New York v. Microsoft Corp.

• Decision Date: 12 June 2002
• Docket Number: No. CIV.A. 98-1233(CKK).,CIV.A. 98-1233(CKK).
• Parties: State of NEW YORK, et al., Plaintiffs, v. MICROSOFT CORPORATION, Defendant.
• Court: U.S. District Court — District of Columbia

209 F.Supp.2d 132

State of NEW YORK, et al., Plaintiffs, v. MICROSOFT CORPORATION, Defendant.

No. CIV.A. 98-1233(CKK).

United States District Court, District of Columbia.

June 12, 2002.

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MEMORANDUM OPINION

KOLLAR-KOTELLY, District Judge.

Presently pending before the Court is a motion by Defendant Microsoft Corporation ("Microsoft") seeking "dismissal of the Non-Settling States' demand for equitable relief." See Microsoft Mot. at 1. Microsoft filed its motion and memorandum in support thereof following the remand of the above-captioned case from the Court of Appeals for the District of Columbia Circuit and immediately prior to the commencement of evidentiary proceedings on the issue of remedy for Microsoft's violations of Section 2 of the Sherman Act. The Litigating States¹ oppose Microsoft's motion on multiple grounds. Upon review of Defendant's motion, Plaintiffs' opposition, Defendant's reply, the brief of the United States as amicus curiae, the brief of the State of New York as amicus curiae, and the brief of twenty-four other states² as amici curiae, the Court concludes that Defendant's motion shall be denied.

I. PROCEDURAL HISTORY³

On May 18, 1998, the United States and a group of state plaintiffs filed separate civil complaints alleging antitrust violations by Microsoft and seeking preliminary and permanent injunctions barring the company's allegedly unlawful conduct. See United States v. Microsoft Corp., 253 F.3d 34, 47 (D.C.Cir.2001). In United States v. Microsoft Corp., No. 98-1232 (D.C.C.), the federal government brought claims pursuant to federal law, while in State of New York, et al. v. Microsoft Corp., No. 98-1233 (D.D.C.), the Plaintiff States brought claims pursuant to both federal and state law. These two cases were consolidated, and following a bench trial in the consolidated cases, Judge Thomas Penfield Jackson concluded that Microsoft had violated Sections 1 and 2 of the Sherman Act. See generally United States v. Microsoft Corp., 87 F.Supp.2d 30 (D.D.C.2000). Correspondingly, Judge Jackson held Microsoft liable for violations of the state antitrust laws analogous to Sections 1 and 2 of the Sherman Act in each of the nineteen Plaintiff States and the District of Columbia.⁴ Id. at 54. Microsoft filed an appeal in both cases. On appeal, the D.C. Circuit deferred to Judge Jackson's factual findings, altered his findings of liability affirming in part and reversing in part, and vacated the remedy decree. See generally Microsoft, 253 F.3d 34.

The Court of Appeals remanded the cases to the District Court with instructions to hold a "remedies-specific evidentiary hearing," id. at 103, and to "fashion an appropriate remedy" in light of the revised liability findings, id. at 105. Following remand, pursuant to Court order, the parties in the two consolidated cases entered into intensive settlement negotiations. See United States v. Microsoft Corp., Nos. 98-1232 and 98-1233 (D.C.C. Sept. 28, 2001) (order requiring the parties to enter into settlement negotiations). The settlement negotiations did not resolve both cases in their entirety. However, the United States and Microsoft were able to reach a resolution in United States v. Microsoft Corp. in the form of a proposed consent decree. The settlement negotiations were partially successful with regard to the states' case, State of New York, et al. v. Microsoft Corp.; a portion of the Plaintiff States joined in the settlement between the United States and Microsoft. Consequently, these states have elected not to proceed to a remedies-specific hearing in State of New York, et al. v. Microsoft Corp. Those states which opted not to join the settlement between the United States and Microsoft — the Litigating States — have proposed a remedy distinct from that presented in the proposed consent decree. Microsoft's motion addresses only the continuing request for injunctive relief by these Litigating States.

II. LEGAL STANDARD

Ordinarily, the Court would commence its discussion of a dispositive motion, such as a motion to dismiss, with a succinct statement of the legal standard applicable to the pending motion. In this instance, the parties have provided little guidance on the threshold question of the appropriate legal standard. Despite labeling its motion as a "motion to dismiss," Microsoft does not identify any basis in the Federal Rules of Civil Procedure which permits the filing of a post-liability "motion to dismiss." Upon examination by the Court, the authorization for Defendant's motion is not immediately apparent in the Federal Rules. Still, the Court will endeavor to identify the proper basis for Defendant's motion, and hence, the applicable legal standard, before proceeding to the merits of the arguments contained therein.

