PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
PAUL A. DEITER; GARY LEACH;
FRANKLIN L. DEJULIUS,
Plaintiffs-Appellants,
and
LINDA DAMERON KLOTH; BLAINE
COX; DEBRA CUNNINGHAM; ERIC
FERRELL; ELIZABETH STRICKLAND;
RENE GONZALEZ; CLAY TYLER; PETER
HAKLAR; ERIC S. LAZARUS; HAROLD
A. PHILLIPS; PRECISION BILLING
SERVICES, INCORPORATED; MSC
SYSTEMS, INCORPORATED; O’SULLIVAN,
HICKS & PATTON; CARL C. CONRAD;
PAUL L. HOWARD; THOMAS
MCCALEB; VICKI MCCALEB; JAMES
WOODS; LEYTON T. BROWN; GALE No. 04-1633
RUFFIN; RYAN D. REYNOLDS; JAY S.
QUIGLEY; JOHN W. REDMANN; KEVIN
HUDDELL; ELEADERS, INCORPORATED;
JOHN GLASE; BRUCE WRIGHT; KBS-
NET, SA; EVANGELOS KRITIKOS;
WALTER LORELL; RENALDO VELTRI;
JOHANNA M. MCWHINNEY; JODI
MARKS; JUDD GOODMAN;
SILVERWARE, LIMITED; DATA UNIT
AG; DATACROWN, LIMITED, On
Behalf of Themselves and All
Others Similarly Situated; WAYNE
MIMS; GRAVITY, INCORPORATED; 403
WEST LOOP 820 N; TO THE RESCUE
COMPREHENSIVE COMPUTER SERVICES;
2 DEITER v. MICROSOFT CORP.
D’S PET SUPPLIES, INCORPORATED;
DAVID BACH; THE RUBBRIGHT GROUP;
JAMES M. BURT; RECLAIM CENTER,
INCORPORATED; STEVEN NIELSEN;
RAYMOND PRYOR; SEASTROM
ASSOCIATES LTD; CHRIS CAMPBELL;
DENISE DAVENPORT; SARA
CHEESEMAN; RONALD RODJENSKI;
HAROLD PHILLIPS; MATTHEW W.
O’NEILL; ROBERT WEINKE; IDY
KLEIN; DAVID JAFFEE; AVI MANDEL;
SOUTH DAKOTA ASSOCIATION OF
PLUMBING, HEATING AND COOLING
CONTRACTORS; JOHNNIE MOON;
ROBERT LEE COLEBANK; BRYAN K.
MANSON; FRED LUCE; EDWARD
MICHAEL O’BRIEN; GOLF O’BRIEN
COMPANY; CYNTHIA M. AIKENS;
CLAIR FALGOUST; CARLTON
FALGOUST; MANUAL KNIGHT;
WEBSTER T. KNIGHT; JAMES RUDASIL;
AUBREY BERNARD; GERALDINE GUICE;
WILLIAM BRAND PRYOR; PACIFIC
COAST SYSTEMS; TERI GORDON;
MICHAEL SHEVEKOV; MARTIN HAGAN;
ELHAM SHIRZAI; DAWN BRANDT;
DONALD J. GIANNI; MARIO
TRAFFICHINI; JOHN F. SIEGENTHALER;
CAREN M. MCCALL; LARRY A.
PENIX; PRYCE M. HAYNES, II; JOHN
K. HEIDLAGE; RYAN D. REYNOLDS;
DANIEL C. RAY; GTI SYSTEM
INTEGRATORS; TZIRI FINE; DEREK M.
