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State of New York v. Microsoft Corp.

June 12, 2002


The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge


Presently pending before the Court is a motion by Defendant Microsoft Corporation ("Microsoft") seeking "dismissal of the Non-Settling States' demand for equitable relief." See Microsoft Mot. at 1. Microsoft filed its motion and memorandum in support thereof following the remand of the above-captioned case from the Court of Appeals for the District of Columbia Circuit and immediately prior to the commencement of evidentiary proceedings on the issue of remedy for Microsoft's violations of Section 2 of the Sherman Act. The Litigating States *fn1 oppose Microsoft's motion on multiple grounds. Upon review of Defendant's motion, Plaintiffs' opposition, Defendant's reply, the brief of the United States as amicus curiae, the brief of the State of New York as amicus curiae, and the brief of twenty-four other states *fn2 as amici curiae, the Court concludes that Defendant's motion shall be denied.


On May 18, 1998, the United States and a group of state plaintiffs filed separate civil complaints alleging antitrust violations by Microsoft and seeking preliminary and permanent injunctions barring the company's allegedly unlawful conduct. See United States v. Microsoft Corp., 253 F.3d 34, 47 (D.C. Cir. 2001). In United States v. Microsoft Corp., No. 98-1232 (D.D.C.), the federal government brought claims pursuant to federal law, while in State of New York, et al. v. Microsoft Corp., No. 98-1233 (D.D.C.), the Plaintiff States brought claims pursuant to both federal and state law. These two cases were consolidated, and following a bench trial in the consolidated cases, Judge Thomas Penfield Jackson concluded that Microsoft had violated Sections 1 and 2 of the Sherman Act. See generally United States v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000). Correspondingly, Judge Jackson held Microsoft liable for violations of the state antitrust laws analogous to Sections 1 and 2 of the Sherman Act in each of the nineteen Plaintiff States and the District of Columbia. *fn4 Id. at 54. Microsoft filed an appeal in both cases. On appeal, the D.C. Circuit deferred to Judge Jackson's factual findings, altered his findings of liability-affirming in part and reversing in part, and vacated the remedy decree. See generally Microsoft, 253 F.3d 34.

The Court of Appeals remanded the cases to the District Court with instructions to hold a "remedies-specific evidentiary hearing," id. at 103, and to "fashion an appropriate remedy" in light of the revised liability findings, id. at 105. Following remand, pursuant to Court order, the parties in the two consolidated cases entered into intensive settlement negotiations. See United States v. Microsoft Corp., Nos. 98-1232 and 98-1233 (D.D.C. Sept. 28, 2001) (order requiring the parties to enter into settlement negotiations). The settlement negotiations did not resolve both cases in their entirety. However, the United States and Microsoft were able to reach a resolution in United States v. Microsoft Corp. in the form of a proposed consent decree. The settlement negotiations were partially successful with regard to the states' case, State of New York, et. al. v. Microsoft Corp.; a portion of the Plaintiff States joined in the settlement between the United States and Microsoft. Consequently, these states have elected not to proceed to a remedies-specific hearing in State of New York, et al. v. Microsoft Corp. Those states which opted not to join the settlement between the United States and Microsoft-the Litigating States-have proposed a remedy distinct from that presented in the proposed consent decree. Microsoft's motion addresses only the continuing request for injunctive relief by these Litigating States.


Ordinarily, the Court would commence its discussion of a dispositive motion, such as a motion to dismiss, with a succinct statement of the legal standard applicable to the pending motion. In this instance, the parties have provided little guidance on the threshold question of the appropriate legal standard. Despite labeling its motion as a "motion to dismiss," Microsoft does not identify any basis in the Federal Rules of Civil Procedure which permits the filing of a post-liability "motion to dismiss." Upon examination by the Court, the authorization for Defendant's motion is not immediately apparent in the Federal Rules. Still, the Court will endeavor to identify the proper basis for Defendant's motion, and hence, the applicable legal standard, before proceeding to the merits of the arguments contained therein.

