Howe v. Microsoft Corp.

• Citation: 656 N.W.2d 285,2003 ND 12
• Decision Date: 28 January 2003
• Docket Number: No. 20020075.,20020075.
• Parties: Henry H. HOWE and Michael Simonson, individually and on behalf of all others similarly situated, Plaintiffs and Appellees, v. MICROSOFT CORPORATION, Defendant and Appellant, and Does 1 through 100, inclusive, Defendants.
• Court: United States State Supreme Court of North Dakota

656 N.W.2d 285

2003 ND 12

Henry H. HOWE and Michael Simonson, individually and on behalf of all others similarly situated, Plaintiffs and Appellees, v. MICROSOFT CORPORATION, Defendant and Appellant, and Does , inclusive, Defendants.

No. 20020075.

Supreme Court of North Dakota.

January 28, 2003.

Vincent J. Esades (argued), Daniel E. Gustafson (on brief), and Jason Kilene (on brief), Heins Mills & Olson, PLC, Minneapolis, MN, and Robert J. Gralewski, Jr. (appeared), Dennis Stewart (on brief), and Leonard B. Simon (on brief), Milberg Weiss Bershad Hynes & Lerach, LLP, San Diego, for plaintiffs and appellees.

Patrick J. Ward (appeared), Zuger Kirmis & Smith, Bismarck, David B. Tulchin (argued) and Joseph E. Neuhaus (on brief), Sullivan & Cromwell, LLP, New York, NY, Thomas W. Burt (on brief), Richard Wallis (on brief), Steven J. Aeschbacher (on brief), Microsoft Corporation, Redmond, WA, Charles B. Casper (on brief), Montgomery, McCracken, Walker & Rhoads, LLP, Philadelphia, PA, and Steve W. Berman (on brief), Hagens Berman, Seattle, WA, for defendant and appellant.

KAPSNER, Justice.

[¶ 1] Microsoft Corporation has appealed from an order granting class certification in an action against Microsoft for violations of the North Dakota Antitrust Act and the Unfair Trade Practices Law. We affirm, concluding the district court did not abuse its discretion in certifying the class action.

I

[¶ 2] Microsoft manufactures, markets, and licenses computer software, including operating systems. Most of Microsoft's operating system software is distributed to personal computer ("PC") manufacturers, known in the industry as original equipment manufacturers ("OEMs"). OEMs incorporate the operating system software into PCs which pass through various chains of distribution and are eventually sold to end users. Some Microsoft operating system software is also sold in "shrink wrap" form, without being pre-loaded into a PC. Microsoft does not charge uniform prices for its operating system software; rather, the price varies widely among the first purchasers in the distribution chain.

[¶ 3] Henry Howe and Michael Simonson (collectively "Howe") are North Dakota residents who were indirect purchasers of Microsoft operating system software. They brought this action in March 2000, on behalf of themselves and others similarly situated, alleging Microsoft has established a monopoly in the marketplace for operating system software through anti-competitive acts and has maintained this monopoly for more than a decade. They further allege Microsoft has used its monopoly power to stifle innovation, reduce and eliminate competition, and overcharge consumers, in violation of the North Dakota Antitrust Act and the Unfair Trade Practices Law.

[¶ 4] Howe moved for class certification under N.D.R.Civ.P. 23. After considering the pleadings, the record, and the arguments and submissions of the parties, the trial court issued a written order certifying the following class:

All persons who acquired for their own use, and not for further selling, leasing or licensing, a license in North Dakota from Microsoft, an agent of Microsoft or an entity under Microsoft's control, for an Intel-compatible PC version of MS-DOS, Windows 95, upgrades to higher MS-DOS versions, upgrades to or of Windows 95, Windows 98, upgrades to or of Windows 98, or other software products in which MS-DOS or Windows have been incorporated in full or part ("Microsoft operating systems software") at any time during the class period.

The class period was established as May 18, 1994 and thereafter.

[¶ 5] Microsoft appealed from the written order granting class certification.

II

[¶ 6] An order certifying a class action under N.D.R.Civ.P. 23 is appealable. Rose v. United Equitable Ins. Co., 2002 ND 148, ¶ 5, 651 N.W.2d 683; Ritter, Laber & Assocs., Inc. v. Koch Oil, Inc., 2000 ND 15, ¶ 3, 605 N.W.2d 153 ("Ritter I"). We recently summarized our standard of review of such orders:

The trial court has broad discretion in determining whether to certify a class action under N.D.R.Civ.P. 23. The trial court's decision to certify a class action will not be overturned on appeal unless the court has abused its discretion. A trial court abuses its discretion only when it acts in an unreasonable, arbitrary, or unconscionable manner, when its decision is not the product of a rational mental process leading to a reasoned decision, or when it misinterprets or misapplies the law.

Rose, at ¶ 5 (citations omitted).

