Gordon v. Microsoft Corp., C8-01-701.

• Decision Date: 13 June 2002
• Docket Number: No. C8-01-701.,C8-01-701.
• Citation: 645 N.W.2d 393
• Parties: Daniel GORDON, et al., on behalf of themselves and all others similarly situated, Respondents, v. MICROSOFT CORPORATION, Petitioner, Appellant.
• Court: Minnesota Supreme Court

645 N.W.2d 393

Daniel GORDON, et al., on behalf of themselves and all others similarly situated, Respondents, v. MICROSOFT CORPORATION, Petitioner, Appellant.

No. C8-01-701.

Supreme Court of Minnesota.

June 13, 2002.

Frederick W. Morris, Robert L. DeMay, David R. Crosby, Leonard, Street and Deinard, Minneapolis, MN, David B. Tulchin, Michael Lacovara, Justin J. Daniels, Sullivan & Cromwell, New York City, Charles B. Casper, Montgomery, McCracken, Walker & Rhoads, L.L.P., Philadelphia, PA, for Appellant; Steven W. Berman, Hagens Berman, Seattle, WA, Thomas W. Burt, Richard Wallis, Steven J. Aeschbacher, Microsoft Corp., Redmond, WA, of counsel.

Richard M. Hagstrom, Terrance C. Newby, Zelle, Hoffman, Voelbel, Mason & Gette, L.L.P., Minneapolis, MN, Alice McInerney, Daniel A. Hume, Kirby McInerney & Squire, L.L.P., New York City, Thomas M. Sobol, Leiff, Cabraser, Heimann & Bernstein, L.L.P., Boston, MA, for Respondents.

Heard, considered, and decided by the court en banc.

OPINION

PAUL H. ANDERSON, Justice.

Microsoft Corporation appeals from a decision of the Minnesota Court of Appeals denying discretionary review under Minn. R. Civ.App. P. 105.01. More particularly, Microsoft asserts that the court of appeals improperly denied review of a district court order granting class certification under Minn. R. Civ. P. 23. We affirm.

On May 3, 2000, respondent Daniel Gordon commenced an action against Microsoft in Hennepin County District Court on behalf of himself and others similarly situated. Gordon claimed that Microsoft violated Minnesota's antitrust law. In the complaint, Gordon alleged that he and others similarly situated purchased Microsoft operating system software when they obtained a license for the use of MS-DOS, Windows 95, Windows 98, and other Microsoft software. Gordon claimed that he and others similarly situated were damaged because they paid a higher price for the software than they would have paid in a competitive market absent Microsoft's alleged monopoly and anti-competitive practices. Gordon asserted that the higher prices were the direct result of Microsoft charging artificially-inflated prices to its distributors, who in turn passed the overcharges on to consumers. In September 2000, Gordon moved the court for class certification under Minn. R. Civ. P. 23. In January 2001, while this motion was pending, Gordon moved the court to amend his complaint by expanding the factual allegations and adding an additional class of purchasers as well as named plaintiffs. The court granted this motion and Gordon filed an amended complaint in February 2001, along with four other individually named plaintiffs (hereinafter referred to collectively as respondents).

Microsoft does not sell or license its operating system software directly to consumers and instead uses a multiple-level system of distributors from whom consumers ultimately obtain Microsoft products. It is undisputed that under this distribution system, respondents and other consumers similarly situated are "indirect purchasers" of Microsoft products. The parties agree that because respondents are indirect purchasers they must show that any alleged overcharge to Microsoft's distributors was passed on to them. Respondent Gordon attempted to show that the alleged overcharges were passed on to respondents by submitting an affidavit by Dr. Keith Leffler, an authority on antitrust and economics. In his affidavit, Dr. Leffler purported to establish a workable economic model and methodology to establish class-wide impact and damages. Microsoft disputed the accuracy of Leffler's model and its applicability to the facts of this case.

The district court granted respondents' motion to certify the class. The court noted that Dr. Leffler's methodology was hotly disputed by the parties, but found that at this preliminary stage in the proceeding the economic model appeared adequate for use at trial. The court supported its order with a 25-page memorandum specifically discussing and addressing each of Microsoft's arguments against granting the motion.

