Davidson v. Microsoft Corp.

SONNER, J.,

dissenting.

I respectfully dissent. While I agree with the majority that appellants’ consumer protection act claim fails, I believe the majority reached the wrong conclusion on appellants’ other claim grounded in a violation of the Maryland Antitrust Act (“MATA”). I believe the majority’s opinion is flawed because it misconstrues the purpose of the Illinois Brick rule, and refers to the legislative history of a. statute that is clearly unambiguous.

First, a bit of background about the Microsoft litigation explains why this Court should not follow the Illinois Brick rule, which denies indirect purchasers redress for monopolistic practices that have injured them. See Illinois Brick Co. v. *58Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). To follow that rule here is to confuse the important interests that underpin it.

In April 2000, Judge Thomas Pennfield Jackson ruled that Microsoft had used its market power to create a monopoly, which then permitted the overpricing of its Windows 98 Operating System. United States v. Microsoft Corp., 87 F.Supp.2d 30 (D.D.C.2000). The U.S. Court of Appeals partially overturned the decision and remanded the case for rehearing. United States v. Microsoft Corp., 253 F.3d 34 (D.C.Cir.2001).1 Nevertheless, the appellate court let stand the essential find*59ing that Microsoft’s monopolistic practices violated the Sherman Antitrust Act. What the appellants in this appeal seek to do, as indirect purchasers of Microsoft browsers, is sue Microsoft for damages resulting from the company’s monopolistic activity. What Illinois Brick suggests is that they cannot bring suit because the direct purchasers, e.g., IBM, Compaq, CompUSA, and Dell, will do so for them. See Illinois Brick, 431 U.S. at 730-33, 97 S.Ct. 2061; see also Jeff Patterson, Note, Microsoft Antitrust Litigation: Illinois Brick Defeats its Intended Purpose, 5 J. Small & Emerging Bus. L. 377, 384-85 (2001). The trouble is that the direct purchasers here are not likely to bring suit against the sole supplier of a popular operating system because, understandably, they fear retaliation by Microsoft, and they can pass on any monopolistic costs to the indirect purchasers.

This reality likewise undercuts another stated rationale in Illinois Brick that the incentive for direct purchasers of private recompense would aid the government in enforcing antitrust laws. See Illinois Brick, 431 U.S. at 745-46, 97 S.Ct. 2061. The simple truth is that a direct purchaser will gain more from selling the Microsoft product than policing the company’s conduct. A third rationale for the outcome in Illinois Brick was judicial economy; the Court feared that including indirect purchasers would “add whole new dimensions of complexity to [Clayton Act] treble-damages suits and seriously undermine their effectiveness.” Id. at 737, 97 S.Ct. 2061. The majority’s application of Illinois Brick in this case, however, effectively forecloses judicial remedy, a result both unnecessary and unjustified in the name of efficiency. We must remember that, when the Supreme Court decided Illinois Brick in 1977, the world of browsers and personal computers was in its infancy. The case presented to us today demands a more independent analysis.

Turning to Maryland law, as the majority has noted, Maryland Code (1975, 2000 Repl.Vol.) Com. Law II, Section 11-209, governs the deteimination of who has standing for redress of MATA violations. At issue in this appeal is section ll-209(b), which provides:

*60(1) The United States, the State, and any political subdivision organized under the authority of the State is a person having standing to bring an action under this subsection.
(2) (i) A person whose business or property has been injured or threatened with injury by violation of § 11-204 may maintain an action for damages or for an injunction or both against any person who has committed the violation.
(ii) The United States, the State, or any political subdivision organized under the authority of this State may maintain an action under subparagraph (i) of this paragraph for damages or for an injunction or both regardless of whether it dealt directly or indirectly with the person who has committed the violation.

The General Assembly defined “person” as “an individual, corporation, business trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.” Md.Code (1975, 2000 Repl.Vol.), Com. Law II, § ll-201(f). Section 11-209 serves the same purpose as section 4 of the federal Clayton Act. That Act states:

[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including reasonable attorney’s fee.

15 U.S.C. § 15 (2000).

Maryland’s antitrust law also states that we should be guided by federal court interpretations of federal statutes dealing with antitrust violations. Md.Code (1975, 2000 Repl. Vol.), Com. Law II, § ll-202(a)(2). The majority has interpreted this to mean that we are bound by federal court construction of federal antitrust statutes. In interpreting Maryland antitrust statutes, however, we are only guided by federal court interpretations of federal antitrust law. See generally, Quality Disc. Tires, Inc. v. Firestone Tire & Rub*61ber Co., 282 Md. 7, 12, 382 A.2d 867 (1978)(holding that Supreme Court’s Colgate principal did not preclude plaintiffs suit under Maryland antitrust law); see also Greenbelt Homes, Inc. v. Nyman Realty, Inc., 48 Md.App. 42, 48, 426 A.2d 394 (1981) (expressly holding that we are not bound by federal court construction of federal law when interpreting MATA). Federal court construction guides me to part company with the majority and conclude that Maryland law allows indirect purchasers to obtain redress in our courts.

