Restaurant meal helped fuel Microsoft's Iowa settlement deal

Lawyers say agreement to end class-action lawsuit was reached on Sunday

Fueled by milkshakes and omelets, the opposing lawyers in the Comes v. Microsoft Corp. class-action lawsuit Sunday sealed a settlement that had eluded them since the case was first filed in Des Moines seven years ago.

The settlement agreement, which was announced today, leaves just one state-court antitrust class action in Mississippi pending against Microsoft, according to Rich Wallis, the software vendor's associate general counsel and its lead lawyer in both the Iowa and Mississippi cases. Microsoft will try to get that case dismissed at a hearing scheduled to take place later this month, Wallis said.

A trial in Iowa began in mid-November and had resulted in the public unearthing of internal e-mails and documents that were embarrassing to Microsoft, including a 2004 message in which now-former Windows development chief Jim Allchin complained to top executives Bill Gates and Steve Ballmer about the progress of Windows Vista and said that he would buy a Macintosh if he wasn't a Microsoft employee.

The trial had been expected to last until at least midyear. In an interview today, Wallis denied that the public release of Allchin's message and other revealing e-mails as evidence had made Microsoft more eager to settle the Iowa case. "Most of those allegations had been out there," he said. "And those e-mails were old. We were very anxious to continue the trial so we could tell our story."

Wallis said that Gates and Jeff Raikes, president of the Microsoft division responsible for Office and the company's Dynamics business applications, were both expected to testify at the trial in the spring.

But, he added, "we have a pattern of consistently settling these old cases whenever we can [do so] on a reasonable basis. That opportunity presented itself." Wallis said Roxanne Conlin, the lead lawyer for the plaintiffs, called him on Sunday, and the two of them met at a local Perkins restaurant "and worked out most of the details."

Conlin, who is based in Des Moines, said in a separate interview today that the plaintiffs and Microsoft had held "sporadic discussions for quite a long time" about a possible settlement. "But we really started to close the gap on Sunday, and we finalized the settlement at about 6 p.m.," she said.

Last month, the plaintiffs posted about 3,000 documents, including letters, memos and e-mails from Raikes and other Microsoft executives, on a public Web site called www.iowaconsumercase.com. That site wasn't accessible today, as would-be visitors were asked to enter a username and password. Neither Conlin nor Wallis would comment on whether the site was being taken down as part of the settlement deal.

Microsoft was hit by a spate of state-level class actions in the late 1990s following the U.S. Department of Justice's federal antitrust lawsuit against the company. The Iowa case is one of only two state suits that have gone to trial thus far. A case in Minnesota was settled in 2004 after two months of trial, with Microsoft agreeing to pay a total of $175 million to customers in that state.

The Iowa plaintiffs had been seeking up to $330 million in damages, alleging that customers had overpaid for software because of anticompetitive practices by Microsoft. The terms of the settlement aren't being disclosed pending an April 20 court hearing on the proposed deal, and both Conlin and Wallis declined to say how much money Microsoft will pay as compensation to the individuals and businesses that qualify as members of the class represented by the lawsuit.

But Conlin said the agreed-upon amount is roughly proportional to the compensation paid in Minnesota, based on the number of customers and their software purchases. In Minnesota, the overall population is about 50% larger than Iowa's. But the period for eligible purchases of Microsoft products was three years shorter than it was in Iowa.

According to information released by the Iowa plaintiffs during the trial, the lawsuit covered 7.5 million purchases of Windows and other Microsoft products between May 1994 and June 2006. More than 1,100 Microsoft customers opted out of the suit, but Conlin said that number was a statistically insignificant portion of the overall base of users who made qualifying purchases. "It was just half of half of half a percent of the total number of people affected," she said.

Regarding a claim by the plaintiffs that they had proof Microsoft was violating its 2002 antitrust settlement with the DOJ, Conlin said it's unclear if and when the public may have access to that information. "We did what lawyers are supposed to do, which is turn it over to the U.S. Department of Justice and the Iowa Department of Justice," she said.

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