Court Opinion

ID: 1017941
Source: CourtListenerOpinion
Date Created: 2013-07-04 22:12:33.205625+00
Date Added: 2024-06-11T15:38:05.586147
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 05-1013

CYNTHIA M. AIKENS; JACQUELINE BELFIELD; AMBER
CISNEY,

                                             Plaintiffs - Appellants,

           versus

MICROSOFT CORPORATION,

                                               Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, District Judge. (CA-
00-2132-JFM; CA-00-1332-MDL)

Argued:   September 20, 2005             Decided:    December 15, 2005

Before LUTTIG and GREGORY, Circuit Judges, and Robert J. CONRAD,
Jr., United States District Judge for the Western District of North
Carolina, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: John Kerry Weston, SACKS & WESTON, Philadelphia,
Pennsylvania, for Appellants.     David Bruce Tulchin, SULLIVAN &
CROMWELL, New York, New York, for Appellee. ON BRIEF: G. Stewart
Webb, Jr., VENABLE, L.L.P., Baltimore, Maryland; Thomas W. Burt,
Richard J. Wallis, Steven J. Aeschbacher, MICROSOFT CORPORATION,
Redmond, Washington; Joseph E. Neuhaus, Richard C. Pepperman, II,
Sharon L. Nelles, SULLIVAN & CROMWELL, New York, New York; Charles
B. Casper, Peter Breslauer, MONTGOMERY, MCCRACKEN, WALKER & RHOADS,
L.L.P., Philadelphia, Pennsylvania, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

                               2
PER CURIAM:

         In November 1999, the United States District Court for the

District of Columbia entered findings of fact in the United States

Department of Justice’s federal antitrust suit ("federal antitrust

action") against Microsoft Corporation (“Microsoft”).1               Shortly

thereafter,    in   January    2000,   the   plaintiffs,   Cynthia   Aikens,

Jacqueline     Belfield,      and   Amber    Cisney   (collectively     “the

plaintiffs”), sued Microsoft in Louisiana state court on behalf of

a putative class of Louisiana residents who had purchased Microsoft

operating system software. The plaintiffs claimed that, because of

Microsoft’s anti-competitive and monopolistic practices, they had

paid more for Microsoft’s operating software than they otherwise

would have in a competitive market.          Microsoft removed the case to

federal court, and the Judicial Panel on Multidistrict Litigation

(“JPML”) transferred the matter to the United States District Court

for the District of Maryland (“the district court”). Subsequently,

the district court denied the plaintiffs’ motion to remand and

later dismissed their causes of action for failure to state a claim

under Louisiana law.       The plaintiffs appeal both rulings.

     1
      In this proceeding, the Justice Department and various state
attorneys general alleged that Microsoft had violated provisions of
the Sherman Act, 15 U.S.C. § 1 et seq., and section 4 of the
Clayton Act, 15 U.S.C. § 15. See United States v. Microsoft Corp.,
84 F. Supp. 2d 9, 12 (D.D.C. 1999). Hereinafter, we will refer to
this proceeding as “the federal antitrust action.”

                                       3
        We affirm the district court’s order denying the motion to

remand, because we find that the court had jurisdiction over the

claims    of    the   class   representatives          based       on    diversity    of

citizenship under 28 U.S.C. § 1332 and over the claims of the other

class members based on supplemental jurisdiction under 28 U.S.C.

§ 1367.       Further, because the plaintiffs’ complaint is devoid of

any factual basis for the state law claims, we affirm the order of

dismissal.

                                          I.

      The plaintiffs’ complaint borrowed liberally from the findings

of fact issued in the federal antitrust action.                    Specifically, the

plaintiffs      asserted   that    with    the      release   of    its    Windows    98

operating system in 1998, Microsoft had achieved a monopoly over

“the operating systems installed in virtually all Intel-compatible

personal computers worldwide.”            J.A. 178.     Further, the plaintiffs

alleged    that   Microsoft   was    able      to    create     and     maintain   this

monopoly by intimidating potential competitors.                         As a result of

these     monopolistic     practices,         the    plaintiffs         asserted     that

Microsoft was able “to charge a substantially higher price for its

software than that which could be charged in a competitive market.”

