Please contact us
with corrections
or breaking news
Pixar, ILM and DW Stung by Wage Fixing Scandal by Karl Cohen
Pixar head Ed Catmull and Jim Morris (lf), president of Walt Disney Animation, costume up for the premiere of Pixar's 'Brave' at the 2012 Los Angeles Film Festival. photo: courtesy LAFF
RECENTLY UNCOVERED COURT
documents that show Pixar, ILM and DreamWorks were part of what the press calls “Techtopus,” the Silicon Valley wage-fixing cartel, now considered the largest wage-fixing scandal in US history.
In late May, 2014, Techtopus members settled out of court a case that accused them of developing and using an illegal system to suppress wages in the high tech industry. The US Department of Justice ruled earlier this year the class action case filed in 2011 would go to trial in late May.
Until I read Cnets.com’s account of the case I had no idea Pixar, ILM and DreamWorks were involved. I had read several other reports and the press kept saying the defendants were Apple, Google, Intel, Adobe “and three smaller companies.”
OK, Pixar, DreamWorks and Lucasfilm (ILM) are, technically speaking, smaller than Apple and Google, but they are super-giants in the entertainment business. Another reason they probably got left out of the headlines is they settled earlier this year.
Cnet reported Pixar was told to pay a "tiny" fine of $9 million. I have not found any published information about the amount ILM and DreamWorks were fined. Perhaps it was so "small" reporters saw no reason to mention it.
Since the trial date for the four remaining defendants was set in late May, the four companies apparently decided not to risk losing the case and paying perhaps billions. Instead they settled out of court. The court ruled that the class action settlement would amount to $324.5 million.
That means each of the 60,000 employees and former employees in the case will get between $2,000 and $8,000 if an appeal judge authorizes the terms of the settlement.
Despite a hippie-travel-to-India youth, Steve Jobs took to the corporate bully pulpit, and outright bully, position with an odd sort of glee. photo: courtesy Apple
The suit involved companies that had a verbal agreement not to get into bidding wars over wages when one of their employees wanted to change jobs and go to work for another company that was a cartel member.
Also, companies agreed not to solicit workers from each other, nor would a firm offering a person a job, raise the original salary offered if the job seeker tells them he is being offered more at another firm. The Department of Justice ruled that these secret agreements were illegal ant-trust violations that serve to suppress workers’ wages.
The court papers that have been released since the settlement show that the late Steve Jobs from Apple, Ed Catmull from Pixar and George Lucas, were involved as early as 2004 in agreeing not compete with each other for workers. By 2006 Jeffrey Katzenberg from DreamWorks was also involved with the scheme.
Some of the evidence against the cartel came from their own emails discussing fixing wages. For example in 2007 Edwin ("Ed") Catmull from Pixar wrote Dick Cook, chairman at Disney, about Bob Zemeckis at ImageMovers.
Catmull said Zemeckis, who was making a feature for Disney at his studio in Novato, CA, was violating the non-solicitation agreement when he hired DreamWorks employees. The email was first quoted in an article titled “REVEALED: Court docs show role of Pixar and DreamWorks Animation in Silicon Valley Wage-Fixing Cartel” published on July 7th on the pando.com website.
In it Catmull says, “We have avoided wars up here in Northern California because all of the companies up here—Pixar, ILM [Lucasfilm], DreamWorks and a couple of smaller places—have conscientiously avoided raiding each other.”
Since Pando broke the story some have blamed Steve Jobs for creating the cartel, but several others correctly state that Pixar's Catmull was also a ringleader. He not only made more money for Pixar by keeping a tight lid on wages, he also was active in trying to get Sony to join the group, even flying to Los Angeles to discuss the matter with Sony’s co-presidents in 2004.
Catmull, in a quite moment, at the Pixar campus in Emeryville, an enormous, Oldenburg-like desklamp referencing one of Pixar's first groundbreaking shorts, in the background. photo: courtesy Pixar
Although Sony had actively recruited artists from Pixar when they were working on “Open Season” (2006), Sony’s actions were legal while Catmull's alleged suggestions to Sony weren't.
Sony wisely declined to participate in the wage-fixing syndicate and continued to recruit freely. Court records also show that: "John Lasseter was both aware of and supported some of Catmull’s illegal activities.”
This case has received coverage abroad but not much has been reported in the American mainstream press. The Economics Times in India thought the $324.5 million judgment is too light considering, “Apple has $150 billion in the bank” and “Google, Intel and Adobe have a total of about $80 billion stored up for a rainy day.”
The headline at Forbes, the American business magazine, said, “Apple, Google, Intel, Adobe Escape Cheaply from the Engineers Class Action Suit”.
The article went on to note, “That’s hardly a punishment for the companies when they will have saved much more than that in lower wages over the several years the scheme lasted.” Will any of the seven defendants involved dare to appeal the judgment against them?
The penalties for violating the Sherman Act can be severe. Although most enforcement actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it may be prosecuted by the Department of Justice. Criminal prosecutions are typically limited to intentional and clear violations such as when competitors fix prices or rig bids.
The Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison. Under federal law, the maximum fine may be increased to twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims of the crime, if either of those amounts is over $100 million.
Mark Ames, senior editor of Pando Daily on the Internet, researched the article and has been working hard to share the facts with the public. Raised in Silicon Valley, Ames graduated from UC Berkeley and has lived in Europe and Russia. He is the author of three books, including “The Exile: Sex, Drugs and Libel in the New Russia”. Thank you, Mark, for your excellent investigative journalism.
Karl Cohen is an animator, educator and director of the local chapter of the International Animation Society and can be reached .Posted on Jul 22, 2014 - 02:38 AM