Taking the title of Microsoft's motion as a starting point, the Court turns to Rule 12 of the Federal Rules of Civil Procedure which, by its own title, concerns "Defenses and Objections-When and How Presented-By Pleading or Motion-Motion for Judgment on Pleadings." Fed. R. Civ. P. 12. Motions to dismiss brought pursuant to Rule 12(b) of the Federal Rules of Civil Procedure must be "made before pleading if a further pleading is permitted." Fed. R. Civ. P. 12(b). Rule 12(b) further specifies that where "a pleading sets forth a claim for relief to which the adverse party is not required to serve a responsive pleading, the adverse party may assert at the trial any defense in law or fact to that claim for relief." Id. Clearly the parties are well past the pleading stage and indeed, are past a trial on the merits of Plaintiffs' claims. Thus, at a minimum, Microsoft's "motion to dismiss" does not appear to fit the ordinary parameters of a motion pursuant to subsection (b) of Rule 12. *fn5

Arguments presented by Microsoft in its reply memorandum give the impression that Microsoft has based its request for dismissal upon an asserted lack of subject matter jurisdiction. See generally Microsoft Reply. Given this position, Microsoft's motion could be considered in accordance with Rule 12(h)(3) of the Federal Rules of Civil Procedure, which authorizes challenges to subject matter jurisdiction at any point in the proceedings. Fed. R. Civ. P. 12(h)(3) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action."). Accordingly, the Court will treat any of Microsoft's arguments which can be characterized as concerning subject matter jurisdiction as having been raised pursuant to Rule 12(h)(3). *fn6

This conclusion, however, does not provide an appropriate standard for many of Microsoft's arguments which cannot be couched in terms of jurisdiction and instead appear to raise issues relating to judgment on the merits. Bell v. Hood, 327 U.S. 678, 682 (1946 ("Jurisdiction . . . is not defeated . . . by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover. For it is well settled that the failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction."). *fn7 In this regard, Microsoft's motion reads largely as an attack on the liability findings of the Court of Appeals in this case. To the extent that Microsoft's motion challenges the substantive merits of Plaintiffs' case, for lack of a better standard, the Court will treat the motion as a motion for partial summary judgment. *fn8


Plaintiffs' action arises, in part, under Section 16 of the Clayton Act, which provides that "[a]ny person, firm, corporation, or association shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws . . . ." 15 U.S.C. § 26. In addition to the Clayton Act, Plaintiffs' request for equitable relief rests upon the finding by the District Court, as affirmed by the Court of Appeals, that Defendant violated the various state statutes analogous to the federal antitrust statutes. Plaintiffs in this case seek equitable relief in their capacity as parens patriae "to prevent or repair harm to [their] quasisovereign interests," Hawaii v. Standard Oil Co., 405 U.S. 251, 258 (1972) (internal quotations omitted), resulting from federal and state antitrust violations already found in this case by the District Court and affirmed by the Court of Appeals. See generally Microsoft, 253 F.3d 34; Microsoft, 87 F. Supp. 2d 30.

Microsoft's "motion to dismiss" attacks Plaintiffs' right to seek equitable relief on numerous fronts. Microsoft couches its primary arguments in terms of "standing" and, in doing so, merges and mingles a number of distinct doctrines. Microsoft primarily relies upon the doctrines of "antitrust standing," "antitrust injury," and "parens patriae standing." In the discussion to follow, the Court will address each of these arguments, as well as Microsoft's secondary arguments.

A. Antitrust Standing and Injury

One of Microsoft's central, though vaguely articulated, *fn9 arguments for dismissal relies upon the complementary doctrines of antitrust standing and antitrust injury. In short, Microsoft argues that Plaintiffs have not satisfied "all of the requirements of Section 16 . . . including proof of antitrust injury and a causal connection between the injury and the actions found to be anticompetitive." Microsoft Reply at 12; accord Microsoft Mem. at 22.

The label "antitrust standing" has traditionally been applied to a court's evaluation of the relationship between the antitrust plaintiff's harm and the alleged wrongdoing by the defendant. See Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 535 & n.31 (1983). Thus, antitrust standing has been characterized as a way to capture the requirement that the plaintiff demonstrate a "direct link between the antitrust violation and the antitrust injury." Greater Rockford Energy and Tech. Corp. v. Shell Oil Co., 998 F.2d 391, 395 (7th Cir. 1993). The doctrine of antitrust standing reflects the Supreme Court's attempt to articulate a test for recovery of treble damages pursuant to Section 4 of the Clayton Act that will not "encompass every conceivable harm that can be traced to alleged wrongdoing." Associated Gen. Contractors, 459 U.S. at 536. Notwithstanding this attempt, there exists no "black-letter rule that will dictate the result in every case." Id. Instead, where injury has been established, the decision as to whether the law affords a remedy is to be based upon a variety of factors, and ultimately upon the specific circumstances of the case. Id. at 536- 37.

Distinct from the antitrust standing requirement is the earlier-articulated requirement of antitrust injury. The requirement of antitrust injury arises out of the Supreme Court's announcement in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977), that plaintiffs seeking "to recover treble damages [pursuant to § 4 of the Clayton Act] on account of § 7 [Clayton Act] violations, . . . must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." 429 U.S. at 489. The Brunswick Court explained further that "[t]he injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation." Id. In other words, the antitrust injury requirement specifies that a "plaintiff's injury be caused by the anticompetitive aspect of the defendant's illegal conduct." William H. Page, The Scope of Liability for Antitrust Violations, 37 Stan. L. Rev. 1445, 1447 (1985) (cited with approval for "distinguishing concepts of antitrust injury and antitrust standing" in Cargill Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 110 n.5 (1986)).

