DocketNumber: No. X06-CV00-0160064-S
Citation Numbers: 2000 Conn. Super. Ct. 12445, 28 Conn. L. Rptr. 353
Judges: McWEENY, JUDGE.
Filed Date: 10/10/2000
Status: Non-Precedential
Modified Date: 7/5/2016
Vacco seeks to recover damages for himself and on behalf of a purported class of similarly-situated Connecticut residents who allegedly have paid a "monopoly price" for Windows 98,1 "in excess of what Microsoft would have been able to charge in a competitive market." Complaint, ¶ 5.2 The complaint is asserted in three counts: violation of the Connecticut Antitrust Act, General Statutes §
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted . . . (Citation omitted; internal quotation marks omitted.) Peter-Michael, Inc. v. Sea Shell Associates,
In count I, Vacco claims damages by way of a private right of action for antitrust violations pursuant to General Statutes §
Microsoft's motion to strike relies on the principle of federal antitrust law holding that indirect purchasers do not have standing to assert a private cause of action. See Illinois Brick Co. v. Illinois,
Similarly, Vacco complains for himself and purported class members that Microsoft has charged them in excess of what it would have been able to charge in a competitive market. Likewise, the complaint alleges that Vacco is an "indirect purchaser" because he bought his computer from a retailer (Staples) who bought its merchandise from a distributor or hardware manufacturer who paid Microsoft for a license to include the software in its computers. Significantly, the complaint fails to allege that Vacco or any one of the purported class members bought their Microsoft operating system directly from Microsoft.4
The holding in Illinois Brick, that only direct purchasers have standing to bring a private cause of action under federal antitrust law, relies on several policy choices. First, the court wanted to avoid a CT Page 12448 serious risk of multiple liability for defendants. Second, the court understood the difficulty of determining the amount of overcharge passed from direct to indirect purchasers. The court also observed that:
Permitting the use of pass-on theories under § 4 essentially would transform treble-damages actions into massive efforts to apportion the recovery among all potential plaintiffs that could have absorbed part of the overcharge — from direct purchasers to middlemen to ultimate consumers. However appealing this attempt to allocate the overcharge might seem in theory, it would add a whole new dimension of complexity to treble-damage suits and seriously undermine their effectiveness.
Id., 737. Thus, the court determined that the better choice was to limit recovery to direct purchasers on the basis that the antitrust laws would be enforced more effectively by concentrating the full recovery for the overcharge in the direct purchasers. Id., 733. The Supreme Court reaffirmed its Illinois Brick decision in Kansas v. Utilicorp United,Inc.,
Recognizing that application of the Illinois Brick indirect purchaser rule to his antitrust claims would require their dismissal, Vacco correctly argues that Connecticut antitrust law is not preempted by federal law. In addition, he argues that nothing in federal antitrust law would prevent a state from allowing indirect purchasers to recover under the state's own antitrust laws. See California v. Arc America, 490 u.s. 93, 103,
The court is not persuaded, however, that Connecticut antitrust law differs significantly from federal antitrust law in their mutual restriction of private causes of action to direct purchasers. Supporting this observation is our legislature's response to the numerous attempts to enact an "Illinois Brick repealer." While California and some other states have enacted such legislation, bills offered in Connecticut to repeal Illinois Brick (Senate Committee Bill Nos. 1159 (1981), 1119 (1983), 88 (1984), 825 (1987), and 7052 (1991)) have uniformly been rejected.5
In the absence of "Illinois Brick repealer" legislation, courts interpreting their own state antitrust statutes have dismissed indirect purchaser actions. See Blewett v. Abbott Labs,
In litigation alleging state antitrust claims almost identical to Vacco's, such claims were dismissed under the authority of IllinoisBrick. See Weinberg v. Microsoft Corp., No. D-162, 526 (Dist.Ct. Tex., August 30, 2000); Arnold v. Microsoft Corp., No. 00-CI-00123 (Ky. Cir. Ct., July 21, 2000); Hindman v. Microsoft Corp., No. 00-1-0945-03 (Haw. Cir. Ct., July 20, 2000); Comes v. Microsoft Corp., No. CL82311, p. 14 (Iowa Dist. Ct., July 11, 2000); Daraee v. Microsoft Corp., No. 0004-03311 (Or. Cir. Ct., June 27, 2000); Krotz v. Microsoft Corp., No. A416361 (Nev. Dist. Ct. June 22, 2000).