Microsoft petitioned the court of appeals for discretionary review of the class certification order. It did so under Minn. R. Civ.App. P. 105.01. Microsoft also requested that the court of appeals certify the issue to our court for accelerated review. The court of appeals declined to exercise discretionary review. The court concluded that discretionary review was not appropriate because (1) denial of class status would not obviate all proceedings below because individual claims would remain for resolution, and (2) the specific issue regarding the calculation of damages was not a legal issue of broad applicability to the state. The court of appeals also declined to certify the issue to our court for accelerated review because it concluded that the issue was moot in light of its refusal to grant discretionary review.

We granted Microsoft's subsequent petition for further review and we specifically ordered the parties to brief the issue of whether the court of appeals applied the proper standard for the exercise of discretionary review.¹ Given the scope of the case before us and the potential issues that it might present, it is important to understand that Microsoft only petitioned from the court of appeals' order denying discretionary review of the district court's order.² It did not petition for review of the district court's order granting class certification to respondents. Therefore, the narrow issue before us is whether the court of appeals acted properly when it denied Microsoft's request for discretionary review.³ To resolve this issue, we must determine (1) what standard of review we use to review court of appeals' decisions whether to exercise discretionary review of an interlocutory order under Minn. R. Civ.App. P. 105.01, and (2) what standards the court of appeals should use in deciding whether to exercise discretionary review under Rule 105.01.

I.

We have not previously articulated the standard of review to be used when reviewing a court of appeals' decision to grant or deny discretionary review of an interlocutory order under Minn. R. Civ. App. P. 105.01. However, the appropriate standard of review is evident given the nature of Rule 105.01. The court of appeals' power to grant review under Rule 105.01 is exercised at the discretion of the court of appeals. Minn. R. Civ.App. P. 105.01 ("the Court of Appeals may allow an appeal from an order not otherwise appealable") (emphasis added). Therefore, it follows that we should review the court of appeals' decision for an abuse of discretion. Accordingly, we conclude that an abuse of discretion standard applies to our review of court of appeals' decisions whether to exercise discretionary review under Minn. R. Civ.App. P. 105.01.

II.

Whether the court of appeals abused its discretion by denying Microsoft's petition for discretionary review depends partly on whether there are guidelines that the court of appeals should follow when making a decision to exercise discretionary review of interlocutory orders under Minn. R. Civ.App. 105.01. Generally, interlocutory appeals are disfavored and, ordinarily, only "final judgments" are appealable. See Emme v. C.O.M.B., 418 N.W.2d 176, 178-79 (Minn.1988). However, we have recognized exceptions to this general rule. Id. Class certification orders do not meet any exception and are not appealable as of right. See In re Objections and Defenses to Real Property Taxes for the 1980 Assessment, 320 N.W.2d 729, 731 (Minn.1982) (holding no appeal as of right from order denying class certification). Nevertheless, in circumstances when a specific exception does not apply and there is a compelling reason for immediate appeal, parties may petition for discretionary review under Minn. R. Civ. App. P. 105.01. Emme, 418 N.W.2d at 179. Rule 105.01 provides that: "Upon the petition of a party, in the interests of justice the Court of Appeals may allow an appeal from an order not otherwise appealable * * *."

We have previously granted or denied discretionary review of interlocutory orders based on the specific facts of cases and thus prior case law provides little basis for generalization or broad rulemaking. See, e.g., Emme, 418 N.W.2d at 179 (noting the availability of discretionary review in "rare" cases); Price v. Amdal, 256 N.W.2d 461, 462 n. 1 (Minn.1977) (granting discretionary review because of "troublesome and vexing question").⁴ Further, many of these cases were decided before the court of appeals was created and thus present different policy considerations for the appropriate exercise of discretionary review. Therefore, it is difficult to extract actual rules or guidelines from prior case law. Nevertheless, we are able to make two observations from these cases. First, discretionary review has been exercised under Rule 105.01 and its predecessors both by this court and the court of appeals, but our court has yet to develop general standards, or indicate that there are no standards, to guide the court of appeals when exercising such discretionary review under Rule 105.01. Second, the fact that there have been no standards developed or rules promulgated may be an indication in itself that the power of discretionary review in the interests of justice was meant to be exercised in the pure discretion of the court of appeals, without standards or guidelines or criteria that limit its discretion.

None of the parties advocate a purely discretionary standard. Respondents and the court of appeals cite Emme and Price for the proposition that discretionary review under Rule 105.01 is appropriate when (1) reversal would obviate all proceedings in the district court and (2) the ruling involves a legal issue of broad application.⁵ However, Emme does not stand for these propositions and has been misconstrued by respondents and the court of appeals. Emme dealt with interlocutory appeals certified as important and doubtful...