Mediation fails, judge blocks private settlement

A US district court judge Friday blocked a settlement proposal between Microsoft and plaintiffs represented in more than 100 private antitrust class-action lawsuits that have been consolidated under his jurisdiction.

          A US district court judge last Friday blocked a settlement proposal between Microsoft and plaintiffs represented in more than 100 private antitrust class-action lawsuits that have been consolidated under his jurisdiction.

          District Court Judge J Frederick Motz wrote in his 21-page opinion that he was not convinced the deal would have produced a fair conclusion to the case. The proposal would have funneled about $US1 billion worth of computers, software and support to the nation's poorest schools.

          "I cannot presently determine the adequacy of the proposed settlement because the record has not been sufficiently developed on the question of the underlying value of the class claims," Motz wrote in his opinion last Friday.

          Microsoft expressed disappointment in the decision in a statement but said it was "confident" that it would ultimately prevail in the litigation.

          "Microsoft is always open to looking for reasonable ways to resolve litigation. We will review the courts opinion and at the same time move forward with the next steps in the litigation," Tom Burt, deputy general counsel for Microsoft, said in the statement.

          One lawyer representing some of the private plaintiffs in favour of the settlement offered a similar response.

          "We’re disappointed of course that the settlement did not receive preliminary approval. We believe it would have done a lot of good," says Dan Small, an attorney with Cohen, Milstein, Hausfeld & Toll, who represents individual and corporate plaintiffs in the case. "We certainly respect the court's decision and we are prepared now to litigate the case against Microsoft."

          Mediation talks to hash out disagreements surrounding the proposed settlement failed to produce results by a Thursday deadline, according to officials involved in the negotiations.

          Because the parties involved in the talks -- which included lawyers for Microsoft, a group of attorneys representing class-action cases consolidated under Motz, and attorneys for California cases that are not represented in that group -- could not come to agreement, most experts said they did not expect Motz to approve the settlement.

          Judge Motz gave the parties until January 10 to hold mediation talks. He said he would make a preliminary ruling on the settlement after that date.

          "I wouldn't say that (the mediation) failed; it never really got started. Dealing with Microsoft is a unique experience," Steven Benz, an attorney with Washington, DC-based law firm Kellogg, Huber, Hansen, Todd & Evans, said before the court issued its decision. The firm, along with Townsend and Townsend and Crew, is representing California plaintiffs. "We hope there will be a judge ruling today denying preliminary approval" of the settlement.

          Even though an agreement was not reached, a Microsoft spokesman said before Friday's ruling by Motz that the parties complied with Judge Motz's request that they attempt to work out their differences.

          "It was in our interest to go the extra mile, in being as inclusive as possible. We went into it with good faith ... no agreement was reached, but it was the process that the judge was interested in," said spokesman Jim Desler.

          The settlement in question was proposed by Microsoft and lawyers as a resolution to over 100 private suits filed across the nation that claim the software company overcharged millions of users for its software. The cases, mainly filed in federal courts, were consolidated under Motz. The proposed settlement would have given more than 16,000 schools in the nation's poorer districts about $US1 billion worth of software, hardware, training, and support that Microsoft would have donated, via an independent foundation, in lieu of paying damages to the plaintiffs. The schools in question encompass some seven million students.

          Apple Computer had criticised the deal, saying that among other things, it would help solidify Microsoft's monopoly in the desktop operating system market by extending it to the education sector. Linux software maker Red Hat was also a vocal opponent to the deal. The company went as far as proposing its own "settlement" in the case, which involved providing its distribution of the open-source operating system instead of Microsoft's Windows.

          "We're very pleased that Judge Motz has ruled against the Microsoft proposal, which would have extended their monopoly into our schools," says Michael Tiemann, chief technology officer for Red Hat.

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