley employee poaching lawsuit settlement agreement


A federal judge has refused to approve a settlement agreement between plaintiffs and high-tech firms over the issue of an alleged nonpoaching agreement among the Silicon Valley companies, stating the amount offered the workers was inadequate.

A legal expert said the ruling represents a trend towards close judicial scrutiny of class action settlements.

Despite the agreement between defendants and plaintiff attorneys, Judge Lucy H. Koh in the U.S. District Court in San Jose, California, on Friday refused to OK an agreement under which workers would receive $324.5 million to settle the class action litigation against Mountain View California-based Adobe Systems Inc., Cupertino, California-based Apple Inc., Mountain View-based Google Inc. and Santa Clara, California-based Intel Corp.

Plaintiffs had charged that the defendants had entered into an “overarching conspiracy through a series of bilateral agreements” to not solicit one another’s employees in violation of federal law, according to Judge Koh’s ruling in In Re: High-Tech Employee Antitrust Litigation.

Judge Koh said under terms of the agreement, defendants will pay a total of $324.5 million, and workers will receive an average of about $3,750 each after $18 million in attorneys’ fees, $1.2 million in costs and $80,000 per class representative in incentive payments is deducted. There are about 64,000 affected workers, according to a news report.

“The court finds the total settlement amount falls below the range of reasonableness,” she said. She said if this case had been settled on the same basis of a much weaker case against other defendants in related litigation, which was settled a year ago, plaintiffs would receive at least $380 million.

Defendants in the case either had no comment or could not be reached.

Commenting on the ruling, defense attorney Michael W. Kelly, a partner with law firm Squire Patton Boggs L.L.P. in San Francisco, said: “From the defense bar’s perspective it’s significant, because it continues to represent close judicial scrutiny of settlement decisions between the parties in class actions, with the courts imposing their own assessment of the likelihood of success.”

Mr. Kelly said if the two sides want to settle, “it is clear they would have to come back with a number that’s at least $380 million, if not in excess of $380 million.”