Id.      In    asserting   these    factual         antitrust      allegations,      the

plaintiffs did not cite any specific theory of liability or cause

of action.

                                          4
     In addition to alleging antitrust violations, the plaintiffs

also asserted that Microsoft was liable, under Louisiana law, for

(a) bad faith breach of contract; (b) negligent misrepresentation;

(c) fraudulent misrepresentation; (d) unjust enrichment; (e) breach

of warranty concerning redhibitory defects; and (f) any other acts

of negligence or violations of Louisiana law.      J.A. 174-75.   The

plaintiffs offered no separate factual support for these additional

state law allegations.

     The   plaintiffs,   all   indirect    purchasers   of   Microsoft

software,2 concluded that they were entitled to damages, “including

but not limited to, the difference between the price the class

members actually paid for Windows 95, Windows 98, and Internet

Explorer and the amount they would have paid if Microsoft was not

an illegal monopoly.”     J.A. 179.       The plaintiffs also sought

“remuneration . . . of all sums by which Microsoft has been

directly and indirectly unjustly enriched[,]” in addition to treble

damages and reasonable attorneys fees.        J.A. 180-82.      In an

apparent attempt to avoid federal diversity jurisdiction, the

plaintiffs contended that they were not seeking recoveries in

excess of $75,000 per class member.   See J.A. 181.

     2
      As indirect purchasers, the plaintiffs did not buy their
operating system software directly from Microsoft but, instead,
purchased the software from intermediaries such as retailers and
wholesalers.

                                  5
     After the JPML transferred this action to the United States

District Court for the District of Maryland in April 2000, the

plaintiffs filed a motion to remand to the state court for lack of

subject   matter   jurisdiction.   In   support   of   the   motion,   the

plaintiffs argued that to the extent that they had limited their

prayer for damages to no more than $75,000 per class member, there

was no subject matter jurisdiction on the basis of diversity of

citizenship.    Further, the plaintiffs argued that there was no

federal question jurisdiction because their antitrust allegations

relied on Louisiana law and did not involve substantial questions

of federal antitrust law.    J.A. 188-89.

     Concluding that it had original jurisdiction over the action,

the district court denied the plaintiffs’ motion to remand. First,

the district court asserted jurisdiction on the basis of diversity

of citizenship, concluding that the plaintiffs’ collective prayer

for remuneration or disgorgement of profits would yield a recovery

well in excess of $75,000.    Alternatively, the district court held

that it had federal question jurisdiction because the plaintiffs’

complaint raised substantial questions of federal antitrust law.

Subsequently, Microsoft moved to dismiss the unjust enrichment

claim under Federal Rule Civil Procedure 12(b)(6).           The district

court granted this motion, finding that the unjust enrichment claim

was not supported by Louisiana law.      Thereafter, Microsoft moved

for dismissal and/or summary judgment of the remaining state law

                                   6
claims.   The district court granted that motion in December 2004.

In so doing, the district court held that the plaintiffs had failed

to raise any facts that would support those causes of action.              See

J.A. 472-73.

                                   II.

       We first turn to the district court’s order denying the

plaintiffs’ motion to remand.        This Court reviews questions of

subject matter jurisdiction de novo. Dixon v. Cogburg Dairy, Inc.,

369 F.3d 811, 814 (4th Cir. 2004)(en banc).                 The burden of

demonstrating   subject   matter   jurisdiction     rests   on     the   party

seeking removal.   Mulcahey v. Columbia Organic Chems. Co., 29 F.3d

148, 151 (4th Cir. 1994).      Because of the underlying federalism

concerns, this Court must strictly construe removal jurisdiction.

Id.   “If federal jurisdiction is doubtful, a remand is necessary.”

Id.

