Berghausen v. Microsoft Corp.

• Decision Date: 13 March 2002
• Docket Number: No. 10A01-0106-CV-230.,10A01-0106-CV-230.
• Citation: 765 N.E.2d 592
• Parties: Jeffrey A. BERGHAUSEN, Appellant-Plaintiff, v. MICROSOFT CORPORATION, Appellee-Defendant.
• Court: Indiana Appellate Court

765 N.E.2d 592

Jeffrey A. BERGHAUSEN, Appellant-Plaintiff, v. MICROSOFT CORPORATION, Appellee-Defendant.

No. 10A01-0106-CV-230.

Court of Appeals of Indiana.

March 13, 2002.

Darrell M. Auxier, Jenner & Auxier Law Offices, Madison, IN, Stanley M. Chesley, Robert Heuck II, Waite Schneider Bayless & Chesley Co., LPA, W.B. Markovits, Markovits & Greiwe Co., LPA, Cincinnati, OH, for Appellant.

William C. Barnard, Gayle A. Reindl, Sommer & Barnard, P.C., Indianapolis, IN, for Appellee.

OPINION

MATTINGLY MAY, Judge.

Jeffrey Berghausen appeals the dismissal of his amended class action complaint against Microsoft Corporation. He raises four issues on appeal, which we consolidate and restate as:

1. Whether Berghausen, as an indirect purchaser, had standing to bring his antitrust claim against Microsoft;

2. Whether Berghausen's allegation of degradation of his computer's performance states a claim of an "antitrust injury"; and

3. Whether Berghausen stated a claim of unjust enrichment or violation of the Indiana Deceptive Consumer Sales Act.

We affirm.

FACTS AND PROCEDURAL HISTORY

Berghausen sued Microsoft, alleging he purchased a computer from the Micro Center computer store, which computer contained an inoperable copy of Windows 98 software provided by Microsoft. The complaint alleged Microsoft distributes Windows through computer manufacturers who are licensed by Microsoft to load copies of the operating system onto the computers they manufacture. After Berghausen bought the computer, he entered into an end-user licensing agreement that allowed him to use Windows on his computer. He alleged Microsoft monopolized the market for computer operating systems and as a result he paid a monopoly price for his copy of Windows. Berghausen also alleged Microsoft unlawfully bundled its internet browser with Windows, which bundling caused his computer to run more slowly.

Berghausen sought restitution and damages from Microsoft for its alleged monopolization in violation of Ind.Code § 24-1-2-2 ("the Indiana Act") and Ind.Code § 24-5-0.5-1 ("the Deceptive Sales Act"). Microsoft moved to dismiss for failure to state a claim on which relief could be granted, and the trial court granted the motion.

DISCUSSION AND DECISION¹

Standard of Review

A Rule 12(B)(6) motion to dismiss tests the legal sufficiency of the complaint. When reviewing a 12(B)(6) motion to dismiss, we view the pleadings in the light most favorable to the nonmoving party and we draw every reasonable inference in favor of that party. We will affirm a successful T.R. 12(B)(6) motion when a complaint states a set of facts that, even if true, would not support the relief requested in that complaint. Further, we will affirm the trial court's grant of a motion to dismiss if it is sustainable on any theory or basis found in the record. Right Reason Publications v. Silva, 691 N.E.2d 1347, 1349 (Ind.Ct.App.1998).

1. Application of the Indiana Act to Indirect Purchasers

Berghausen did not allege in his complaint that he purchased the Windows software directly from Microsoft. Rather, he alleged the software was installed on a computer he purchased and that before he could operate the computer he was required to enter into a licensing agreement with Microsoft. Because Berghausen was not a direct purchaser of the Microsoft product, we find he lacks standing to sue for damages under the Indiana Act and his complaint was therefore properly dismissed.

The Indiana Act was modeled after section two of the Sherman Antitrust Act, 15 U.S.C. 2, ("the Federal Act") and has been interpreted consistent with the federal law interpreting the Federal Act. Rumple v. Bloomington Hosp., 422 N.E.2d 1309, 1315 n. 1 (Ind.Ct.App.1981). The federal decisions addressing the question whether the Federal Act permits an action by an indirect purchaser of a product consistently hold that it does not. While Berghausen correctly notes there are no Indiana decisions that explicitly hold an indirect purchaser may not bring such an action, we believe the reasoning supporting the federal decisions is sound and we adopt it in interpreting the Indiana Act.

