In the latest fallout over an illegal no-hire scheme by Silicon Valley companies, an Apple shareholder is suing CEO Tim Cook and other company directors, including the estate of the late Steve Jobs.
According to a complaint filed in San Jose, the Apple executives harmed the company by promoting the scheme, which involved a web of agreements in which companies agreed not to hire each others’ employees, and by failing to disclose government investigations.
“As a result of its illegal agreements, Apple’s reputation has been harmed. Further harm has come from the loss of innovation which occurred because of the illegal agreements […] Defendants impeded technological and economic growth at Apple by entering into illegal non-solicitation agreements .. which suppressed high-velocity labor by squelching flexibility and information diffusion,” claims the suit.
The case, filed by Apple shareholder Andre Klein, is known as a “derivative suit.” These are a type of corporate lawsuit in which shareholders take action to protect a company when its own leadership will not. In this case, the derivative action is allegedly necessary because Cook and the other directors participated in the scheme that harmed Apple, and will not take action themselves.
The defendant names Cook, the estate of Jobs and various Apple directors, including Bob Iger, and accuses them of “gross mismanagement,” breach of fiduciary duty and other acts that harmed Apple.
If you think this all sounds a little far-fetched, you have a point. For the lawsuit to succeed, Klein will have to show that Apple has been harmed by the actions of Jobs, Cook and the others — something that might be difficult given that Apple is coming off a series of earnings reports that for a time established it as the richest and most successful company in the history of the world.
The real goal of the lawsuit, however, is probably not so much about seeking relief for Apple’s not-so-beleaguered shareholders. Instead, Klein and his lawyers may simply be seeking a symbolic settlement and a tidy bundle of legal fees, which is something Apple might agree to in order to avoid the nuisance and bad press of fighting the claims.
For the tech world, the most interesting part of the lawsuit is the pastiche of Silicon Valley gossip it collects from various press reports and legal filings. These include a quote from a BusinessWeek story that describes Jobs as a “walking antitrust violation” and an amusing email in which Google wonders if Jobs will get upset if it hires a Sous-Chef from Apple.
The lawsuit also traces the genesis of the anti-poach scheme, which began with studios Pixar and Lucas Films joining Apple in an agreement where, according to one email, “The key is to stay away from the engineers.”
The new derivative lawsuit comes a week after a federal judge rejected a settlement in a class action brought by Silicon Valley employees, on the grounds that a $325 million pay-out from Apple, Google and others was too low. Apple has declined to comment on the litigation.
Here’s a copy of the derivative suit, which was reported by AppleInsider’s Mikey Campbell, with some highlights underlined:
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