Microsoft and Best Buy failed to get a racketeering case against them dismissed Monday, and now face trail in a class-action RICO suit. Yet, somehow, investors don't seem to mind all that much. The two companies asked the justices to overturn a May ruling by the San Francisco-based 9 th U.S. Circuit Court of Appeals that allowed the lawsuit to proceed. In rejecting the appeal, the Supreme Court let the lower court’s action stand.
In response to the Supreme Court's decision, Microsoft reiterated its innocence.
In Monday afternoon trading, shares of Microsoft slipped 0.4%, or 11 cents, to $30.06, while Best Buy dropped 1.5%, or 76 cents, to $48.95. The two companies are now faced with a class-action lawsuit arguing that a joint venture between them violated the federal Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO.
The suit alleges the companies violated RICO by engaging in wire fraud when they electronically transmitted the plaintiffs' financial information. The plaintiffs are claiming damages in the "tens of millions" of dollars, which if tripled would top $100 million, said Daniel Girard, a lead attorney on the case in San Francisco.
Initially intended to provide greater ease to prosecute mob figures, the law has been applied in several other cases as well. It also provides for triple-damage awards in civil cases.
The two companies have also received support from the U.S. Chamber of Commerce, who said in friend-of-the-court filing on behalf of the companies that the use of RICO in civil cases has gotten out of control and urged the court to take the case in order rein in its use.
Under the joint venture, Microsoft invested $200 million in Best Buy in April 2000, and agreed to promote the company's online store through its Internet access service, MSN. In turn, Best Buy agreed to promote MSN in its stores.
The dispute began in 2003, when James Odom sued the companies after purchasing a laptop computer at a Best Buy outlet. Odom alleged that Best Buy included software with his purchase that provided a six-month free trial to MSN.
Best Buy allegedly signed Odom up an MSN account with the credit card Odom used to pay for the computer. After a six-month free trial ended, Microsoft began charging him for the account, the suit charged.
Odom is one of two lead plaintiffs in a class-action suit involving thousands of consumers with similar claims, said Girard.
Microsoft has denied illegal conduct in response to these allegations and a Best Buy spokeswoman says the company does not comment on pending litigation.
In papers filed in court, the companies said their joint marketing agreement did not constitute an ongoing "enterprise," as required under the RICO statute. The companies also said that the appeals court ruling would greatly expand RICO’s scope.
Despite the seemingly dire consequences, the case is low on investor's radar.
http://bits.blogs.nytimes.com/2007/10/15/tuesday-is-layoff-day-at-aol/
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