« Red Hat and Novell Sued Over Alleged Linux Patent Violations | Main | Apple Lowers Price of DRM-Free Tracks to 99 Cents »

October 15, 2007

Scotus Declines MS, Best Buy Appeal on Cross Promotion

The Supreme Court has refused to hear an appeal of a 9th Circuit case allowing a class action to proceed against Microsoft and Best Buy.  The opinion at issue is Odom v. Microsoft, 486 F3d 541 (CA 9 2007).  The denial of certiorari is at 2007 WL 2982493 .  The case involves RICO and other claims against the two corporations for conspiring to sign customers up to the MSN Internet service without those customers' permission.  The case was dismissed by the trial court but reinstated by the 9th Circuit after an en banc hearing.

The facts as stated in the 9th Circiut:

Named plaintiff James Odom-then the only plaintiff-filed the first complaint in this action in the Northern District of California, alleging that defendants Microsoft and Best Buy had violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962(c) and (d). Odom alleged that in April 2000 defendants entered into an agreement under which “Microsoft invested $200 million in Best Buy and agreed to promote Best Buy's online store through its MSN service.” MSN is a division of Microsoft offering Internet access services. In return, “Best Buy agreed to promote MSN service and other Microsoft products in its stores and advertising.” Odom alleged that pursuant to their agreement, Best Buy employees distributed different Microsoft compact discs (“Trial CDs”) depending on what the customer purchased. For example, a customer who purchased a computer would receive a Trial CD providing a free six-month subscription to MSN. A customer who purchased a cell phone would receive a Trial CD providing a free thirty-day subscription.

Odom alleged that if the customer was paying by debit or credit card the Best Buy employee would scan the Trial CD. If asked why the Trial CD had been scanned, the Best Buy employee would claim it was for “inventory control or otherwise misrepresent[ ] the purpose of the scanning.” Odom alleged that what this scanning actually did was send the information to Microsoft. Microsoft would then, without the customer's knowledge or permission, activate an MSN account in the customer's name. If the customer did not cancel the account before the expiration of the free trial period, Microsoft would start billing the debit or credit card number. Odom further alleged that when customers called to dispute these charges, Microsoft directed some of them to “seek relief from their debit or credit card issuers.”

Odom alleged that the “policies and practices by Best Buy and its employees relating to distribution of the Trial CDs-including but not limited to the deliberate failure to make disclosures and making of misrepresentations-have been formulated and implemented by Best Buy jointly with Microsoft, by agreement with Microsoft, and/or with Microsoft's knowledge and approval for the benefit of both Best Buy and Microsoft.” Odom alleged that no affected customer had been fully compensated for his or her losses, defined as (1) a full refund of the unauthorized charges; (2) a full refund of the accrued finance charges; (3) payment of interest on the money during the time it was held by Microsoft; and (4) compensation for the “time, effort, and expense” incurred in cancelling MSN accounts and seeking refunds. Odom alleged that these losses resulted from defendants' actions taken pursuant to their agreement.

The 9th Circuit heard arguments that this type of arrangement was not the type of conspiracy that Congress intended to fall under the RICO statute.  The Court rejected that position by stating that the language of the statute was broad.  Congress could make changes to the language of the statute, not the courts, citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985).  Now Microsoft and Best Buy will have to defend themselves over the alleged conduct.  This case may be better off settled as far as the defendants are concerned.  We'll see.

October 15, 2007 | Permalink


TrackBack URL for this entry:

Listed below are links to weblogs that reference Scotus Declines MS, Best Buy Appeal on Cross Promotion:


Post a comment