Johnson v. Microsoft Corp.
| Citation | 155 Ohio App.3d 626,802 NE 2d 712 |
| Decision Date | 30 December 2003 |
| Docket Number | No. C020564.,C020564. |
| Court | United States Court of Appeals (Ohio) |
| Parties | JOHNSON, Appellant, v. MICROSOFT CORPORATION, Appellee. |
COPYRIGHT MATERIAL OMITTED
Stanley M. Chesley, Robert Heuck II, W.B. Markovits and Michael R. Barrett, for appellant.
Gregory A. Harrison and John D. Luken, for appellee.
{¶ 1} The plaintiff-appellant, Maria Johnson, appeals from the order of the trial court dismissing her amended complaint against the defendant-appellee, Microsoft Corporation, under Civ.R. 12(B)(6). The amended complaint contained three counts: (1) a common-law claim for restitution alleging that Microsoft had charged a monopoly price for its Windows operating system; (2) a claim that Microsoft had violated Ohio's version of the Valentine Act, R.C. 1331.01; and (3) a claim that Microsoft had violated two provisions of the Ohio Consumer Sales Practices Act, R.C. 1345.02 and 1345.03, by engaging in "unfair or deceptive" and "unconscionable acts" relating to a consumer sale. Johnson brought her claims as part of a putative class consisting of all those who had purchased a license to use any version of the Windows operating system within four years of her filing the complaint.
{¶ 2} In her single assignment of error, Johnson argues that she successfully stated claims under Ohio common law, the Valentine Act, and the Ohio Consumer Sales Practices Act. For the reasons that follow, we affirm the judgment of the trial court.
{¶ 3} Johnson alleged that she had purchased a personal computer ("PC") from a retail merchant, Gateway, and that the PC was loaded with the Windows 98 operating system. She further alleged that the Windows system on her new PC remained inoperable until it was out of the box and in her home, and that she used the PC to indicate her acceptance of an on-screen licensing agreement drafted by Microsoft and entitled "Microsoft End User License Agreement" ("EULA"). When she provided the obligatory acceptance, she alleged, she entered into a separate transaction with Microsoft.
{¶ 4} Johnson further alleged that Microsoft had obtained a monopoly in the market of PC operating systems. She alleged that Microsoft had used its superior position in the market to control price "free of the normal restraints faced in a competitive market." She alleged that the price charged by Microsoft for the Windows operating system was a "monopoly price, far above the price that would be paid in a competitive market."
{¶ 5} Johnson further alleged that Microsoft had erected barriers to competition. Her allegations focused primarily on Microsoft's efforts to thwart competition from Navigator, a browser program introduced by Netscape Communications. She cited the action of the federal government and several states, including Ohio, in United States v. Microsoft (C.A.D.C.2001), 253 F.3d 34, which, she alleged, had resulted in findings that Microsoft had violated Ohio's Valentine Act as well as the Sherman Antitrust Act, Section 2, Title 15, U.S.Code. She alleged that these findings had then been upheld in New York v. Microsoft Corp. (D.D.C.2002), 209 F.Supp.2d 132.
{¶ 6} Microsoft successfully argued in its motion to dismiss that the United States Supreme Court's decision in Illinois Brick Co. v. Illinois (1977), 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707, required a direct purchase from the company in order to confer standing upon Johnson to bring an action against it under Ohio's version of the Valentine Act. Johnson argues, as she did below, that Microsoft's reliance on Illinois Brick resulted from a false premise—that Ohio's version of the Valentine Act must be interpreted in lockstep with the federal courts' interpretation of the Sherman Act. According to Johnson, the legislative history of Ohio's Valentine Act establishes the General Assembly's intent to chart a different course—a course followed by the federal courts before Illinois Brick1 —that provides indirect purchasers with standing to sue under antitrust laws. For the following reasons, we agree with the legal analysis propounded by Microsoft.
