Class Certification in the Microsoft Indirect Purchaser Litigation

AuthorWilliam H. Page
William H. Page*
A. introduction
The government’s monopolization case against Microsoft has spawned a
myriad of private proceedings in the United States seeking treble dam-
ages.1 This article examines an important subset of those proceedings: the
class actions brought under state law on behalf of indirect purchasers of
Microsoft’s software, mostly consumers and businesses who bought the
software along with new computers from original equipment manufactur-
ers like Compaq, Gateway, and Dell. Although the rule in Illinois Brick
Co. v. Illinois2 denies indirect purchasers the right to sue under federal
antitrust laws, many states have authorized these proceedings under
state antitrust or consumer protection law.3 Before the Microsoft cases,
however, courts in the “Illinois Brick repealer” states had refused, more
often than not, to certify indirect purchaser claims as class actions on
the grounds that issues specific to the individual plaintiffs, particularly
the issue of impact, “predominated” over issues common to the class.4 In
these courts’ “sceptical” view, the complexities of proving whether and
* Marshall M. Criser Eminent Scholar, University of Florida Levin College of
Law; e-mail: I am grateful to John Lopatka, Ronald Cass,
Chuck Casper, and the participants in a workshop at the University of Florida
for helpful comments on earlier drafts of this article. I also benefited from
the comments of Spencer Waller and Samuel Issacharoff at the Western Law
symposium. Finally, I thank Diego Puig for his research assistance. This article
will also appear in the Journal of Competition Law and Economics (Oxford
University Press).
1 See Section C below.
2 431 U.S. 720 (1977) [Illinois Brick].
3 See below notes 14 and 15.
4 See generally William H. Page, “The Limits of State Indirect Purchaser Suits:
Class Certification in the Shadow of Illinois Brick” (1999) 67 Antitrust L.J. 1.
by how much the direct purchasers had passed on the overcharge to the
plaintiffs would likely overwhelm any common issues, like questions of
liability, and thus make the cases unsuitable for trial as class actions. The
courts in the Microsoft indirect purchaser cases, however, have certified
them as class actions much more frequently. Of the fourteen decisions in
these cases, three (two in Michigan and one in Maine) denied certifica-
tion,5 while eleven granted it.6 In this article, I explore possible explana-
tions for this disparity in the rate of certification and consider tentatively
whether the experience in these cases helps us decide whether indirect
purchaser class actions are in the consumer interest.
Antitrust law, at both the state and federal levels, is ostensibly about
protecting the consumer interest from private conduct that reduces com-
petition.7 Courts, for example, interpret the substantive law to prohibit
conduct that harms consumers rather than conduct that harms only
competitors or small businesses.8 Paradoxically, however, consumers
5 A & M Supply Co. v. Microsoft Corp., 654 N.W.2d 572 (Mich. Ct. App. 2002)
[A&M]; Fish v. Microsoft Corp., No. 00-031126-NZ (Mich. Cir. Ct. Wayne
County 8 April 2004) [Fish]; Melnick v. Microsoft Corp., [2001] WL 1012261
(Me. Super. Ct. Cumberland County) [Melnick].
6 See Bellinder v. Microsoft Corp., [2001] WL 1397995 (Kan. Dist. Ct. Johnson
County) [Bellinder]; Capp v. Microsoft Corporation, No. 00-CV-0637 (Wis. Cir.
Ct. Dade County 12 September 2001); Comes v. Microsoft Corp., No. CL82311
(Iowa Dist. Ct. Polk County 16 September 2003) [Comes]; Coordination
Proceedings, Microsoft I-V Cases, No. J.C.C.P. 4106 (Cal. Super. Ct. San
Francisco County 29 August 2000); In re Florida Microsoft Antitrust Litigation,
[2002] WL 31423620 (Fla. Cir. Ct. Miami-Dade County) [Florida Microsoft];
Gordon v. Microsoft Corp., [2001] WL 366432 (Minn. Dist. Ct. Hennepin
County) [Gordon I]; Gordon v. Microsoft Corp., [2003] WL 23105552 (Minn.
