Claims of No-Poach Deal Between Samsung, LG on Thin Ice

SAN JOSE, Calif. (CN) – A federal judge conceded she is “on the fence” on whether to dismiss a major antitrust lawsuit claiming a no-poach conspiracy exists between two of the world’s largest technology companies, during a hearing Thursday.

U.S. District Court Judge Beth Labson Freeman, in her typical direct style, told plaintiff attorney Steve Williams she has grave concerns about the sufficiency of his clients’ claims LG and Samsung – two large electronics and technology corporations both based in South Korea – conspired to stay away from each other’s employees.

“A lot of these circumstances in your complaint take place at the lowest possible level,” Freeman said. “Whether it’s a recruiter placing a cold call, colleagues having a conversation around a water cooler, I’m just not sure you present evidence of a high level conspiracy not to poach each other’s employees.”

Instead, Freeman expressed concern the third amended complaint contains stereotypical representations of Korean companies that rely more on assumptions and inferences than hard evidence.

“I am concerned you have stereotyped the nature of the Korean company and gotten a lot of your information from Wikipedia,” Freeman said.

Williams said the plaintiffs have enlisted experts to give them insight on the corporate structure of Korean companies, referred to repeatedly in the complaint as chaebol.

Plaintiffs A. Frost and Jose Ra say the centralized structure and enforced culture of corporate loyalty in the South Korean concept of chaebol means employee policies are likely formulated at the top of the corporate chain and disseminated throughout the corporate structure, including to subsidiaries based in the United States.

In the original complaint, Frost, a former employee at LG, said he contacted Samsung multiple times to apply for various jobs. He said he received a call back from a recruiter, who cut off the phone call when he found out Frost worked for LG while alluding to the apparent collusion between the two companies.

The complaint also references a story from an English language newspaper published in India called the The Economic Times Mumbai, which detailed the no-poaching pact between the two companies.

Freeman wondered if the evidence presented was enough, saying that just because a subsidiary engaged in the practice in India doesn’t necessarily mean collusion is widespread throughout the company.

Williams argued antitrust law gives judges latitude to consider the totality of evidence provided, rather than dismantle the complaint allegation by allegation as is the case in other areas of civil litigation.

He also noted the plaintiffs did not have the benefit of government investigations into collusive practices between companies, which preceded each of the high-profile court cases that revealed no-poach agreements in the tech world.

In re High-Tech Employee Antitrust Litigation, a case where notable Silicon Valley companies like Apple, Adobe, Google, Intel and Intuit faced accusations of no-poach agreements that deflated the labor market for employees and eventually settled for $435 million, stemmed from the U.S. Department of Justice’s investigation of the practice.

Similarly, a high-profile case over similar agreements between animated movie studios also came after a Justice Department investigation.

Those investigations revealed parts of the scheme before the lawsuits were filed, so the lawsuits naturally contained more specific allegations – a benefit the plaintiffs in the present case do not enjoy, Williams said.

Freeman seemed persuaded by this point.

“I’m on the fence, especially absent the government investigation,” she said toward the end of the hearing. “That was a gift in the other cases and these are difficult pleadings to make.”

But Samsung’s attorney Anne Davis said the true difference in the cases is that there was no evidence that LG and Samsung ever even contacted each other, let alone hatched an elaborate scheme.

“There is a big gap between zero contacts and hundreds,” Davis said.

Vanessa Jacobsen, attorney for LG, also noted the plaintiffs offer no evidence that LG refused to hire Samsung employees, meaning there was no parallel conduct.

Freeman seemed to agree that under the context of the current framing for allegations, LG did not belong as a co-plaintiff.

She eventually took the matter under submission.

Williams is with the Joseph Saveri Law Firm in San Francisco. Anne Davis works for Arnold and Porter in Massachusetts and Jacobsen is with Eimer Stahl in Chicago.

 

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