Judge denies Microsoft dismissal request

Microsoft had asked U.S. District Judge Colleen Kollar-Kotelly to dismiss the case in part because the Justice Department and nine other states had separately settled with the software giant. The plaintiff states and the District of Columbia rejected that settlement and chose to continue litigation. But Microsoft pointed to jurisdictional issues, arguing that only the Justice Department should determine national antitrust policy, and that the litigating states were trying to usurp that power.

"The Court concludes that Microsoft's motion is without merit and must be denied," Kollar-Kotelly wrote. Besides rejecting Microsoft's arguments, the judge concluded a court of appeals had already dealt with the jurisdictional issue last year.

In the 35-page memorandum accompanying her order, Kollar-Kotelly also questioned whether the software giant had veiled a different argument as one about jurisdiction. Microsoft's arguments "cannot be couched in terms of jurisdiction and instead appear to raise issues relating to judgment on the (case's) merits," Kollar-Kotelly wrote.

"Microsoft made its jurisdictional argument on constitutional grounds, that the judge essentially didn't have the right to hear the case," said Rich Gray, a Menlo Park, Calif.-based attorney closely following the trial. "Clearly, the judge didn't buy into Microsoft's arguments on their merits."

Throughout the remedy hearing and in supporting legal filings, Microsoft has used the June 2001 Court of Appeals ruling as a lens to narrow the focus of the case. In its ruling, the appellate court upheld about a dozen separate antitrust violations against Microsoft. The software titan also had argued that the ruling had not considered jurisdictional issues should federal and state trustbusters split on the case.

But in Wednesday's ruling, Kollar-Kotelly wrote that "The Court is loath to presume, as Microsoft does, that the Court of Appeals did not consider the jurisdictional issue of standing."

Twenty-five additional states had banded together to oppose Microsoft's motion to dismiss, including New York, one of the states involved in the DOJ settlement. The Justice Department, too, had opposed the dismissal, in a legal brief filed at the request of Kollar-Kotelly.

In a brief opposing the motion and filed March 15, 24 states argued that the law invoked by Microsoft did not prohibit the plaintiff states from pressing on with the case.

The Clayton Act, the brief said, grants states the authority to continue litigation "even when the federal government has proposed to settle a case. Congress has granted the states clear authority to proceed independently under Section 16, despite the fact that the federal government has chosen not to act, has proposed to settle a case, has in fact settled a case, or has taken the matter to trial." New York raised similar concerns in a separate brief filed the same day.

Wednesday's decision comes just a week before the plaintiff states and Microsoft return to the courtroom for closing arguments in a proceeding that could determine a remedy for the company's antitrust violations. Both sides present arguments June 19, after which Kollar-Kotelly will deliberate on the remedy.

"While we had hoped for a different outcome on this particular motion, we did raise some important constitutional and policy issues," Microsoft spokesman Jim Desler said. "The court did note (that) some of these issues may remain relevant in determining the remedy. We look forward to delivering our closing arguments next week."

Not surprisingly, the states heralded the ruling as a victory.

We are very pleased the court found that Microsoft's motion to dismiss our case is without merit and must be denied," said Tom Miller, Iowa state attorney general and one of the plaintiff states' leaders. "The decision confirms the rightful role of state attorneys general to prosecute antitrust violations."

On Monday, Microsoft and the plaintiff states filed proposed "findings of fact" and "conclusions of law" in the case. Kollar-Kotelly will draw on the two filings, totaling almost 1,100 pages, when drafting her remedy.

Four other motions are still pending before Kollar-Kotelly, as well as a final decision on the separate settlement.

Microsoft admonished
At points, Kollar-Kotelly chastised Microsoft with some fairly harsh language. The judge said one argument "borders on the frivolous," while calling another "improper." At another point, she said one Microsoft claim was "flatly contradicted" by the initial antitrust ruling handed down by U.S. District Judge Thomas Penfield Jackson.

From a legal perspective, the stiffest admonishment may have come on page 28 of the memorandum, where Kollar-Kotelly accused Microsoft of "mischaracterizing their holdings."

"When a judge says someone is 'mischaracterizing a holding,' the judge is saying that someone is mischaracterizing the legal principal established by that case," Gray said. "That's a very serious thing for a federal judge to say to a party to a case."

Gray used the example of someone getting into an elevator eating Cheetos and drinking a Diet Pepsi and then punching another rider in the mouth.

"A court opinion about my poor judgment (in) mixing Cheetos and Diet Pepsi would not be the holding of the case," Gray said. "The holding of the case would be my fist hitting your face, the illegal invasion of your person."

Kollar-Kotelly's tough treatment of Microsoft could indicate the remedy portion of the case may not be going as well for the company as initial appearances indicated.

Throughout the nearly two months of testimony, Kollar-Kotelly repeatedly rapped the knuckles of states' lawyers for a number of procedural errors. One error prevented the states from giving an important in-court demonstration of a version of the Windows operating system. Another allowed Microsoft to drop important witnesses, thus preventing the states from introducing evidence that Microsoft had used the settlement to saddle PC makers with more restrictive Windows licensing terms.

"Just as the judge was fairly harsh with the states during the remedy hearings, here she is being very harsh with Microsoft in arguments made in their legal briefs," Gray said.

Kollar-Kotelly also delivered an important message to Microsoft. On page two of the memorandum, the judge made clear that the appeals court had "deferred" to Jackson's findings on the facts of the case when delivering its ruling last year.

"That's this judge's clear signal--hell, it's a statement--(that) she is not going to listen to Microsoft attempting to re-litigate the factual findings made by Judge Jackson," Gray said. "That poses some difficulties for Microsoft in this remedy phase."