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Microsoft Antitrust Litigation

Montgomery Partners v. Microsoft (Cal. Super. Ct., San Francisco Cty.). Zelle Hofmann is the Court-appointed Liaison Counsel and Chair of the Plaintiffs' Executive Committee in this indirect purchaser class action on behalf of an estimated thirteen million California consumers. The Class alleges that Microsoft illegally acquired and maintained monopolies in the markets for Microsoft's MS-DOS and Windows operating system software, as well as its Word and Excel applications software, in violation of California's Cartwright Act and Unfair Competition Act. The plaintiffs allege that, as a result of Microsoft's illegal conduct, they were overcharged for this software, and were denied the benefits of free and fair competition on the merits, such as lower prices, greater choice and superior products. Zelle Hofmann attorneys played an instrumental role in the case, which resulted in a $1.1 billion settlement.

The settlement is believed to be the largest settlement ever reached under the antitrust or unfair competition laws of California. It benefits consumers and businesses who purchased Microsoft operating system, productivity suite, spreadsheet or word processing software between February 18, 1995, and December 15, 2001, for use in the State of California. The $1.1 billion settlement represents 28.4% of all of the money paid by California consumers and businesses for Microsoft products during the class period. The settlement proceeds will be distributed to class members in the form of vouchers that may be used to buy any manufacturer's desktop, laptop and tablet computers, any software used with those computer products and specified peripheral devices for use with computers. Two-thirds of any unclaimed proceeds will be donated to California's most needy public schools in the form of vouchers for the purchase of computer equipment, professional development services and non-Microsoft software, as well as Microsoft educational and productivity software. "Coming at a time when California is in the middle of a significant budget crisis, these funds and software will help to ensure that California's schoolchildren get technology they can use," said Jack O'Connell, State Superintendent of Public Instruction. O'Connell continued, "This settlement is an innovative way to help our most needy schools shrink the 'digital divide' and will help deliver on my department's commitment to getting technology infrastructure into our schools to enhance the learning process."

Gordon v. Microsoft  (Minnesota) Zelle Hofmann served as Plaintiffs' co-lead counsel in this indirect purchaser antitrust class action brought on behalf of Minnesota consumers. The Minnesota Plaintiffs alleged that Microsoft had illegally monopolized and engaged in unreasonable restraints of trade in markets for operating system and productivity applications software, in violation of Minnesota's antitrust laws. As a result of Microsoft's illegal conduct, Minnesota consumers were overcharged for various Microsoft software packages, including MS-DOS, Windows, Word, Excel and Office.

Zelle Hofmann attorneys were instrumental in obtaining a $182 million settlement from Microsoft after seven weeks of trial. Under the settlement, which was approved by Hennepin County Judge Bruce A. Peterson on October 22, 2004, Microsoft agreed to provide Minnesota consumers up to $174.5 million in vouchers that may be used to purchase new desktop computers, laptop, tablet PCs, various peripheral devices, and software from any manufacturer (not just Microsoft). The per license amounts obtained in Minnesota greatly exceed all other settlements to date, with the exception of the California settlement. One-half of unclaimed vouchers and 100 percent of claimed but unredeemed vouchers will be distributed to Minnesota's public schools, in a program to be administered by the Minnesota Department of Education.

Under the settlement, Minnesota co-lead counsel obtained $2.5 million in cash for Minnesota's Legal Aid Society. Moreover, they obtained $2.5 million in cash and $2.5 million in general purpose technology vouchers to assist the University of Minnesota's Institute of Technology. The Minnesota settlement is the only one to date to require Microsoft to make cash payments of any sort.

Minnesota co-lead counsel overcame numerous hurdles in reaching this favorable outcome for Minnesota consumers. They obtained certification for the first time of an indirect purchaser class in a lawsuit brought under the Minnesota Antitrust Law. They also were the first (and so far only) consumer class action against Microsoft to go to trial. Microsoft agreed to the settlement terms only after seven weeks of trial.

