O'Connell v. Microsoft Corp.

13 Mass. L. Rptr. 435
CourtMassachusetts Superior Court
DecidedJune 14, 2001
DocketNo. CA0001743
StatusPublished

This text of 13 Mass. L. Rptr. 435 (O'Connell v. Microsoft Corp.) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
O'Connell v. Microsoft Corp., 13 Mass. L. Rptr. 435 (Mass. Ct. App. 2001).

Opinion

Fabricant, J.

The plaintiffs in these two consolidated actions, Virginia M. O’Connell and Michael Germano, each allege that the defendant, Microsoft Corporation, engaged in anti-competitive conduct in connection with the marketing of its Windows 98 computer operating system. Both plaintiffs assert claims under the Massachusetts Consumer Protection Act, G.L.c. 93A, §9; O’Connell also asserts a claim under the Massachusetts Antitrust Act, G.L.c. 93, iS.1 Presently before the Court are Microsoft’s motions to dismiss all counts of both complaints pursuant to Mass.R.Civ.P. 12(b)(6). For reasons that will be explained, the defendant’s motion will be allowed as to O’Connell’s claim under G.L.c. 93, §5. As to both plaintiffs' claims under G.L.c. 93A, §9, the motions will be denied without prejudice to renewal upon the decision of the Supreme Judicial Court in Ciardi v. F. Hoffmann-LaRoche, Ltd., No. 99-3244 (Middlesex Super. Ct. Oct. 20, 2000), which presents the same question of law raised by the present motions.

BACKGROUND

O’Connell’s second amended complaint alleges, in substance, as follows. Microsoft “possess[es] monopoly power ... in the market for operating systems for Intel-based personal computers.” It has created and maintained that monopoly power by various anti-competitive techniques, as detailed in the complaint. In the exercise of its monopoly power, Microsoft has licensed its Windows 98 operating system for such computers “at a monopoly price in excess of what Microsoft would have been able to charge in a competitive market." Computer equipment manufacturers, as well as distributors of CD ROM upgrades, “have treated Microsoft’s monopoly price for Windows 98 as an element of their cost and have passed most, if not all, of Microsoft’s monopoly price on” to their customers.

Users of Windows 98, according to the complaint, are “compelled to accept and agree to an end user license directly from Microsoft, pursuant to the terms dictated by Microsoft,” and to agree “that Windows 98 [is] ‘licensed, not sold.’ ” Such users, the complaint alleges, “incur!] the monopoly price charged by Microsoft for their use of Windows 98,” and thereby suffer damage “in amounts equal to the difference between a competitive price and the monopoly price that they incurred as end user licensees for their use of Windows 98.” Through a series of licensing agreements, the complaint alleges, Microsoft has created “a functional economic unity between Microsoft and [equipment manufacturers] and distributors of upgrade CD ROMs, with respect to Windows 98, such that there is effectively only one transaction between [436]*436Microsoft and end user licensees of Windows 98, who are themselves in direct privity with Microsoft."

The complaint further alleges that in or about October 1999, O’Connell purchased an Intel-based personal computer on which the manufacturer had pre-installed Windows 98 as the operating system. She “is informed and believes . . . that at least $89.00 of the total purchase price of her computer was attributable to Windows 98. Upon activating her computer, and as a precondition to using Windows 98, plaintiff became an end user licensee of Microsoft as to Windows 98.” She registered her license by electronic mail, providing Microsoft with her electronic mail address and state of residence. She and others similarly situated suffered injury, she alleges, “by paying monopoly prices for Windows 98, ultimately to Microsoft." On this basis, she seeks compensatory damages on behalf of herself and class members “based on the difference between the monopoly prices they paid and the pricé that they would have paid in a competitive market.”

Apparently anticipating one of the issues raised in the present motion, the complaint alleges that “it will be easy for plaintiff and the Class to prove the extent to which the overcharge was passed on to them and, in that aspect of this action, they will not need to resort to economic theory in tracing the effect upon them of Microsoft’s monopoly pricing decisions. Such proof will be detailed and particular, involving principally Microsoft’s series of Windows 98 licensing agreements, culminating in the end user licenses between Microsoft and plaintiff and the class."

Plaintiff Germano’s complaint contains allegations regarding Microsoft’s conduct with respect to Windows that generally parallel the allegations of O’Connell’s complaint, adding additional details about Microsoft’s use of its monopoly power in marketing its web browser, Internet Explorer, as found by Judge Thomas Penfield Jackson in the federal government’s antitrust action against Microsoft. Unlike O’Connell, however, Germano alleges not that he became an end user licensee, but that he “purchased in Massachusetts, for his own use and not for resale, a Windows 95 PC operating system.” On this basis, Germano alleges that he and the members of the class he seeks to represent “were not able to purchase PC operating systems and/or web browsers at prices determined by free and open competition, and were injured in their business and property in that, inter alia, they paid more for Windows and/or the Internet Explorer2 than they would have paid in a free and open competitive market.” Germano alleges that, pursuant to G.L.c. 93A, §9(3), he and other class members “are entitled to recover double or treble the amount of their actual damages or twenty-five dollars, whichever is greater,” plus attorneys fees and costs.

DISCUSSION

1. Introduction.

Microsoft’s motions to dismiss both actions rest on the bar to claims for pass-through of overcharges established by the United States Supreme Court in the case of Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), and acknowledged by the Supreme Judicial Court in Commonwealth v. Mass. CRINC, 392 Mass. 79, 95, n. 14 (1984). Microsoft argues that the allegations of O’Connell’s complaint establish that she and her purported class are seeking to recover for overcharges passed through to them by direct purchasers of Windows, so that her antitrust claim is barred by the doctrine of Illinois Brick. Microsoft argues further that c. 93A, §9, if it creates a cause of action for anti-corn - petitive conduct at all, incorporates the same doctrine, so that both plaintiffs claims under that statute, based on the facts as alleged, are also barred. O’Connell responds that the end user licensing agreement gives rise to a direct contractual relationship between her and Microsoft, so that the Illinois Brick doctrine does not apply to her antitrust claim. She also invokes various claimed exceptions to that doctrine. Both plaintiffs also argue that c. 93A creates a separate cause of action for monopolistic conduct that harms consumers, without regard to the nature of the relationship between the consumer and the defehdant.

For purposes of a motion to dismiss pursuant to Mass.R.Civ.P. 12(b), the allegations of fact in the complaint must be treated as true, with all reasonable inferences drawn in favor of the plaintiffs. See General Motors Acceptance Corp. v. Abington Casualty Ins. Co., 413 Mass. 583, 584 (1992). Characterizations and conclusions of law, however, warrant no such consideration, and may be disregarded. See e.g. Cheney v. Automatic Sprinkler Corp., 377 Mass. 141, 149 ((1979); Boston & M.R.R. v. County Com’rs of Middlesex County, 239 Mass. 127, 131 (1921).

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13 Mass. L. Rptr. 435, Counsel Stack Legal Research, https://law.counselstack.com/opinion/oconnell-v-microsoft-corp-masssuperct-2001.