Law360, Los Angeles (March 23, 2015, 10:25 PM ET) -- Google Inc.’s board of directors was hit with a shareholder derivative lawsuit in California federal court on Monday alleging the board harmed the company by engaging in illegal anti-poaching agreements with other tech giants in violation of federal antitrust laws.
West Palm Beach Fire Pension Fund sued 10 of the 11 Google board members, including CEO Larry Page, chairman Eric Schmidt and co-founder Sergey Brin, for breach of fiduciary duty and violation of the Securities and Exchange Act in connection with the revelation of its anti-poaching agreements with competitors including Apple Inc., Adobe Systems Inc. and Intel Corp.
“Defendants caused or condoned Google’s conspiracy to repeatedly and persistently violate federal antitrust laws, with several of its Silicon Valley colleagues, by engaging in a multi-year scheme to illegally suppress competition and wages for high-tech employees in Silicon Valley, thereby effectively undermining innovation in technology,” the complaint says.
The plaintiffs, on behalf of Google, seek to recover damages as a result of the alleged breaches of fiduciary duty, a return of all compensation given to board members during the time of the alleged violations and for the company to set up a corporate governance and compliance program to prevent future violations.
Monday’s suit was filed just weeks after a California federal judge issued preliminary approval of a $415 million settlement in the long-running antitrust class action filed against Google and others for illegally agreeing not to poach each other’s engineers.
On March 4, U.S. District Judge Lucy H. Koh approved the revised deal, which tacked $90 million onto the initial $325 million offer the judge rejected in August. A final approval hearing is scheduled for July 9, with an opt-out deadline of May 21.
The settlement ends nearly four years of litigation over claims the companies conspired to suppress pay for software engineers. The allegations came to light following a U.S. Department of Justice investigation into the hiring practices of several Silicon Valley technology companies.
The software engineers sued Google, Apple and other Silicon Valley companies in May 2011 for damages, claiming that the companies had agreed to provide each other notice whenever one made an offer to another's employee. They also agreed to cap pay packages for prospective hires to prevent bidding wars, and to abstain from recruiting one another's personnel, the plaintiffs contended.
The agreements depressed the workers' pay 10 to 15 percent below what it would have been with natural market conditions, the plaintiffs claimed.
Apple, eBay Inc. and Intel have been the targets of similar shareholder suits filed in California state court.
Intel dodged a putative shareholder class action in September after the judge said plaintiffs needed to take their complaint to the board first. In November, a state judge tossed the derivative suit against eBay, ruling that the complaint failed to sufficiently allege presuit demand futility.
Monday’s suit against Google was assigned to U.S. Magistrate Judge Howard R. Lloyd.
Representatives for the parties did not immediately respond to requests for comment late Monday.
The plaintiffs are represented by John Jasnoch, Thomas L. Laughlin IV, Judith Scolnick and David R. Scott of Scott & Scott LLP.
Counsel information for the defendants was not immediately available.
The case is West Palm Beach Fire Pension Fund v. Lawrence "Larry" Page et al., case number 5:15-cv-01334, in the U.S. District Court for the Northern District of California.
--Additional reporting by Michael Lipkin, Daniel Siegal and Kurt Orzeck. Editing by Brian Baresch.
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