{¶ 7} Initially, we note that the weight of authority in this state is that the Valentine Act be interpreted consistently with federal antitrust law. The Ohio Supreme Court in C.K. & J.K., Inc. v. Fairview Shopping Ctr. Corp. (1980), 63 Ohio St.2d 201, 17 O.O.3d 124, 407 N.E.2d 507, stated that the statutes comprising the Act "were patterned after the Sherman Antitrust Act, and as a consequence this court has interpreted the statutory language in light of federal judicial construction of the Sherman Act * * *." Quoting from Std. Oil Co. v. United States (1911), 221 U.S. 1, 62, 31 S.Ct. 502, 55 L.Ed. 619, the court in C.K. indicated that violations of the Valentine Act were to be judged on the same basis as violations of the Sherman Act—in other words, on the basis that what was prohibited under the one was prohibited under the other. Id. The parallel construction2 adopted by the court in C.K. was employed by this court in Acme Wrecking Co., Inc. v. O'Rourke Constr. Co. (Mar. 1, 1995), 1st Dist. No. C-930856, 1995 WL 84188. In Acme, we applied to the Valentine Act the antitrust-injury requirement of the Clayton Act, Section 4, Title 15, U.S.Code, which permits a private civil cause of action to be brought by persons injured by conduct forbidden by the Sherman Act and other antitrust laws.3
{¶ 8} Prior to the United States Supreme Court's decision in Illinois Brick, and at the time that Ohio's version of the Valentine Act was enacted, there was no direct-purchaser requirement for standing to bring a claim under the Valentine Act.4 However, in 1977, the United States Supreme Court decided Illinois Brick and imposed such a requirement. The court's holding was a corollary of its earlier holding in Hanover Shoe v. United Shoe Mack Corp. (1968), 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231. In Hanover Shoe, the court had held that middlemen could recover the full amount of a manufacturer's illegal overcharge without any deduction for the amount of the illegal overcharge "passed-on" to the middlemen's consumers. The court in Illinois Brick imposed the direct-purchaser standing requirement to avoid the possibility of duplicate recoveries by both middlemen and consumers created by Hanover Shoe. Id. at 725-748, 97 S.Ct. 2061, 52 L.Ed.2d 707. The court reasoned that treble-damage proceedings in actions brought by middlemen against the monopolist would be greatly complicated and rendered less effective if they were forced to include an analysis of how much of the illegal overcharge of the monopolist was absorbed by the middlemen and how much was then passed on to the consumer. Id. at 745-747, 97 S.Ct. 2061, 52 L.Ed.2d 707. The court wished to avoid the difficulties and uncertainties of measuring, tracing, and apportioning damages between the two groups (middlemen and consumers) based upon pass-on theories. Further, the court expressed its concern that the dispersion of damages among a much larger group of plaintiffs that included individual consumers would lessen the incentive to sue for such a diluted individual recovery. Id. at 745-746, 97 S.Ct. 2061, 52 L.Ed.2d 707.5
{¶ 9} After Illinois Brick, the court in California v. ARC Am. Corp. (1989), 490 U.S. 93, 109 S.Ct. 1661, 104 L.Ed.2d 86, held that states were not obligated to impose their own direct-purchaser standing requirement upon state antitrust laws. The court reiterated that Illinois Brick was intended to interpret only federal antitrust laws, and that state antitrust statutes conferring standing upon indirect purchasers were not preempted by federal law. Id. at 101, 105-106, 109 S.Ct. 1661, 104 L.Ed.2d 86. Nonetheless, a majority of state courts that have considered the issue in the absence of legislative intervention have followed a course of parallel federal-state construction and incorporated Illinois Brick's direct-purchaser requirement into their states' versions of the Valentine Act. See Pomerantz v. Microsoft Corp. (Colo.App.2002), 50 P.3d 929; Vacco v. Microsoft Corp. (2002), 260 Conn. 59, 793 A.2d 1048; Hindman v. Microsoft Corp. (July 20, 2000), Hawaii Dist. Ct. No. 00-1-0945; Berghausen v. Microsoft Corp. (2002), 765 N.E.2d 592; Arnold v. Microsoft (2001), Ky.App. No. 2000-CA-002144-MR, 2001 WL 1835377; Davidson v. Microsoft Corp. (2002), 143 Md.App. 43, 792 A.2d 336; O'Connell v. Microsoft Corp. (June 14, 2001), Mass. Sup.Ct. No. CA 0001743, 2001 WL 893525; Ireland v. Microsoft Corp. (Jan. 24, 2001), Mo. Cir. Ct. No. OOC201515, 2001 WL 1868946; Arthur v. Microsoft Corp. (June 25, 2003), Neb. No. S-01-1325; Krotz v. Microsoft Corp. (June 19, 2000), Nev. Dist. Ct. No. A41631; Minuteman, LLC v. Microsoft Corp. (2002), 147 N.H. 634, 795 A.2d 833; Major v. Microsoft Corp. (Okla.App.2002), 60 P.3d 511; Daraee v. Microsoft Corp. (June 27, 2000), Ore. Cir. Ct. No. 0004-03311, 2000 WL 33187306; Siena v. Microsoft Corp. (R.L2002), 796 A.2d 461; and Weinberg v. Microsoft Corp. (Aug. 18, 2002), Tex. Dist. Ct. No. D-162, 526.6
{¶ 10} Of equal significance, although some 26 states and the District of Columbia do allow for some form of indirect-purchaser actions, 23 of these jurisdictions do so only because of Illinois Brick repealer statutes passed by their respective legislatures. Many of these repealer statutes, in turn, limit indirectpurchase actions to the state attorney general as parens patriae.7
{¶ 11} Ohio is not among the states that have passed an Illinois Brick repealer statute. Still, Johnson argues that, despite the weight of authority to the contrary, Illinois Brick's direct-purchaser requirement should not be applied to Ohio's Valentine Act. The reason, Johnson argues, is that the Ohio legislature never manifested an intent that the Act would be subject to evolving federal antitrust law. To support this argument,...
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