LinkedIn corporate headquarters in Sunnyvale, California
OAKLAND - A federal judge in Oakland has rejected a negotiated settlement to end an antitrust lawsuit accusing LinkedIn of illegally monopolizing the online networking industry before overcharging premium subscribers, saying the deal needed to do more than set up a temporary ban on LinkedIn's alleged misconduct in exchange for a $4 million payment to the trial lawyers who filed the lawsuit.
U.S. District Judge Haywood Gilliam filed an opinion Dec. 17 rejecting a motion for settlement from the plaintiffs who first sued LinkedIn in January 2022. That lawsuit alleged the company’s “data centralization, machine learning models and resulting trove of inferred data” empower it to monopolize the market and pave the way for gouging members of its Premium Career service.
The users — Todd Crowder, Kevin Schulte and Garrick Vance — filed the settlement motion in July through their attorneys from the firms of Bathaee Dunne, of New York and Austin, Texas; Burke LLP, of San Diego; and Korein Tillery, of St. Louis. They had proposed the class include about 9 million Premium purchasers dating back to January 2018, with service awards of up to $5,000 per plaintiff.
The attorneys, however, would get up to $4 million and another $100,000 in reimbursement for costs and expenses.
According to the motion, relief for the class members would be in the form of an agreement from LinkedIn to refrain for three years from making deals with potential rivals that offer access to private user data on the condition those companies don’t compete with LinkedIn.
The plaintiffs claimed those deals have centered on application programming interfaces, or APIs, and said LinkedIn only offers APIs when it wants to stifle competition. They also claimed LinkedIn integrated user data with Microsoft’s Azure cloud system in an effort to control scarce hardware resources.
In his decision, Judge Gilliam said plaintiffs sacrificed potential claims for damages before even trying to get a damages class certified, while the plaintiffs' lawyers would split a seven-figure fee.
He noted the plaintiffs argued a three-year moratorium on API dealing would be “enough time for market correction and price equilibrium.” But the judge said the plaintiffs provided no real data to show why 36 months would be sufficient for a competitor to challenge the strength of LinkedIn’s machine learning and data collection models.
“The court appreciates that the practical realities of negotiation sometimes mean that a plaintiff cannot achieve permanent injunctive relief through a settlement,” Gilliam wrote. “That said, three years is a far cry from achieving ‘essentially all of … (the) injunctive relief’ sought.”
Gilliam further said that even if LinkedIn agreed to stop offering APIs and related data in exchange for noncompete clauses, nothing would stop LinkedIn from just shielding its data from anyone. Since the initial complaint alleged no entity can compete with LinkedIn given its critical mass of data and models, he reasoned LinkedIn could continue to control the market even under the settlement terms.
“Plaintiffs claim they will be able to quantify the value of this injunctive relief at final approval by presenting expert testimony from an antitrust economist,” Gilliam wrote. “But that does not help when serious problems are evident on the face of the settlement, and the court does not have the purported evidence before it.”
The original complaint sought actual or trembled damages and consistently alleged the anticompetitive behavior led to supracompetitive prices LinkedIn charged to subscribers, but Gilliam said they “entirely abandoned” that pursuit with the settlement terms.
“Plaintiffs do not attempt to quantify the monetary relief they could have achieved at trial or compare that expected value to the benefits of the injunctive relief here, making this decision even harder to understand,” Gilliam wrote. “Plaintiffs have not clearly explained what about the strength of their case, the risks and costs of trial, or the possible relief at trial justified compromising the monetary relief for zero dollars.”
Gilliam agreed with the plaintiffs’ framing regarding challenging, protracted litigation typical of antitrust cases and acknowledged his previous skepticism about their legal theory. But he said their statements were “generic” and added “the lack of any unique discussion makes the zero-dollar value of this settlement hard to compare against the expected recovery at a later stage.”
Although some settlements yielding only an injunction are fair and reasonable, he continued, there also is the matter of balancing the agreed upon terms against the $4 million attorney award.
“Because plaintiffs have not shown that this short-term injunctive relief is adequately valuable to justify sacrificing monetary relief without ever attempting to certify a damages class — including by failing to clearly articulate what the expected recovery could have been — the court cannot find that this settlement falls in the range of possible approval, and this factor heavily favors denial of preliminary approval,” Gilliam wrote.
He said the terms are “particularly concerning” coming so soon in the litigation and while the factors don’t “per se establish collusion,” the situation warrants enhanced judicial scrutiny. Since courts usually calculate 25% of a settlement fund as a reasonable benchmark for a fee award, the injunction would have to be worth at least $16 million, a figure he said isn’t warranted based on current evidence.
Gilliam set a case management conference for Jan. 13.
