In May 2002, Sony Pictures launched a new CGI animation motion picture division, Sony Pictures Animation, hoping to challenge Pixar and Dreamworks Animation for the wildly popular CGI animated movie market.

Heading up the new Sony Pictures Animation were co-executive vice presidents Sandra Rabins and Penny Finkelman Cox, both having been hired from Jeffrey Katzenberg’s Dreamworks Animation. A year later, Sony Animation announced it had poached one of George Lucas’ top talents, Jill Culton, from Lucas’ Industrial Light & Magic studio, then based in San Rafael. Culton was also close to Pixar, credited with having written the original story for the studio’s biggest hit to date, Monsters, Inc.

From the point of view of Pixar and Lucasfilm, the new Sony Animation studios presented a serious problem. As Pando previously reported, Pixar and Lucasfilm had a longstanding, secret agreement to control their computer specialists’ wages and mobility by not recruiting each other’s employees, and by agreeing not to “bid up” salary offers should an employee be considering both companies.

The agreement, originally forged between George Lucas, Pixar president Ed Catmull and Pixar CEO Steve Jobs in the mid-1980s, was illegal, a violation of the Sherman Antitrust Act. But to the executives and owners looking to maximize profits, the wage-fixing agreement worked, and so it would last for nearly a quarter of a century, spreading across Silicon Valley and across industries and oceans, until the Department of Justice’s antitrust division busted it open in 2010.

Sony’s entrance into the CGI film studio market in 2002 threatened to upset the wage-fixing cartel. As we reported, documents show that Pixar and Lucasfilm had become adept at roping other computer animation film studio outfits into the wage-theft agreement, including Dreamworks Animation. And yet Sony had always remained a standout.

Now, thanks to court documents and confidential emails, we can reveal how the other animation giants failed to convince Sony to play ball with their cartel. Certainly it wasn’t for lack of effort.

Late on the evening of February 18th 2004, Pixar’s Ed Catmull emailed his boss, Steve Jobs, with the subject heading “Sony”:

From: EC

Sent: Wednesday, February 18, 2004 1:19AM

To: Steve Jobs [email protected]

Subject: Sony

Sony has approached all of our producers trying to hire them. They all just ignored Sony, although REDACTED forwarded on the email from the recruiter.

Today, REDACTED, one of our department managers told me that she was offered a position as producer for Sony’s first CG film and is likely to accept. If so, she would report to REDACTED.

...

The director of the movie is REDACTED [Jill Culton, ex-Lucasfilm and on Pixar-produced Monsters Inc—M.A.] who started off as head of story on Monsters but burnt out. She is good but fragile. The movie is about animals that turn the table on hunters. REDACTED

REDACTED will talk with her [the Pixar manager that Sony was poaching]. She isn’t so great that we have to keep her, and she isn’t so bad that she would hurt Sony.

We don’t have a no raid arrangement with Sony. We have set up one with ILM [Lucasfilm] and Dreamworks which has worked quite well. I probably should go down and meet with Sandy and Penney and Sony to reach some agreement. Our people are become [sic] really desirable and we need to nip this in the bud. Nine years later, in early 2013, Ed Catmull — now president of Walt Disney and Pixar Animation Studios — was questioned by the plaintiffs’ attorney in the landmark hi-tech antitrust class action lawsuit. In his deposition, Catmull was asked about his email to Steve Jobs in 2004 complaining about Sony Animation, and about Catmull’s meeting with “Sandy and Penney” — referring to Sandy Rabins and Penney Finkelman Cox, the two co-founding executive vice presidents at Sony Animation.

Q: So did you in fact go down and meet with Sandy and Penny [sic]?

CATMULL: I did.

Q: Do you recall that actually?

CATMULL: I just recall going down and meeting with them. But whatever they agreed on, it didn’t work out as Catmull and Jobs had planned. Sometime in 2005 [the exact dates were redacted—M.A.), Pixar executives began frantically emailing each other about their growing concern that Sony Animation was once again recruiting their talent. Sony wasn't playing ball with the non-solicitation cartel.

