Olstad v. Microsoft Corporation

• Decision Date: 13 July 2005
• Docket Number: No. 2003AP1086.,2003AP1086.
• Citation: 284 Wis.2d 224,2005 WI 121,700 N.W.2d 139
• Parties: Gene L. OLSTAD, Individually and on Behalf of All Others Similarly Situated, Plaintiff-Appellant, v. MICROSOFT CORPORATION, a foreign corporation, and Does 1 through 100, inclusive, Defendants-Respondents.
• Court: Wisconsin Supreme Court

284 Wis.2d 224

2005 WI 121

700 N.W.2d 139

Gene L. OLSTAD, Individually and on Behalf of All Others Similarly Situated, Plaintiff-Appellant, v. MICROSOFT CORPORATION, a foreign corporation, and Does , inclusive, Defendants-Respondents.

No. 2003AP1086.

Supreme Court of Wisconsin.

Oral argument September 22, 2004.

Decided July 13, 2005.

For the plaintiff-appellant there were briefs by John F. Maloney and McNally, Maloney & Peterson, S.C., Milwaukee and Ben Barnow and Barnow and Associates, P.C., Chicago, IL, and oral argument by John F. Maloney.

For the defendant-respondent there were briefs by W. Stuart Parsons, Jeffrey Morris, Brian D. Winters, Kelly H. Twigger, and Quarles & Brady LLP, Milwaukee; David B. Tulchin, Jeremy T. Kamras, Ryan C. Williams and Sullivan & Cromwell, LLP, New York, NY; Charles B. Casper and Montgomery, McCracken, Walker & Rhoads LLP, (of counsel), Philadelphia, PA; and Thomas W. Burt, Richard J. Wallis, Steven J. Aeschbacher (of counsel) and Microsoft Corporation, Redmond, WA, and oral argument by David B. Tulchin.

An amicus curiae brief was filed by Stephen E. Meili, Peter C. Carstensen and Susan LaCava and Susan LaCava S. C., Madison, on behalf of the University of Wisconsin Law School Consumer Law Litigation Clinic, Professor Peter C. Carstensen of the University of Wisconsin Law School, and Susan LaCava, Esq.

An amicus curiae brief was filed by John J. Prentice, Andrew T. Phillips and Prentice & Phillips, LLP, Milwaukee; Richard M. Hagstrom and Zelle, Hofmann, Voelbel, Mason & Gette LLP, Minneapolis, MN, on behalf of Wisconsin Counties Association.

An amicus curiae brief was filed by H. Dale Peterson and Stroud, Willink & Howard, LLC, Madison; William L. Oemichen, Madison; Gary Bakke and Bakke Norman SC, New Richmond; on behalf of Wisconsin Farm Bureau Federation, Cooperative, Wisconsin Federation of Cooperatives and Wisconsin Agri-Service Association.

An amicus curiae brief was filed by Gerald Thain, University of Wisconsin Law School, Madison, and James May, Washington College of Law/American University of Law School, Washington, D.C., on behalf of the American Antitrust Institute.

An amicus curiae brief was filed by Peggy A. Lautenschlager, attorney general and Eric J. Wilson, assistant attorney general, on behalf of the Wisconsin Department of Justice, and oral argument by Eric J. Wilson.

¶ 1. DAVID T. PROSSER, J.

Gene L. Olstad (Olstad), suing individually and as class representative of all others similarly situated, appeals from a final order of the Circuit Court for Milwaukee County granting Microsoft Corporation's (Microsoft) motion for summary judgment and dismissing Olstad's action alleging that Microsoft employs monopolistic practices prohibited by Wis. Stat. § 133.03 (2001-02).¹ The circuit court dismissed Olstad's complaint because it found that Chapter 133 of the Wisconsin Statutes applies only to intrastate commerce. We reverse the circuit court's order because we conclude that Wisconsin's antitrust statutes may reach interstate commerce if (1) actionable conduct, such as the formation of a combination or conspiracy, occurred within this state, even if its effects are felt primarily outside Wisconsin; or (2) the conduct complained of "substantially affects" the people of Wisconsin and has impacts in this state, even if the illegal activity resulting in those impacts occurred predominantly or exclusively outside this state.

I. FACTS AND PROCEDURAL POSTURE

¶ 2. Olstad,² seeking to represent a class of Wisconsin consumers,³ alleges that Microsoft controls a "dominant and persistent share" of the market for Intel-compatible⁴ personal computer operating systems. In 1985 Microsoft introduced its "Windows" operating system. In the following years, Microsoft released newer—and increasingly dominant—versions of Windows. Olstad alleges that Microsoft's Windows market share has "at times exceeded ninety-five percent."

¶ 3. Olstad claims that Microsoft's dominant market share acts as a barrier to entry for would-be competitors. He alleges that Microsoft has created a continuously increasing feedback loop: that is, because "everyone" uses Windows, all new consumers must also buy Windows. In Olstad's view, this feedback loop has become a vicious cycle for consumers. He claims that Microsoft has engaged in various forms of anticompetitive conduct to maintain its monopoly, including actively discouraging competitors from "encroaching upon its operating system monopoly."

