Sony, Disney and DreamWorks Slam Anti-Poaching Lawsuit as Futile

Chris Meledandri
Justin Stephens

"Part of the premise I had in starting this new company (Illumination) was that we would not build a bricks-and-mortar studio.” -- Despicable Me producer Chris Meledandri.


On Friday, The Walt Disney Company, DreamWorks Animation, Sony Pictures and Blue Sky Studios fired heavy legal artillery at a proposed class-action lawsuit that aims to punish the studios for allegedly conspiring to deny workers in the visual effects community better work opportunities. The defendants are demanding a dismissal on new antitrust claims as coming too late and being bereft of necessary factual support.

Arrangements to freeze wages and not poach employees were the subject of an investigation and lawsuit by the U.S. Justice Department in 2010. Several companies agreed to a prohibition against enforcing anti-poaching pacts for a period of five years, which ended the DOJ review, but in 2011, a class-action lawsuit was brought against Pixar, Lucasfilm, Apple, Google, Adobe and Intuit. The first two companies settled claims for $9 million while the other companies have gone to an appeals court after a federal judge rejected a $325 million settlement as insufficient.

Meanwhile, Robert Nitsch Jr., a former visual effects worker at DreamWorks Animation, was one of many who aimed to get another chance to dig into how studios were allegedly colluding with each other. He filed a lawsuit in September, which preceded others in the visual effects community doing the same. Many of these lawsuits were then consolidated.

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The studios have now filed their first substantive response to the consolidated lawsuit — pretty much deeming it to be a loser that the court shouldn't waste much time in disposing. According to a motion to dismiss (read in full here), the DOJ investigation and 2011 lawsuit got broad press attention, and yet, the plaintiffs decided to wait five years until commencing their own lawsuit.

"In an effort to manufacture new claims not covered by the High-Tech lawsuits, plaintiffs assert that animation studios, other than High-Tech defendants Pixar and Lucasfilm, also participated in the alleged conspiracy. However, plaintiffs’ attempt is futile as a matter of law and comes far too late. The statutes of limitations for their claims expired long ago."

The motion to dismiss continues by pointing out that much of what was uncovered by the DOJ relates to communications prior to 2009 — which the defendants argue is out of bounds for review as well as activity that the DOJ itself declined to prosecute. If the anti-poaching pacts continued after 2010, within the statute of limitations, they say "it is plaintiffs' burden to allege specific anticompetitive conduct," and not only haven't they done so, continues the motion, the studios say it's also implausible.

"It is highly improbable, to say the least, that parties under a DOJ investigation of their allegedly unlawful conduct would continue to engage in any such conduct while under that scrutiny," states the motion.

The visual effects workers who are suing can perhaps beat the clock if they can show fraudulent concealment, or that the studio purposely hid their anti-competitive conduct. The studios say that nothing like this is alleged in the complaint.

But the motion to dismiss isn't merely an attempt to have a judge reject the lawsuit on procedural grounds. The studios go above and beyond the typical route toward defeating a lawsuit by attacking class-action attorneys at the firm of Cohen Milstein as springing into action upon word that a judge rejected Apple's $325 million settlement as too low. "As for the named plaintiffs, there is no allegation that any of them ever did anything to investigate his or her claim," they say.

The studios attempt to pick apart the smoking-gun evidence of an antitrust conspiracy offered up by the plaintiffs.

For example, there's Blue Sky, the 20th Century Fox-controlled production company behind Rio and Ice Age. The plaintiffs have seized upon a statement from one Blue Sky employee that he did not "want to be starting anything" with DreamWorks over one story guy. That might be an example of Blue Sky’s "unilateral desire" to avoid a wage war with DreamWorks, says the defendant, but not evidence of any agreement that violates antitrust laws.

Similarly, when Chris Meledandri (a former exec at Blue Sky) emails Pixar's then-CFO Simon Bax and references “our sensitive issue of employee retention,” and quotes an internal Pixar conversation about anti-poaching assurances, he's not being read correctly, imply the defendants. The lawsuit complaint "omits the portions of this email that make it clear that Meledandri’s concern is simply Blue Sky’s ability to keep certain employees 'through the completion of ICE 2,'" and further that "not only does this email not suggest Blue Sky’s involvement in some broad anti-solicitation conspiracy, it demonstrates that Pixar frequently hired Blue Sky employees."

Some of the defendants like Blue Sky might have have refrained from becoming aggressive on the hiring front without any formal agreement — that's at least the defendants' read, here — while other studios might have been doing stuff that's arguably pro-competitive on the hiring front.

"Plaintiffs fail to allege plausibly that Sony Pictures entered into non-solicitation agreements with anyone, let alone that it participated in the purported overarching conspiracy that is described in the [consolidated amended complaint]," states the motion to dismiss. "To the contrary, the picture that emerges from the CAC, and the record it relies upon, is not that Sony Pictures entered into nonsolicitation agreements, but that Sony Pictures consistently engaged in aggressive recruiting practices."

The basis for asserting that Sony had somehow become part of a conspiracy on the anti-poaching front was a meeting held about a decade ago between Pixar president Ed Catmull and senior executives at Sony Animation for the purpose of reaching some understanding about not soliciting each other's employees. After the meeting, Pixar human resources employee Lori McAdams is said to have suggested that Sony entered into a “gentleman’s agreement.”

"While plaintiffs are correct in alleging that Mr. Catmull did have such a meeting at which he attempted to persuade Sony Pictures to discontinue its aggressive recruiting conduct, absolutely no change in Sony Pictures’ behavior resulted from his efforts," says the motion to dismiss.

As evidence that Sony never made an agreement with Pixar, the defendants point to Catmull's deposition testimony in the earlier lawsuit as well as an email with the subject line "Zemeckis" that Catmull sent to former Disney film chief Dick Cook in 2007. At the time, Catmull wrote, "Every time a studio tries to grow rapidly, whether it is Dreamworks in 2D animation or Sony in 3D, it seriously messes up the pay structure."

By the end of 2007, Catmull stated in another message, "[G]iven Sony’s extremely poor behavior in its recruiting practices, I would feel very good about aggressively going after Sony people.”

The defendants tell the judge that nothing turned up in the DOJ investigation indicating that Sony agreed not to solicit Pixar employees. (If the plaintiffs are allowed to amend, it will be interesting to see if there's anything from the hacked documents that turn up — which would raise other serious issues.) "The DOJ recognized this dearth of evidence in documents produced by Sony Pictures, Pixar, Lucasfilm, DreamWorks, Blue Sky and others, so it closed its Sony Pictures file without even requesting a meeting with Sony Pictures’ employees or its counsel," says the motion.

U.S. District Judge Lucy Koh has scheduled a hearing on March 26 to consider the studios' motion to dismiss the consolidated lawsuit.

The dispute is bringing to the courtroom some of the biggest law firms in the nation. Disney is represented by Emily Henn at Covington & Burling. DreamWorks is repped by Rod Stone at Gibson Dunn & Crutcher. Sony is being handled by Stephen Bomse at Orrick Herrington & Sutcliffe. Blue Sky is being defended by John Schmidtlein at Williams & Connolly as well as William Faulkner at McManis Faulkner.

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