Arthur v. Microsoft :the Supreme Court of Nebraska Sacrifices Nebraska's Antitrust Law for Indirect Purchasers to Have Standing in Antitrust Claims

• Publication year: 2003

38 Creighton L. Rev. 155. ARTHUR V. MICROSOFT :THE SUPREME COURT OF NEBRASKA SACRIFICES NEBRASKA'S ANTITRUST LAW FOR INDIRECT PURCHASERS TO HAVE STANDING IN ANTITRUST CLAIMS

Creighton Law Review

Vol. 38

INTRODUCTION

Antitrust laws are based on the strong public policy against economic power being concentrated in a small number of people.(fn1) Thus, antitrust regulation seeks to protect competition and the public interest.(fn2) Although the federal government began promulgating antitrust regulation in 1890,(fn3) today, state antitrust statutes regulate trade also.(fn4) As a result, state antitrust law may differ from federal antitrust law, and states' antitrust laws may differ from one another.(fn5) Therefore, application of antitrust law can be inconsistent depending on the jurisdiction.(fn6) The recent claims against Microsoft in different jurisdictions illustrate this irregularity in antitrust law.(fn7) In response to this inconsistency, many states have attempted to reconcile state and federal law by passing harmonization statutes.(fn8) These statutes dictate the effect of federal antitrust law on state antitrust law.(fn9)

In Arthur v. Microsoft Corp.,(fn10) the Supreme Court of Nebraska interpreted Nebraska's harmonization statute in relation to a United States Supreme Court ruling that indirect purchasers do not have standing to bring a federal antitrust claim.(fn11) In Arthur, the Supreme Court of Nebraska adopted the reasoning of the Iowa Supreme Court in Comes v. Microsoft(fn12) and stated Nebraska's harmonization statute did not require the court to follow federal antitrust law.(fn13) Thus, the Supreme Court of Nebraska determined indirect purchasers had standing to sue under Nebraska antitrust law.(fn14)

This Note will first review the facts and holding of Arthur v. Microsoft.(fn15) This Note will then examine other states' harmonization statutes and other cases analyzing the application of harmonization statutes.(fn16) Lastly, this Note will discuss how the Supreme Court of Nebraska incorrectly determined federal antitrust law was not applicable in Arthur.(fn17) This Note will illustrate: 1) the court incorrectly adopted the reasoning of Comes; 2) the court misconstrued Nebraska's antitrust law and harmonization statute, which differs from other states' harmonization statutes; 3) the court ignored protections already in place for indirect purchasers under Nebraska law, regardless of Nebraska's differing harmonization statute; and 4) the court's decision conflicted with the stated purpose of Nebraska's harmonization statute.(fn18)

FACTS AND HOLDING

In Arthur v. Microsoft Corp.,(fn19) Jill A. Arthur ("Arthur") and Nancy Waters ("Waters") were users of Microsoft operating systems.(fn20) Arthur purchased the Windows 98 operating system from a CompUSA store in 2000.(fn21) In 1999, Waters purchased a computer with Windows 98 pre-installed.(fn22) The Windows operating system required Arthur and Waters to accept end-user license agreements to load and use the software.(fn23)

Arthur and Waters ("Plaintiffs") filed a class action suit against Microsoft in the district court for Dodge County alleging violations of Nebraska's Consumer Protection Act ("Act") and Nebraska U.C.C. § 2-302.(fn24) Under the Act, Plaintiffs alleged Microsoft's share of the operating system market was dominant and Microsoft's prices demonstrated its monopoly in the market.(fn25) The Plaintiffs further alleged Microsoft maintained its monopoly "by anticompetitive and unreasonably exclusionary conduct" and licensed Windows 98 at a price much higher than would be charged in a competitive market.(fn26) In the U.C.C. claim, the Plaintiffs alleged an unconscionable contract.(fn27) The Plaintiffs sought damages of the difference between the monopoly price Microsoft charged and the price Microsoft would have charged in a competitive market.(fn28) The Plaintiffs also requested attorney fees, costs, and other relief.(fn29)

The Plaintiffs defined the class as "all end-user licensees of Windows 98 residing in Nebraska for whom Microsoft has an electronic mail or surface address that is accessible by Microsoft."(fn30) The Plaintiffs believed the number of people in the class exceeded 4,000 people.(fn31) The Plaintiffs claimed these parties, like themselves, were subjected to a monopoly price for the use of Windows 98.(fn32)

