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On January 7, 2000, a Settlement Agreement was signed by representatives of Microsoft Corp. and Caldera, Inc. ending one of the largest private monopolization cases in
history.2
The settlement amount is confidential, but Microsoft announced that it was taking a three cent per share charge against earnings to pay the settlement amount. Based upon that information, news organizations estimated the settlement to be somewhere between $155,000,000 (Deseret News - January 11, 2000), and $275,000,000 (Wall
Street Journal - January 11, 2000).
As one of Caldera's lawyers, I learned (or relearned) some valuable lessons from my participation in the case. For some, these observations will not be new or
interesting. For others, some of these observations, hopefully, will be instructive.
10. Take Some Risks. It was a substantial risk for Snow, Christensen & Martineau ("SC&M") to take the Caldera case. At the time we were approached about the case, the firm was already heavily invested in another large contingent fee case. I, initially, did not believe the firm could or would take on another large contingent fee case. We knew that Microsoft is one of the wealthiest companies in the world, is aggressive in its litigation and would undoubtedly hire top firms and lawyers to defend this case. In many respects, Caldera's claims, some of which had previously been litigated by the Federal Trade Commission and the Department of Justice, challenged the means by which Microsoft became the global force it is today, so we knew Microsoft would spare no expense in defending the case. When Steve Hill, another SC&M lawyer who represented Caldera,
asked me if I thought the firm would take the case on a contingent fee basis, I said that I did not believe the firm could or would take on another large contingent fee case. I thought we would have to
take the case on some other basis such as a split hourly rate/contingent fee basis. Ultimately, however, the firm determined to take the case on a straight contingent fee basis.
Lawyers are often risk averse but, fortunately, attorneys in the firm were convinced we should take on the risk of this case, both because of the nature of the claims and the
potential outcome for the firm. This was a good decision for our client and the firm. As Steve Hill likes to tell people, "I can't tell you what the settlement was, I can only tell you that I have
retired from the practice of law."
9. Form a Good Team Around You. Given the magnitude of the case, and the defense we knew Microsoft would throw at us, SC&M determined to associate with other firms on the case. We teamed up with Susman Godfrey of Houston and Seattle, and Heller, Ehrman, White & McAuliffe (the HEW&M lawyers working on the case left that firm soon after the case was filed to form the Summit Law Group in Seattle.) We entered into a written agreement between the firms as to how the work and fees would be divided. Susman Godfrey is a nationally renowned litigation firm which added substantial clout to our team. The three main Susman Godfrey lawyers who worked on the case, Steve Susman, Parker Folse and Charles Eskridge, all clerked for the United States Supreme Court and are superb lawyers. The main Summit Law lawyers, Ralph Palumbo and Matt Harris, are also superb lawyers, and they knew the technology in this case better than anyone. We also had several skilled paralegals on our team who effectively handled the databases and the enormous number of documents the case generated. Microsoft was represented by Sullivan & Cromwell and by Ray, Quinney & Nebeker, as well as several Microsoft in-house lawyers, so the Microsoft team was formidable.
8. Never Agree to an Overly Complicated Protective Order. Early in the case, the court ordered Microsoft to produce the documents it had produced to the government in the prior FTC and DOJ actions. A protective order was necessary, due to the sensitive nature of some of the documents and information involved. Microsoft proposed a complicated protective order. Because we were anxious to obtain the documents and begin our discovery, we agreed to Microsoft's proposed protective order rather than argue for weeks over its terms. That protective order caused us headaches throughout the case. Microsoft used the protective order to classify nearly all of the millions of pages of documents it produced as either "confidential" or "highly confidential," and each of these classifications triggered its own set of complicated rules. The protective order also made it cumbersome for us to deal with the documents, both in filings with the court and in dealing with witnesses. Although the court ultimately determined that Microsoft had incorrectly classified many of the documents as "confidential" or "highly confidential," we should have eliminated that problem by having the court narrow the protective order at the beginning, rather than dealing with it throughout the case. The protective order also created problems for news organizations that desired access to the Microsoft documents. The news organizations were ultimately forced to petition the court to unseal documents. For the most part, they were successful in their attempts to gain access to the documents, but only after much effort and expense.
7. "Victory is in the Documents." At about the time we began discovery in the case, an issue of Litigation3
arrived. That issue, which is dedicated to discovery, contains several interesting articles, including one entitled "Victory is in the Documents."4
The introductory page to the Discovery section contained the following statement:
The dream, of course, is to be called two weeks before trial to try the case. . . . Reality, however, is different. Most cases settle, and victory is not in the scathing
cross, but in the tedious review of documents. . . . For it is Discovery which we do. The motions, the papers, the depositions. This is the numbing, dig ditching work that determines the winner.5
We circulated a copy of this statement to our team at the time we commenced review of the documents Microsoft produced to us. The success we experienced in the case all
flowed from the tedious weeks we put into reviewing hundreds of boxes of documents produced by Microsoft. Some of the boxes were densely packed with single-spaced, small font, hard copies of Microsoft
e-mail, each of which took more than one ten hour day to review. Several lawyers in our firm sampled nearly every restaurant in Seattle while spending weeks there reviewing Microsoft documents. One
Susman Godfrey lawyer from Houston lived in a Seattle hotel for six weeks so that he could organize the documents we selected from the boxes. Everyone has now read about the evidence the government
discovered in Microsoft e-mail in the United States v. