Class Action Is Rejected in Microsoft Lawsuit

Microsoft Corp. won a major victory Monday against individual consumers suing the software giant on antitrust grounds when a federal judge refused to consolidate their cases into a massive class-action proceeding.

U.S. District Judge Frederick Motz in Baltimore ruled that people who bought Windows operating systems directly from Microsoft shouldn’t be allowed to represent big business customers who purchased many more copies of the company’s flagship software and haven’t sued.

The decision leaves fewer than 30,000 plaintiffs with cases in federal court. They could recover a total of less than $10 million for alleged overcharges.

“A plaintiff class of individual consumers should not be expanded to include business customers who, through their own inactions, have evidenced a disinterest in their potential claims,” Motz wrote.

Shares in Microsoft, the second-largest U.S. company in terms of stock market value, rose 55 cents Monday to $24.75 in Nasdaq trading.

“It’s very good news” for Microsoft, said Don Gher, chief investment officer at Coldstream Capital Management, which owns Microsoft shares. “It solves a little more of the legal battle” against “people jumping on the bandwagon looking for where the money is.”

In earlier rulings, Motz rejected antitrust claims by millions of potential claimants: people who bought Microsoft software from computer manufacturers and live in states where customers are barred from filing antitrust cases against firms further up the distribution chain.

In California, which allows such indirect claims, a class-action suit has been tentatively settled for $1.1 billion in vouchers from Microsoft toward additional software.

The federal plaintiffs bought 26,000 copies of Windows through Microsoft’s Web site. The combined dollar value of the site’s sales of Windows and the Office suite of programs during the period cited in the lawsuits was less than $10 million. Motz said any overcharges of Windows software would “only be a fraction of that.”

Eugene Crew, a lead attorney for the California plaintiffs, speculated that the lawyers for the federal plaintiffs might drop the cases now because they would be worth only several million dollars at best. “I would think that they’re at the end of their rope,” he said.

Attorneys for the plaintiffs had no comment.

In the cases, customers contend that Microsoft was able to charge more than it should have because it had a monopoly on operating systems for personal computers and acted illegally to protect that monopoly. The antitrust violations have been verified by a U.S. appeals court, but the plaintiffs in Baltimore have to show they were overcharged.

In his ruling, Motz criticized the plaintiffs’ lawyers. The judge noted that they repeatedly shifted gears to try to get the largest possible class.

For instance, one lawyer signed up his sister-in-law as a plaintiff; she had purchased Office software from Microsoft and could have led a group that bought that program, not Windows. But Motz dismissed her as representative of that group, concluding that her role presented a conflict of interest for her brother-in-law. That decision eliminated 20,000 Office buyers from the class action.

“Plaintiffs’ various tactical maneuvers ... reflect that they view this litigation as a chess game in which the lawyers, not their clients, are the players,” Motz wrote.

Microsoft spokeswoman Stacy Drake called the ruling “a significant step in resolving a number of the legal issues facing the company.”

But Microsoft’s legal troubles are far from over. Still unresolved are suits by Microsoft competitors, including Sun Microsystems Inc. and AOL Time Warner Inc.; an antitrust probe by the European Union; and an appeal by Massachusetts and West Virginia of a court-approved settlement of the federal government’s monopoly claims against Microsoft.

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Bloomberg News was used in compiling this report.