United States: Wage Suppression Antitrust Class Allegations Against Oracle Dismissed As Untimely

A 2009 Department of Justice ("DOJ") investigation of the employment and recruitment practices of a number of Silicon Valley technology companies resulted in DOJ lawsuits against seven companies, followed by consent decrees and numerous class actions brought by employees and former employees.  The plaintiffs claimed that their employers entered into agreements not to solicit one another's employees and that these agreements unlawfully suppressed their compensation.  Several of the class actions were consolidated before Judge Lucy Koh in the U.S. District Court for the Northern District of California and resulted in a settlement totaling $435 million.  In Re High-Tech Employee Antitrust Litigation, No. 11-CV-02508, 2015 U.S. Dist. LEXIS 118051, at *12‑15 (N.D. Cal. Sept. 2, 2015) ("High-Tech").  But more recently, Judge Koh dismissed a similar case brought against Microsoft on statute of limitations grounds.  Ryan v. Microsoft Corp., 14-CV-04634, 2015 U.S. Dist. LEXIS 158944, at *1‑2 (N.D. Cal. Nov. 23, 2015) ("Ryan").  And now, less than 2 1/2 months later, a similar case brought against Oracle has met the same fate.  (We have previously blogged on the High-Tech litigation here, and on the Ryan case here.)  Garrison v. Oracle Corp., Case No. 14-CV-04592, 2016 U.S. Dist. LEXIS 13118, at *2‑3 (N.D. Cal. Feb. 2, 2016).

The Claims Against Oracle

Oracle was one of the technology companies that were the subject of the 2009 DOJ investigation.  However, the DOJ concluded its investigation of Oracle on October 29, 2014, without filing suit.  Id. at *7.  The underlying allegations in this case were very similar to those in the High-Tech and Ryan litigation – that Oracle entered into a number of secret gentlemen's agreements with other technology companies not to solicit each other's employees.  Id. at 7-13.  The claims asserted against Oracle were identical to the claims brought against Microsoft in Ryan – that Oracle violated:  (1) Section 1 of the Sherman Act, 15 U.S.C. §1; (2) California's Cartwright Act, Cal. Bus & Prof. Code §16720; (3) California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code, §§17200, et seq.; and (4) California Business and Professions Code §§16600, et seqId., at *22-23.

The Statute Of Limitations Analysis

It was undisputed that a four-year statute of limitations applied to each of these claims, and the original complaint was filed on October 14, 2014.  Id. at *34.  The Court found that each of the three plaintiff's claims accrued by 2009.  Thus, the applicable statutes of limitations expired in 2013, unless an exception to the default accrual rules or a tolling doctrine applied.  Id., at 45.

Plaintiffs raised the same five arguments for extending the statute of limitations that were raised by the plaintiffs and Ryan, and Judge Koh rejected them for the same reasons.  Statutory tolling during the pendency of the DOJ investigations did not apply because the DOJ never filed a complaint against Oracle.  Id. at *49-51. The continuing violation doctrine did not apply because merely maintaining the alleged unlawful agreements did not constitute an overt act necessary for application of the doctrine.  Id. at *55-62. Fraudulent concealment was not adequately alleged because, among other things, insufficient facts supporting the doctrine were pled to satisfy the heightened pleading requirements of Rule 9(b), and Plaintiffs failed to plead any affirmative acts of concealment.  Id. at *63-88.  The Court also rejected Plaintiffs' argument that the California discovery rule applied to Plaintiffs' UCL claim. While the California discovery rule might apply to a UCL claim grounded in fraud, it does not apply in cases like this one where the UCL claim involves solely unfair competition.  Id. at *88‑92.  Finally, the Court also rejected Plaintiffs' argument that California's "continuous accrual" rule applied. The "continuous accrual" rule requires a separate recurring invasion of the Plaintiff's rights. Here, while entering into a new anti-solicitation agreement could constitute a separate recurring invasion, merely maintaining an existing agreement did not.  Accordingly, the doctrine did not apply.  Id. at *92-96.

Dismissal With Prejudice

This was the Plaintiffs' second chance to plead allegations sufficient to overcome the statute of limitations defense.  In dismissing Plaintiffs' original complaint, Judge Koh warned that failure to cure the statute of limitations deficiencies would result in dismissal with prejudice.  Accordingly, the Court dismissed the complaint with prejudice.

Implications For Employers

As noted in our blog on the Ryan decision, Judge Koh, who reports say is being considered by the Obama administration to fill a vacancy on the Ninth Circuit, took a very favorable position for employers on the grounds necessary to plead a basis for extending the statute of limitations.  Judge Koh did not vary from that stance in this case.

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