      Pursuant to section 1441 of Title 28, “any civil action

brought in a State court of which the district courts of the United

States have original jurisdiction, may be removed by the defendant

. . . to the district court of the United States for the district

and division embracing the place where such action is pending.” 28

U.S.C. § 1441(a)(2000).       In this case, Microsoft argues that

removal   was   proper   because   the   district   court    had    original

jurisdiction under 28 U.S.C. § 1331.      Section 1331 grants district

                                    7
courts “original jurisdiction of all civil actions arising under

the Constitution, laws, or treaties of the United States.”        28

U.S.C. § 1331. Microsoft also contends that the district court had

original jurisdiction under section 1332 of Title 28.     Under that

provision, federal courts “shall have original jurisdiction of all

civil actions where the matter in controversy exceeds the sum or

value of $75,000, exclusive of interest and costs, and is between

. . . citizens of different states.”   Id. § 1332(a)(1).

                                A.

     We believe that this court has jurisdiction over the claims of

the class representatives based on diversity of citizenship under

28 U.S.C. § 1332 and over the claims of the other class members

based on supplemental jurisdiction under 28 U.S.C. § 1367.    It is

undisputed that the parties are diverse, see J.A. 189, and we

conclude that the amount in controversy is satisfied for the class

representatives based on the provisions in Louisiana law governing

the allocation of attorney’s fees in class actions.          Because

attorney’s fees in this class action, which would easily exceed

$75,000, are awarded pursuant to the substantive state statutes

under which the plaintiffs’ causes of action accrue, and because

under La. Code Civ. Proc. art. 595(A), the attorney’s fees would be

awarded entirely to the class representatives, the amount in

controversy is satisfied for the class representatives.    See In re

                                8
Abbott Labs., 51 F.3d 524, 526-27 (5th Cir. 1995) (holding, in a

Louisiana antitrust class action, that the amount in controversy

was satisfied for the class representatives because of article

595(A)).    Supplemental jurisdiction then exists over the claims of

the other class members.           See id. at 527-29; see also Exxon Mobil

Corp. v. Allapattah Servs., Inc., 125 S. Ct. 2611, 2625 (2005)

(ratifying        Abbott     Laboratories’         holding       with       respect     to

supplemental jurisdiction).

     The district court rejected this argument because it believed

that in order to rely upon Abbott Laboratories, the plaintiffs’

right to attorney’s fees must derive from a substantive state

statute,    not    just    article   595(A),       and   it     concluded     that    the

plaintiffs    did    not    rely   on   a    substantive        state   statute       that

provided for attorney’s fees.               J.A. 446.     Even assuming that the

district court’s narrow construction of Abbott Laboratories is

correct, which the parties dispute, the district court’s conclusion

was still in error.            Abbott Laboratories recognized, and the

district court itself admitted, that Louisiana’s antitrust statute

awards     mandatory       attorney’s       fees   as    part     of    a    prevailing

plaintiff’s recovery.          See Abbott Laboratories, 51 F.3d at 526

(citing La. Rev. Stat. Ann. § 51:137); J.A. 446.                  Because the state

antitrust statute is a substantive statute that provides for

mandatory attorney’s fees, the amount in controversy is satisfied

under Abbott Laboratories.

                                            9
     The plaintiffs have one final argument. They claim that Count

47 of their complaint limits their requested damages to $75,000 and

thus diversity jurisdiction does not exist even if the attorney’s

fees would otherwise satisfy the amount in controversy requirement.

Count 47 states:

          Plaintiffs and the plaintiff class seek monetary
     relief as provided by Louisiana law. Plaintiffs and each
     member of the class have individually incurred damages
     under the laws of Louisiana in an amount less than
     $75,000. Neither of the Plaintiffs, nor any member of
     the class seeks damages exceeding $75,000, nor do their
     damages individually exceed $75,000, inclusive of
     interest and attorneys’ fees and all relief of any nature
     sought hereunder. Plaintiffs do not seek any form of
     “common” recovery, but rather individual recoveries not
     to exceed $75,000 for any class member, inclusive of
     interest and attorneys’ fees and all relief of any nature
     sought hereunder.

J.A. 181.   We conclude, however, that the language in Count 47 is

insufficient to limit the plaintiffs’ possibility of recovery to

$75,000 for the purposes of determining the amount in controversy

and that diversity of citizenship jurisdiction therefore exists.

