Source: http://kegel.com/remedy/rwmf02.html
Timestamp: 2019-04-24 06:52:44+00:00

Document:
STATE OF NEW YORK, ex rel.
Microsoft and the Department of Justice have entered into a "Consent Decree" purporting to negate Judge Jackson's affirmed Findings of Fact and Conclusions of Law and void their collateral estoppel effect. Proposed intervenors, the 13 million plaintiffs in the certified indirect purchaser class action pending against Microsoft in California Superior Court, intend to assert those Findings and Conclusions against Microsoft at trial. Since Microsoft and the Department of Justice have asked the Court to erase the entire history of this litigation, "the disposition of th[is] action may as a practical matter impair or impede [intervenors'] ability to protect th[eir] interest[s]." Rule 24(a), Fed.R.Civ. P. Proposed intervenors, including many class members who are also Microsoft's competitors in Silicon Valley, have a further interest in seeing this court carry out the Court of Appeals' mandate to "ensure that there remain no practices likely to result in monopolization in the future." United States v. Microsoft, 253 F.3d 34, 103 (2001). At a minimum, intervenors would raise important questions about what effects the Revised Proposed Final Judgment (RPFJ) will have on the many consumer and competitor actions now pending or yet to be filed against Microsoft in courts around the country. The public interest demands that these questions be answered now, by this court, before judgment is entered. See Security Insurance Co. v. Schipporeit, Inc., 69 F.3d 1377, 1381 (7th Cir. 1995) ("Perhaps the most obvious benefits of intervention in general are the efficiency and consistency that result from resolving related issues in a single proceeding"); 15 U.S.C. §16(f)(3) (in making its public interest determination, the court may "authorize . . . participation . . . by interested persons, including . . . intervention as a party"). Accordingly, the California plaintiffs have standing to intervene.
Intervention is also appropriate because the California plaintiffs' interests are not "adequately represented" by Microsoft or the Department of Justice ("DOJ"). See Fed. R. Civ. P. 24(a). Microsoft and the DOJ, in fact, have agreed with each other to extinguish those interests. Finally, with the period for objecting to the Revised Proposed Final Judgment (RPFJ) still open, this motion is timely. See Twelve John Does v. District of Columbia, 117 F.3d 571 (D.C. Cir. 1997). Should the Court deny this motion to intervene, the California plaintiffs ask to submit the following memorandum of points and authorities as a brief amicus curiae.
The California plaintiffs have sued Microsoft for violations of the Cartwright Act, California Business & Professions Code §§ 16720 et seq. (hereinafter "the California antitrust laws") and the California Unfair Competition Act, California Business & Professions Code §§17200 et seq.
2.	The California classes were certified on August 29, 2000, and the period for opting out of the classes has expired.
3.	Discovery is far advanced in the California case, and trial will begin in August 2002.
4.	On November 2, 2001, Microsoft and the Department of Justice submitted for the Court's approval a "consent decree" that seeks, among other things, to negate Judge Jackson's affirmed Findings of Fact and Conclusions of Law and to void the collateral estoppel effect of those Findings and Conclusions. The "consent decree" is currently under review in this Court under procedures prescribed by the Tunney Act.
5.	California Superior Court Judge Stuart Pollak has already declared his intention to instruct the jury that Microsoft has violated the antitrust laws based on the district court's affirmed Findings and Conclusions. Entry of the Revised Proposed Final Judgment (hereinafter "RPFJ") would impair the California plaintiffs' rights to make use of those Findings and Conclusions.
6.	The California plaintiffs, both consumers and competitors of Microsoft, have a further interest in seeing the district court carry out the Court of Appeals' mandate to "unfetter [the] market from anticompetitive conduct, . . . terminate the illegal monopoly, . . . and ensure that there remain no practices likely to result in monopolization in the future." United States v. Microsoft, 253 F.3d 34, 103 (D.C. Cir. 2001).
7.	The California plaintiffs raise questions that should be answered in this court, before judgment is entered, about what effects the RPFJ will have on private antitrust suits against Microsoft.
8.	Neither Microsoft nor the DOJ has adequately represented the California plaintiffs' interests.
9.	Furthermore, Microsoft and the DOJ are leading the court to violate the constitutional separation of powers by urging Tunney Act review of a settlement agreement entered after a case has been fully litigated.