To view various press releases regarding this case, please visit the links below:

Comes v. Microsoft (Iowa) Zelle Hofmann served as Plaintiffs’ co-lead counsel in this indirect purchaser antitrust class action against Microsoft brought on behalf of Iowa consumers and businesses.  In February 2007, after seven years of litigation – including three trips to the Iowa Supreme Court and three months of trial – the parties reached a settlement under which Microsoft will provide up to $179.95 million in cash and vouchers to members of the Iowa class.  Unique among all the indirect purchaser settlements with Microsoft to date, the Iowa settlement includes a substantial cash component and many class members are eligible to receive a cash payment.  Class members who are volume licensees and/or Iowa state and local governmental entities and who will likely have substantial claims will be compensated in vouchers , allowing them to purchase hardware and software for their business needs.  The vouchers do not have to be redeemed for Microsoft products. The settlement’s value, on a per license basis, is the highest in any of the other Microsoft consumer class actions.  Moreover, the settlement has, by far, the highest per capita payout of any other Microsoft class action settlement.

Comes v. Microsoft Corp. was filed on February 18, 2000.  Plaintiffs alleged that Microsoft unlawfully monopolized the markets for Intel-compatible PC operating system software, word processing software, and spreadsheet software in violation of the Iowa Competition Law.  Plaintiffs further alleged that, as a result of Microsoft’s illegal monopolies, indirect purchasers of Microsoft’s desktop operating systems (MS-DOS and Windows) and applications software (Word, Excel, and Office) paid higher prices for that software than they would have paid in markets unaffected by Microsoft’s exclusionary conduct. 

Microsoft filed a motion to dismiss Plaintiffs’ action arguing that indirect purchasers do not have standing under the Iowa Competition Law.  After the trial court dismissed the action, on the basis that indirect purchasers did not have standing under the Iowa Competition Law, Plaintiffs appealed to the Iowa Supreme Court.  The Iowa Supreme Court reversed the trial court’s decision and affirmed the right of all Iowa consumers – including indirect purchasers – who are harmed by illegal, anticompetitive conduct, to bring an action under the Iowa Competition Law.  See Comes v. Microsoft Corp., 646 N.W.2d 440 (Iowa 2002). 

The trial court subsequently certified two Iowa software classes: an operating systems class and an applications class.  Microsoft unsuccessfully challenged the trial court’s certification order, which the Iowa Supreme Court affirmed on appeal.  See Comes v. Microsoft Corp., 696 N.W.2d 318 (Iowa 2005). 

When Plaintiffs obtained a ruling that precluded Microsoft from re-litigating various legal and factual issues that had been decided in the government action, United States v. Microsoft Corp., Microsoft appealed that decision.  After the Iowa Supreme Court remanded with instructions regarding the standard to be applied, see Comes v. Microsoft Corp., 709 N.W.2d 114 (Iowa 2006), Plaintiffs renewed their motion and obtained a ruling that precluded Microsoft from disputing over 140 factual findings made in the government action, or from challenging the determination that certain conduct violated the antitrust laws.  Microsoft again sought to appeal that decision to the Iowa Supreme Court, but Microsoft’s request was denied.

Plaintiffs engaged in extensive pre-trial preparation, including propounding 286 discovery requests on Microsoft and bringing ten motions to compel discovery.  As a result of these efforts, Microsoft produced more than 25 million pages of documents. 

Plaintiffs retained twelve experts for trial on issues such as software code, the economics of the software industry, injury to competition, causation, and damages.  Plaintiffs also retained experts and obtained evidence   supporting injury resulting from increased security vulnerabilities caused by Microsoft’s alleged anticompetitive conduct.  Zelle Hofmann attorneys worked closely with these experts.

Microsoft filed eight motions for partial summary judgment on various theories of liability and damages.  The court denied all but one of Microsoft’s dispositive motions. Zelle Hofmann attorneys took the lead in briefing and arguing the majority of these and other motions.