PRENTICE; KURT C. CARTER;
DEITER v. MICROSOFT CORP. 3
JAMES T. BREMS; TIM APPELGATE;
JULIE TINKHAM; STEVEN MASTER;
THOMAS INFANTE; TURNER
CORPORATION; JOHN A. SUPERNOVICH;
MARLENE K. SUPERNOVICH;
SHERWOOD; AUTOMATIK DESIGN,
INCORPORATED; STATE OF WEST
VIRGINIA, ex rel Darrell V. McGraw,
Jr., Attorney General; NETSCAPE
COMMUNICATIONS CORPORATION; SUN
MICROSYSTEMS; BE INCORPORATED;
BURST.COM, INCORPORATED; IVAX
CORPORATION; KEITH COOPER;
CONWAY, MACKENZIE & DUNLEAVY,
PC; CHRISTINE BARTON; RHODA
HENNING; KAREN GREEN; RENAE
LUCAS; JOHN ROBY; JOHN DOES 1-50;
MICHAEL LEWIS; HENRY MASCAGNI;
HAYLEY J. GARDNER; STEVE GRUBB;
LINDA STEWART; MURLINE
ADDINGTON; TRAVIS D. MCHANN, JR.;
BILLY LEWIS; BOOKER T. BAILEY, JR.;
JAMES PIGG; ANGELA BRINKLEY;
DELANIOUS HARRIED; GERTRUDE
GREEN; CAMELIA CALVERT; MARY
WYATT; EMMA WALTON; HETHA
GREEN; REALNETWORKS,
INCORPORATED; PRADEEP SUJAN,
Plaintiffs,
v.
MICROSOFT CORPORATION,
Defendant-Appellee.
4 DEITER v. MICROSOFT CORP.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
J. Frederick Motz, District Judge.
(CA-00-1332-MDL; CA-00-2117-JFM)
Argued: October 28, 2005
Decided: February 7, 2006
Before WIDENER, NIEMEYER, and GREGORY, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion,
in which Judge Widener and Judge Gregory joined.
COUNSEL
ARGUED: Daniel A. Small, COHEN, MILSTEIN, HAUSFELD &
TOLL, Washington, D.C., for Appellants. David Bruce Tulchin,
SULLIVAN & CROMWELL, New York, New York, for Appellee.
ON BRIEF: Michael D. Hausfeld, Michael W. Byrne, COHEN,
MILSTEIN, HAUSFELD & TOLL, Washington, D.C.; Stanley M.
Chesley, Robert Heuck, II, WAITE, SCHNEIDER, BAYLESS &
CHESLEY, Cincinnati, Ohio; Dianne M. Nast, Michael Nast, RODA
& NAST, Lancaster, Pennsylvania; Douglas Thompson, William But-
terfield, FINKELSTEIN, THOMPSON & LOUGHRAN, Washing-
ton, D.C.; Frank C. Dudenhefer, CUMMINGS, CUMMINGS &
DUDENHEFER, New Orleans, Louisiana; James R. Malone, CHIMI-
CLES & TIKELLIS, L.L.P., Birmingham, Alabama; Elwood S.
Simon, John P. Zuccarini, ELWOOD SIMON & ASSOCIATES, Bir-
mingham, Alabama; Robert A. Skirnick, MEREDITH, COHEN,
GREENFOGEL & SKIRNICK, P.C., New York, New York; William
Markovits, MARKOVITS& GREIWE, Cincinnati, Ohio; Lynn L.
Sarko, Mark Griffin, Raymond Farrow, KELLER ROHRBACK,
L.L.P., Seattle, Washington; Christopher Lovell, LOVELL, STEW-
ART & HALEBIAN, L.L.P., New York, New York; Melissa H. Max-
man, DUANE MORRIS, L.L.P., Philadelphia, Pennsylvania; William
DEITER v. MICROSOFT CORP. 5
Kerschaw, KERSCHAW, CUTTER, RATINOFF & YORK, Sacra-
mento, California; James Patrick Ulwick, KRAMON & GRAHAM,
Baltimore, Maryland, for Appellants. Michael F. Brockmeyer, Jeffrey
D. Herschman, PIPER RUDNICK, L.L.P., Baltimore, Maryland;
Richard J. Wallis, Steven J. Aeschbacher, MICROSOFT CORPORA-
TION, Redmond, Washington; Daryl A. Libow, Richard C. Pepper-
man, II, Sharon L. Nelles, SULLIVAN & CROMWELL, L.L.P., New
York, New York; Charles B. Casper, Peter Breslauer, MONTGOM-
ERY, MCCRACKEN, WALKER & RHOADS, L.L.P., Philadelphia,
Pennsylvania, for Appellee.