The district court for Dodge County sustained Microsoft's demurrer and dismissed the Plaintiffs' antitrust and unconscionable contract claims.(fn33) The district court cited Nebraska Revised Statute § 59-289 as defining standing to bring a claim under the Act.(fn34) The statute stated when a provision of Chapter 59 is "the same as or similar to the language of a federal antitrust law," Nebraska courts shall follow the construction federal courts give to the federal law.(fn35) The district court concluded the United States Supreme Court's decision in Illinois Brick Co. v. Illinois,(fn36) which held indirect purchasers do not have the right to sue for damages under the Sherman Act, 15 U.S.C. § 1 et seq. (2000), controlled whether the Plaintiffs had standing.(fn37)

The district court held the Plaintiffs were indirect purchasers of the operating system and that, according to Illinois Brick Co., indirect purchasers were not allowed to bring claims under federal antitrust law.(fn38) The district court asserted § 59-829 required the court to follow Illinois Brick Co. and thus, indirect purchasers, such as the Plaintiffs, could not bring a claim under the Act.(fn39) The district court also dismissed the antitrust and unconscionable contract claims finding the Plaintiffs failed to state a cause of action for both claims.(fn40) The Plain-tiffs appealed the district court decision to the Supreme Court of Nebraska.(fn41) The Supreme Court of Nebraska affirmed the district court's dismissal in a memorandum opinion on June 25, 2003, but later granted the Plaintiffs' motion for rehearing.(fn42)

At the rehearing, the Supreme Court of Nebraska affirmed the dismissal of the unconscionable contract claim but reversed the dismissal of the antitrust claim, withdrawing its memorandum opinion of June 25, 2003.(fn43) The Plaintiffs argued consideration of the Act as a whole revealed sections with no complement in Federal law.(fn44) Therefore, the Plaintiffs contended the court need not follow federal interpretation of antitrust law.(fn45) Microsoft focused on the individual provisions of the Act and the similarity to federal antitrust law.(fn46) Microsoft argued federal court interpretations of such provisions controlled the court's decision.(fn47)

Justice John Wright, writing for the majority, adopted the Iowa Supreme Court's reasoning in Comes v. Microsoft Corp(fn48) and determined federal interpretation of antitrust law did not apply.(fn49) The court analyzed Nebraska Revised Statute § 59-829 and stated its purpose was to establish uniformity of conduct for businesses to understand what is acceptable behavior.(fn50) The Supreme Court of Nebraska cited the reasoning of the Iowa Supreme Court that stated "To achieve this uniformity or predictability, we are not required to define who may sue in our state courts in the same way the federal courts have defined who may maintain an action in federal court."(fn51)

After determining federal court interpretation of antitrust law was not controlling, the Supreme Court of Nebraska addressed whether indirect purchasers had standing to bring suit under the Act.(fn52) Here, the court also looked to the purpose of the Act to guide its decision.(fn53) The court stated the Act's purpose was to protect consumers against unlawful practices in commerce.(fn54) The court concluded the legislature intended to afford recovery in a civil action to consum-ers injured, directly or indirectly, under the Act.(fn55) The court reasoned denying relief to indirect purchasers "would essentially remove the word 'consumer' from the Act."(fn56)

The court found who may sue under the Act was only limited by whether the violation affects the people of Nebraska.(fn57) The court determined the Plaintiffs' class action, allegedly involving 4,000 people in Nebraska, sufficiently affected the people of Nebraska.(fn58) Thus, the court concluded the district court incorrectly sustained Microsoft's demurrer as to the antitrust claim.(fn59)

The court noted the Plaintiffs sought money damages and the U.C.C. did not provide for such damages.(fn60) Therefore, the court affirmed dismissal of the unconscionable contract claim.(fn61) However, due to indirect purchasers having standing under the Act, the court reversed the dismissal of the Consumer Protection Act claim and remanded the case to the lower court.(fn62)

Justice Kenneth Stephan, joined by Chief Justice John Hendry and Justice John Gerrard, dissented, reasoning the language of Nebraska's harmonization statute required the result opposite of the one the majority chose.(fn63) The dissent emphasized Nebraska's harmonization statute required Nebraska courts to follow federal interpretation of federal antitrust law with the same or similar language as Nebraska antitrust law.(fn64) Justice Stephan stated the relevant provisions of the Act contained language substantially similar to the corresponding federal antitrust law.(fn65) Thus, the dissent stated the harmonization statute required the court to follow Illinois Brick Co., in...