10.	If the court reviews the "consent decree" under the deferential standards of the Tunney Act, it is likely to enter the RPFJ, thus impairing the California plaintiffs' interests.
a.	Permit the California plaintiffs to intervene under Rule 24 of the Federal Rules of Civil Procedure.
d.	Conduct a "remedies-specific evidentiary hearing," per the D.C. Circuit Court of Appeals' mandate, and enter a judgment designed to remediate the affirmed findings of Microsoft's antitrust liability.
e.	Order such other and further relief as the Court deems fair and just.
The Department of Justice ("DOJ") and Microsoft have filed a proposed "consent decree" to settle the litigated case of United States v. Microsoft. They assert that their Revised Proposed Final Judgment (RPFJ) "may be filed and entered by the Court . . . at any time after compliance with the requirements of the [Tunney Act, 15 U.S.C. §§ 16(b)-(h)]," and that once filed, it will supersede and implicitly vacate the findings of fact and conclusions of law expressly affirmed by the D.C. Circuit Court of Appeals. Stipulation, p. 1. Microsoft and the DOJ further suggest that, should the court enter it, their negotiated judgment will deprive third parties of "any rights or remedies of any nature whatsoever." RPFJ ¶ VIII., p. 22.
There are three problems with the Microsoft/DOJ proposal. First, the DOJ and Microsoft cannot rewrite history. Parties to a case are not empowered to erase findings of fact and conclusions of law after they have been affirmed on appeal. After failing to settle in early 2000, Microsoft and the DOJ cannot negotiate away the judicial findings and conclusions that were necessitated by that failure. As the D.C. Circuit has noted, judicial "precedent . . . is not the parties' property" and is not "to be a bargaining chip in the process of settlement." In re United States, 927 F.2d 626, 628 (D.C. Cir. 1991).
Second, the settling parties cannot avoid the collateral estoppel effect of the affirmed findings and conclusions. Section 5(a) of the Clayton Act specifically accords that effect to judicial decrees entered in antitrust litigation after "any testimony has been taken." In contrast, the Tunney Act, sections 5(b)-(h), which applies before any testimony is taken, makes both the record of proceedings and the competitive impact statements required to be filed under the Act inadmissible against defendants in future antitrust actions. 15 U.S.C. §16(h). Together, sections (a) and (h) thus encourage early settlement. Microsoft, having refused to settle "before any testimony [was] taken," cannot bargain away section 5(a) of the Clayton Act. The D.C. Circuit has declared that 5(a) must override "the mere appendage" of a nonliability clause to an antitrust agreement entered after trial has begun. Southern Pacific Comms. Co. v. AT&T, 740 F.2d 1011, 1022 (D.C. Cir. 1984). Furthermore, consent decrees cannot "limit nonparty rights that would otherwise prevail." United States v. Bleznak, 153 F.3d 16, 19 (2d Cir. 1998); Firefighters Local 93 v. Cleveland, 478 U.S. 501, 521 (1986); see also Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979).
Third, the Tunney Act, 15 U.S.C. §§ 16(b)-(h), has no application to consent decrees entered after a case has been litigated to judgment. Rather, the Act prescribes half administrative-half judicial protocols for reviewing the settlement of cases the government has decided not to pursue through trial. This case was tried and appealed, so it is no longer amenable to settlement by a consent decree to be reviewed under the Tunney Act. By insisting otherwise, Microsoft and the DOJ urge the court to abdicate to the executive branch powers expressly conferred on the judiciary by section 4 of the Sherman Act and thus violate the constitutional separation of powers.
Finally, the court is not free to ignore the D.C. Circuit's mandate to "conduct a remedies-specific evidentiary hearing." United States v. Microsoft, 253 F.3d 34, 103 (D.C. Cir. 2001). See Utah Public Service Comm'n v. El Paso Natural Gas Co., 395 U.S. 464, 471-472 (1969) ("The Department of Justice . . . by stipulation or otherwise has no power to circumscribe the power of the courts to see that our mandate is carried out.") And it is independently obliged both to evaluate the proposed settlement in light of the litigated record under the standards of section 4 of the Sherman Act, see United States v. Microsoft, 56 F.3d 1448, 1461 (D.C. Cir. 1995), and to impose a remedy designed "to prevent the continuance of wrongful conduct, . . . to deprive the wrongdoers of the fruits of their unlawful conduct, and to prevent the creation anew of restraint forbidden by law." United States v. E.I. DuPont De Nemours and Co., 366 U.S. 316, 366, n. 12 (1961).