OPINION
NIEMEYER, Circuit Judge:
In this antitrust litigation, the district court entered an order dated
May 27, 2003, certifying a class of consumers seeking damages
against Microsoft Corporation allegedly caused by Microsoft’s use of
monopoly power to overcharge purchasers of Microsoft’s Windows
operating system software during the period between February 1999
and April 2003. Plaintiffs Paul A. Deiter, Franklin L. DeJulius, and
Gary L. Leach, who made their purchases on the Internet or by tele-
phone during the class period, were appointed class representatives.
The district court excluded from the class businesses who were direct
purchasers of software from Microsoft through its "Enterprise Pro-
gram" because these "Enterprise customers" purchased bundles of
various Microsoft software in large volume and for negotiated prices.
The court concluded that the representative parties’ claims were not
"typical" of the claims that the Enterprise customers might have. See
Fed. R. Civ. P. 23(a)(3). The court concluded in the alternative that
certifying a class consisting of both individuals and Enterprise cus-
tomers would not be "superior" to other methods of proceeding with
the Enterprise customers’ potential claims. See Fed. R. Civ. P.
23(b)(3).
On appeal of the certification order, we affirm.
I
In the wake of the United States’ suit against Microsoft Corpora-
tion, in which Microsoft was found to have maintained an illegal
6 DEITER v. MICROSOFT CORP.
monopoly in the worldwide market for licensing Intel-compatible PC
operating systems, see United States v. Microsoft Corp., 253 F.3d 34
(D.C. Cir. 2001), dozens of class action lawsuits were filed against
Microsoft in courts across the country. The plaintiffs in these actions
contended that as a result of Microsoft’s violations, they were over-
charged for operating system software and applications software.
They sought damages and injunctive relief under the Clayton and
Sherman Acts. See 15 U.S.C. § 2, 15, 26. On April 25, 2000, the Judi-
cial Panel on Multidistrict Litigation transferred all such cases pend-
ing in federal district courts to the District of Maryland pursuant to
28 U.S.C. § 1407. Shortly thereafter, 39 plaintiffs filed a superseding
consolidated complaint in which they purported to represent multiple
classes of consumers. Following Microsoft’s motion to dismiss or for
summary judgment, the district court dismissed the damages claims
of all plaintiffs who did not buy software directly from Microsoft pur-
suant to Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The court
also dismissed the claims of foreign plaintiffs under the Foreign Trade
Antitrust Improvements Act of 1982, 15 U.S.C. § 6a.
On September 5, 2001, the remaining plaintiffs filed a motion with
the district court to certify four classes of persons who had "acquired"
Microsoft operating system or applications software anytime after
November 10, 1995. Two purported classes were defined by those
requesting injunctive relief — one for direct purchasers of operating
systems and one for direct purchasers of applications software. The
other two were defined by those claiming monetary damages —
again, one for operating systems and one for applications software.
By order dated May 27, 2003, the district court certified a single class
under Federal Rule of Civil Procedure 23(b)(3) for claims seeking
monetary damages, which it defined as:
All persons and entities in the United States who acquired
directly from Microsoft through the shop.microsoft.com
Web site (by ordering on line or by calling the toll free num-
ber provided there) a license, other than for re-sale or re-
licensing, for Microsoft single-user operating system soft-
ware, including upgrades, compatible with x86 computers,
but not including Windows 2000 or Windows NT, from
February 22, 1999 through April 30, 2003.
