Elkins v. Microsoft Corp.

• Decision Date: 01 November 2002
• Docket Number: No. 01-431.,01-431.
• Citation: 817 A.2d 9
• Parties: Richard L. ELKINS v. MICROSOFT CORPORATION.
• Court: Vermont Supreme Court

817 A.2d 9

Richard L. ELKINS v. MICROSOFT CORPORATION.

No. 01-431.

Supreme Court of Vermont.

November 1, 2002.

Kirsten A. Beske, David N. Dunn, and Potter Stewart, Jr. of Potter Stewart, Jr. Law Offices, P.C., Brattleboro, for Plaintiff-Appellant.

Robert Luce of Downs Rachlin Martin, PLLC, Burlington, and David Tulchin of Sullivan & Cromwell (Of Counsel), New York, New York, for Defendant-Appellee.

William H. Sorrell, Attorney General, and Julie Brill and David B. Borsykowsky, Assistant Attorneys General, Montpelier, for Amicus Curiae State of Vermont.

Present: AMESTOY, C.J., DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ.

DOOLEY, J.

This is an appeal from the trial court's dismissal of a class action suit brought under the Vermont Consumer Fraud Act (VCFA or the Act), 9 V.S.A. §§ 2451-2480g. Plaintiff, Richard Elkins, alleged that defendant Microsoft Corporation (Microsoft) used its monopoly power to overprice the Windows 98 operating system which plaintiff purchased pre-installed in a personal computer from a computer manufacturer (called original equipment manufacturer or OEM). Based on the United States Supreme Court decision in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), the superior court dismissed the case because plaintiff was only an indirect purchaser of Windows 98, that is, he purchased it from the OEM rather than Microsoft. Plaintiff appeals arguing that he does not have to be a direct purchaser to sue under the VCFA. We agree and reverse and remand.

The facts of this case are not in dispute. Microsoft is the leading supplier of operating system software for personal computers. Microsoft distributed its Windows 98 operating system through OEM's, who pre-installed the software on personal computers they sold to consumers, and through retailers of CD-ROMs containing the software. In February 1999, plaintiff purchased a computer with a pre-installed Microsoft Windows 98 operating system. He subsequently brought suit under the VCFA, alleging that he and other similarly situated Vermont licensees of Windows 98 were injured by Microsoft's abuse of its monopoly power in charging consumers a price in excess of the price it would have been able to charge in a competitive market.

Microsoft moved to dismiss the complaint on the grounds that an "indirect purchaser" such as plaintiff does not suffer cognizable damages in an unfair competition case and thus is barred from bringing a claim under the VCFA. The trial court agreed and granted the motion.

The issue on appeal is the same as before the trial court: whether, given the Illinois Brick decision and the statutory language of the VCFA, an indirect purchaser is barred from bringing an action for antitrust violations under the VCFA. Plaintiff and amicus curiae State of Vermont argue that a suit by an indirect purchaser under the VCFA is not barred because (1) the VCFA provides a cause of action for indirect purchasers, and (2) the Illinois Brick indirect purchaser rule is not applicable because it construes the Clayton Antitrust Act, and not the VCFA, and our construction of the VCFA is not guided by federal Clayton Act decisions. In response, Microsoft argues that (1) an indirect purchaser cause of action did not exist under the VCFA until the 2000 amendment, which became effective after plaintiff acquired his copy of Windows 98, and (2) the indirect purchaser rule of Illinois Brick controls here because there is no express statutory provision in the VCFA providing indirect purchasers a cause of action and because the VCFA directs that construction of its terms be guided by federal law.

A motion to dismiss for failure to state a claim should not be granted unless there exists no facts or circumstances that would entitle plaintiff to relief. Richards v. Town of Norwich, 169 Vt. 44, 48, 726 A.2d 81, 85 (1999). On review of the trial court's disposition of the motion to dismiss, this Court will assume the truth of all factual allegations pleaded in the complaint as well as all reasonable inferences that may be derived from the pleadings. Id. at 48-49, 726 A.2d at 85. To the extent that our review of the trial court's decision involves questions of statutory construction, and thus questions of law, it is nondeferential and plenary. State v. Koch, 169 Vt. 109, 112, 730 A.2d 577, 580 (1999).

We begin with the applicable provisions of the VCFA and then consider the impact of Illinois Brick.

As with any attempt at statutory construction, we begin with the plain meaning of the statutory language, because we presume that it reflects the Legislature's intent. Dover Town Sch. Dist. v. Simon, 162 Vt. 630, 631, 650 A.2d 514, 516 (1994) (mem.).

