MS takes $1.1bn ‘hostage’ to freeze Lindows out of California case

Microsoft is holding up compensation claims from a quarter of million Californians in order to punish Lindows.com, and to coerce the class action plaintiffs "into siding with Microsoft against its Lindows competitor," according to a court filing seen by The Register. The document, filed on 21st November by Townsend and Townsend and Crew, lead counsel for the Californian class action consumers, points out that none of the claims being held up was actually filed via Lindows.com, yet Microsoft has held them "hostage" for over two months.

Microsoft settled the class action with a $1.1 billion settlement at the beginning of this year, with these funds to be disbursed in the form of vouchers to qualifying claimants. Microsoft gets to keep a third of all money unclaimed, while the remainder will go to California schools for the purchase of IT. Quite a bit of that money will end up going back to Microsoft as well, so even without squirming and foot-dragging from The Beast we are not going to be talking about $1.1 billion really - but squirming and foot-dragging there is.

If we just take the 250,000 claims filed so far and guesstimate an average claim value of $200 (which we think is on the generous side), then you get a total of $50 million, which barely scratches the total settlement size. Lindows' MSFreePC.com might, by collecting claims, have the capability to increase this total, but Microsoft is objecting to its intervention, and in doing so is road-blocking the entire process.

According to a declaration also filed by Townsend on the 21st, during meetings between the parties "the claims Administrator requested that the parties discuss and adopt rules pertaining to the processing of claims. Microsoft refused. At a meeting held on October 15, 2003, Microsoft's counsel Robert Traylor-Manning indicated 'that there may otherwise be concessions he could make, but that with that issue outstanding [Lindows] he could not make them' and that 'therefore, he recommended that the group not discuss claims processing.'" And "Microsoft refused to have any discussion with Lindows."

The main Townsend filing is particularly instructive in that it has been made on behalf on consumers, not on behalf of Lindows, yet it comes firmly down on Lindows' side. Plaintiffs "have no interest whatsoever in helping Lindows or harming it... Although plaintiffs expressed some initial concerns with the Lindows web site, we are now satisfied with Lindows' explanation of its procedures and believe that it fully comports with the express terms of the Settlement Agreement."

In response to MSFReePC.com Microsoft earlier this month asked the judge to reject all settlement claims submitted with digital signatures, but the Townsend filing says that this motion "is based solely upon Microsoft's rank speculation about the process that will be used for submitting these consumer claims for approval by their duly appointed attorney-in-fact and chosen software vendor, Lindows.com." It argues that applicants using the Lindows process are giving Lindows a power of attorney to act on their behalf, that the certification process for these is identical to that used by the 'official' Californian web claims process, that there's nothing in the settlement that says claims can't be filed electronically, and that it may well be the case that Lindows will, perfectly legally, manually sign the combined claims on the claimants' behalf.

"Microsoft complains that it did not agree to conduct the transaction by electronic means" but, says the filing tartly: "That argument fails for two reasons: First, Microsoft's agreement is not required and, second, Microsoft actually has agreed to the preparation of claim forms by electronic means."

Microsoft's actions, it says, are nothing less than an attempt to "stifle the legitimate participation of one of its competitors in the settlement process" and the company "asks the Court to assist in its efforts to harm a business rival who is risking large sums of money in an effort to implement the express terms of the settlement." The settlement agreement rules "cannot be used by Microsoft to complicate or discourage claims, and they must not discourage legitimate Microsoft competitors from promoting the settlement, distributing claim forms or otherwise participating in the settlement process as expressly contemplated by the Settlement Agreement."

If they're accepted the Lindows claims are unlikely to make a significant difference to the take-up of the process, and to get this into perspective you should note that Townsend claims 14 million class members. Barely a week seems to pass these days without Microsoft settling yet another class action with yet another US state, but in all probability its actual payouts so far consist almost entirely of lawyers' bills. Microsoft is not exactly short of money so won't miss the odd billion promised in exchange for continued innocence (see Microsoft redefines 'guilt'), but if it contrives never to hand most of it over anyway, and/or gets most of it straight back, then there won't be that much to miss, will there?

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