¶ 4. In 2000 a United States District Court in the District of Columbia accepted most of these arguments. United States v. Microsoft Corp., 97 F. Supp. 2d 59 (D.D.C. 2000) (final judgment); United States v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C. 2000) (conclusions of law); United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (findings of fact). Olstad directs our attention to the District Court's findings for "the details of Microsoft's and its co-conspirators' conduct."

¶ 5. In its "conclusions of law," the District Court found that Microsoft's conduct violated the federal Sherman Act "sufficient to meet analogous elements of causes of action arising under the laws of each plaintiff state," one of which was Wisconsin. Microsoft, 87 F. Supp. 2d at 54. Microsoft argued that "a plaintiff cannot succeed in an antitrust claim under the laws of . . . Wisconsin without proving an element that is not required under the Sherman Act, namely, intrastate impact." Id. at 55. The court rejected Microsoft's argument, concluding that even if a state like Wisconsin had such a requirement, "that element is manifestly proven by the facts presented here." Id. The court was "compel[led]" to the conclusion that "Microsoft's anticompetitive conduct has substantially hampered competition" in Wisconsin. Id. Accordingly, the court found that Microsoft violated Wis. Stat. § 133.03. Id. at 56.

¶ 6. Microsoft appealed, and the United States Court of Appeals for the D.C. Circuit affirmed that part of the District Court's decision holding that Microsoft committed monopoly violations. United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir. 2001). The court of appeals remanded the case for further findings on other issues. See id. at 95.

¶ 7. Olstad alleges that as a result of Microsoft's anticompetitive conduct, Wisconsin consumers have paid artificially high prices for Microsoft products over the past six years. He argued to the circuit court that Microsoft's conduct violated Wis. Stat. § 100.18 (prohibiting unfair trade practices) and Wis. Stat. § 133.03 (prohibiting unlawful contracts and conspiracies).

¶ 8. Microsoft denied these allegations and moved for summary judgment. Microsoft noted that it is a foreign corporation, not organized under the laws of Wisconsin, and its principal place of business is not in Wisconsin. It is undisputed that most of the conduct complained of occurred outside Wisconsin and affected interstate commerce. Microsoft argued that Wisconsin courts have consistently held that Wisconsin's antitrust law, Chapter 133, does not apply to conduct that primarily affects interstate commerce. Microsoft also argued that Olstad failed to state a claim actionable under Wis. Stat. § 100.18.

¶ 9. The Milwaukee County Circuit Court, Jeffrey Kremers, Judge, granted Microsoft's motion and dismissed Olstad's complaint. In an oral ruling, Judge Kremers held that plaintiffs like Olstad could not recover under Chapter 133 because it does not extend to interstate commerce. Judge Kremers relied on a line of cases beginning with Pulp Wood Co. v. Green Bay Paper & Fiber Co., 157 Wis. 604, 147 N.W. 1058 (1914).

¶ 10. Olstad appealed,⁵ and the court of appeals certified the following issue to this court: "Does Wisconsin's antitrust act, Wis. Stat. § 133.03, apply to interstate commerce affecting Wisconsin commerce?" We accepted the certification.

¶ 11. In this appeal we are not concerned with the truth or merit of Olstad's allegations. The circuit court did not address the substance of the claim that Microsoft violated Chapter 133. The circuit court concluded that controlling precedent did not allow it to consider whether Chapter 133 had been violated because, as a threshold matter, the statute could not apply to the interstate conduct at issue. Accordingly, we must decide whether the Wisconsin statute reaches interstate commerce.

¶ 12. We review the circuit court's grant of summary judgment independently, applying the same methodology as the circuit court. Smaxwell v. Bayard, 2004 WI 101, ¶ 12, 274 Wis. 2d 278, 682 N.W.2d 923. Summary judgment "shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Wis. Stat. § 802.08(2). We evaluate the facts in the light most favorable to the nonmoving party, Olstad, and draw all reasonable inferences from the facts in his favor. Garcia v. Mazda Motor of America, 2004 WI 93, ¶ 4 n.3, 273 Wis. 2d 612, 682 N.W.2d 365. If, as here, the salient facts are undisputed, our task is simply to apply the law to the undisputed facts.

II. DISCUSSION

¶ 13. We note at the outset that Microsoft concedes that a state may regulate interstate commerce in some circumstances. This point is well settled. See, e.g., California v. ARC America Corp., 490 U.S. 93, 101-02 (1989) (state laws may reach interstate commerce in indirect purchaser action); David Lamb, Avoiding Impotence: Rethinking the Standards for Applying State Antitrust Laws to Interstate Commerce, 54 Vand. L. Rev. 1705, 1721 (2001) ("[M]ost recent decisions have upheld state antitrust regulations despite their incidental impact on interstate commerce"); Herbert Hovenkamp, State Antitrust in the Federal Scheme, 58 Ind. L.J. 375, 386-87 (1983) ("applications of state antitrust laws to situations `in or...