Although the Brunswick Court's enunciation of the requirement of "antitrust injury" concerned Section 4 of the Clayton Act, the antitrust injury requirement did not remain confined to Section 4 claims. Under Section 4 of the Clayton Act, "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" may sue for treble damages, 15 U.S.C. § 15, while Section 16 of the Clayton Act entitles "[a]ny person, firm, corporation, or association . . . to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws." 15 U.S.C. § 26. Despite the differences between "actual" and "threatened" injury, the Supreme Court's opinion in Cargill extended the doctrine of "antitrust injury" beyond suits for damages under Section 4 to suits for injunctive relief pursuant to Section 16. Cargill, 479 U.S. at 110-113. In doing so, the Court concluded that "actual" and "threatened" injury were part of a "single set of injuries" for which Section 4 and Section 16 provided "complementary remedies." Id. at 113. However, the Cargill Court expressly noted that the antitrust standing inquiry would not translate identically to a Section 16 suit, as some of the factors which apply to an antitrust standing inquiry in a Section 4 case, such as "the potential for duplicative recovery, the complexity of apportioning damages, and the existence of other parties that have been more directly harmed," are typically inapposite to Section 16 cases. Cargill, 479 U.S. at 111 n.6. This difference results from the fact that a broad potential for recovery is not as troublesome where the only remedies available are equitable. Id. ("[A]s we recognized in Hawaii v. Standard Oil Co., 'the fact is that one injunction is as effective as 100, and concomitantly, that 100 injunctions are no more effective than one.' 405 U.S. at 261.").

As the separate doctrines of antitrust standing and antitrust injury exist, in part, to "set economically rational limits . . . on the frequency of antitrust litigation," Page, 37 Stan L. Rev. at 1446, the doctrines are "commonly applied at an early stage of litigation, in either a motion to dismiss or for summary judgment," id. at 1447-48. Given that both doctrines serve to establish the proper scope of antitrust liability, id. at 1447, logic dictates that where liability has been found, and affirmed at the appellate level, both the District Court and the Court of Appeals have necessarily concluded that the requirements of antitrust standing and antitrust injury have been satisfied. In this case, the Court of Appeals' findings of antitrust standing and injury are implicit, if not express, in its order that the District Court "on remand . . . after affording the parties a proper opportunity to be heard, can fashion an appropriate remedy for Microsoft's antitrust violations." Microsoft, 253 F.3d at 105; see also Microsoft, 253 F.3d at 103 ("We therefore vacate the District Court's final judgment, and remand with instructions to conduct a remedies- specific evidentiary hearing."). The Court, therefore, must consider the effect of the implicit and explicit findings by the Court of Appeals.

1. Law-of-the-Case Doctrine and the Mandate Rule

Where issues have been resolved at a prior stage in the litigation, based upon principles of judicial economy, courts generally decline to revisit these issues. More than a mere rule-of- thumb, the "'law-of-the-case doctrine' refers to a family of rules embodying the general concept that a court involved in later phases of a lawsuit should not reopen questions decided (i.e., established as the law of the case) by that court or a higher one in earlier phases." Crocker v. Piedmont Aviation, Inc., 49 F.3d 735, 739 (D.C. Cir. 1995). The doctrine bars reconsideration of a court's explicit decisions, as well as those issues decided by necessary implication. Id.; LaShawn A. v. Barry, 87 F.3d 1389, 1394 (D.C. Cir. 1996) (en banc) ("The law-of-the-case doctrine, the Supreme Court said, turns 'on whether a court previously decide[d] upon a rule of law . . . not whether, or how well, it explained the decision.'") (quoting Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 817 (1988)) (alteration in Christianson).

Similar to the law-of-the-case doctrine is the "mandate rule," a "'more powerful version' of the law-of-the-case doctrine, which prevents courts from reconsidering issues that have already been decided in the same case." Independent Petroleum Ass'n of America v. Babbitt, 235 F.3d 588, 597 (D.C. Cir. 2001) ("IPAA II") (quoting LaShawn, 87 F.3d at 1393 n.3 ("[A]n even more powerful version of the [law-of-the-case] doctrine--sometimes called the 'mandate rule'-- requires a lower court to honor the decisions of a superior court in the same judicial system.")). "Under the mandate rule, 'an inferior court has no power ...

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