The central provision of the VCFA is 9 V.S.A. § 2453(a), which provides:

(a) Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby declared unlawful.

The Act goes on to provide a private remedy for violations:

Any consumer who ... sustains damages or injury as a result of any false or fraudulent representations or practices prohibited by section 2453 of this title... may sue for appropriate equitable relief and may sue and recover from the seller, solicitor or other violator the amount of his damages....

Id. § 2461(b) (emphasis added). "Consumer" is defined by the act as:

[A]ny person who purchases, leases, contracts for, or otherwise agrees to pay consideration for goods or services not for resale in the ordinary course of his or her trade or business but for his or her use or benefit or the use or benefit of a member of his or her household, or in connection with the operation of his or her household....

Id. § 2451a(a) (emphasis added).

The statutory language contains no privity requirement, that is, no provision that the consumer can sue only the retailer and no one further up the supply chain. In general, we will not read provisions into the statute that are not present unless it is necessary in order to make the statute effective. State v. O'Neill, 165 Vt. 270, 275, 682 A.2d 943, 946 (1996). The Act expressly states that any consumer, reinforced by the definition of consumer as "any person," who suffers injury may bring an action under the statute against a "seller, solicitor or other violator." The language does not support the imposition of a privity requirement.

The plain meaning of the language is supported by the express legislative intent behind the statute to "protect the public" against "unfair or deceptive acts or practices" and to "encourage fair and honest competition." 9 V.S.A. § 2451; see State v. Int'l Collection Serv., Inc., 156 Vt. 540, 543, 594 A.2d 426, 429 (1991); Gramatan Home Investors Corp. v. Starling, 143 Vt. 527, 536, 470 A.2d 1157, 1162 (1983) (purpose of VCFA includes "to encourage a commercial environment highlighted by integrity and fairness"). In light of this purpose, this Court has repeatedly held that the VCFA is "remedial in nature" and therefore must be construed "liberally so as to furnish all the remedy and all the purposes intended." State v. Custom Pools, 150 Vt. 533, 536, 556 A.2d 72, 74 (1988); see also Carter v. Gugliuzzi, 168 Vt. 48, 52, 716 A.2d 17, 21 (1998) (VCFA should be applied "liberally to accomplish its purposes"); State v. Therrien, 161 Vt. 26, 31, 633 A.2d 272, 275 (1993). Of course, liberal construction does not allow us to stretch the language beyond legislative intent. See Wilder v. Aetna Life & Casualty Ins. Co., 140 Vt. 16, 19, 433 A.2d 309, 310 (1981).

The Legislature clearly intended the VCFA to have as broad a reach as possible in order to best protect consumers against unfair trade practices. This intent underlies a private remedy section that allows suits by "any consumer" with no suggestion of a distinction between direct and indirect purchasers. It also underlies a description of proper defendants including not only a seller or solicitor, but also an "other violator," a broad term that covers defendant in this case. We think in this context that any restriction to impose a privity requirement, that is to allow only direct purchasers to sue, must be stated in clear terms. See Int'l Collection Serv., Inc., 156 Vt. at 549-50, 594 A.2d at 429 (in the absence of express language limiting Attorney General's enforcement power to personal consumer victims, plain meaning supports actions against defendants who engage in unfair and deceptive practices with respect to business consumers); Custom Pools, 150 Vt. at 536, 556 A.2d at 74 (if Legislature intended that Attorney General cannot sue a finance company that benefitted from the consumer fraud of a seller, "it could have done so with clear language to that effect").

Although we have never addressed the precise question before us, two of our decisions are instructive. In Carter v. Gugliuzzi, we held that a home purchaser could sue a real estate broker under § 2461(b) as a "seller" even though the broker did not own the home when it was sold to the plaintiff. Relying on the broad remedial purpose of the VCFA, the plain meaning of the term "seller," and the lack of any explicit limitation on that term, we held that the broker could be sued under § 2461(b) for deceptive representations that induced the sale. 168 Vt. at 53,716 A.2d at 22. Also relevant is Poulin v. Ford Motor Co., 147 Vt. 120, 513 A.2d 1168 (1986), where a purchaser of an automobile sued both the dealer and the manufacturer because a representative of the manufacturer misrepresented that the specific model purchased was produced in very limited numbers so that its value would increase. We affirmed a jury verdict against both the dealer and manufacturer in response to various claims that plaintiff had failed to present the proof required by the statute, id. at 125-27, 513 A.2d at 1172-73, although we did not confront the precise claim made here. Poulin is exactly the kind of case that demonstrates that a privity requirement would seriously...