     It is true that a plaintiff can “resort to the expedient of

suing for less than the jurisdictional amount, and though he would

be justly entitled to more, the defendant cannot remove.”   See St.

Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 294

(1938). However, as courts have recognized, this dicta in St. Paul

Mercury was premised on the notion that plaintiffs would be bound

by the amount alleged in the ad damnum clause of the complaint, see

De Aguilar v. Boeing Co., 47 F.3d 1404, 1410 (5th Cir. 1995), a

                                10
premise that is no longer uniformly true and that is clearly not

true in Louisiana, where La. Code Civ. Proc. art. 862 provides that

courts   can    grant   relief    to   which    a    successful    plaintiff   is

entitled, regardless of the ad damnum clause, see Manguno v.

Prudential Property & Casualty Insurance Co., 276 F.3d 720, 722

(5th Cir. 2002).        This gives rise to the concern that plaintiffs

will use a low ad damnum clause to avoid removal, secure in the

knowledge that state law will allow them to recover more after

removal would no longer be timely.              See De Aguilar, 47 F.3d at

1410.    Courts have resolved this concern by requiring plaintiffs

seeking to defeat removal jurisdiction in states where the ad

damnum clause at the time of filing is not legally binding to “file

a binding stipulation or affidavit with their complaints.”                 Id. at

1412.

     The   plaintiffs      do    not   appear   to    dispute     these   general

principles, but instead argue that Count 47, in which they disclaim

any intent to seek more than $75,000, is not just an ad damnum

clause, but is also a “judicial confession” under Louisiana law

that should have the same legal effect as a De Aguilar stipulation

-- namely, it should prevent plaintiffs from receiving more than

$75,000.       However, the precise language of Count 47 does not

support their assertion.         Count 47 alleges that plaintiffs “have

individually incurred damages . . . less than $75,000" and do not

“seek[] damages exceeding $75,000.”                 J.A. 181.     It does not,

                                        11
however, stipulate that the plaintiffs will not accept more than

$75,000 if the court awards it.      And since Count 47 also explicitly

notes that the plaintiffs “seek monetary relief as provided by

Louisiana law,” id., and article 862 provides that, regardless of

the complaint, a court “shall grant the relief to which the party

in whose favor [judgment] is rendered is entitled,” it is possible

that the court could award the plaintiffs more than $75,000 even

though they do not seek it.      Thus, the Fifth Circuit has held that,

given Louisiana law, language similar to Count 47 does not suffice

to defeat diversity jurisdiction.          See Manguno, 276 F.3d at 722,

724   (holding,   because   of   article    862,   that   language   in   the

complaint stating that “the amount in controversy does not exceed

$75,000" and that “plaintiffs are not seeking attorneys fees” was

insufficient to defeat diversity jurisdiction based on attorneys’

fees).3

      Thus, we conclude that the district court did not err in

denying the motion to remand for lack of jurisdiction.          The amount

      3
      Moreover, it is questionable whether Count 47 would have been
sufficient even if it had disclaimed any ability to accept more
than $75,000. There would remain a conflict between article 862,
which grants the plaintiff the relief to which he is entitled, even
if it was not demanded in the complaint, and De Aguilar’s holding
that   a   binding  stipulation    suffices   to  prevent   federal
jurisdiction. We believe the best way to resolve this conflict may
be to require that the stipulation be made outside of the text of
the complaint (but of course still within the pending proceedings),
so that any state laws concerning the ad damnum clause are not
implicated. This position is supported by language in De Aguilar.
See 47 F.3d at 1412 (stating that plaintiffs “must file a binding
stipulation or affidavit with their complaints” (emphasis added)).

                                    12
in controversy is satisfied because the Louisiana antitrust statute

provides for mandatory attorney’s fees that article 595(A) directs

shall be awarded to the class representatives. Because Count 47 of

the plaintiff’s complaint does not effectively surrender that

entitlement   under   Louisiana       law,    we    hold   that    diversity    of

citizenship   jurisdiction      exists       with    respect      to   the   class

representatives and that supplemental jurisdiction exists with

respect to the other class members.

                                       B.