DEITER v. MICROSOFT CORP. 7
The court designated Paul Deiter, Franklin DeJulius, and Gary Leach
as representative parties. Each had acquired a copy of Windows oper-
ating system from Microsoft’s shop.microsoft.com website in 1999 or
2000. In its order, the court denied the plaintiffs’ motion for class cer-
tification in all other respects. By order dated July 28, 2003, the court
expanded the scope of the class "to include persons who purchased
Microsoft operating system software as ‘Full Packaged Product’ in
direct marketing campaigns during the class period."
In defining the class, the district court rejected the plaintiffs’
request to certify a class of persons who acquired applications soft-
ware because none of the class representatives ever purchased such
software from Microsoft. The court found that the different software
programs were sold in different markets. Because the liability and
damage issues presented by claims arising out of different markets
were inherently different, the court held that the representatives who
only purchased operating system software did not have claims that
were typical of the claims belonging to purchasers who bought Micro-
soft applications software. See Fed. R. Civ. P. 23(a)(3).
The court also excluded from the class businesses that purchased
large quantities of Microsoft software licenses through Microsoft’s
Enterprise Program. Under the Enterprise Program, which began on
October 1, 2001, Microsoft sold software licenses directly to custom-
ers who wanted to purchase at least 250 licenses for its operating sys-
tem or applications software. In making these sales, Microsoft
negotiated individual three-year agreements to provide both software
and upgrades to the software at lower prices. The district court con-
cluded that the representative parties could not represent the Enter-
prise customers because the Enterprise customers purchased "licenses
of a myriad of software products through an entirely different line of
distribution within Microsoft." As with the applications software pur-
chases, the court based its decision on Rule 23(a)(3). The court held
in the alternative that the class action method was not "superior to
other available methods for the fair and efficient adjudication of the
[Enterprise customers’] controvers[ies]," Fed. R. Civ. P. 23(b)(3),
because the Enterprise customers "have substantial claims" and,
hence, have an incentive to file individual actions. The court noted in
addition that no Enterprise customer had ever sued Microsoft for anti-
trust violations, concluding therefore that the class action device
8 DEITER v. MICROSOFT CORP.
would not be "a valuable management device" for the efficient resolu-
tion of numerous lawsuits.
Following class certification, Microsoft and the class settled their
disputes, and the district court approved the settlement on April 16,
2004. The only issue presented on appeal is whether the district court
erroneously restricted the scope of the class in its May 27, 2003 order
to exclude Enterprise customers.
II
We review class certification orders for abuse of discretion. See
Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 424 (4th Cir.
2003).
The plaintiffs contend that the district court abused its discretion in
concluding that they did not satisfy the typicality requirement of Fed-
eral Rule of Civil Procedure 23(a)(3) with respect to the claims of
Enterprise customers. They argue that the district court’s reliance on
the distinction between plaintiffs’ purchases and the Enterprise cus-
tomers’ purchases was irrelevant. They assert:
The only relevant fact . . . is that both the named plaintiffs
and the Enterprise customers purchased operating system
software directly from Microsoft. Thus, both have damages
claims against Microsoft under federal antitrust law for
unlawful monopolization. This identity of claims satisfies
Rule 23(a)(3)’s typicality requirement.
Microsoft contends that plaintiffs’ claims were not typical of the
potential claims of Microsoft’s Enterprise customers. They assert:
Enterprise customers [are] large businesses that individually
negotiate high-volume, long-term deals with Microsoft for
a number of very different software products. Proof that the
class representatives were overcharged would by no means
necessarily establish that Enterprise customers were over-
charged, and Enterprise customers should not have their
claims put in the hands of "representatives" who lack the
knowledge or incentive to pursue them.
DEITER v. MICROSOFT CORP. 9
The typicality requirement of Rule 23(a)(3) is but one of a number
of threshold requirements that plaintiffs must satisfy to justify their
representation of a class. Other portions of Rule 23 require plaintiffs
to demonstrate at the outset that the class members whom they pur-
port to represent are so numerous that traditional joinder is impracti-
cal; that their claims or defenses present common issues of law or
fact; and that they are able to represent the class members’ interests
fairly and adequately. See Fed. R. Civ. P. 23(a)(1), (2), (4). Even
when these requirements are met, the plaintiffs must also demonstrate
fulfillment of the requirements of Rule 23(b)(1), 23(b)(2), or 23(b)(3).