In Illinois Brick, the Supreme Court held that indirect purchasers are not injured in their businesses within the meaning of section 4 of the Clayton Act. In reaching this conclusion, the Court was bound by Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968), a precedent it declined to overrule.2 Without a doubt, because of the Illinois Brick Rule, the appellants, here, could not pursue their claims under federal antitrust law.

I do not, however, believe that we need or should follow the underpinning rationale from Hanover Shoe or Illinois Brick under Maryland antitrust law. While Congress has authority, under its Article I powers, to pre-empt state law, the Supreme Court has ruled that federal antitrust law does not pre-empt state law, because “Congress intended the federal antitrust laws to supplement, not displace, state antitrust remedies.” See California v. ARC America, Corp., 490 U.S. 93, 102, 109 S.Ct. 1661, 104 L.Ed.2d 86 (1989)(emphasis added). The Supreme Court, in ARC America, held that “[t]he congressional purposes on which Illinois Brick was based provide no support for a finding that state indirect purchaser *62statutes are pre-empted by federal law.” 490 U.S. at 105-106, 109 S.Ct. 1661. In fact, the Supreme Court cited section 11-209 as an example of a state statute that arguably allowed for indirect purchaser suits. Id. at 98 n. 3, 109 S.Ct. 1661. Certainly, as the majority holds, ARC America did not create a cause of action for the appellants, but I disagree with the conclusion that Maryland antitrust law itself does not contemplate a cause of action for indirect purchasers.

Notwithstanding the- majority’s determination to the contrary, MATA Section 11 — 209(b)(2) (ii), itself, makes absolutely no distinction between direct and indirect purchasers who have suffered injury as a result of antitrust violations. MATA allows any “person,” as defined by section 11 — 201(f), who has suffered injury as a result of antitrust violations, to recover. Because it clearly makes no distinction, there is no ambiguity, and we may not find one where none exists.

We must apply principles of construction that render a common sense reading of statutory terms in light of the overriding purpose and goal of the statute. Haigley v. Dept. of Health & Mental Hygiene, 128 Md.App, 194, 222, 736 A.2d 1185 (1999) (quoting Martin v. Beverage Capital Corp., 353 Md. 388, 399, 726 A.2d 728 (1999)). That goal is clear. The General Assembly stated its intent that MATA be liberally construed to serve its beneficial purposes, which is “to protect the public and foster fair and honest intrastate competition.” Md.Code (1975, 2000 Repl.Vol.), Com. Law II, § 11-202. A liberal construction is one that harmonizes the general scheme of the statute and assists us in carrying out its legislative purposes. Smith v. Higinbothom, 187 Md. 115, 125, 48 A.2d 754 (1946). The majority’s reading of the statute to create an ambiguity frustrates the expressed legislative purpose of the law.

The majority interprets section 11-209 to preclude indirect purchasers because the General Assembly failed to provide for them when it amended that section in 1982 to allow governmental entities to bring indirect purchaser suits. 1982 Md. Laws, ch. 214. The General Assembly’s intent should be *63interpreted by its actions, and not by its failure to act. Harrison v. Montgomery County Bd. of Educ., 295 Md. 442, 466, 456 A.2d 894 (1983) (Davidson, J. dissenting); Police Comm’r v. Dowling, 281 Md. 412, 420-21, 379 A.2d 1007 (1977); see also Styers v. Phillips, 277 N.C. 460, 178 S.E.2d 583, 590 (1971).

The majority’s opinion relies heavily on federal antitrust law in reaching its decision. This appeal, however, should be resolved solely upon the construction of an unambiguous state antitrust statute. The Supreme Court clearly expressed the view that state antitrust law is not pre-empted by federal antitrust law, ARC America, 490 U.S. at 105-106, 109 S.Ct. 1661, and held that it is not contrary to federal law for states to permit suits filed by indirect purchasers. Id. at 102-103, 109 S.Ct. 1661. Specifically, the Court stated:

It is one thing to consider the congressional policies identified in Illinois Brick and Hanover Shoe in defining what sort of recovery federal antitrust law authorizes; it is something altogether different, and in our view inappropriate, to consider them as defining what federal law allows States to do under their own antitrust laws.