Fleecing Nemo

In one email, a Pixar senior recruiter, Dawn Haagstad, writes to Pixar’s HR department an internal email subject headed “Studio Relationships” that describes Sony as:

“They’re ruthless! They’ve called employees directly about applying for positions even though they know we don’t engage in poaching.”

“I mentioned to JL [presumably Pixar executive producer John Lasseter—M.A.] on Friday night that we almost lost Chris Bernardi to Sony last week (thankfully he’s staying) and John was wondering if a lot of our employees are getting calls from Sony as it seems they’re on a hiring binge again.

Another internal Pixar email from a senior producer sounded more alarm over Sony Animation doing what companies legally can and should do — recruit talent, and drive up wages if that’s what the workers are worth:

“John thought we should call Ed in Hawaii and have him call the Sony women (Penny and Sandy) and remind them of our gentleman’s agreement not to raid each other.” And this is where Catmull’s deposition gets interesting, and crazy. I’ll quote:

Q: Let me stop there. Did you have such a gentleman’s agreement with Sony?

CATMULL: The only agreement they had was what I told you, when I went down and talked with them. That was it.

Q: Was that an agreement [with Sony] not to initiate contact with each other’s employees without prior indication of interest on the part of the employee being contacted?

CATMULL: Well, I don’t recall the details of what we said, but I do – I think the general principle was that the act of systematically going after everybody was just bad for everybody. So I – I walked away believing that they would not do that anymore. I was wrong.

Q: Well, you may not have been wrong. They may have agreed to it but just didn’t honor the agreement?

CATMULL: Maybe.

Q: Doesn’t that seem more likely than not based on what you are reading in these emails?

CATMULL: Well, the fact that they’re saying this means that I – although I don’t know what I said to them, I think they believed that was the case, also.

Q: Who is “they”?

CATMULL: Well, the recruiting.

Q: I know. But are you talking about Sony or Pixar?

CATMULL: I didn’t have any other communication with Sony after that. Here, the plaintiffs’ lawyer, Robert Heimann, drops a bombshell: A top Pixar producer reveals in her email that Catmull had in fact flown down to Sony Animation and met with the two co-heads, Penney Finkelman Cox and Sandy Rabins, to rope Sony into the non-recruitment cartel. That meeting presumably took place in 2004, when Catmull emailed Steve Jobs his intention to meet Sony about poaching employees. The email from Pixar’s producer reads:

“I do know he [Catmull] flew down and met with them [the two Sony executives] around a year ago and asked them to quit calling our employees.”

Q: That suggests or confirms that you actually – your memory is correct. You did go down there and talk with them [Sony].

After reading that email to Catmull during last year's deposition, the plaintiffs’ attorney needled him:

CATMULL: Yes. Catmull admits to what appears to be further criminal behavior, in violation of the Sherman Antitrust Act: An attempt by a top executive to get other executives to agree to secretly fix their employees’ wages and career opportunities.

Sources with knowledge of the discussion told Pando that Sony Animation’s understanding of the Catmull meeting was very different, and that Catmull had only asked Sony, informally, to let him know in future if they were hiring any Pixar employees.

Their different interpretations were born out in their actions: Catmull was still angry at Sony in 2013; and Sony did not join the Pixar-Lucasfilm non-solicitation agreement.

Thug Story 2

Much appears to have been redacted, but later in the deposition, mention of Sony sparks more outrageous words from Catmull, who comes off more Tony Soprano than Marlin the Clownfish.

As we reported earlier this week, in January 2007, Catmull emailed Disney chairman Dick Cook to complain to him that another of Disney’s new computer animation acquisitions, Bob Zemeckis’ ImageMovers Digital (IMG), was violating the wage-fixing cartel by poaching employees from rival Dreamworks Animation, thereby driving up wages for everyone.

In Catmull’s email, he singled out Sony Animation as an example of the sort of “bad” studio who won’t play ball with wage-fixing, and instead recruited as it saw fit, pushing up wages and career opportunities across the board. Which, in Catmull’s mind, made Sony the Al Qaeda of computer animation studios:

“[Zemeckis] has hired several people away from Dreamworks at a substantial salary increase... every time a studio tries to grow rapidly, whether it is Dreamworks in 2D animation or Sony in 3D, it seriously messes up the pay structure.