In sum, the settling parties are leading the court into reversible error. The court is without jurisdiction to proceed as they urge, and the judgment they propose would not survive an appeal.
The settling parties' Proposed Final Judgment states that it "does not constitute any admission by any party regarding any issue of fact or law." RPFJ Recital, p. 1. But it is too late in the day for denials. Microsoft and the DOJ chose two years – and three court decisions – ago to litigate, not settle. That was a choice with consequences. Although the parties could have negotiated an effective nonliability clause before Judge Jackson entered judgment, they cannot do so now. The District Court, the Court of Appeals, and the Supreme Court have all weighed in since then, making this dispute more than a private quarrel between Microsoft and the DOJ. See Oklahoma Radio Associates v. FDIC, 3 F.3d 1436, 1442 (10th Cir. 1993) ("the worthy goal of encouraging settlements does not `override the policy that a losing party with a deep pocket should not be permitted to use a settlement to have an adverse precedent vacated"), quoting Clarendon Ltd v. Nu-West Industries, Inc., 936 F.2d 127, 129 (3d Cir. 1991); In re Memorial Hospital of Iowa County, Inc., 862 F.2d 1299, 1301-1302 (7th Cir. 1988) ("When the parties' bargain calls for judicial action . . ., the benefits of settlement to the parties are not the only desiderata").
The findings of fact and conclusions of law entered by the district judge still stand, United States v. Microsoft, 253 F.3d 34, 116 ("we . . . will not set aside the existing Findings of Fact or Conclusions of Law (except insofar as specific findings are clearly erroneous or legal conclusions are incorrect)"); id. at 117 ("Given the limited scope of our disqualification of the District Judge, we have let stand for review his Findings of Fact and Conclusions of Law"), and the settling parties cannot bargain them away. In fact, even if it wanted to do so, the District Court could not give effect to the judgment the settling parties seek. Microsoft's nonliability cannot be restored except by the Supreme Court, which denied certiorari, or the Court of Appeals, which, when last asked, expressly affirmed that liability.
Even if this court could vacate Judge Jackson's affirmed findings and conclusions, as the settling parties implicitly urge, the D.C. Circuit has declared that it should not.
When a clash between genuine adversaries produces a precedent, . . . the judicial system ought not allow the social value of that precedent, created at cost to the public and other litigants, to be a bargaining chip in the process of settlement. The precedent, a public act of a public official, is not the parties' property.
In re United States, 927 F.2d 626, 628 (D.C. Cir. 1991), quoting In re Memorial Hospital of Iowa County, Inc., 862 F.2d 1299 (7th Cir. 1988). See also Humphreys v. DEA, 105 F.3d 112, 115, n.1 (3d Cir. 1996) ("appellate courts routinely refuse to vacate their own decisions when the parties settle their dispute after an appellate decision has issued").
The D.C. Circuit's characterization of judicial precedent as public property applies with special force to a case brought by the United States government at substantial public expense to secure the distinctly public benefits of lawful competition. It simply cannot be in the public interest to extinguish the beneficial effects of that costly effort.
The settling parties also attempt to deprive third parties of any benefit from the governments' and courts' labors in this litigation. Paragraph VIII of their Proposed Final Judgment reads "[n]othing in this Final Judgment is intended to confer upon any other persons any rights or remedies of any nature whatsoever hereunder or by reason of this Final Judgment." Again, neither the parties nor the court can give effect to this paragraph.
Section 5(a) of the Clayton Act, 15 U.S.C. § 16(a), which preceded and survived the passage of the Tunney Act, 15 U.S.C. §§ 16 (b)-(h), makes any final judgment or decree rendered in a civil case brought by the United States "to the effect that a defendant has violated [the antitrust] laws . . . prima facie evidence against [that] defendant in any action or proceeding brought by any other party against the same defendant under [the antitrust] laws . . .." At the same time as it gave prima facie effect to government antitrust judgments in section 5(a), Congress provided in section 5(i) for the statute of limitations to be suspended "in respect of every private or State right of action" during the pendency of a government action based on the same facts. 15 U.S.C. § 16(i). The purpose of these tandem statutory provisions was "to stimulate private antitrust suits and aid . . . private suitors," New Jersey Wood Finishing Co. v. Minnesota Min. & Mfg. Co., 332 F.2d 346, 354 (3d Cir. 1964), "by making available to them all matters previously established by the Government in antitrust actions" and then "vouchsaf[ing] the intended benefits of related government proceedings by suspending the running of the statute of limitations." Minnesota Min. & Mfg. Co. v. New Jersey Wood Finishing Co., 381 U.S. 311, 317, 318 (1965), aff'd 332 F.2d 346 (3d Cir. 1964) (citations omitted).
