Class certification in the microsoft indirect purchaser litigation
| Author | William H. Page |
| Profession | Marshall M. Criser Eminent Scholar, University of Florida Levin College of Law |
| Pages | 165-207 |
CLASS
CERTIFICATION
IN THE
MICROSOFT INDIRECT PURCHASER
LITIGATION
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:
page@law.ufl.edu.
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.
(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
LJ. 1.
165
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
6-
M
Supply
Co. v.
Microsoft
Corp.,
654
N.W.Zd
572
(Mich.
Ct.
App. 2002)
[A6»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)
[Melnicfe].
6 See
Bellinder
v.
Microsoft
Corp.,
[2001]
WL
1397995 (Kan. Dist.
Ct.
Johnson
County)
[Bellinder];
Capp
v.
Microsoft
Corporation,
No.
OO-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.
MCOO-5994
(Minn. Dist.
Ct.
Hennepin County
15
December 2003) (refusing
to
decertify);
Howe
v.
Microsoft
Corp.,
(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,
(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,
Seacoost
Motors
of
Salisbury,
Inc.
v.
DaimlerChrysler
Motors
Corp.,
271 F3d 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
166
LITIGATING
CONSPIRACY:
AN
ANALYSIS
OF
COMPETITION
CLASS
ACTIONS
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
met.
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
Rater
v.
Sonotone
Corp.,
(1979)
at
340.
11
U.S.C.
15 §§
41-51 (1914).
12
Alfred
Dunhill,
Ltd.
v.
Interstate
Cigar
Co., Inc.,
499 E2d 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
consumers.
13
Illinois
Brick,
above note
2 at
734.
14
See,
for
example, Edward
D.
Cavanagh,
"Illinois
Brick:
A
Look
Back
and a
Look
CERTIFICATION
IN
MICROSOFT
INDIRECT
PURCHASER
LITIGATION
167
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