Vacco is able to cite only one state court decision to support his position that the Illinois Brick indirect purchaser rule is not controlling, even in the absence of repealer legislation. See DanielSherwood et al v. Microsoft Corp. et al, No. 99 C-3562 (5th Cir. Ct., Davidson County, Tenn.) (filed under Tennessee antitrust law). He also concedes that the Tennessee statute (Tennessee Trade Practices Act, T.C.A. § 47-25-101 et seq. of the Tennessee Consumer Protection Act, T.C.A. § 47-18-101 et seq.) differs significantly from the Connecticut Antitrust Act. The Connecticut statute states on its face that judicial interpretation is to conform with federal antitrust law. "The legislative history of the [Connecticut Antitrust A]ct clearly establishes that it was intentionally patterned after the antitrust law of the federal government. . . . Accordingly, we follow federal precedent when we interpret the act unless the text of our antitrust statutes, or other pertinent state law, requires us to interpret it differently."6
(Citations omitted.) Westport Taxi Service, Inc. v. Westport TransitDistrict,
Vacco attempts to distinguish Illinois Brick by focusing on the license (EULA)7 to which he and members of the purported class were compelled to agree before they were permitted to use the Windows 98 operating system. Because the software was not sold to him but merely licensed, Vacco contends that he cannot be an "indirect purchaser" within the meaning of Illinois Brick. The court finds, however, that the licensing agreement is merely a function of copyright law; it does not replace the economic reality of the indirect purchaser relationship on which the CT Page 12450Illinois Brick court focused its policy choices. The same three policy considerations leading to the Supreme Court's decision in IllinoisBrick, namely, exposure by defendants to a serious risk of overlapping recoveries, difficulty of determining the "pass-on" charge,8 and more effective enforcement in private actions when the complaining party is a direct purchaser, apply equally under a licensing scheme. The Supreme Court drew the line, recognizing that limiting private enforcement to direct purchasers is the better policy choice, even while cognizant that "direct purchasers may sometimes refrain from bringing a treble-damages suit for fear of disrupting relations with their suppliers." IllinoisBrick v. Illinois, supra, 431 U.S. 746.
According to the Supreme Court, two very limited circumstances might permit an exception to the Illinois Brick bright line indirect-purchaser rule. Id., 736 and 750 n. 4. The first exists when the direct purchaser is owned or controlled by its customer, and the second involves a "pre-existing cost-plus contract." There is no reported decision, however, in which the United States Supreme Court has applied these exceptions, and they typically are rejected by federal courts. See LucasAutomotive Eng'g v. Bridgestone/Firestone,
The pre-existing cost-plus contract relates to contractual relationships in which the quantity sold and the pass-on charges are determined by contract. This situation eliminates the problem of apportioning damages between the direct purchaser and the indirect end user, because by contract, the entire over-charge is passed on to the end user. This scenario is not alleged in Vacco's complaint.
The "ownership or control" exception, in which the manufacturer owns or controls the middleman, also is not alleged in this case. In the "ownership or control" situation, the economic reality is that there is only one sale. See Jewish Hosp. Ass'n v. Stewart Mechanical Enterprises,Inc.,
Similarly, Vacco's argument that he has properly alleged a vertical price-fixing scheme9 fails under motion to strike analysis. InLowell, the court recognized that vertical price-fixing involvedconspiracies between retailers, distributors and manufacturers to maintain artificially high resale prices. Conversely, Vacco claims that Microsoft unilaterally set a price that it imposed on hardware manufacturers and direct software purchasers. In the absence of an alleged conspiracy, his complaint is not consistent with a vertical price-fixing scheme.
Accordingly, for all of the above reasons, Microsoft's motion to strike is granted as to count I.
Vacco also includes two CUTPA claims in his complaint, which Microsoft has moved to strike. For the following reasons, the CUTPA claims also are stricken.
In a case analogous to this one, Sorisio v. Lenox,
ROBERT F. McWEENY, J.
Robert Sorisio, D/B/A Connecticut Handbag and Luggage ... , 863 F.2d 195 ( 1988 )
mary-ruth-mccarthy-guy-colville-edward-ormsby-carmen-tomasetti-joseph , 80 F.3d 842 ( 1996 )
state-of-illinois-ex-rel-roland-w-burris-attorney-general-of-the-state , 935 F.2d 1469 ( 1991 )
Stifflear v. Bristol-Myers Squibb Co. , 931 P.2d 471 ( 1996 )
jewish-hospital-association-of-louisville-kentucky-inc-cross-appellee , 628 F.2d 971 ( 1980 )
In Re Brand Name Prescription Drugs Antitrust Litigation. ... , 123 F.3d 599 ( 1997 )
Abbott Laboratories, Inc. v. Segura , 907 S.W.2d 503 ( 1995 )
Blewett v. Abbott Laboratories , 86 Wash. App. 782 ( 1997 )
Illinois Brick Co. v. Illinois , 97 S. Ct. 2061 ( 1977 )
California v. ARC America Corp. , 109 S. Ct. 1661 ( 1989 )