The aid to private litigants conferred by sections 5(a) and 5(i) thus represents a "stick" for antitrust defendants who litigate against the government. Congress offers a complementary "carrot" for defendants who settle early: the evidentiary weight assigned by section 5(a) does "not apply to consent judgments or decrees entered before any testimony has been taken." 15 U.S.C. § 16(a).
With increasing frequency, parties to antitrust agreements are inserting into consent agreements nonliability clauses such as that contained in the [RPFJ]. We do not believe that the mere appendage of such a clause should automatically make section 5(a) inapplicable: such a per se rule would contravene the congressional mandate contained in the statute. The question in each case must be whether the judgment, considered as a whole, is "to the effect that" the defendant has violated the antitrust laws.
Southern Pacific Communications Co. v. AT&T, 740 F.2d 1011, 1022 (D.C. Cir. 1984).
Without a doubt, the District Court's judgment is "to the effect that" Microsoft violated section 2 of the Sherman Act. The D.C. Circuit affirmed that legal conclusion, remanding solely for a remedy to be imposed. However heartily they agree with each other, the settling parties can no more work a repeal of section 5(a) than they can vacate the opinions of the trial and appellate courts.
While the United States is certainly free to bargain away its own right to use offensive collaterel estoppel should the need arise to sue Microsoft again in the future, it cannot bargain away the right of other antitrust plaintiffs to do so. "[P]arties who choose to resolve litigation through settlement may not dispose of the claims of a third party . . . without that party's agreement." Firefighters Local 93 v. Cleveland, 478 U.S. 501, 529 (1986); see also Martin v. Wilks, 490 U.S. 755 (1989).
Not only Congress, but the Supreme Court – indeed everyone except Microsoft and the DOJ – "recognize[s] the obvious difference in position between a party who has never litigated an issue and one who has fully litigated and lost." Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 320, 327 (1979). Both Congress and the Supreme Court have, therefore, conferred on antitrust plaintiffs who would sue Microsoft the right to rely upon the affirmed findings of fact and conclusions of law yielded by the DOJ litigation. See 15 U.S.C. §16(a); Parklane Hosiery, supra, 439 U.S. at 336-337. To the extent there is authority to refuse a future plaintiff's claim to the offensive use of those findings and conclusions, that authority is reposed in the courts faced with trying later cases against Microsoft, see id. at 331, and not in the parties to this agreement.
The Tunney Act prescribes the mechanism for presenting consent decrees entered in government civil antitrust cases that have not been litigated to judgment. In such cases, the court must defer to the prosecutor's decision to settle. By contrast, this case has been litigated through judgment and appeal and is now on remand. It comes before the court with a fully developed record of Microsoft's predatory deeds sustaining the findings of antitrust liability the D.C. Circuit affirmed. Its settlement therefore does not proceed under the Tunney Act. As Justice Rehnquist has explained, "[t]he Act applies only when a case has been settled. Thus, by definition, there has been no judicial finding . . . of anticompetitive activity to be prevented." Maryland v. United States, 460 U.S. 1001, 1004 (1983) (Rehnquist, J., dissenting from summary affirmance). Section 5(e) of the Act itself clearly indicates that a "consent decree" under the statute is one entered without a trial: that section lists among the factors a court may consider in deciding whether the proposed settlement is in the public interest "the public benefit, if any, to be derived from a determination of the issues at trial." 15 U.S.C. § 16(e)(2).
[T]here are no findings that the defendant has actually engaged in illegal practices. It is therefore inappropriate for the [district] judge to measure the remedies in the decree as if they were fashioned after trial. Remedies which appear less than vigorous may well reflect an underlying weakness in the government's case, and for the district judge to assume that the allegations in the complaint have been formally made out is quite unwarranted.