A person who monopolizes any part of the trade or commerce within this state commits a Class A misdemeanor. Ind. Code § 24-1-2-2. The Indiana Act goes on to provide a private right of action for such violations:

Any person who shall be injured in his business or property by any person or corporation by reason of the doing by any person or persons of anything forbidden or declared to be unlawful by this chapter may sue therefor in the circuit or superior court of any county in which the defendant or defendants, or any of them, reside or are found without respect to the amount in controversy, and shall recover a penalty of threefold the damages which may be sustained, together with the costs of suit, including a reasonable attorney's fee.

Ind.Code § 24-1-2-7.²

The United States Supreme Court has concluded that "the legislative purpose in creating a group of `private attorneys general' to enforce the antitrust laws under § 4 is better served by holding direct purchasers to be injured to the full extent of the overcharge paid by them than by attempting to apportion the overcharge among all that may have absorbed a part of it." Illinois Brick Co. v. Illinois, 431 U.S. 720, 748, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) (citation omitted).

In that case, a number of government entities that had purchased buildings from general contractors sued concrete block manufacturers, alleging the manufacturers had illegally fixed prices for their product. The manufacturers had sold their concrete blocks to masonry contractors, who performed masonry work on the buildings and charged the general contractors, who in turn sold the buildings to the government. So, "[t]he only way in which the antitrust violation alleged could have injured respondents is if all or part of the overcharge was passed on by the masonry and general contractors to respondents, rather than being absorbed at the first two levels of distribution." Id. at 727, 97 S.Ct. 2061. The Court determined the plaintiffs, as indirect purchasers of the block, could not recover damages because they were not injured in their business or property as contemplated by the Act. Id. at 729, 97 S.Ct. 2061.

The Court acknowledged that its rule "elevating direct purchasers to a preferred position as private attorneys general" denies recovery to those indirect purchasers who may have been actually injured by antitrust violations. Id. at 746, 97 S.Ct. 2061. Still, it held

[W]e are unwilling to carry the compensation principle to its logical extreme by attempting to allocate damages among all those within the defendant's chain of distribution because we question the extent to which such an attempt would make individual victims whole for actual injuries suffered rather than simply depleting the overall recovery in litigation over pass-on issues. Many of the indirect purchasers barred from asserting pass-on claims under the Hanover Shoe rule have such a small stake in the lawsuit that even if they were to recover as part of a class, only a small fraction would be likely to come forward to collect their damages. And given the difficulty of ascertaining the amount absorbed by any particular indirect purchaser, there is little basis for believing that the amount of the recovery would reflect the actual injury suffered.

Id. at 746-47, 97 S.Ct. 2061 (footnote and internal quotation omitted).³

Berghausen correctly notes, citing California v. ARC America Corp., 490 U.S. 93, 98 n. 3, 109 S.Ct. 1661, 104 L.Ed.2d 86 (1989), that some states "have allowed recovery for antitrust injury, regardless of whether it was incurred `directly or indirectly.' " The ARC America Court indicated that some fifteen states had enacted statutes that expressly allow indirect purchasers to sue for antitrust injury. Indiana has not enacted such a statute.

Because we hold the Indiana Act does not provide a cause of action to indirect purchasers who allege they were harmed by an antitrust injury, we cannot say the trial court erred to the extent it dismissed Berghausen's claim on that ground.⁴ a. The License Agreement

Even if the Indiana Act does not allow an indirect purchaser to bring an action for antitrust injury, Berghausen asserts, he has standing to bring such an action as a direct licensee of Microsoft. This "direct contractual relationship with Microsoft" (Appellant's Br. at 11), he asserts, gives him standing even absent any allegation that he paid Microsoft directly for the license to use Windows.

We disagree, and believe the Illinois Brick reasoning does not support standing on the part of a licensee who is not a direct purchaser:

[W]e are unwilling to ... attempt[ ] to allocate damages among all those within the defendant's chain of distribution because we question the extent to which such an attempt would make individual victims whole for actual injuries suffered rather than simply depleting the overall recovery in litigation over pass-on issues... given the difficulty of ascertaining the amount absorbed by any particular indirect purchaser, there is little basis for believing that the amount of the recovery would reflect the actual injury suffered.

431 U.S. at 746-47, 97 S.Ct. 2061. The damage absorbed by a direct licensee in Berghausen's position is no less difficult to ascertain than that suffered by an indirect purchaser; we therefore decline to hold that a direct licensee who did not directly pay the licensor for the use of the software has standing to bring an action for antitrust injury. Whether the consumer buys the software or just the license to use it, "the immediate economic transaction constituting the purchase occurs between the consumer and [computer manufacturer] or retail seller." In re Microsoft Corp. Antitrust Litigation, 127 F.Supp.2d 702, 709 (D.Md.2001). The trial court properly dismissed Berghausen's...