Trial began on November 13, 2006.  A twelve-member jury was empanelled on November 30, 2006.  Opening statements lasted more than two weeks.  The trial court admitted more than 3,300 of Plaintiffs’ trial exhibits as evidence against Microsoft.  Plaintiffs also presented live testimony from four witnesses, and prior deposition and/or trial testimony from fourteen additional witnesses.  A settlement was reached only after three months of trial.  The settlement received final approval in August 2007.

Fifty percent of any unclaimed funds from the $179.95 million settlement will be provided to needy Iowa public schools in the form of vouchers.  In addition, 100 percent of any claimed but unredeemed vouchers will be given to Iowa public schools.  These vouchers may be redeemed for hardware and software technology which these schools may use to help close the digital divide in Iowa.  Microsoft also agreed to pay $1 million to the Iowa Legal Aid Society for its charter purposes. 

Bettendorf v. Microsoft (Wisconsin)  Zelle Hofmann served as co-lead settlement class counsel in this indirect purchaser antitrust class action against Microsoft brought on behalf of Wisconsin consumers, businesses and local governments.

In 2003, the Bettendorf Plaintiffs filed suit on behalf of two broad Wisconsin classes that included indirect purchasers of Microsoft operating systems and office productivity applications software.  The classes included both private and public indirect purchasers.  The Bettendorf Plaintiffs alleged that Microsoft had monopolized the markets for Intel-compatible PC operating system software, word processing software, and spreadsheet software, in violation of the Wisconsin Antitrust Law.

On March 16, 2006, counsel for plaintiffs in two other actions informed the Bettendorf Plaintiffs’ that a settlement had been reached with Microsoft on behalf of all Wisconsin indirect purchasers.  Attorneys from Zelle Hofmann and their economists reviewed the terms of the proposed settlement and determined that the deal, with a “face value” of $204.5 million, would deliver, at best, no more than $45 million to the Wisconsin class.  After conferring with their clients, the Bettendorf Plaintiffs and their counsel decided to oppose the proposed settlement. 

Zelle Hofmann attorneys subsequently exposed the shortcomings of the March 2006 settlement in extensive briefing – put together in very short order – and oral argument.  On May 5, 2006, the court agreed with the Bettendorf Plaintiffs and denied the joint motion of the Spence/Capp Plaintiffs and Microsoft to grant preliminary approval to the terms of their proposed settlement, which the court observed was “not adequate, nor within the ballpark of settlement values that a court could reasonably find adequate even at this preliminary stage.” 

A new settlement was negotiated in September 2006 that was vastly superior to the previously rejected settlement proposal.  It is virtually identical, in fact, to the favorable settlement negotiated with Microsoft in Minnesota, where Zelle Hofmann was co-lead counsel in the first indirect purchaser action against Microsoft to go to trial. 

Under the terms of the September 2006 settlement, which received final approval in March 2007, Microsoft will provide the Wisconsin class with up to $223.896 million in consumer vouchers that may be used to obtain reimbursement for a wide variety of computer hardware or software items.  The consumer vouchers do not have to be redeemed for Microsoft products.  Class members will receive vouchers worth $15 for each license of a qualifying Microsoft operating system, $23 for each license of Microsoft Office or Excel, and $10 for each license of Microsoft Word, Works Suite, or Home Essentials. 

The inadequate March 2006 settlement proposal did not include any cy pres component to deal with unclaimed or unredeemed funds.  The September 2006 settlement, in contrast, provides that needy Wisconsin schools will receive fifty percent of any unclaimed funds, and 100 percent of any claimed but unredeemed vouchers.  Wisconsin’s public schools – like their counterparts in Minnesota – will receive tens of millions of dollars as a result.

Microsoft Antitrust Litigation, California Government Entities (U.S. District Court, D. Md.)  Zelle Hofmann was Co-Counsel for a class of California government entities, including the City of San Francisco and Los Angeles, Santa Clara, Contra Costa, and San Mateo counties as plaintiffs and class representatives, against Microsoft for unlawful monopolization of operating system, word processing, and spreadsheet software markets.  The parties reached a settlement for $70 million.

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