See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614 (1997) ("In
addition to satisfying Rule 23(a)’s prerequisites, parties seeking class
certification must show that the action is maintainable under Rule
23(b)(1), (2), or (3)"); id. at 621 (same).
The class action device, which is "designed as an exception to the
usual rule that litigation is conducted by and on behalf of the individ-
ual named parties only," Gen. Tel. Co. of Southwest v. Falcon, 457
U.S. 147, 155 (1982) (internal quotation marks omitted), allows
named parties to represent absent class members when, inter alia, the
representative parties’ claims are typical of the claims of every class
member. To be given the trust responsibility imposed by Rule 23, "a
class representative must be part of the class and possess the same
interest and suffer the same injury as the class members." Id. at 156
(internal quotation marks omitted). That is, "the named plaintiff’s
claim and the class claims [must be] so interrelated that the interests
of the class members will be fairly and adequately protected in their
absence." Id. at 157 n.13. The essence of the typicality requirement
is captured by the notion that "as goes the claim of the named plain-
tiff, so go the claims of the class." Broussard v. Meineke Discount
Muffler Shops, Inc., 155 F.3d 331, 340 (4th Cir. 1998) (quoting
Sprague v. Gen. Motors Corp., 133 F.3d 388, 399 (6th Cir. 1998)
(internal quotation marks omitted)).
The typicality requirement goes to the heart of a representative par-
ties’ ability to represent a class, particularly as it tends to merge with
the commonality and adequacy-of-representation requirements. See
Amchem, 521 U.S. at 626 n.20; Gen. Tel., 457 U.S. at 157 n.13. The
representative party’s interest in prosecuting his own case must simul-
taneously tend to advance the interests of the absent class members.
10 DEITER v. MICROSOFT CORP.
For that essential reason, plaintiff’s claim cannot be so different from
the claims of absent class members that their claims will not be
advanced by plaintiff’s proof of his own individual claim. That is not
to say that typicality requires that the plaintiff’s claim and the claims
of class members be perfectly identical or perfectly aligned. But when
the variation in claims strikes at the heart of the respective causes of
actions, we have readily denied class certification. See, e.g., Brous-
sard, 155 F.3d at 340-44 (holding that plaintiffs could not sustain a
class action based on a theory of collective breach of contract because
variations in the claims undermined typicality); Boley v. Brown, 10
F.3d 218, 223 (4th Cir. 1993) (affirming the district court’s denial of
class certification when the resulting harm was dependent on consid-
erations of each class member’s unique circumstances). In the lan-
guage of the Rule, therefore, the representative party may proceed to
represent the class only if the plaintiff establishes that his claims or
defenses are "typical of the claims or defenses of the class." Fed. R.
Civ. P. 23(a)(3) (emphasis added).
Thus, it follows that the appropriate analysis of typicality must
involve a comparison of the plaintiffs’ claims or defenses with those
of the absent class members. To conduct that analysis, we begin with
a review of the elements of plaintiffs’ prima facie case and the facts
on which the plaintiff would necessarily rely to prove it. We then
determine the extent to which those facts would also prove the claims
of the absent class members.
To establish an antitrust violation, a plaintiff would have to prove
"(1) a violation of the antitrust law, (2) direct injury to the plaintiff
from such violations, and (3) damages sustained by the plaintiff."
