California cases charge ahead

Summary:The lead attorney for dozens of private antitrust lawsuits wants Microsoft to pay for overcharging consumers.

Attorney Gene Crew looks at his antitrust suit against Microsoft as a labor of love.

Crew, a partner in San Francisco-based Townsend, Townsend & Crew, has been a pioneer in seeking retribution from the software giant through a private class-action suit.

While most attorneys waited until after U.S. District Judge Thomas Penfield Jackson issued his first major ruling in the Department of Justice antitrust case, Crew quietly filed suit months earlier because, he said, it was clear the government's case was going well.

"We knew no one else would take it because it was too risky," said Crew, whose suit -- along with one other federal suit -- hit the courts in February 1999. "We wanted to be ahead of the game."

And he has been so far.

Now the lead attorney of the 32 cases consolidated in California Superior Court in San Francisco, Crew is well into the discovery process of the case. His firm was recently in Washington sate, plowing through more than 900 boxes of Microsoft (msft) documents, many of them gleaned from the government's case.

Class-action status sought
During the first week in August, Crew will argue for class-action status for the lawsuit, seeking to represent hundreds of thousands of Californians who use Microsoft's operating system and word processing software. A trial date already has been set for the California cases, although it's not until March 2002.

"This is the best case, and the biggest, and the most advanced," Crew said during an interview in his office eight floors above the San Francisco waterfront.

Simply stated, the suits allege consumers paid too much for Microsoft software. Unlike the case brought by the DOJ and 17 state attorneys general, the California cases cover applications software, such as Word and Excel, in addition to the Windows operating system.

Crew originally filed suit on behalf of Charles Lingo, an outspoken retired hospital maintenance engineer and Microsoft critic, who's marched on the company demanding a refund for unused Windows software.

Though cases in Oregon and Nevada have been tossed out, Crew is confident that he will prevail.

California is key
"The California litigation is the most important in the country," Crew said. "It's the best. It's the strongest." That's because California is one of at least 17 states with consumer protection laws that are more flexible in letting people sue even if they don't purchase a product directly from a company.

Sporting down-to-earth khakis and plaid shirt, Crew bristles at allegations that he's only in it for money -- allegations commonly made against attorneys taking on civil action cases. Instead, he couches it as a holy war on behalf of Silicon Valley consumers and competitors who've suffered Microsoft's greed for years.

"It's a labor of love," he said. "We're in Silicon Valley, and we have a lot of Silicon Valley clients. There's a lot of concern over Microsoft."

Coordinating the suits has been a logistical nightmare, partly because there are so many and partly because of the money at stake.

Disputes in the California case have pitted attorneys who are on the same side of the case against one other. Though he filed first, Crew had to battle latecomers to be lead attorney, usually the person who collects the lion's share of the legal fees.

Lawyer v. lawyers
Squabbling among attorneys already has slowed the case. In January, a judge told the lawyers involved in the California cases that they had to work out their differences if they wanted him to certify the class. At times, the battles have become quite heated.

In one legal document filed earlier this year, an attorney at Crew's firm asserted that a Microsoft lawyer was conspiring with attorneys at class-action firms Milberg, Weiss Bershad Hynes & Lerach and Lief, Cabraser, Heimann & Bernstein to make those firms the lead firms on the case instead of Crew's.

Townsend partner Richard Grossman claimed in the affidavit that his firm received a phone call from a Microsoft-hired attorney urging them to back down and allow the two other firms to assume lead status. Shortly afterward, the Townsend attorneys received a call from a lawyer at one of the two firms, who bragged of a special relationship with Microsoft.

"We were alarmed by Microsoft's efforts to control the management of the plaintiff's legal team and to have it stacked with two firms that appear to be colluding with Microsoft," Grossman wrote in the filing.

Eventually, Crew managed to maintain his lead status.

Hint of collusion
Attorneys in the Valley find it ironic that Microsoft would press to have Milberg Weiss as one of the lead firm in the case.

Considered the scourge of computer companies everywhere, Milberg Weiss attorney Bill LeRach has attacked hi-tech firms of all stripes with hundreds of shareholder lawsuits. What's more, in 1996 LeRach promoted Proposition 211, a California ballot initiative that would have made it easier to sue in state courts. The initiative so alarmed normally libertarian Silicon Valley companies that they orchestrated a massive campaign to successfully defeat the measure.

"Usually Mr.LeRach is not sought out by the members of class action defense," Silicon Valley attorney Rich Gray chuckled.

Collusion was probably too strong a word to describe what Microsoft was trying to do with the Milberg Weiss attorneys, he added. More likely, Microsoft attorneys want to work with someone whose tactics they understand.

"I have trouble believing they think he's going to be easier," Gray said.

Microsoft denies that it has an interest in the wrangling.

Spokesman: MS will prevail
"We will leave that work up to the plaintiffs' attorneys," spokesman Jim Cullinan said. "Microsoft has no stake in who the lead plaintiff's counsel really is."

Cullinan said the company already is working with Milberg Weiss on several fronts because the company has filed so many of the private cases throughout the country. Cullinan said eventually Microsoft will prevail in both the government case and, as a result, in the class action suits.

"Their reliance on the ruling in the DOJ case is sadly misplaced because we believe that case will be overturned on appeal," Cullinan said.

Microsoft (msft) Meanwhile, Crew said his biggest fears are that the government's case could slow down his suit and that class-action attorneys working on the case would also pressure his firm to settle for remedies that include coupons for future purchases.

Crew ultimately hopes to put cash in consumers pockets, he said. "I personally am not interested in any of these sham settlements."

As University of South Carolina law professor and antitrust expert John Lopatka pointed out, "There's a long way between what the plaintiff's lawyer wants and what the judge is going to order."

Even so, if the cases are successful, any sizeable settlement is sure to put a dent in Microsoft's coffers. Because it's home to Silicon Valley and other pockets of tech-savvy citizens, California houses as many as one-third of all users of Microsoft software, according to some estimates.

"The fact is the stakes are so huge that even if there's a small chance the cases will succeed, it's something Microsoft has to take seriously," Lopatka said.

Topics: Microsoft, Government, Legal, Windows

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