Objection Stalls Studios’ $170 Million Wage-Fixing Settlement

SAN JOSE, Calif. (CN) – On the precipice of finalizing a $170 million settlement between major animation studios and the workers victimized by a wage-suppression scheme, a major hurdle appeared in the form of an objection.

“I hoped we could resolve this today, close this case and be done with it, but now it looks like it’s not going to happen,” a visibly irked U.S. District Judge Lucy Koh said during a contentious hearing Thursday.

A class of animation workers and other associated employees who worked at major animation studios like Disney, Dreamworks, Sony Pictures, Blue Sky Studios and Pixar were unwittingly subjected to no-poach agreements by the executives who ran the studios.

Led by Steve Jobs, who founded Pixar in 1986, the studio executives agreed to broad no-poach agreements, promising not to cold-call each other’s employees – leading to an artificial suppression of wages, according to the plaintiffs in the case.

The case was similar to and emerged from a case, also presided over by Koh, which explored a no-poach agreement between Silicon Valley heavyweights like Apple, Adobe, Google, Intel, Intuit, Lucasfilm and eBay.

Koh granted preliminary approval to the approximately $170 million animation settlement in March, labeling it “a good recovery for the class.”

It appeared Thursday’s hearing would be a formality, but attorney Joshua Furman threw a wrinkle into the otherwise smooth process.

Furman says his two clients, who were producers on movies at Disney during the established class period, were inappropriately removed from the class despite being included in the initial complaint.

“Every other studio involved in this conspiracy included producers,” Furman said during the hearing. “As a matter of logic, it would be appropriate to include producers who worked for Disney as well.”

Jeff Friedman, attorney for the plaintiffs, said producers at Disney had access to hiring and firing decisions and were in a class of executives that potentially knew about the wage-suppression scheme and therefore were excluded from the class.

But Furman said the exclusion was more sinister, labeling it a “discovery fluke” where Disney purposefully supplied the expert in charge of establishing the size and scope of the class with misleading information that led to the arbitrary exclusion of his clients, Alice Gladstone and Charles Williams.

Williams and Gladstone were producers whose level of compensation and perks exceeded that of many of the class members, but Furman said it shouldn’t matter because their compensation was just as adversely affected by the wage-fixing conspiracy as other class members.

Friedman said their inclusion would have compromised the entirety of the class because it would have raised questions about the individual nature of their claims and compromised commonality – a death knell for a class-action suit.

Friedman went farther during Thursday’s hearing, saying he was going to file a Rule 11 sanctions document asking that Furman be fined for holding up an important settlement and be forced to pay attorney’s fees for causing an unnecessary delay in the case.

“His clients don’t have standing,” Friedman said. “So if the court views it consistent with what we think the law is, handing up a substantial payment to 10,000 people is a problem festering within his objection.”

Friedman also noted Furman had filed a federal lawsuit in a different district and said that was a more appropriate venue for his claims, not using payment to nearly 10,000 animation workers as leverage to get his clients justice.

Koh seemed inclined to agree.

“I don’t think you have standing,” she told Furman during the proceedings. “I do not think it is right to hold up payment for over 10,000 people when your clients are not class members. If I need to sanction I will do it, because that is not justice.”

Koh was careful to say she will not prejudge the situation and will listen to Furman’s arguments, but made it clear she felt the appropriate venue for Furman and his clients was a different lawsuit.

“I have done a few class actions and it is not unique for the size of the class to change,” she said. “It usually gets narrower, not broader.”

Both parties have set June 3 as the deadline, at which point if the objection is not removed, Friedman will bring a Rule 11 Sanctions motion in front of Koh.

If the objection is removed, the final settlement appears to be ready for approval.

Friedman works for Hagens Berman Sobol Shapiro in Berkeley.