     Because we conclude that diversity jurisdiction exists, we

find it unnecessary to reach the district court’s alternative basis

for finding original jurisdiction: federal question jurisdiction

under 28 U.S.C. § 1331.

                                      III.

     The   plaintiffs    also    appeal      the    district      court’s    order

dismissing their non-antitrust state law claims.                   Although the

factual    allegations   in     the    complaint       related     entirely    to

Microsoft’s   anti-competitive        and    monopolistic      practices,      the

plaintiffs also concluded that Microsoft was liable for unjust

enrichment, bad faith breach of contract, misrepresentation, and

breach of warranty concerning redhibitory defects.

                                       13
     We review the district court’s dismissal for failure to state

a claim under Federal Rule of Civil Procedure 12(b)(6) de novo.

Flood v. New Hanover County, 125 F.3d 249, 251 (4th Cir. 1997).   In

considering the motion to dismiss, we will accept as true the

plaintiffs’ factual allegations and construe them in the light most

favorable to the plaintiffs.    Randall v. United States, 30 F.3d

518, 522 (4th Cir. 1994).   Dismissal under Rule 12(b)(6) is proper

“only if it is clear that no relief could be granted under any set

of facts that could be proved consistent with the allegations.”

Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

                                 A.

     The district court properly dismissed the plaintiffs’ unjust

enrichment claim.   Under Louisiana Civil Code Article 2298, “[a]

person who has been enriched without cause at the expense of

another person is bound to compensate that person.”   La. Civ. Code

Ann. art. 2298 (West 2000).   However, the unjust enrichment remedy

is “subsidiary” in nature and “shall not be available if the law

provides another remedy for the impoverishment or declares a

contrary rule.”     Id.   Indeed, “where there is a rule of law

directed to the issue, [an unjust enrichment claim] must not be

allowed to defeat the purpose of said rule.”          Coastal Env’t

Specialists, Inc. v. Chem-Lig Int’l, Inc., 818 So. 2d 12, 19 (La.

Ct. App. 2001).

                                 14
     The     plaintiffs      sought   unjust    enrichment    damages    for

Microsoft’s “monopolistic, anti-competitive practices.”            J.A. 180.

As indirect purchasers, however, the plaintiffs cannot sue to

recover monetary damages under Louisiana antitrust law.             See Free

v. Abbott Labs., Inc., 176 F.3d 298, 301 (5th Cir. 1999) (finding

that Louisiana courts would follow the federal Illinois Brick rule

barring indirect purchaser suits for monetary damages). Therefore,

to the extent that the plaintiffs cannot sue for monetary damages

under Louisiana antitrust law, they cannot employ a subsidiary

unjust enrichment claim to circumvent this rule. See Coastal Env’t

Specialists, Inc.,     818 So. 2d at 19.       Accordingly, we affirm the

district court’s dismissal of the unjust enrichment claim.

                                      B.

     Next, the plaintiffs assert that the district court erred in

dismissing their bad faith breach of contract claim. Under Article

1997 of the Louisiana Civil Code, “[a]n obligor in bad faith is

liable for all damages, foreseeable or not, that are a direct

consequence of his failure to perform.”             In order to prove bad

faith,     the   plaintiff    must    demonstrate    that    the   defendant

“intentionally and maliciously [failed] to perform his obligation.”

First Nat’l Bank of Jefferson Parish v. Dazet, 656 So. 2d 1110,

1113 (La. Ct. App. 1995).        Bad faith entails “some interested or

sinister motive and implies the conscious doing of wrong for

                                      15
dishonest or morally questionable motives.” Pellerin Constr., Inc.

v. Witco Corp., 169 F. Supp. 2d 568, 585 (E.D. La. 2001)(quoting

First Nat’l Bank of Jefferson Parish, 656 So. 2d at 1113).

     We will assume, as the district court did, that Microsoft’s

end-user software licensing agreement constituted an adequate basis

in fact for a contract between the parties. However, the complaint

lacked any factual allegations regarding how Microsoft breached the

terms of that agreement.      Further, the plaintiffs failed to allege

how Microsoft acted with sinister or morally questionable motives.

