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Class-action lawsuits get boost from ruling

Logo - USA TodayJune 7, 2000 | USA Today

By Edward Iwata

PALO ALTO, Calif. – The legal barrage fired Monday against Microsoft by U.S. District Judge Thomas Penfield Jackson should give strong momentum to the 120-plus class-action lawsuits filed nationwide against the software goliath, legal experts say.

The lawsuits, on behalf of millions of consumers in dozens of states and legal jurisdictions, accuse a monopolistic Microsoft of snuffing competition and overcharging computer buyers for software.

“We’re very encouraged by the judge’s ruling, which should be very helpful in our cases,” says Terry Gross, a class-action attorney at Gross & Belsky in San Francisco.

Some of the top class-action and antitrust law firms in the land – from Townsend, Townsend & Crew in San Francisco to famed class-action attorney Bill Lerach of Milberg, Weiss in San Diego – are suing Microsoft.

The most important development for the class-action lawsuits: The judge’s finding that Microsoft is an illegal monopoly will be allowed as powerful and potentially damaging evidence in the consumer cases. Under the legal concept of collateral estoppel, once a court has rendered a judgment against a party, the party is bound by those conclusions.

“Under antitrust laws, the plaintiffs won’t have to reinvent the wheel and establish that Microsoft abused its monopoly position,” says Andrew Gavil, a law professor at Howard University. “It’s a good place to be in if you’re a plaintiff.”

Microsoft’s lawyers disagree, arguing that the ruling won’t be final until the appeals process is exhausted, says Microsoft spokesman Jim Cullinan.

The next big hurdle for the class-action lawsuits: Lawyers and their expert witnesses – economists and industry experts – must prove that Microsoft’s predatory pricing of its software hurt consumers.

According to the judge’s initial findings in November, Microsoft’s Windows 98 operating system sold for $89, even though the company’s own studies showed the product should have been priced at $49.

If damages in the civil cases are assessed by units sold, Microsoft may face a huge payment years from now, attorneys estimate.

“If 300 million copies were sold just in the United States, you’re looking at an extremely large sum of money to recover – possibly in the billions of dollars,” says Michael Hausfeld, a class-action attorney at Cohen Milstein Hausfeld & Toll in Washington.

Microsoft’s Cullinan contends that the firm peddled its software to consumers and computer makers at “high volume, low cost and low prices.” Consumers weren’t harmed but benefited from better technology and innovation on the market, he says.

Besides, Cullinan says, several competing software systems from Apple Computer, IBM and others cost $10 to $60 more than similar Microsoft products.

The class actions are under review by the federal Multi-District Litigation Panel, which will decide whether to consolidate the state and federal cases. “The only contention they have is that we overcharged consumers, and there is so much contrary evidence to that,” Cullinan says. “We feel very good about our case.”

One lingering issue to be decided by the panel: Can the plaintiffs in the federal class actions sue Microsoft under federal antitrust law, which bans suits involving consumers who indirectly purchase products from an illegal monopoly.

Microsoft has argued that its pricing did not hurt consumers, because much of Microsoft’s software came with computers sold by IBM, Dell Computer, Compaq Computer and others.

Gavil at Howard University says the lawsuits probably will be merged into one gigantic case, to streamline the pretrial proceedings and discovery process for all parties.

“Can you imagine if the plaintiffs in all 120 cases decided to depose Bill Gates? It would be a logistical nightmare for everyone.”

Attorneys estimate that the lawsuits will go to trial, if ever, in a year or two. Much hinges on the status of the Justice Department’s case as it winds its way through appeals court as anticipated.