Ryan v. Microsoft Corp.

147 F.Supp.3d 868

Deserae Ryan, et al., Plaintiffs,

v.Microsoft Corporation, Defendant.

Case No. 14-CV-04634-LHK

United States District Court, N.D. California, San Jose Division.

Signed November 23, 2015

Jeffrey Lee Hogue, Tyler Jay Belong, Bryce Aaron Dodds, Hogue and Belong, David Roger Markham, Maggie K. Realin, Peggy J. Reali, Janine Renee Menhennet, The Markham Law Firm, Debra Hurst, Julie Corbo-Ridley, Kyle Mark Van Dyke, Hurst & Hurst, San Diego, CA, Bonny E. Sweeney, Christopher L. Lebsock, Melinda R. Coolidge, Michael D. Hausfeld, Hausfeld LLP, San Francisco, CA, for Plaintiffs.

Robert J. Maguire, Stephen Michael Rummage, Candice M. Tewell, Davis Wright Tremaine LLP, Seattle, WA, Allison Ann Davis, Sanjay Mohan Nangia, Davis Wright Tremaine LLP, San Francisco, CA, for Defendant.

ORDER GRANTING MOTION TO DISMISS WITH PREJUDICE

Re: Dkt. No. 67

LUCY H. KOH, United States District Judge

Before the Court is Defendant Microsoft Corporation's motion to dismiss. ECF No. 67. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court hereby GRANTS Defendant's motion to dismiss with prejudice.

I. BACKGROUND

A. Factual Background

1. The Parties

Plaintiff Deserae Ryan (“Ryan”) and Plaintiff Trent Rau (“Rau”), (collectively, “Plaintiffs”), bring this putative class action against Defendant Microsoft Corporation (“Defendant” or “Microsoft”) for alleged violations of state and federal antitrust laws. Plaintiff Ryan, an individual, is a resident of the State of California. First Amended Compl. (“FAC”), ECF No. 61, ¶ 16. Plaintiff Ryan worked for Microsoft as a “Senior Product Manager” from April 2007 to September 2012 in Redmond, Washington. Id. ¶ 15. Plaintiff Rau, an individual, is a resident of the State of Washington. Id. ¶ 18. Plaintiff Rau worked for Microsoft as a “Lead Systems Engineer Senior” from June 2006 to June 2010. Id. ¶ 17.

Defendant Microsoft is a Washington corporation with its principal place of business in Redmond, Washington. Id. ¶ 19.

2. In re High-Tech Employees Litigation

Here, Plaintiffs allege that Defendant Microsoft conspired with “other technology companies” in various “Anti-Solicitation and Restricted Hiring” agreements. As the factual and procedural history of In re High-Tech Employees Litigation , No. 11-CV-02509-LHK, and the DOJ investigations and complaints are relevant to this action, the Court briefly summarizes the background of that litigation below.

From 2009 to 2010, the Antitrust Division of the DOJ investigated the employment and recruitment practices of various Silicon Valley technology companies, including Adobe Systems, Inc., Apple, Inc., Google, Inc., Intel Corp., and Intuit, Inc. See In re High – Tech Employee Litig. , 856 F.Supp.2d 1103, 1109 (N.D.Cal.2012). The DOJ filed its complaint against Adobe, Apple, Google, Intel, Intuit, and Pixar on September 24, 2010. Id. On December 21, 2010, the DOJ filed another complaint against Lucasfilm and Pixar. See No. 11-CV-2509-LHK, ECF No. 65. The defendants stipulated to proposed final judgments in which they agreed that the DOJ's complaints had stated claims under federal antitrust law and agreed to be “enjoined from attempting to enter into, maintaining or enforcing any agreement with any other person or in any way refrain from ... soliciting, cold calling, recruiting, or otherwise competing for employees of the other person.” High – Tech , 856 F.Supp.2d at 1109–10 (quoting Adobe Proposed Final Judgment at 5). The U.S. District Court for the District of Columbia entered the stipulated proposed final judgments in March and June of 2011. Id. at 1110.

The High – Tech plaintiffs filed five separate state court actions between May and July of 2011. Following removal, transfer to San Jose to the undersigned judge, and consolidation, the High – Tech plaintiffs filed a consolidated amended complaint on September 13, 2011. Id. at 1112–13. In their complaint, the High – Tech plaintiffs alleged antitrust claims against their employers, claiming that the defendants had conspired “to fix and suppress employee compensation and to restrict employee mobility.” Id. at 1108. More specifically, the High – Tech plaintiffs alleged a conspiracy comprised of “an interconnected web of express bilateral agreements.” Id . at 1110. One agreement, the “Do Not Cold Call” agreement involved one company placing the names of the other company's employees on a “Do Not Cold Call” list and instructing its recruiters not to cold call the employees of the other company. Id. In addition to the “Do Not Cold Call” agreements, the High – Tech plaintiffs also alleged that Pixar and Lucasfilm entered into express, written agreements to (1) not cold call each other's employees, (2) to notify the other company whenever making an offer to an employee of the other company, and (3) not to engage in “bidding wars.” Id. at 1111.

