Todd v. Exxon Corp.

Citation275 F.3d 191
Decision Date01 August 2001
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

John F. Carney, Carney & McKay, Pelham, NY (Joseph P. Garland, Klein &amp Solomon, Llp, New York, Ny, J. Dennis Faucher, Ellen Meriwether, Miller Faucher and Cafferty Llp, Philadelphia, PA on the brief), for plaintiff-appellant.

James C. Egan, Jr., Clifford, Chance, Rogers & Wells Llp, New York, NY (Sean M. Murphy, C. Neil Gray, Clifford, Chance, Rogers & Wells Llp, Jon A. Baughman, Nichole D. Galli, Thomas E. Zemaitis, Pepper Hamilton Llp, Philadelphia, Pa, Mark R. Merley, Arnold & Porter, Washington, Dc, Thomas G. Hungar, Jeffrey A. Wadsworth, Gibson, Dunn & Crutcher Llp, Washington, Dc, Alan M. Grimaldi, Howrey Simon Arnold & White Llp, Washington, Dc, Lawrence R. Jerz, Robert D. Wilson, Texaco, Inc., White Plains, Ny, Terry Calvani, Pillsbury Winthrop Llp, Washington, Dc, Gregory A. Markel, Brobeck, Phleger & Harrison Llp, New York, Ny, Ronald W. Teeple, Defrees & Fiske, Chicago, Il, Harvey Shapiro, Sargoy, Stein, Rosen & Shapiro, New York, Ny, Saul P. Morgenstern, Dewey Ballantine Llp, New York, Ny, Jeffrey R. Witham, Dewey Ballantine Llp, Los Angeles, Ca, Yosef J. Riemer, Jonathan F. Putnam, Kirkland & Ellis, New York, Ny, Richard C. Godfrey, J. Andrew Langan, Kirkland & Ellis, Chicago, Il, James H. Carter, James V. Masella, III, Sullivan & Cromwell, New York, Ny, on the brief), for defendants-appellees.

Before: Walker, Chief Judge, Oakes and Sotomayor, Circuit Judges.

Sotomayor, Circuit Judge

Plaintiff-appellant Roberta Todd appeals from an order of the United States District Court for the Southern District of New York (Sprizzo, J.) granting defendants-appellees' motion to dismiss the complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). We hold that plaintiff adequately alleges a § 1 Sherman Act violation for an unlawful information exchange. Plaintiff's complaint alleges a plausible product market, a market structure that is susceptible to collusive activity, a data exchange with anticompetitive potential, and antitrust injury. We therefore vacate and remand.


Plaintiff brought this action against fourteen major companies in the integrated oil and petrochemical industry, collectively accounting for 80-90% of the industry's revenues and employing approximately the same percentage of the industry's workforce.1 Todd v. Exxon Corp., 126 F. Supp. 2d 321, 323 (S.D.N.Y. 2000); Second Am. Compl. ¶¶ 15-28, 101 [hereinafter "Compl."]. On behalf of herself and all other similarly situated current and former Exxon employees (the putative class),2 plaintiff alleges that defendants violated § 1 of the Sherman Act by regularly sharing detailed information regarding compensation paid to nonunion managerial, professional, and technical ("MPT") employees and using this information in setting the salaries of these employees at artificially low levels. Todd, 126 F. Supp. 2d at 322-23. Plaintiff seeks money damages and equitable relief pursuant to § 1 of the Sherman Act. Compl. ¶¶ 129, 132-133.