Id. at 103, 109 S.Ct. 1661. It follows, then, that indirect purchasers may have a cause of action under state law, while simultaneously not having a cause of action under federal antitrust law. Given this guidance from the Court in ARC America, I conclude Maryland state law provides for indirect purchaser suits.

I also part ways with the principal authority the majority uses for support of its determination on appellants’ MATA claim. The majority relies on the Court of Appeals’s decision in State v. Jonathan Logan, Inc., 301 Md. 63, 482 A.2d 1 (1984), as support for its conclusion that section ll-209(b) bars suits by private indirect purchasers. In Logan, the State Attorney General brought suit on behalf of private citizens, contrary to the “real party in interest” rule. Id. at 77, 482 A.2d 1. The Court of Appeals adopted the rationale of an out-of-state case that, “if the state is to maintain an action in its *64parens patriae capacity, initially facts must show that the state has an interest ‘independent of and behind the titles of its citizens.’ ” Id. at 73, 482 A.2d 1. The Court did not even address the indirect purchaser issue presented in this appeal.

When other appellate courts have construed their state antitrust statutes containing language similar to MATA, they reached the exact opposite conclusion the majority reaches here. In Hyde v. Abbott Labs., Inc., 123 N.C.App. 572, 473 S.E.2d 680, 683 (1996), the court held that it could, consistent with the Supremacy Clause of the United States Constitution, allow an indirect purchaser to sue under North Carolina’s antitrust laws. The Tennessee appellate court reached the same conclusion about its antitrust statutes. Blake v. Abbott Labs., Inc., 1996 WL 134947, 1996 Tenn.App. LEXIS 184, 192 (Tenn.Ct.App.1996). These cases reflect a trend among the states to complement federal antitrust law and permit indirect purchasers to bring antitrust lawsuits. See, e.g., Minnesota ex rel. Humphrey v. Philip Morris, Inc., 551 N.W.2d 490 (Minn. 1996); Cellular Plus, Inc. v. Superior Court, 14 Cal.App.4th 1224, 18 Cal.Rptr.2d 308 (Cal.Ct.App.1993); see also Gaebler v. New Mexico Potash Corp., 285 Ill.App.3d 542, 221 Ill.Dec. 707, 676 N.E.2d 228 (1997) (permitting only the state attorney to bring indirect purchaser suits).

In sum, allowing indirect purchasers to sue for MATA violations reflects the legislative purpose that such violations be deterred, and gives all aggrieved consumers the means to redress those violations. Accordingly, I believe the proper disposition of this case should have been to reverse the decision of the trial court on that issue and remand for further proceedings.

. The Court held:

[W]e affirm in part and reverse in part the District Court's judgment that Microsoft violated § 2 of the Sherman Act by employing anti-competitive means to maintain a monopoly in the operating system market; we reverse the District Court’s determination that Microsoft violated § 2 of the Sherman Act by illegally attempting to monopolize the internet browser market; and we remand the District Court’s finding that Microsoft violated § 1 of the Sherman Act by unlawfully tying its browser to its operating system. Our judgment extends to the District Court’s findings with respect to the state law counterparts of the plaintiffs’ Sherman Act claims.
We also find merit in Microsoft's challenge to the Final Judgment embracing the District Court’s remedial order. There are several reasons supporting this conclusion. First, the District Court’s Final Judgment rests on a number of liability determinations that do not survive appellate review; therefore, the remedial order as currently fashioned cannot stand. Furthermore, we would vacate and remand the remedial order even were we to uphold the District Court’s liability determinations in their entirety, because the District Court failed to hold an evidentiary hearing to address remedies-specific factual disputes.
Finally, we vacate the Final Judgment on remedies, because the trial judge engaged in impermissible ex parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality. Although we find no evidence of actual bias, we hold that the actions of the trial judge seriously tainted the proceedings before the District Court and called into question the integrity of the judicial process. We are therefore constrained to vacate the Final Judgment on remedies, remand the case for reconsideration of the remedial order, and require that the case be assigned to a different trial judge on remand. We believe that this disposition will be adequate to cure the cited improprieties.

. Hanover Shoe involved an antitrust action brought against a manufacturer of shoes. The manufacturer defended the action by claiming that the plaintiff had not been injured in its business because it had passed on the alleged overcharges to retail customers as indirect purchasers. The Court rejected the defense. Hanover Shoe, 392 U.S. at 494, 88 S.Ct. 2224. The Court was heavily persuaded by the concern that unless direct purchasers were allowed to sue, antitrust violators "would retain the fruits of their illegality.” Id.