Taking the title of Microsoft's motion as a starting point, the Court turns to Rule 12 of the Federal Rules of Civil Procedure which, by its own title, concerns "Defenses and Objections — When and How Presented — By Pleading or Motion — Motion for Judgment on Pleadings." Fed.R.Civ.P. 12. Motions to dismiss brought pursuant to Rule 12(b) of the Federal Rules of Civil Procedure must be "made before pleading if a further pleading is permitted." Fed. R.Civ.P. 12(b). Rule 12(b) further specifies that where "a pleading sets forth a claim for relief to which the adverse party is not required to serve a responsive pleading, the adverse party may assert at the trial any defense in law or fact to that claim for relief." Id. Clearly the parties are well past the pleading stage and indeed, are past a trial on the merits of Plaintiffs' claims. Thus, at a minimum, Microsoft's "motion to dismiss" does not appear to fit the ordinary parameters of a motion pursuant to subsection (b) of Rule 12.⁵

Arguments presented by Microsoft in its reply memorandum give the impression that Microsoft has based its request for dismissal upon an asserted lack of subject matter jurisdiction. See generally Microsoft Reply. Given this position, Microsoft's motion could be considered in accordance with Rule 12(h)(3) of the Federal Rules of Civil Procedure, which authorizes challenges to subject matter jurisdiction at any point in the proceedings. Fed. R.Civ.P. 12(h)(3) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action."). Accordingly, the Court will treat any of Microsoft's arguments which can be characterized as concerning subject matter jurisdiction as having been raised pursuant to Rule 12(h)(3).⁶

This conclusion, however, does not provide an appropriate standard for many of Microsoft's arguments which cannot be couched in terms of jurisdiction and instead appear to raise issues relating to judgment on the merits. Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946) ("Jurisdiction ... is not defeated ... by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover. For it is well settled that the failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction.").⁷ In this regard, Microsoft's motion reads largely as an attack on the liability findings of the Court of Appeals in this case. To the extent that Microsoft's motion challenges the substantive merits of Plaintiffs' case, for lack of a better standard, the Court will treat the motion as a motion for partial summary judgment.⁸

III. DISCUSSION

Plaintiffs' action arises, in part, under Section 16 of the Clayton Act, which provides that "[a]ny person, firm, corporation, or association shall be entitled to sue for and have injunctive relief ... against threatened loss or damage by a violation of the antitrust laws...." 15 U.S.C. § 26. In addition to the Clayton Act, Plaintiffs' request for equitable relief rests upon the finding by the District Court, as affirmed by the Court of Appeals, that Defendant violated the various state statutes analogous to the federal antitrust statutes. Plaintiffs in this case seek equitable relief in their capacity as parens patriae "to prevent or repair harm to [their] quasisovereign interests," Hawaii v. Standard Oil Co., 405 U.S. 251, 258, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972) (internal quotations omitted), resulting from federal and state antitrust violations already found in this case by the District Court and affirmed by the Court of Appeals. See generally Microsoft, 253 F.3d 34; Microsoft, 87 F.Supp.2d 30.

Microsoft's "motion to dismiss" attack Plaintiffs' right to seek equitable relief on numerous fronts. Microsoft couches its primary arguments in terms of "standing" and, in doing so, merges and mingles a number of distinct doctrines. Microsoft primarily relies upon the doctrines of "antitrust standing" "antitrust injury," and "parens patriae standing." In the discussion to follow, the Court will address each of these arguments, as well as Microsoft's secondary arguments.

A. Antitrust Standing and Injury

One of Microsoft's central, though vaguely articulated,⁹ arguments for dismissal relies upon the complementary doctrines of antitrust standing and antitrust injury. In short, Microsoft argues that Plaintiffs have not satisfied "all of the requirements of Section 16 ... including proof of antitrust injury and a causal connection between the injury and the actions found to be anticompetitive." Microsoft Reply at 12; accord Microsoft Mem. at 22.

The label "antitrust standing" has traditionally been applied to a court's evaluation of the relationship between the antitrust plaintiff's harm and the alleged wrongdoing by the defendant. See Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 535 & n. 31, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983). Thus, antitrust standing has been characterized as a way...