Windham v. Am. Brands, 565 F.2d 59, 65 (4th Cir. 1977). Specifi-
cally, to prove a violation of § 2 of the Sherman Act, which prohibits
monopolization or attempted monopolization of a relevant market, a
plaintiff would have to demonstrate that the defendant possesses
monopoly power in the relevant market and "willfully acquired or
maintained that power as distinguished from growth or development
as a consequence of a superior product, business acumen, or historic
accident." Cavalier Telephone v. Verizon, Virginia, 330 F.3d 176, 183
(4th Cir. 2003) (internal quotation marks and citation omitted);
Advanced Healthcare Servs., Inc. v. Radford Community Hosp., 910
F.2d 139, 147 (4th Cir. 1990). Finally, the plaintiff would have to
DEITER v. MICROSOFT CORP. 11
prove that antitrust injury, i.e. injury to competition, that resulted
from the illegal acquisition or maintenance of monopoly power in that
the plaintiff was overcharged in its purchases because of the injury to
or absence of competition. Advanced Healthcare, 910 F.2d at 147.
Describing how proof of their claims would be typical of the proof
of the claims of absent class members, the plaintiffs asserted to the
district court:
The representative plaintiffs, like the absent class members,
acquired Microsoft licenses for operating systems or office
suite software for their own use at a price determined by
Microsoft. All class members, including the named plain-
tiffs, were injured because the price they paid was artifi-
cially inflated as a result of Microsoft’s monopolization of
the relevant markets in violation of § 2 of the Sherman Act.
J.A. 1421-22. But this argument was made at an unacceptably general
level. Examining typicality at a more directly relevant level, the dis-
trict court found meaningful differences between plaintiffs’ claims
and those of Enterprise customers. The plaintiffs purchased operating
system software in 1999 and 2000 from Microsoft either on-line or by
telephone, paying the fixed prices that Microsoft posted as part of its
offer to sell. They claimed that they purchased individual copies of
Windows at Microsoft’s "estimated retail price," which they con-
tended was as much as twenty percent higher than the prices charged
by retail stores and other on-line retailers. They argue that Microsoft
could demand and receive that price because of its monopoly power.
In proving their case, however, the plaintiffs would hardly prove
a case on behalf of Microsoft’s Enterprise customers. These custom-
ers, who purchased at least 250 licenses, did not purchase on-line or
by telephone, nor did they pay prices established in advance by
Microsoft. The prices that Enterprise customers paid were negotiated
and, as a consequence, were both discounted and unique to each
transaction. In addition, Enterprise customers purchased different
products: their agreements were three-year deals that included
upgrades for the software covered by their agreements and sometimes
included applications software in addition to operating system soft-
12 DEITER v. MICROSOFT CORP.
ware. Thus, plaintiffs’ proof that Microsoft overcharged them would
hardly prove that Microsoft overcharged the Enterprise customers.
Moreover, to prove that Microsoft overcharged the Enterprise cus-
tomers would require new and different proof because the Enterprise
customers were able to negotiate their deals in a different competitive
context from that involving the plaintiffs. Thus, with respect to the
Enterprise deals, the plaintiffs would have to define and prove a rele-
vant market and then injury to competition in that market. The plain-
tiffs themselves seem to recognize a difference in this proof for they
have alleged different markets for the sale of operating system soft-
ware and applications software. But the differences may be even
greater because evidence would be required to demonstrate how
Microsoft’s monopoly powers caused Enterprise customers to be
overcharged in negotiated deals involving bundles of products other-
wise sold in two different markets. Because of these factual dissimi-
larities as to market, injury to competition, and causation, the district
court’s conclusion that there would be a substantial gap between what
plaintiffs proved for their individual cases and what would be
required proof for the Enterprise customers’ claims was a reasonable
one.
Thus, in concluding that the representative parties’ claims are not
typical of the claims of Microsoft’s Enterprise customers, the district
court did not err, and in refusing to include Enterprise customers as
part of the certified class represented by these plaintiffs, the court did
not abuse its discretion. See Gunnells, 348 F.3d at 424.
Because we affirm the district court’s reliance on Rule 23(a)(3) to
deny the representative parties’ representation of Enterprise custom-
ers, we do not reach the additional reason given by the district court
based on Rule 23(b)(3), that a class action would not be superior over
other methods of proceeding.
AFFIRMED