“I know that Zemeckis’ company will not target Pixar, however, by offering higher salaries to grow at the rate they desire, people will hear about it and leave. We have avoided wars up in Norther[n] California because all of the companies up here – Pixar, ILM [Lucasfilm], Dreamworks, and couple of smaller places [sic]- have conscientiously avoided raiding each other.

“...even raiding other studios has very bad long term consequences [i.e., higher benefits for employees, lower profits for companies and executives—M.A.].” To which the chairman of the world’s largest media conglomerate, Dick Cook, responded:

“I agree.”

Towards the very end of 2007, word leaked that Sony Animation was hurting, and its parent company, Sony Pictures, was looking to sell off a large chunk of the computer animation division.

And that pleased a very vindictive Ed Catmull — both then in 2007, and six years later, in deposition in 2013.

The bad news in late 2007 was that Bob Zemeckis’ computer animation studio was reportedly recruiting talent from a smaller CGI outfit, The Orphanage, in San Francisco. Placing the interests of the wage-fixing cartel above all, Catmull wrote to Disney studios president Alan Bergman and Disney’s head of HR, Marjorie Randolph, to complain that their Disney colleague, Zemeckis, was recruiting talent from a non-Disney firm. “I received the following complaint from the Orphanage,” Catmull wrote to the two Disney executives regarding Zemeckis’ recruiting.

Further down the email, Catmull explained how things should work, and how Zemeckis should behave:

“Just this last week, we did have a recruiter working for ILM [Lucasfilm] approach some of our people. We called to complain and the recruiter immediately stopped. This kind of relationship has helped keep the peace in the Bay Area and it is important that we continue to use restraint.

“Now that Sony has announced their intentions with regard to selling part of their special effects business, and given Sony’s extremely poor behavior in its recruiting practices, I would feel very good about aggressively going after Sony people.” Note the threat at the end of his email: To use recruiting as a weapon, a way of punishing a "rogue" company outside of the cartel. This is yet another aspect of the politics of cartelizing the tech industry labor market: Recruitment thus artificially stifled can now be deployed with far greater impact and force to punish firms that don’t join in the illegal conspiracy. Power accrues, and is weaponized, in ways we haven’t even imagined.

The plaintiffs’ attorney probes Catmull’s email threat to punish Sony by unleashing not Pixar’s recruiters, but Zemeckis’ uppity recruiters on Sony, in their weakened position:

Q: That’s what you wrote, right?

CATMULL: That’s what I wrote.

Q: And did you? Did you aggressively go after Sony people?

CATMULL: Did Pixar?

Q: Yeah.

CATMULL: Oh, not at all.

Q: So this was just you venting?

CATMULL: No, no, no. I’m saying if IMD [Zemeckis’ studio] is trying to get people, but Pixar did not change the way we operate with any of them.

Q: So IMD went after Sony?

CATMULL: I don’t know if they did. The answer is, yes, I was venting there. But Pixar didn’t change the way it recruited.

Q: You were cheering on somebody else to go after Sony?

CATMULL: I was pissed at them. That is true. Disney’s HR head, Marjorie Randolph, responded back to Catmull, again strongly suggesting Disney’s complicity as well as knowledge about the illegal cartel:

“Yes, we’ve put some rules in place that I will go over with you, Ed, on our scheduled call.”

Lucky for Disney, Catmull said he could not recall what those rules were that his bosses “put in place.”

But what is revealed here is a cartel, a “conspiracy” as the court documents call it, that goes well beyond two cute computer animation studios — to the top board rooms and executive offices of Hollywood’s most powerful companies, as well as Silicon Valley’s.

To be continued.

Read about Dreamworks Animation's role in Pixar-Lucasfilm's illegal wage-fixing cartel here.

Follow all of our Techtopus coverage here.

Pando contacted Sony and Pixar for comment on this story but neither had provided a response by publication time.

Additional documents cited in this article:

[Illustration by Brad Jonas for Pando]