3. Alleged Conspiracy in the Instant Action

In their original complaint, Plaintiffs alleged that Microsoft in May 2007 “was one of several parties to an Anti-Solicitation Agreement otherwise known as the ‘Do Not Cold Call’ list,” ECF No. 1 ¶ 28, and that Microsoft allegedly entered into a “Restrictive Hiring Agreement” with “several other technology companies,” id. ¶ 36.

In the First Amended Complaint, Plaintiffs appear to have abandoned their allegations that Microsoft was a party to two agreements in May 2007. Instead, Plaintiffs now allege that Microsoft entered into a series of independent anti-solicitation agreements with various companies. See FAC. Plaintiffs allege that each time Microsoft entered into an anti-solicitation agreement with a company, Microsoft added the company to an internal “Hands-Off List.” Id. ¶ 33. The Hands-Off List allegedly consisted of those companies “with whom Microsoft entered into a Secret Agreement to restrict or prohibit the solicitation or hiring of each other's employees.” Id. ¶ 34. The First Amended Complaint alleges that Microsoft entered into the following specific agreements:

• On April 19, 2005, Microsoft entered into a mutual non-solicitation agreement with Transmeta and added Transmeta to the Hands-Off List. Id. ¶ 29.

• In 2005 or 2006, Microsoft reached “an understanding” with Dell that Microsoft and Dell would not “poach” each other's employees, and Microsoft added Dell to the Hands-Off List. Id. ¶ 31.

• In 2005, Microsoft entered into a mutual non-solicitation agreement with Yahoo! and added Yahoo! to the Hands-Off List. Id. ¶ 32; ECF No. 38, Ex. 3.¹

• By 2007, Hewlett Packard (“HP”) was included on the Hands-Off List. FAC ¶ 34. In June 2009, Microsoft renewed a “Secret Agreement” with HP. Id. ¶ 41. The First Amended Complaint does not specify when the “Secret Agreement” began or when HP was added to the Hands-Off List.

• On an unspecified date, Microsoft and Avanade agreed “to refrain from soliciting each other's employees.” Id. ¶ 38. By 2007, Avanade was included on the Hands-Off List. Id. ¶ 34. The First Amended Complaint does not allege when Avanade was added to the Hands-Off List.

• In 2007, Microsoft entered into mutual non-solicitation agreements with Nvidia, ATI, and Intel and added them to the Hands-Off List. Id. ¶ 35. In June 2009, Microsoft renewed its agreement with Nvidia. Id. ¶ 41.

• By 2007, Microsoft agreed with Google “not to directly recruit or ‘cold-call’ each other's employees, and to also refrain from hiring each other's manager-level and above employees.” Id. ¶ 36. The First Amended Complaint does not specify when this agreement began.

• On an unspecified date, Microsoft entered into a mutual non-solicitation agreement with ASAP Software Express, Inc. Id. ¶ 37.

• By 2009, Microsoft agreed not to solicit candidates from IMPAQT and placed IMPAQT on the Hands-Off List. Id. ¶ 41; ECF No. 68, Ex. 7.

• On an unspecified date, Microsoft entered into a mutual non-solicitation agreement with Waggener Edstrom Communications. FAC ¶ 41.

• In June 2009, Microsoft renewed “Secret Agreements” with Real Networks, Wipro Limited, and Nortel. Id. The First Amended Complaint does not specify when these agreements first began.

• On an unspecified date, Microsoft entered into non-solicitation agreements with Avenue A, Borland, Digitas, OMD, RazzorFish, Real Networks, Satyam, Universal McCann, and InfoUSA, Inc .. Id. ¶ 77.

• On an unspecified date, Microsoft entered into an agreement with Expedia prohibiting Expedia from directly solicitating Microsoft's employees. Id. ¶ 79.

Altogether, Plaintiffs identify 25 different companies with whom Microsoft allegedly entered into non-solicitation agreements. These companies are not limited to Silicon Valley technology companies, but also include non-technology companies, including a public relations company and a marketing company. See ECF No. 68, Exs. 9-17. The latest dates by which Plaintiffs allege that Microsoft entered into these specific agreements are in 2009. Plaintiffs additionally allege that between 2007 and 2013, “Microsoft continued to modify and add to its Hands-Off List as it continued to renew and engage in new Secret Agreements with over approximately 75 different companies, most of which were added to Microsoft's Hands-off List.” Id. ¶ 41. However, Plaintiffs do not allege the identity of these 75 companies, and do not allege when these 75 agreements were reached.

According to Plaintiffs, the effect of these agreements was to restrict competition in the labor market and artificially depress compensation. Id. ¶¶ 43, 44, 49. Plaintiffs allege that the agreements prohibited the parties to the agreements from cold calling or directly soliciting each other's employees. Id. ¶ 44. Plaintiffs assert that “[c]old calling and direct solicitation serve as essential and effective recruiting methods,” because current employees of competitors are “often the most highly qualified,” but also “often unresponsive to other recruiting strategies.” Id. ¶ 45. Plaintiffs allege that restrictions on cold calling have the effect of “limit[ing] an...