Accepting the allegations in the complaint as true, as we must on this motion to dismiss, the facts of this case are as follows. Defendants instituted a system whereby they periodically conducted surveys comparing past and current MPT salary information and participated in regular meetings at which current and future salary budgets were discussed. Todd, 126 F. Supp. 2d at 323; Compl. ¶ 88. The data exchanges were also accompanied by assurances that the information would be used in setting the salaries of MPT employees. Compl. ¶ 106. Defendants' "Job Match Survey" created a common denominator to facilitate the comparison of MPT salaries. Id. ¶ 50. The survey used certain jobs at defendant Chevron as benchmarks. The other defendants would submit detailed information regarding the jobs at their companies that were most comparable to the Chevron benchmark jobs so that they could be matched. Id. ¶ 51. The survey compared the responsibilities and compensation packages offered by defendants for certain jobs and job types against those of the benchmark positions at Chevron. Todd, 126 F. Supp. 2d at 323 n.4. This survey was coordinated by defendants Unocal and Chevron. Chevron and Unocal each would meet with half of the other companies involved to develop matches to the benchmarks, and then would gather the information before submitting it to a third-party consultant, Towers Perrin. Towers Perrin compiled the information, then analyzed, refined, and distributed it to the defendants on diskettes and in the form of hard copies. Compl. ¶ 52. Since not all jobs could be matched precisely, defendants agreed upon certain percentage "offsets" to facilitate the comparison. Id. ¶ 53. The Job Match Survey was performed every two years and was supplemented in the "off years" by the "Grade Average Update," which would calculate the change in grade average salaries since the last Job Match Survey and then adjust the salary level from the previous year's survey by the amount of the change. Id. ¶¶ 67-68.

Defendants' "Job Family Survey" provided the most current account of the compensation being paid in the industry. Each company submitted information on salaries actually paid in thirty different categories of jobs, or "job families," classified according to the nature of the work. Id. ¶ 69. The information exchanged for each family was broken down by the job level classification, experience level, and academic background of the MPT employee. Id. ¶ 69. This survey was coordinated by Exxon, and again the information was submitted to and compiled by Towers Perrin. Each participating company received the information from Towers Perrin in hard copy and disk form. The information gathered in the survey was updated and distributed to the participants several times per year. Todd, 126 F. Supp. 2d at 323 n.5.

Furthermore, each company was entitled to receive subsets of Job Family Survey data, consisting of salary information from as few as three companies at a time. Compl. ¶ 70. Plaintiff alleges that Exxon used these subsets to compare its own salaries with those of six particular competitors, referred to as the "Six Majors." Id. ¶ 75. These periodically updated data sets were used by each defendant to determine whether the announced budgets of its competitors had been implemented so that each could consider what adjustments should be made to coordinate salary levels. Id. ¶ 76.

Although these were the primary forms of salary information exchange, defendants supplemented this information with data from other sources. Defendants' "Advancement Guides" established requirements for advancement within a given salary grade of employee. Id. ¶ 77. These guides were used by defendants to slow the rates of advancement for MPT employees in defendants' companies. Id. ¶ 79. The "ABC," "B-1" and "B- 2" surveys collected additional data regarding bonuses and other non- standard payments above base compensation that were not captured in the Job Match and Job Family Surveys. Id. ¶¶ 80, 82. The "Long-Term Incentive Survey" refined the comparison further by accounting for the economic value of certain non-cash benefits paid to MPT employees. Id. ¶ 83. The "Starting Salary Survey," in which only the Six Majors apparently participated, measured starting salaries of college graduates entering MPT positions. Id. ¶¶ 84-85. In addition to the data exchange surveys, human resource personnel at defendant companies held regular meetings - at least three times per year - to discuss and exchange salary and salary-related information. Id. ¶¶ 87, 91-95. These meetings included discussions of individual defendants' current and future salary budgets for MPT employees. Id. ¶¶ 88, 92.

Plaintiff contends that defendants' arrangement violated § 1 of the Sherman Act. Id. ¶¶ 127, 131. According to the complaint, these violations had the purpose and effect of depressing MPT salaries paid by defendants. Id. ¶¶ 117, 120. The arrangement reduced the incentive for defendants to bid up salaries in order to attract experienced MPT employees or to retain employees who might be lured to other firms. Id. ¶¶ 103-104. As a result, the plaintiffs in the putative class received compensation that was materially lower than what they would have received but for defendants' anticompetitive practices. Id. ¶¶ 128, 132.

Plaintiff alleges that Exxon, in particular, used this data to maintain a market position slightly above the so-called "Six Majors" and below three higher-paying competitors referred to as the "High Three." Id. ¶ 58. Exxon capitalized on the shared data to decrease its "competitive factor" - the percentage by which Exxon would have to adjust its salary levels in order to maintain alignment with the salaries offered by its competitors. Id. ¶ 108. Exxon's competitive factor dropped from 6.5% in 1991 to 0% in 1995, id. ¶ 109, and its salaries decreased 4.1% between 1987 and 1994 in comparison to the...

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