Dist. Ct. Hennepin County) [Gordon II] (applications software); Gordon
v. Microsoft Corp., No. MC00-5994 (Minn. Dist. Ct. Hennepin County 15
December 2003) (refusing to decertify); Howe v. Microsoft Corp., 656 N.W.2d
285 (N.D. 2003) [Howe]; In re New Mexico Indirect Purchasers Microsoft
Antitrust Litigation, No. D-0101-CV-2000-1697 (N.M. Dist. Ct. Santa Fe County
2 October 2002) [New Mexico Microsoft]; Sherwood v. Microsoft Corp., No. 99C-
3562 (Cal. Cir. Ct. Davidson County 20 December 2002); In re South Dakota
Microsoft Antitrust Litigation, 657 N.W.2d 668 (S.D. 2003) [South Dakota
Microsoft]; Friedman v. Microsoft Corp., CV2000-000722 (Ariz. Super. Ct.
Maricopa County 15 November 2000). Final settlements have been approved
in California, Montana, North Dakota, South Dakota, Tennessee, West Virginia,
Florida, and Kansas.
7 See, for example, Seacoast Motors of Salisbury, Inc. v. DaimlerChrysler Motors
Corp., 271 F.3d 6 (1st Cir. 2001) at 9: “The central aim of the antitrust laws is
to protect consumers against certain abusive business practices — especially
price-fixing and monopoly.”
8 See John E. Lopatka & William H. Page, “Monopolization, Innovation, and
certification in microsoft indirect purchaser litigation 167
often cannot sue for the harms they suffer as a result of federal antitrust
violations.9 Although they have the right to sue under federal law for
their antitrust injuries,10 most are foreclosed from doing so by the rule
in Illinois Brick, which denies indirect purchasers the right to sue for
damages from monopolistic overcharges. Consumers are usually indirect
purchasers, because they do not often buy monopolized or cartelized
products directly from the offenders.
However, the absence of a remedy for consumers is not necessarily
inconsistent with the goal of protecting the consumer interest. Whether
a statute protects a class is a separate question from whether it would be
efficient for that class to have a private right of action. Many federal stat-
utes, such as the Federal Trade Commission Act,11 are designed to protect
consumers but do not accord them a private right to sue, presumably
because to do so would not be the most efficient mechanism for secur-
ing compliance with substantive standards.12 Similarly, the United States
Supreme Court in Illinois Brick reasoned that concentrating the right to
recovery in direct purchasers would ensure more effective deterrence.13 It
would, for example, be very difficult to apportion the overcharge among
the various levels of a chain of distribution. Although the theory behind
the pass-through of an overcharge is clear, the theory depends on assump-
tions of facts that usually cannot be established and thus that are rarely
Nevertheless, to critics of Illinois Brick it seemed anomalous that
direct purchasers who had passed on most of the overcharge could recover
treble damages for all of it, while consumers, to whom at least a share of
the overcharge was passed on, could recover nothing. This anomaly was
sufficiently disturbing to cause a political backlash. Many states, under
the banner of compensating consumers, have enacted so-called Illinois
Brick repealer statutes that allow indirect purchasers to sue in state
courts for passed-on overcharges.14 Other states’ courts have interpreted
Consumer Welfare” (2001) 69 Geo. Wash. L. Rev. 367 at 373–76.
9 See, for example, Leider v. Ralfe, [2003] WL 22339305 (S.D.N.Y.), denying fed-
eral antitrust standing to consumers as indirect purchasers of diamonds.
10 Reiter v. Sonotone Corp., 442 U.S. 330 (1979) at 340.
11 U.S.C. 15 §§ 41–51 (1914).
12 Alfred Dunhill, Ltd. v. Interstate Cigar Co., Inc., 499 F.2d 232 (2d Cir. 1974) at
237, holding that “the Federal Trade Commission Act may be enforced only by
the Federal Trade Commission” [citations omitted] and not by competitors or
13 Illinois Brick, above note 2 at 734.
14 See, for example, Edward D. Cavanagh, “Illinois Brick: A Look Back and a Look

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT