PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

IN RE: MICROSOFT CORPORATION 

ANTITRUST LITIGATION

(Kloth, et al. v. Microsoft Corp.;

Netscape Communications Corp. v.  No. 03-1817

Microsoft Corp.; Sun Microsystems,

Inc. v. Microsoft Corp.; Burst.com,

Inc. v. Microsoft Corp.) (MDL No.

1332) 

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

J. Frederick Motz, District Judge.

(CA-00-1332-MDL, CA-00-2117-1, CA-02-2738-1, CA-02-2739-1,

CA-02-2952-1)

Argued: October 29, 2003

Decided: January 15, 2004

Before WIDENER, NIEMEYER, and GREGORY, Circuit Judges.

Reversed and remanded by published opinion. Judge Niemeyer wrote

the opinion, in which Judge Widener joined. Judge Gregory wrote a

separate opinion concurring in part and dissenting in part. 

COUNSEL

ARGUED: David Bruce Tulchin, SULLIVAN & CROMWELL,

L.L.P., New York, New York, for Appellant. John Bucher Isbister,

TYDINGS & ROSENBERG, L.L.P., Baltimore, Maryland, for
Appellees. ON BRIEF: Richard C. Pepperman, II, Marc De Leeuw,

SULLIVAN & CROMWELL, L.L.P., New York, New York; Robert

A. Rosenfeld, Matthew L. Larrabee, HELLER, EHRMAN, WHITE

& MCAULIFFE, L.L.P., San Francisco, California; Michael F.

Brockmeyer, Jeffrey D. Herschman, PIPER RUDNICK, L.L.P., Baltimore, Maryland; Charles W. Douglas, SIDLEY, AUSTIN, BROWN

& WOOD, Chicago, Illinois; Thomas W. Burt, Richard L. Wallis,

Linda K. Norman, Steven J. Aeschbacher, MICROSOFT CORPORATION, Redmond, Washington, for Appellant. Thomas M. Wilson, III,

TYDINGS & ROSENBERG, L.L.P., Baltimore, Maryland; Lloyd R.

Day, Jr., James R. Batchelder, Robert M. Galvin, DAY, CASEBEER,

MADRID & BATCHELDER, L.L.P., Cupertino, California; Michael

A. Schlanger, Kirk R. Ruthenberg, SONNENSCHEIN, NATH &

ROSENTHAL, Washington, D.C.; Spencer Hosie, Bruce J. Wecker,

HOSIE, FROST, LARGE & MCARTHUR, San Francisco, California; Parker C. Folse, III, Ian B. Crosby, Edgar G. Sargent, SUSMAN

GODFREY, L.L.P., Seattle, Washington; Stephen D. Susman, James

T. Southwick, SUSMAN GODFREY, L.L.P., Houston, Texas; Christopher Lovell, Victor E. Stewart, Jody Krisiloff, Peggy Wedgworth,

LOVELL, STEWART & HALEBIAN, L.L.P., New York, New

York; Stanley M. Chesley, WAITE, SCHNEIDER, BAYLESS &

CHESLEY, Cincinnati, Ohio; Robert Yorio, CARR & FERRELL,

L.L.P., Palo Alto, California; Michael D. Hausfeld, COHEN, MILSTEIN, HAUSFELD & TOLL, P.L.L.C., Washington, D.C., for

Appellees.

OPINION

NIEMEYER, Circuit Judge: 

In 1998, the United States and several of the States filed a civil

action against Microsoft Corporation in the District of Columbia for

violations of the Sherman Act. The district court in that action found

that Microsoft (1) illegally maintained a monopoly in the market of

"licensing of all Intel-compatible PC operating systems worldwide,"

(2) attempted to monopolize a "putative browser market," and (3)

entered into an illegal tying arrangement by bundling its Internet

Explorer web browser with its Windows operating system, in viola2 IN RE: MICROSOFT CORPORATION
tion of §§ 1 and 2 of the Sherman Act. The Court of Appeals for the

D.C. Circuit affirmed, with limitations, the district court’s conclusion

that Microsoft illegally maintained a monopoly in the PC operating

systems market but reversed the district court’s other conclusions.

United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001). 

Based in large part on the factual findings made in that District of

Columbia litigation, the plaintiffs in the cases now before this court

have asserted a broad range of antitrust violations against Microsoft.

On the plaintiffs’ motions to foreclose Microsoft from relitigating 356

factual findings made by the district court in the District of Columbia

litigation, the district court in these actions entered a pretrial order

applying the doctrine of "offensive collateral estoppel" to preclude

Microsoft from relitigating 350 of the factual findings. The district

court made its decision about each finding by determining that the

finding was "supportive of" the judgment affirmed by the Court of

Appeals for the D.C. Circuit. In re Microsoft Corp. Antitrust Litig.,

232 F. Supp. 2d 534, 537 (D. Md. 2002). On appeal, Microsoft contends that the standard that the district court used to apply offensive

collateral estoppel to factual findings from the District of Columbia

litigation was too broad, unfairly denying Microsoft an opportunity to

litigate those facts in this action. 

Because the "supportive of" standard is not the appropriate standard for applying collateral estoppel, we reverse and remand, directing the district court to give preclusive effect only to factual findings

that were necessary — meaning critical and essential — to the judgment affirmed by the D.C. Circuit. 

I

Several competitors of Microsoft — Netscape Communications

Corporation, Sun Microsystems, Inc., Burst.com, Inc., and Be Incorporated — as well as a class of consumers commenced these actions

against Microsoft for various violations of the antitrust laws and

related laws, and in April 2002 these actions were transferred to the

District of Maryland under multidistrict litigation procedures. See 28

U.S.C. § 1407. 

In August 2002, several of the plaintiffs filed pretrial motions

under Federal Rule of Civil Procedure 16(c) to foreclose Microsoft,

IN RE: MICROSOFT CORPORATION 3
under the doctrine of collateral estoppel, from relitigating 356 of the

412 factual findings made by the district court in the District of

Columbia litigation. See United States v. Microsoft Corp., 84 F. Supp.

2d 9 (D.D.C. 1999). The district court granted the motions with

respect to 350 of those findings. In re Microsoft Corp. Antitrust Litig.,

232 F. Supp. 2d 534 (D. Md. 2002). In reaching its conclusion, the

court recognized that it could foreclose Microsoft from relitigating

only those facts that were "necessary to the prior judgment," id. at

537, but it concluded that the doctrine "is sufficiently served by

requiring that a specific finding be supportive of the prior judgment,"

id. (emphasis added). 

On Microsoft’s motion, the district court certified for review under

28 U.S.C. § 1292(b) its interlocutory order, which the court characterized as a ruling that "facts found by Judge Jackson [for the District

of Columbia District Court] that were supportive of (rather than indispensable to) the liability judgment against Microsoft in the government case should be given collateral estoppel effect in the cases

encompassed in this MDL proceeding." By order dated July 3, 2003,

we granted Microsoft leave to appeal. 

II

Under the traditional rubric of res judicata, once a matter —

whether a claim, an issue, or a fact — has been determined by a court

as the basis for a judgment, a party against whom the claim, issue, or

fact was resolved cannot relitigate the matter. Judicial efficiency and

finality have demanded such a policy. 

The doctrine of "collateral estoppel" or "issue preclusion," which

the district court applied in this case, is a subset of the res judicata

genre. Applying collateral estoppel "forecloses the relitigation of

issues of fact or law that are identical to issues which have been actually determined and necessarily decided in prior litigation in which

the party against whom [collateral estoppel] is asserted had a full and

fair opportunity to litigate." Sedlack v. Braswell Servs. Group, Inc.,

134 F.3d 219, 224 (4th Cir. 1998) (internal quotation marks and citation omitted). To apply collateral estoppel or issue preclusion to an

issue or fact, the proponent must demonstrate that (1) the issue or fact

is identical to the one previously litigated; (2) the issue or fact was

4 IN RE: MICROSOFT CORPORATION
actually resolved in the prior proceeding; (3) the issue or fact was critical and necessary to the judgment in the prior proceeding; (4) the

judgment in the prior proceeding is final and valid; and (5) the party

to be foreclosed by the prior resolution of the issue or fact had a full

and fair opportunity to litigate the issue or fact in the prior proceeding. See id.; Polk v. Montgomery County, Maryland, 782 F.2d 1196,

1201 (4th Cir. 1986) (using "necessary, material, and essential" for

the third prong); Tuttle v. Arlington County Sch. Bd., 195 F.3d 698,

703-04 n.6 (4th Cir. 1999) (using "critical and necessary"); C.B. Marchant Co. v. Eastern Foods, Inc., 756 F.2d 317, 319 (4th Cir. 1985)

(using "necessary and essential"); see also Restatement (Second) of

Judgments § 27 & cmt. h (1982) (using "essential to the judgment,"

meaning that the judgment must be "dependent upon the determinations"). 

When a plaintiff employs the doctrine of collateral estoppel or issue

preclusion "to foreclose the defendant from litigating an issue the

defendant has previously litigated unsuccessfully in an action with

another party," it is known as "offensive collateral estoppel." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.4 (1979). And when

a defendant employs the doctrine "to prevent a plaintiff from asserting

a claim the plaintiff has previously litigated and lost against another

defendant," it is known as "defensive collateral estoppel." Id. Recognizing a greater possibility for unfairness from the use of offensive

collateral estoppel, the Supreme Court has held that in lieu of prohibiting its use altogether, district courts should be granted "broad discretion to determine when it should be applied." Id. at 331. But this

discretion should not be exercised to permit the use of offensive collateral estoppel "where a plaintiff could easily have joined in the earlier action or where . . . the application of offensive estoppel would

be unfair to a defendant," particularly in several specified ways. Id.

Thus, when exercising its discretion, a court should consider the following nonexclusive factors: (1) whether the plaintiff could have easily joined in the action against the defendant in the earlier action, (2)

whether the defendant had an incentive in the prior action to have

defended the action fully and vigorously; (3) whether the defendant

had won litigation other than the prior action that determined the

same issues or facts favorably to the defendant; (4) whether procedural opportunities are available in the pending action that were not

available in the prior action. See id. at 331-32. In sum, the doctrine

IN RE: MICROSOFT CORPORATION 5
of offensive collateral estoppel or offensive issue preclusion may be

used cautiously to preclude a defendant from relitigating a fact actually found against the defendant in prior litigation when the fact was

critical and necessary to the judgment in the prior litigation, so long

as the plaintiff using the fact could not have easily joined the prior litigation and application of the doctrine would not be unfair to the

defendant. The caution that is required in application of offensive collateral estoppel counsels that the criteria for foreclosing a defendant

from relitigating an issue or fact be applied strictly. See, e.g., Jack

Faucett Assocs. v. AT&T, 744 F.2d 118, 124 (D.C. Cir. 1984) ("The

doctrine [of offensive collateral estoppel] is detailed, difficult, and

potentially dangerous"). 

The single criterion at issue in this appeal is whether the district

court correctly applied the requirement that facts subject to collateral

estoppel be "critical and necessary" to the judgment in the prior litigation. While the district court correctly stated this criterion, it interpreted and applied it to foreclose relitigation of any fact that was

"supportive of" the prior judgment. We believe that this interpretation

changes the criterion, rendering it too broad to assure fairness in the

application of the doctrine. "Supportive of" is a term substantially

more inclusive than the stated criterion of "critical and necessary." 

Tellingly, in describing the scope of the "critical and necessary"

criterion, we have used the alternative word "essential." See, e.g.,

Polk, 782 F.2d at 1201 ("necessary, material, and essential"); C.B.

Marchant, 756 F.2d at 319 ("necessary and essential"). And all of the

terms that we have used — critical, necessary, essential, and material

— are words of limitation. See Webster’s Third New International

Dictionary 1510-11 (1993) (defining "necessary" to mean logically

required, essential, indispensable); Random House Dictionary 1283-

84 (2d ed. 1987) (defining "necessary" to mean "essential, indispensable, or requisite"). Because a fact that is "supportive of" a judgment

may be consistent with it but not necessary or essential to it, the term

"supportive of" is a broader term than "critical and necessary." The

term "supportive of" sweeps so broadly that it might lead to inclusion

of all facts that may have been "relevant" to the prior judgment. Such

a broad application of offensive collateral estoppel risks the very

unfairness about which the Supreme Court was concerned in Park6 IN RE: MICROSOFT CORPORATION
lane, 439 U.S. at 330-31, and we conclude therefore that it is inappropriate. 

In addition, the "supportive of" standard, when applied to offensive

collateral estoppel, would foreclose further litigation of findings for

which the defendant had no opportunity for appellate review in the

prior litigation. See 18 Charles Alan Wright et al., Federal Practice

and Procedure § 4421, at 559 (2d ed. 2002); 18 James Wm. Moore

et al., Moore’s Federal Practice § 132.03[4][b][iv], at 113,

§ 132.03[4][k][ii], at 123-24 (3d ed. 2003). If a trial court were to

make an unnecessary or collateral finding in a case and the defendant

appealed the judgment, the appellate court, in affirming the judgment,

would generally not reach the unnecessary findings. Thus, such findings would evade appellate review. See 1B James Wm. Moore et al.,

Moore’s Federal Practice ¶ 0.443[5.-1], at 585-86 (2d ed. 1996). Yet,

under a "supportive of" standard, these unnecessary or collateral findings, which are practically immune to appellate review, would still

foreclose further litigation, as long as they tended generally to confirm the affirmed judgment. In contrast, when only "necessary" findings are given preclusive effect, the defendant will have received a

full opportunity for litigation in the prior proceeding, including the

opportunity for appellate review. 

In support of its broader interpretation of "necessary," the district

court cited Delaware River Port Auth. v. Fraternal Order of Police,

290 F.3d 567, 572 (3d Cir. 2002); Hoult v. Hoult, 157 F.3d 29, 32 (1st

Cir. 1998); and Synanon Church v. United States, 820 F.2d 421, 424-

25 (D.C. Cir. 1987). But none of these opinions employed the district

court’s broadening interpretation. See Delaware River Port Auth., 290

F.3d at 572 (using "necessary to support [the] judgment" in the prior

action); Hoult, 157 F.3d at 32 (using a "‘necessary component of the

decision reached’" in the earlier action (quoting Dennis v. Rhode

Island Hosp. Trust Nat’l Bank, 744 F.2d 893, 899 (1st Cir. 1984)));

Synanon Church, 820 F.2d at 424 (using "actually and necessarily

determined by a court of competent jurisdiction" in a prior proceeding). 

The district court also reasoned that if "necessary" were to be construed as strictly as is suggested by "indispensable" and "essential,"

we could not have reached the decision that we did in Ritter v. Mount

IN RE: MICROSOFT CORPORATION 7
St. Mary’s Coll., 814 F.2d 986 (4th Cir. 1987). The district court

observed that the more restricted meaning would require that if there

were two independently sufficient grounds for a prior decision, preclusive effect could not be given to either ground. Yet we gave preclusive effect to two independently sufficient grounds in Ritter. 

But Ritter does not undermine the generally restrictive meaning of

necessary. In Ritter, the court observed the principle that "where the

court in the prior suit has determined two issues, either of which

could independently support the result, then neither determination is

considered essential to the judgment. Thus, collateral estoppel will

not obtain as to either determination." 814 F.2d at 993. In the circumstances of that case, however, which involved no prior judgment from

another proceeding but rather a prior ruling in the same case, we

noted that "if the parties were not bound by the facts found in the very

same case which they were litigating, then the judgments of courts

issued during trial would become irrelevancies." Id. at 992. Even

though we enforced an earlier factual finding applied to a motion

decided later in the same case — essentially applying a law-of-thecase principle — we called it collateral estoppel and applied it in the

exceptional circumstances of that case, where the parties were the

same, the issues were the same, the facts were the same, and even the

court was the same. Id. at 994. Indeed, the case itself was the same.

Id. at 992-94. But when issue preclusion is considered in the context

of two separate litigations, the restrictive principle recognized in Ritter remains viable — that if a judgment in the prior case is supported

by either of two findings, neither finding can be found essential to the

judgment. Id. at 993; see also Tuttle, 195 F.3d at 704; C.B. Marchant,

756 F.2d at 319. 

III

On remand, when the district court applies the "critical and necessary" standard to the facts found in the District of Columbia litigation,

it must take care to limit application to facts that were necessary to

the judgment actually affirmed by the D.C. Circuit. The D.C. Circuit

held that Microsoft illegally maintained a monopoly in the market of

"licensing of all Intel-compatible PC operating systems worldwide"

through 12 specified acts of anticompetitive conduct, described by the

D.C. Circuit in United States v. Microsoft Corp., 253 F.3d 34, 50-80

8 IN RE: MICROSOFT CORPORATION
(D.C. Cir. 2001). Microsoft may be precluded from relitigating the

facts necessary to this judgment under the doctrine of offensive collateral estoppel. 

To support their argument that all 350 factual findings were necessary to the District of Columbia judgment, the plaintiffs contend that

the D.C. Circuit "affirmed all 412" of the district court’s factual findings. In making this assertion, the plaintiffs seem to be suggesting that

the scope of the judgment in the District of Columbia litigation was

broader than the judgment actually affirmed by the D.C. Circuit. But

the D.C. Circuit did not affirm all 412 factual findings. The D.C. Circuit considered all of the factual findings only when considering

whether the improprieties of the district judge evidenced a bias

against Microsoft that would have invalidated all of his factual findings. See Microsoft, 253 F.3d at 117-18. While the D.C. Circuit ultimately rejected this bias argument, it did not review the 412 factual

findings to determine whether they were clearly erroneous or whether

they should be affirmed on appeal. Indeed, because the D.C. Circuit

reversed two of the three claims found by the district court, the district court’s judgments on those two claims were deprived of all preclusive effect. See 18 James Wm. Moore et al., Moore’s Federal

Practice § 131.30[1][a] (3d ed. 2003). On remand the district court

must limit itself to those facts critical and necessary to the judgment

actually affirmed by the D.C. Circuit. 

In sum, we reverse the ruling of the district court that offensive collateral estoppel will apply to any fact found in the District of Columbia litigation that is supportive of the judgment, and remand for

application of the doctrine under the standards stated in this opinion.

REVERSED AND REMANDED

GREGORY, Circuit Judge, concurring in part and dissenting in part:

I concur in the majority’s conclusion that preclusive effect should

only be given to factual findings that were necessary to, rather than

supportive of, the judgment affirmed by the Court of Appeals for the

District of Columbia. I respectfully dissent, however, from the majority’s rigid construction of the term "necessary." In my view, this rigid

construction of "necessary" is inconsistent with both the purposes of

IN RE: MICROSOFT CORPORATION 9
collateral estoppel and the contextual approach taken by the Supreme

Court and our sister circuits when defining "necessary."

I

The majority construes "necessary" to mean critical and essential.

Ante at 3. In so doing, the majority cites to and relies on dictionary

definitions of "necessary." Id. at 6. As the Supreme Court has noted,

however, dictionary definitions provide little guidance as to the

proper construction of "necessary." In the landmark case of McCulloch v. Maryland, the Court expressly held that the term "necessary"

must be construed in accordance with the context in which it is used:

It is essential to just construction, that many words which

import something excessive, should be understood in a more

mitigated sense—in that sense which common usage justifies. The word "necessary" is of this description. It has not

a fixed character, peculiar to itself. It admits of all degrees

of comparison; and is often connected with other words,

which increase or diminish the impression the mind receives

of the urgency it imports. A thing may be necessary, very

necessary, absolutely or indispensably necessary. To no

mind would the same idea be conveyed by these several

phrases. 

17 U.S. 4 Wheat. 316, 414 (1819)(emphasis added). In McCulloch,

the Supreme Court considered whether the Necessary and Proper

Clause required that the incorporation of a bank be absolutely necessary to the exercise of Congress’s enumerated powers. Id. at 401. In

rejecting such a rigid construction of "necessary," the Court held that

the Necessary and Proper Clause only requires that a statute be conducive to and plainly adopted to serve the end for which it was

enacted. Id. at 414, 417, 421. The Supreme Court has since reaffirmed

this construction of the Necessary and Proper Clause. In Jinks v. Richland County—a decision issued last term—the Court held that 42

U.S.C. § 1367(d) satisfies the requirements of the Necessary and

Proper Clause because it is "‘conducive to the due administration of

justice’ . . . and is ‘plainly adapted’ to that end." ___ U.S. ___, ___,

123 S.Ct. 1667, 1671 (2003). In so holding, the Court noted: "[W]e

long ago rejected the view that the Necessary and Proper Clause

10 IN RE: MICROSOFT CORPORATION
demands that an Act of Congress be ‘absolutely necessary’ to the

exercise of an enumerated power." Id.

Further illustrating the Supreme Court’s contextual approach for

construing "necessary" is its tax law jurisprudence. Rather than relying upon dictionary definitions, the Court has construed "necessary"

in a manner that is best suited for this highly technical area of law.

For instance, in determining whether an expense can be properly

deducted as an "ordinary" and "necessary" business expense, the

Court has "consistently construed the term ‘necessary’ as imposing

only the minimal requirement that the expense be ‘appropriate and

helpful’ for ‘the development of the [taxpayer’s] business.’" Comm’r

v. Tellier, 383 U.S. 687, 689 (1966)(quoting Welch v. Helvering, 290

U.S. 111, 113 (1933)). Such a construction reflects the Court’s understanding that a correct construction of "necessary" cannot turn on dictionary definitions.

II

A number of our sister circuits have followed the Supreme Court’s

contextual approach when construing "necessary" and have thus

declined to mechanically apply dictionary definitions of "necessary."

The D.C. Circuit, for example, has expressly stated: "[I]t is crucial to

understand the context in which ["necessary"] is used in order to comprehend its meaning." Cellular Telecomm. & Internet Ass’n v. FCC,

330 F.3d 502, 510 (D.C. Cir. 2003). In Cellular Telecomm. & Internet

Ass’n, the D.C. Circuit considered whether the FCC’s enforcement of

wireless number portability rules was "necessary" for the protection

of consumers. Id. at 504. In construing the term "necessary," the D.C.

Circuit noted that "a dictionary definition by no means tells us what

‘necessary’ means in every statutory context," id. at 510, because "the

word ‘necessary’ does not always mean absolutely required or indispensable." Id. at 509-10. The court further observed: "‘[C]ourts have

frequently interpreted the word ‘necessary’ to mean less than absolutely essential, and have explicitly found that a measure may be ‘necessary’ even though acceptable alternatives have not been

exhausted.’" Id. at 510 (quoting Natural Res. Def. Council v. Thomas,

838 F.2d 1224, 1236 (D.C. Cir. 1988)). Accordingly, the D.C. Circuit

held that the FCC need not show that enforcement of its wireless

IN RE: MICROSOFT CORPORATION 11
number portability rules "is absolutely required or indispensable to

protect consumers." Id. at 511. 

Similarly, the Second Circuit noted in FTC v. Rockefeller that the

use of the term "necessary" does not automatically render something

"‘absolutely needed’ or ‘inescapable’" because "‘necessary’ is not

always used in its most rigid sense." 591 F.2d 182, 188 (2d Cir.

1979). The specific issue before the Second Circuit in Rockefeller was

whether an investigation conducted by the FTC fell under a statutory

provision authorizing the FTC to "‘gather and compile information’

from, and to ‘investigate,’ banks ‘to the extent that such action is necessary to the investigation’ of non-banking targets." Id. (quoting Pub.

L. 93-153 § 408(e), 87 Stat. 592)(emphasis added). Given its more

flexible construction of "necessary," the court held that an ancillary

investigation of a bank is "necessary" if it "arise[s] reasonably and

logically out of the main investigation" of nonbanking targets. Id. In

so holding, the court rejected the argument that "‘necessary’ means

that the [FTC] must pursue all other ‘reasonably available alternatives’ before engaging in the ancillary investigation." Id.

More importantly, for present purposes, two of our sister circuits

have expressly declined to adopt a rigid construction of "necessary"

in the context of collateral estoppel. In Hoult v. Hoult, the First Circuit held that "a finding is ‘necessary’ if it was central to the route

that led the factfinder to the judgment reached, even if the result

‘could have been achieved by a different, shorter and more efficient

route.’" 157 F.3d 29, 32 (1st Cir. 1998)(quoting Commercial Assocs.

v. Tilcon Gammino, Inc., 998 F.2d 1092, 1097 (1st Cir. 1993))(emphasis added). Similarly, the Federal Circuit has stated: 

At the outset, [when determining the applicability of collateral estoppel] it is important to note that the requirement

that a finding be "necessary" to a judgment does not mean

that the finding must be so crucial that, without it, the judgment could not stand. Rather, the purpose of the requirement

is to prevent the incidental or collateral determination of a

nonessential issue from precluding reconsideration of that

issue in later litigation. 

Mother’s Rest. Inc. v. Mama’s Pizza, Inc., 723 F.2d 1566, 1571 (Fed.

Cir. 1983)(emphasis added). Two circuits have thus concluded that a

12 IN RE: MICROSOFT CORPORATION
finding need not be indispensable to a prior judgment in order to be

deemed "necessary" to that judgment. A conclusion which is directly

in conflict with the one reached by the majority today.

III

Despite this case law, the majority adopts a rigid construction of

"necessary," whereby preclusive effect is only accorded to findings

deemed indispensable to a prior judgment. As previously noted, the

majority holds that findings are "necessary" to a prior judgment and

thereby entitled to preclusive effect if they are critical and essential

to that judgment. Random House Webster’s College Dictionary 317

(2000)(defining "critical" to mean of essential importance, indispensable); id. at 451 (defining "essential" to mean absolutely necessary,

indispensable); Webster’s Third New International Dictionary 538

(1981)(defining "critical" to mean indispensable); id. at 777 (defining

"essential" to mean indispensable). The majority concludes that such

a rigid construction is required due to the potential unfairness that can

result from the application of offensive collateral estoppel. Ante at 5-

6. While it is true that we must cautiously apply the doctrine of offensive collateral estoppel, we must also take care to construe the

requirements for this doctrine in a manner that furthers its purpose.

As noted by the Supreme Court, offensive and defensive collateral

estoppel serve "to ‘relieve parties of the cost and vexation of multiple

lawsuits, conserve judicial resources, and, by preventing inconsistent

decisions, encourage reliance on adjudication.’" United States v. Mendoza, 464 U.S. 154, 158 (1984)(quoting Allen v. McCurry, 449 U.S.

90, 94 (1980)). The majority’s rigid construction of "necessary," however, runs contrary to these purposes. Indeed, the majority’s rigid construction of "necessary" frustrates these purposes. Very few findings,

while a material element of a prior judgment, can be considered indispensable. Consequently, under the majority’s construction of "necessary," litigants and courts will be forced to reconsider an issue that

constituted or was a material element of a prior judgment even though

that issue was fully contested and resolved in a previous proceeding.

For instance, a finding during a dispute concerning the amount of

a contractor’s lien on real property that the contract in question contains a provision placing a limit on the contractor’s compensation is

not indispensable because it does not determine the actual amount of

IN RE: MICROSOFT CORPORATION 13
the contractor’s lien. Nonetheless, such a finding is a material element

of the judgment because it establishes that the compensation to which

the contractor is entitled cannot exceed a certain amount. Accordingly, the parties should be precluded in a subsequent suit from relitigating whether the contract in question placed a limit on the

contractor’s compensation if this issue was fully and fairly contested

during the initial proceeding. Allowing this issue to be relitigated

defeats the purposes of collateral estoppel, which, as previously

noted, are "to ‘relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent

decisions, encourage reliance on adjudication.’" Id.

IV

As a means of drawing an appropriate balance between the costs

and purposes of offensive collateral estoppel, I believe a finding

should be deemed "necessary" to a prior judgment if it concerns a

matter that was "distinctly put in issue and directly determined by a

court of competent jurisdiction," Montana v. United States, 440 U.S.

147, 153 (1979)(quoting S. Pac. R. Co. v. United States, 168 U.S. 1,

48-49 (1897)), and a material element of the judgment. Although less

rigid than the construction adopted by the majority, this construction

of "necessary" offers the same protection against the potential unfairness of offensive collateral estoppel with which the majority is concerned while better serving the purposes of this doctrine. By requiring

that a matter be directly put in issue, determined and a material element of a prior judgment, this construction of "necessary" prevents

nonessential dicta and ancillary findings from being accorded preclusive effect. 

With respect to the present case, application of this less rigid construction of "necessary" would not unfairly prejudice Microsoft, the

party against whom collateral estoppel is being asserted. Microsoft

had sufficient incentive to vigorously contest every issue raised during the government’s antitrust case given that its continued existence

as a single entity was directly at issue. Moreover, Microsoft understood that the findings rendered in the government’s antitrust case

would determine, in large part, whether private parties would commence civil actions against Microsoft. Accordingly, Microsoft should

be precluded from relitigating issues that were distinctly raised, deter14 IN RE: MICROSOFT CORPORATION
mined and a material element of the judgment affirmed by the D.C.

Circuit. 

V

For the foregoing reasons, I concur in the conclusion that preclusive effect should only be accorded to factual findings that were "necessary" to the judgment affirmed by the D.C. Circuit. I respectfully

dissent, however, from the majority’s determination that a factual

finding must be indispensable to a prior judgment in order to be "necessary" to that judgment. In my view, factual findings made during

the course of a proceeding are "necessary" to the judgment rendered

in that proceeding if they concern a matter that was "distinctly put in

issue and directly determined," Montana, 440 U.S. at 153, and a

material element of that judgment. Accordingly, on remand, I believe

preclusive effect should be accorded to factual findings that meet the

construction of "necessary" as set forth in my opinion. 

IN RE: MICROSOFT CORPORATION 15