United States v. Microsoft, supra, 56 F.3d at 1460-1461, citing Maryland v. United States, supra, 460 U.S. at 1004 (Rehnquist, J., dissenting). The D.C. Circuit noted "the constitutional questions that would be raised if courts were to subject the government's exercise of its prosecutorial discretion to non-deferential review." Massachusetts School of Law v. United States, 118 F.3d 776, 783 (D.C. Cir. 1997).
The Microsoft case that is now before the court presents the road not taken in the 1994 Microsoft case. Here, the government exercised its discretion to prosecute, and Microsoft refused to settle. The parties thus submitted their dispute to resolution by judges in a public trial and appeal. What weaknesses there were in the governments' case and in Microsoft's defenses were all revealed and resolved. Findings of fact and conclusions of law were entered, appealed, and affirmed, and certiorari was sought and denied. It is thus too late in the day to settle this case under the Tunney Act. The same constitutional questions the D.C. Circuit discerned in the 1994 Microsoft case – separation of powers questions – would arise in reverse if the court subjects thissettlement to review under the Act's deferential standards. Instead, the court must "measure the remedies in the decree as if they were fashioned after trial" – because they indeed were – or abdicate powers committed to the court by Congress. United States v. Microsoft, supra, 56 F.3d at 1461; see 15 U.S.C. § 4 ("The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of section 1 to 7 of this title . . ..") The court's deference to the prosecutor at this late date, after the courts have decided this case, would constitute a failure to exercise a power that is reposed in the court alone, and would constitute reversible error. See Landry v. FDIC, 204 F.3d 1125, 1131 (D.C. Cir. 2000) (a violation of the separation of powers usually constitutes "structural error" requiring automatic reversal.).
It is also now the law of this case that "[a] party has the right to judicial resolution of disputed facts not just as to the liability phase, but also as to appropriate relief." United States v. Microsoft, 253 F.3d at 101. Accordingly, the Court of Appeals remanded to the District Court "with instructions to conduct a remedies-specific evidentiary hearing," id. at 103, and fashion an injunction that "unfetter[s] [the] market from anticompetitive conduct, . . . terminate[s] the illegal monopoly, den[ies] to the defendant the fruits of its statutory violation, and ensure[s] that there remain no practices likely to result in monopolization in the future," id.
This mandate is binding on all parties to this case. It is of no import that the DOJ and Microsoft have come up with the "better idea" of coming to terms and submitting their agreement for approval under the deferential – but irrelevant – standards of the Tunney Act. "The Department of Justice . . . by stipulation or otherwise has no authority to circumscribe the power of the courts to see that [their] mandate is carried out." Utah Public Service Commission v. El Paso Natural Gas Co., 395 U.S. 464, 467 (1969), quoting Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 136 (1967). Neither can the court avoid its obligation to investigate the merits of the proposed settlement in open proceedings, not just in light of the thin disclosures mandated by the Tunney Act, but in light of the voluminous record yielded by this litigation.
The Court's jurisdiction to consider the appropriate remedy in this case is based exclusively on Section 4 of the Sherman Act, 15 U.S.C. § 4. Neither that statute nor the mandate authorizes the court to defer to any party, as the inapplicable Tunney Act might allow. Not only has "testimony . . . been taken," 15 U.S.C. § 16(a), there are findings of fact and conclusions of law on the books, a "'full exploration of [which] is usually necessary in order (for the District Court) properly to draw (an antitrust) decree' so as to `prevent future violations and eradicate existing evils.'" United States v. Microsoft, 253 F.3d at 101, quoting United States v. Ward Baking Co., 376 U.S. 327, 330-331 (1964).
mandate of the Court of Appeals. Whatever remedy the court would impose, it cannot void the findings and conclusions affirmed by the D.C. Circuit, nor can it deprive third parties of the right to use those findings and conclusions in future litigation against Microsoft.
LINGEL H. WINTERS, A Prof. Corp.
I, Martha Van Cleef, declare that I am a citizen of the United States, and I am employed in San Francisco County, State of California. I am over the age of eighteen years and not a party to the within action; my business address is Two Embarcadero Center, 8th Floor, San Francisco, California 94111.
125 Broad Street, 31st Fl.
140 East Town Street, 12th Fl.
Executed on January 29, 2002 at San Francisco, California.

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