[¶ 7] We have consistently construed N.D.R.Civ.P. 23 to provide an open and receptive attitude toward class actions. Rose, 2002 ND 148, ¶ 6, 651 N.W.2d 683; Ritter, Laber & Assocs., Inc. v. Koch Oil, Inc., 2001 ND 56, ¶ 5, 623 N.W.2d 424 ("Ritter II"); Ritter I, 2000 ND 15, ¶ 3, 605 N.W.2d 153; Werlinger v. Champion Healthcare Corp., 1999 ND 173, ¶ 6, 598 N.W.2d 820. In reviewing an order granting certification, we are guided by the broad and liberal public policy in favor of class actions in this state:

Decisions as to whether class action status should be allowed seem to rest, more than many other judicial determinations, on judicial philosophy, rather than on precedent or statutory language....

We will interpret Rule 23 so as to provide an open and receptive attitude toward class actions.

We believe that Rule 23 is a remedial rule which "continues to have as its objectives the efficient resolution of the claims or liabilities of many individuals in a single action, the elimination of repetitious litigation and possibly inconsistent adjudications involving common questions, related events, or requests for similar relief, and the establishment of an effective procedure for those whose economic position is such that it is unrealistic to expect them to seek to vindicate their rights in separate lawsuits." 7A Wright & Miller, Federal Practice and Procedure: Civil § 1754.

Peterson v. Dougherty Dawkins, Inc., 1998 ND 159, ¶ 10, 583 N.W.2d 626 (quoting Rogelstad v. Farmers Union Grain Terminal Ass'n, Inc., 226 N.W.2d 370, 376 (N.D.1975)).

[¶ 8] Under N.D.R.Civ.P. 23, the trial court may certify a class action if the following four requirements are satisfied:

1. The class is so numerous or so constituted that joinder of all members, whether or not otherwise required or permitted, is impracticable;

2. There is a question of law or fact common to the class;

3. A class action should be permitted for the fair and efficient adjudication of the controversy; and

4. The representative parties fairly and adequately will protect the interests of the class.

Rose, 2002 ND 148, ¶ 7, 651 N.W.2d 683; Klagues v. Maintenance Eng'g, 2002 ND 59, ¶ 7, 643 N.W.2d 45. Microsoft has not challenged the trial court's determination that factors (1), (2), and (4) are satisfied in this case. The sole dispute on appeal focuses on whether a class action will provide a fair and efficient adjudication of the controversy in this case.

III

[¶ 9] Rule 23(c)(1), N.D.R.Civ. P., lists thirteen factors to guide the trial court's determination whether a class action will provide a fair and efficient adjudication of the controversy. Rose, 2002 ND 148, ¶ 9,651 N.W.2d 683; Klagues, 2002 ND 59, ¶ 8,643 N.W.2d 45; Ritter I, 2000 ND 15, ¶ 10,605 N.W.2d 153. The trial court must weigh the competing factors, and no one factor predominates over the others. Rose, at ¶ 9; Klagues, at ¶ 8; Ritter I, at ¶ 10. The court is not required to specifically address each of the thirteen factors. Rose, at ¶ 9; Werlinger, 1999 ND 173, ¶ 56, 598 N.W.2d 820; Peterson, 1998 ND 159, ¶ 14,583 N.W.2d 626. We explained in Peterson, at ¶ 15:

In most cases some of the thirteen factors will weigh against certification and some will weigh in favor. It is for the trial court, employing its broad discretion, to weigh the competing factors and determine whether a class action will provide a fair and efficient adjudication of the controversy. Thus, even if Dougherty is correct in its assertion four of the factors weigh against certification, that does not preclude the court from certifying the class action if, in its opinion, those factors are outweighed by other factors supporting certification.

A

[¶ 10] Microsoft's argument focuses on two of the thirteen factors: whether common questions of law and fact predominate over individual questions and whether management of the class action poses unusual difficulties. N.D.R.Civ.P. 23(c)(1)(E) and (K). Microsoft argues the trial court abused its discretion in concluding that common questions of law and fact predominate over individual issues and that there are no unusually difficult management problems.

[¶ 11] Microsoft contends that, in order to demonstrate liability under the Antitrust Act and the Unfair Trade Practices Act, Howe must prove: (1) that Microsoft violated the statute; (2) that the violation "impacted" each member of the class, causing injury to business or property; and (3) damages for each class member. Microsoft alleges that, unless Howe can establish the "impact" and "damage" elements by proof common to the entire class, a class action is barred. At oral argument, Microsoft's counsel argued that certification is prohibited unless Howe can show by common proof that any overcharge Microsoft made to direct purchasers "was passed on in a uniform method, and to the same exact extent, to members of the class."

[¶ 12] Neither Rule 23 nor our caselaw requires such a showing as a prerequisite to class certification. We have never suggested a class plaintiff must show there will be common proof on each element of the claim. Rather, we have repeatedly noted that the existence of individual issues is not necessarily fatal to class certification.

[¶ 13] We rejected markedly similar arguments in Rose, 2002 ND 148, 651 N.W.2d 683. In Rose, a class action against insurance companies for alleged fraud in the sale of nursing home policies, the insurers claimed certification was inappropriate because...