Silicon Valley is holding on tight to its wallet.
Last month, a federal judge ordered four leading tech companies to come up with more money to settle a class-action lawsuit that accuses them of conspiring against their own employees. But on Thursday, the companies challenged the ruling, saying the judge was "untethered to - and actually at odds with" the sober realities of the case. They are demanding that a higher court set her straight.
The companies - Google, Apple, Intel and Adobe - filed court papers asking the United States Court of Appeals for the Ninth Circuit to reject Judge Lucy H Koh's highly unusual rejection of their $324.5 million antitrust settlement as too meager. The firms said the judge was committing a "clear legal error" in a case that offers a vivid view of the valley that is at odds with its carefully orchestrated public relations.
The suit, filed in the United States District Court in San Jose, is prompting many questions: When do the chummy relationships among tech titans become illegal collusion? Is it possible that software engineers, usually seen as one of the most privileged groups of workers, can be held back economically? Just because companies have billions upon billions in the bank, should that obligate them to provide richer settlements?
Then there are some unusual legal issues. What are the duties of class-action lawyers to go to trial instead of accepting a lucrative settlement? And, can Silicon Valley properly judge Silicon Valley?
The companies, which are scheduled to hold a settlement conference with Judge Koh next week, filed a petition for writ of mandamus - a legal maneuver that essentially asks the appeals court to tell Judge Koh she is wrong. The companies argue that the case against them is weak, and cite as evidence the plaintiffs' lawyers, who earlier acknowledged the risks in their case as a reason for settling instead of going to trial.
Without a reversal, the companies said, "this fundamentally erroneous ruling will evade appellate review, irreparably harm plaintiffs, absent class members, and defendants, and make it significantly more difficult for parties to settle class actions in future cases."
If a settlement cannot be reached, a trial will take place early next year. The companies argue this is another reason to reinstate the original settlement. The extensive media coverage of Judge Koh's critical comments, they said, is "threatening to taint the jury pool and prejudice defendants' ability to obtain a fair trial."
Daniel Crane, an expert on antitrust law at the University of Michigan who is following the case, doubted the petition would be successful. "I thought the judge's ruling was somewhat adventurous - she was saying, Here is my independent view of the evidence, and I think the plaintiffs could have done better - but it is going to be an uphill battle to get it reversed," he said.
Nevertheless, given the prospect of paying tens of millions of dollars more in a new settlement, the companies clearly thought it was worth a shot. On Friday, they declined to comment or did not respond to requests for comment.
The seeds of the case were planted in the mid-1980s but flowered around 2005. Engineers, never a common commodity in the valley, were in particular demand as the dot-com crash receded and Google gathered momentum.
No one knew this better than Steven Jobs, the Apple co-founder and chief valley genius. He hated it when other companies stole his stars. So he made demands and deals with other executives to keep it from happening. The extent to which valley executives entered into formal agreements to do this is at the heart of the case.
First came a Department of Justice investigation, then came private suits that were rolled up into one big class action. The plaintiffs initially argued they had a strong case. Judge Koh made it clear that she thought so too. The companies, no doubt anticipating the bad publicity a trial would generate - and perhaps mindful that any damages would be trebled under antitrust laws - negotiated a settlement.
Google and Apple, in particular, are extremely wealthy companies, so $324.5 million might not have seemed like much. But the plaintiffs' lawyers called it "the second-largest settlement of employee class action claims in history" and "(by far) the largest recovery ever achieved in an employee class action bringing claims under the antitrust laws, on either an aggregate or net per class member basis."
The fine print, however, said that the lawyers would get as much as a quarter of the money, and that each of the 64,000 class members would get a few thousand dollars at best. This did not sit well with one of the named class representatives, a former Adobe engineer, Michael Devine, and he protested the settlement.
Judge Koh was not keen on it either, as she expressed in a hearing. "The judge has a feeling that from her perspective, settlement has gotten too easy," Mr. Crane said. "She is saying that the plaintiffs' lawyers did not do the job sufficiently aggressively."
Dean Harvey, a lawyer at a firm representing the plaintiffs, Lieff Cabraser Heimann & Bernstein, declined to comment. Joseph Saveri, another lawyer for the plaintiffs, did not respond to a request for comment.
Orly Lobel, a professor of employment law at the University of San Diego, said Judge Koh was right to be skeptical of the deal. "She was quite thorough in her review of the settlement and in explaining why the number reached was below the reasonable threshold," Ms. Lobel said.