To All:
Hope for Microsoft Settlement Rekindled
_____ U.S. v. Microsoft _____
By James V. Grimaldi
Washington Post Staff Writer
Thursday, March 23, 2000; Page E01
Out-of-court negotiations between Microsoft Corp. and government antitrust lawyers have come to life in recent weeks and could be edging closer to a deal that does not involve breaking up the world's largest software company, according to people familiar with the talks.
The two sides are talking to each other not directly but rather through Richard Posner, an appellate judge and renowned legal scholar in Chicago. Posner agreed last year to mediate a settlement of the most significant antitrust case of the information age.
Details of the discussions are not public, but the sources say the focus is on changes in Microsoft's business practices rather than any proposal to break up the company, which Microsoft steadfastly opposes. While the Justice Department and 19 states prefer a breakup of the company, the government is willing to consider a lesser remedy provided it is strong enough, according to the sources.
The recent flurry of paperwork, e-mail and phone calls between Posner and the parties, coming at all hours of day and night, contrasts starkly with the stalled talks in the days leading up to closing arguments a month ago in U.S. District Court in Washington. But the clock is running out ? the presiding judge, Thomas Penfield Jackson, is within weeks of issuing his final judgment.
Jackson already has ruled in his findings of fact that Microsoft's Windows gives it a monopoly in operating-system software for personal computers and has used that monopoly to harm competition, innovation and consumers. He next will rule on whether those acts broke antitrust law.
Some computer industry officials closely following the government's case are skeptical about the recent activity, saying that lawyers on both sides might be eager to appear to be making a good-faith effort to settle. "Both sides are preparing to win the blame game" when the talks fail, said one industry official.
Spokesmen for both sides have declined to comment on the settlement talks. Joel I. Klein, chief of the Justice Department's antitrust division, yesterday told a Senate Judiciary Committee panel on antitrust that "settlement is better than litigation, but settlement would have to be appropriate to the findings."
On Tuesday, the parties participated in a closed-door scheduling conference with Jackson. The judge has told the lawyers that if they are making progress in the talks, he will wait before issuing a final judgment. Some involved in the case have said that they would have expected a ruling to be issued by this month, given how long the judge has spent deliberating his findings of fact.
Posner, the chief appellate judge of the 7th Circuit, recruited by Jackson to mediate the case, has conducted continuing and separate series of talks with Microsoft and the government. The sources say that Posner has worked methodically and tirelessly to refine the areas of difference and possible remedies so that the two sides can hash out their remaining differences face to face.
The government camp is divided over whether the latest exchanges with Posner really can lead to an enforceable settlement that corrects the damage that government attorneys say Microsoft has done to the market, according to the sources.
The move toward settlement comes as Microsoft has gotten strong signs that Wall Street would prefer a deal. The company's stock price has bounced around, dipping to below $90 after closing arguments last month.
"We note that the shares have traded down sharply over the past month," Goldman, Sachs analyst Richard Sherlund said after meeting this month with Microsoft's chief financial officer. "While the risk of an adverse decision in the [Justice Department] case overhangs the stock, we are hopeful that a settlement might be reached, providing a potential catalyst for improving investor sentiment."
The shares have rebounded more recently and closed at $103.25 yesterday on word that the settlement talks were continuing.
One possible motivation for Microsoft to reach a settlement is the danger of private lawsuits filed by class-action lawyers. A U.S. District Court judgment against the company could add significant momentum to those cases ? 110 lawsuits in 28 states ? under federal antitrust law, which permits that judgment to be used in the follow-on cases.
Attorneys in those cases insist that even without a final judgment, they have significant ammunition through the thousands of pages of documents, e-mail messages and depositions already made public in the case.
"We think we have a lot to work with already," said Mike Hausfeld, a Washington lawyer who has filed one of the follow-on lawsuits. "We did not rely exclusively on Judge Jackson's decision."
The attorneys are fighting in federal court in Utah this week, seeking permission to use hundreds of boxes of Microsoft-related documents collected in a separate antitrust lawsuit filed filed by Caldera Systems Inc., a Utah software company.
The attorneys also will have access to hundreds of depositions from the government's case that were ordered open to the public under a 97-year-old law, the Publicity in Taking Evidence Act. The law was intended to permit the public to review business actions of monopolists revealed in cases filed under the Sherman Act.
The law received renewed public attention in 1998, when The Washington Post, the Seattle Times and other newspapers cited it in a successful attempt to make public the deposition of Microsoft Chairman Bill Gates.
In a little-noticed action last fall, the House of Representatives voted to repeal the open-depositions law. The proposal has not yet been acted upon by the Senate.
The repeal of the law, however, would not retroactively close the court record to class-action attorneys in the Microsoft follow-on lawsuits, said Andrew I. Gavil, a Howard University professor who first wrote about the repeal efforts.
Microsoft has made preparations to attack those follow-on lawsuits, particularly if it settles the case with the government, and has hired prominent Seattle class-action lawyer Steve Berman to help defend the company.
¸ 2000 The Washington Post Company |
