Tech Industry

Microsoft looks to dump more state suits

In Baltimore, the Redmond giant is trying to dispatch the single largest block of private cases pending against it.

Will Friday the 13th be lucky for Microsoft?

Thursday the 12th wasn't bad, with a Connecticut court dismissing private antitrust lawsuits pending there.

Connecticut is the eighth state to throw out such private suits, which stem from Microsoft's antitrust trial with the government and allege the software maker overcharged consumers as much as $40 for every copy of Windows 95 and 98 sold.

But in Baltimore on Friday, Microsoft will try to dispatch the single largest block of private cases pending against it, as it challenges 37 out of the 63 lawsuits consolidated in that jurisdiction.

Lawyers started filing the bulk of cases in November, after U.S. District Judge Thomas Penfield Jackson issued his stinging "findings of fact." In that document, Jackson determined Microsoft was a predatory monopoly that had harmed consumers. He later ordered Microsoft be broken into separate companies handling operating systems and software applications.

Microsoft is appealing the decision before the U.S. Court of Appeals for the District of Columbia Circuit.

Despite Microsoft's impressive run of victories--in Kentucky, Hawaii, Iowa, Oregon, Nevada, Rhode Island, Texas and now Connecticut--legal experts warn not to read too much in the successes. All of the cases were dismissed on a technicality.

"It's impressive, but (Microsoft) hasn't faced the challenge on the merits," said Bill Kovacic, an antitrust professor with George Washington University School of Law.

The Redmond, Wash.-based software maker faces its stiffest challenge in Baltimore during oral arguments before Chief Judge J. Frederick Motz of the U.S. District Court for the District of Maryland. Microsoft in August asked Motz to dismiss the cases.

As with cases in the eight other states, Microsoft is expected to argue the nearly 40 cases be dismissed based on a federal precedent known as Illinois Brick. Based on the 1977 Supreme Court decision, indirect purchasers cannot directly sue manufacturers. Special coverage: Breakup

Most consumers bought Windows on new PCs or from retailers, so under Illinois Brick, they should not be able to sue Microsoft directly in federal court and many states, said University of Baltimore Law School professor Bob Lande.

While Lande said Microsoft "would be likely to win" in Baltimore, unlike other states, the judge is not likely to dismiss all the cases pending there.

"Microsoft has methodically been asking cases be removed to the federal level from state courts," said Hillard Sterling, an antitrust attorney with Gordon & Glickson in Chicago. "The removal to federal court does not shed the applicable state's law," he said. "So some of these lawsuits will survive, because some states have rejected the Illinois Brick decision."

"Even if Microsoft were to win on the arguments it's made, it would not get rid of the entire case. It all depends on how the judge rules on it," Dan Small, a partner with Cohen, Milstein, Hausfeld & Toll in Washington, D.C., said last month.

Small's firm represents the majority of cases consolidated in Baltimore.

Motz is not expected to rule today, but any decision he makes could affect the momentum of other cases, particularly as Microsoft recovers from a defeat in California.

In August, San Francisco Superior Judge Stuart R. Pollak elevated the California suits to class-action status. California is one of the handful of states that lets indirect purchasers directly sue antitrust violators like Microsoft. The trial there is scheduled to start in March 2002.

In March, cases filed in Michigan also were elevated to class-action status.

Even if Motz throws out the 37 cases Microsoft is challenging, another 26 or so could still go to trial. These, and those pending in California and Michigan, would be tried on their merits.

But those merits virtually collapse if Microsoft prevails in its federal antitrust appeal, Kovacic said. "Their effort to prove liability is directly linked to the outcome of the federal case," he said.

Even if the appeals court upholds the government's entire case, proving liability will be tough based on Jackson's findings of fact, ruling and the broader court record, Lande said.

"Plaintiffs have been floating that $40 figure around," he said. "Well, they're going to have to prove that. They have the burden of proof in court, and that may not be so easy."