----- Original Message -----
Sent: Thursday, November 22, 2001 9:49
AM
Subject: [plug] Anti-Trust Update:
Microsoft Agrees to Settlement for Schools
Microsoft Agrees to Settlement for
Schools
Courts: Under tentative deal, firm would give $1 billion of software, goods
and services to settle antitrust lawsuits.
By JOSEPH MENN, TIMES STAFF WRITER
SAN FRANCISCO -- Microsoft Corp. said Tuesday that it would
give $1 billion worth of software and related goods and services to needy
schools in order to settle more than a hundred class-action antitrust lawsuits
filed on behalf of millions of consumers.
Microsoft struck the
tentative deal, which encountered immediate criticism, in talks with
plaintiffs' lawyers whose cases had been consolidated in federal court in
Baltimore. The cases argue that Microsoft's monopoly practices forced
consumers to pay more than they should have for Windows and other computer
programs.
At a hearing next week, the world's biggest software company
will ask District Judge Frederick Motz to create a national class of affected
consumers and then move toward approving the deal. "It is a settlement that
avoids long and costly litigation for the company, and at the same time I
think will really make a difference in the lives of millions of school
children," said Microsoft Chief Executive Steve Ballmer.
Some educators
hailed the proposed five-year settlement, which would help the 14% of U.S.
schools where 70% or more of the student body is eligible for meal
assistance.
Yet consumers would get nothing under the accord. Microsoft
would pay the class-action lawyers an additional amount set by Motz. Microsoft
said it would take a $550-million charge before taxes in the current quarter
to cover spending under the settlement.
Microsoft earns more than
$2billion per quarter in profit. The company's shares fell $1.14 on Tuesday to
close at $65.40 on Nasdaq.
The settlement is another major step toward
getting Microsoft out from under the cloud of litigation, Ballmer
said.
The company recently reached a separate tentative arrangement to
resolve antitrust suits filed by the Justice Department and nine states. The
remaining piece of that case, pursued by California and eight other states, is
considered the biggest continued legal threat to the firm.
The proposed
class-action settlement will encounter fierce resistance by the
court-appointed lawyers representing California consumers. It isn't clear
whether lawyers for California consumers will be allowed to independently
pursue the case.
Those lawyers already have won class-action status in
a San Francisco court and were proceeding separately from the claims
consolidated in Baltimore. They say they were excluded from the negotiations
because they were taking a harder line.
"The whole thing is so
ludicrous," said Richard Grossman of San Francisco's Townsend & Townsend
& Crew, the lead firm for 13 million California consumers. "We have been
litigating the longest and most vigorously."
Because the Baltimore
cases were gutted, and many of them dismissed, in Motz's earlier rulings,
Grossman and some of the other California plaintiffs' attorneys said Microsoft
is trying to settle the weakest lawsuits and extend that settlement across the
country.
They also complain that Californians will get no extra benefit
from consumer laws that allow people here and in 16 other states to sue even
though they bought software from companies other than Microsoft, typically
computer makers.
Microsoft acknowledged that it faces a battle in
Baltimore, where Townsend lawyers argued in a closed-door conference with Motz
earlier this month that Californians alone could recover $3 billion to $9
billion at trial.
"Any time you have a high-profile class-action
settlement like this, you're always in for a fight," said Seattle attorney
Steve Berman, one of the company's negotiators.
Microsoft will be aided
by judges' general desire to settle rather than oversee complex trials, by the
favorable publicity generated by a deal that aids schools, and by the support
of plaintiffs' lawyers including Robert Lieff, a San Francisco attorney who
had been helping manage the California consumer cases under the Townsend
firm's leadership.
Lieff and others involved in the talks said the
objections of Townsend partner Eugene Crew already had prompted Microsoft to
sweeten its offer by more than $300 million, mostly in the form of technical
support for schools and in newer computers.
Among the deal's early
opponents is California Atty. Gen. Bill Lockyer, who is leading the remaining
states fighting Microsoft.
Lockyer said he wanted to learn more about
the plan, but giving schools more Microsoft products "just locks more people
into their monopolistic system."
"It's a little like Big Tobacco being
found guilty of selling cigarettes to minors, and the remedy is for them to
agree to give them free cigarettes," Lockyer said.
Lockyer said he
plans to tell Motz his views. Federal judges often give deference to elected
consumer-protection officials in such cases , but they are not bound to follow
their recommendations.
Although the states' lawsuits aim to change
Microsoft's business practices, it was left to private lawyers to seek
disgorgement of improper profits, Lockyer said.
"That aspect of the
alleged injury was left to the private class actions. That makes it
frustrating when the result extends the Microsoft hegemony," he
said.
As in other class actions, the settlement would be advertised
nationally and would allow individuals to object in court or "opt out," that
is, decline to be included. They could then sue on their own. But class-action
lawyers such as Crew have been barred in the past from opting out mass numbers
of people, such as all California customers, because that would make the
settlement process unworkable.
Crew said he wants Motz to act on his
own to exempt Californians.
Asked if such a move would kill the deal,
Microsoft deputy general counsel Thomas Burt said the settlement has to be
national. He declined to say how many people could opt out before Microsoft
walked away.
Lawyers for both sides noted that it would be harder
politically for big companies that purchase large amounts of Microsoft
software to opt out and fight for more if doing so would jeopardize gifts to
schoolchildren.
Under the settlement plan, Microsoft would give $150
million and provide as much as an additional $100 million to match others'
contributions to a new foundation, which in turn would give local grants to
schools.
Among other things, the foundation will make 200,000
refurbished computers available each year for five years at a cost of $50
each. It also will offer to pay for one-third of the cost of other
machines.
Microsoft will pay $160 million for a separate
technical-support plan and $90 million to train educators over five years. And
it will donate as much as $500 million worth of software for machines already
owned by the schools.
Although the settlement plan provides some
support for Apple Computer Corp. Macintosh machines and software, Crew said it
would on balance help Microsoft in the education market, where Apple has
enjoyed a nearly 50% share.
