DreamWorks Animation SKG Inc. has agreed to pay a class of animators $50 Million to settle a class action suit against DreamWorks’ alleged “gentlemen’s agreement” not to poach animators employed by other animation studios or to get into bidding wars with those other studios for animators’ services. The suit targeted not just DreamWorks, but also Sony Pictures Imageworks Inc., and Sony Pictures Animation, Inc., Blue Sky Studios, Walt Disney Co, Pixar Inc., LucasFilm Ltd and ImageMovers Digital LLC. Sony Pictures Imageworks Inc., and Sony Pictures Animation Inc., previously settled for $13 Million and Blue Sky Studios for $6 Million.
More specifically, plaintiffs alleged that the studios’ conduct had suppressed animators’ salaries across the industry for at least the past decade in violation of anti-trust laws by not cold-calling or otherwise actively soliciting each other’s employees; notifying a studio party to the “gentlemen’s agreement” when another party to the agreement was offering the animator a job; and not entering into a bidding war with the animator’s current studio if that studio made a counteroffer. The “gentlemen’s agreement” allegedly suppressed animators’ wages by as much as 30 percent in some years, including an alleged $120 Million in damages suffered by DreamWorks’ animators alone. Because of the risks inherent in this litigation, the animators and DreamWorks agreed to settle at roughly 40 cents on the dollar.
The inspriation for this suit apparently was a similar suit filed in Silicon Valley alleging that certain Internet companies such a Google and Apple also entered into non-poaching agreements over software engineers and that resulted in a $415 Million settlement.
Takeaway: Do not be surprised if copycat suits are initiated by employees of other entertainment and new media employers to the extent those industries require employees with specific skills that are in limited supply, such as software engineers and animators. Employers should also be aware that the Justice Department and the Federal Trade Commission view “no poaching” arrangements as an important target for investigation, including for criminal violations. The two agencies just released a guidance for human resource professionals on how antitrust laws apply to employee hiring and compensation at https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-release-guidance-human-resource-professionals, including a quick reference card with respect to this issue at https://www.justice,gov/atr/file/903506/dowr. The lesson for employers in the entertainment and new media world is they should not enter into any type of understanding with their competitors with respect to bidding for services.