Given these omissions, this Court cannot infer the essential

elements of a bad faith breach of contract claim.        Accordingly, we

hold that the district court properly dismissed this claim.

                                     C.

     The plaintiffs’ negligent and fraudulent misrepresentation

claims   also   fail.   To   prove   negligent   misrepresentation,   the

plaintiff must demonstrate that (1) the defendant had a legal duty

to supply correct information; (2) the defendant breached that

duty; and (3) the plaintiff was damaged as a result of his

justifiable reliance on the defendant’s misrepresentations.           See

Hughes v. Goodreau, 836 So. 2d 649, 663 (La. Ct. App. 2002).

Fraudulent      misrepresentation     occurs     where   the   defendant

misrepresents or suppresses the truth with the intent “either to

obtain an unjust advantage for one party or to cause a loss or

                                     16
inconvenience to the other.” Ballard’s Inc. v. North Am. Land Dev.

Corp., 677 So. 2d 648, 650 (La. Ct. App. 1996).             In order to prove

fraudulent misrepresentation by silence or inaction, the plaintiff

must demonstrate that the defendant had a duty to disclose.              Id. at

650-51.

       As   the      district     court       correctly     concluded,     the

misrepresentation claims fail because the complaint is devoid of

any facts that would give rise to a legal duty on the part of

Microsoft       to      supply   correct      information    regarding     the

incompatibility of its software with third-party applications.

Indeed, we cannot infer the existence of such a duty from any of

the plaintiffs’ unrelated antitrust allegations.               Therefore, we

hold     that     the     district    court      properly    dismissed     the

misrepresentation claims.

                                      D.

       Finally, the plaintiffs contend that the district court erred

in dismissing their redhibitory defect claim.             “Redhibition is the

avoidance of a sale on account of some vice or defect in the thing

sold, which renders it either absolutely useless, or its use is so

inconvenient and imperfect, that it must be supposed that the buyer

would not have purchased the object, if the buyer would have been

aware of the vice or defect in the object.”               La. Civ. Code Ann.

art. 2520 (West 2000).           Furthermore, a plaintiff suing for a

                                      17
redhibitory defect “must also prove that the defect existed at the

time of the sale, and that [the plaintiff] afforded the seller an

opportunity to repair the defect.”       Anzelmo v. Pelican Computer,

892 So.2d 659, 662 (La. Ct. App. 2004).

      For computer software, Louisiana courts have found redhibitory

defects where the product itself was defective or otherwise failed

to perform to its specifications. See Anzelmo v. Pelican Computer,

892   So. 2d 659 (La. Ct. App. 2004); Photo Copy, Inc. v. Software,

Inc., 510 So. 2d 1337, 1339-40 (La. Ct. App. 1987).         In Anzelmo,

the court concluded that a computer that experienced continual CD-

ROM errors was “not useful for the purpose intended by the buyer”

and, therefore, was defective within the meaning of article 2520.

892 So. 2d at 662.    Similarly, in Photo Copy, the court held that

a   customized   software   program’s   failure   to   perform   specific

applications requested by the buyer constituted a redhibitory

defect.    510 So. 2d at 1341.

      The plaintiffs contend that the defect in this case was

“Microsoft’s ability to maintain control over third party [sic]

application software’s compatibility with the Windows operating

system.”     Appellants’ Reply Br. at 21.         In other words, the

plaintiffs allege that the Microsoft software is defective because

Microsoft’s anti-competitive practices inhibited the development of

non-Microsoft software applications.       These alleged practices do

not constitute redhibitory defects within the meaning of article

                                  18
2520.   Unlike   the    plaintiffs   in    Alzemo   and   Photo   Copy,   the

plaintiffs in this case cannot identify a function or application

of Microsoft’s operating software that failed to perform to its

specifications.        Accordingly, we hold that the district court

properly dismissed the redhibitory defect claim.

                                     IV.

     For the reasons stated above, the judgments of the district

court denying the plaintiffs’ motion to remand and granting the

defendant’s motion to dismiss are affirmed.

                                                                   AFFIRMED

                                     19