Class Certification in the Microsoft Indirect Purchaser Litigation

Abstract

The government's monopolization case against Microsoft has spawned a myriad of private lawsuits seeking treble damages. This study examines an important subset of those lawsuits, 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 Manufacturers (OEMs) like Compaq, Gateway, and Dell. Although the Illinois Brick rule denies indirect purchasers the right to sue under the federal antitrust laws, many states have authorized these suits under state antitrust or consumer protection law. Before the Microsoft cases, however, courts in the Illinois Brick repealer states had refused, more often than not, to certify indirect purchaser suits as class actions on the grounds that issues specific to the individual plaintiffs, particularly the issue of impact, predominated over the issues common to the class. In these courts' skeptical view, the complexities of proving whether and 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 opinions in these cases, three (two in Michigan and one in Maine) denied certification, while eleven granted it. This rate of certification is significantly higher than the rate in other indirect purchaser cases during the same period. In this study, I explore possible explanations for this disparity in the rate of certification, including the application of lenient standards of certification; the existence of favorable factual characteristics in the cases; and the preclusive effect of the government case. In the conclusion, I consider whether the certification of these cases has been in the public interest.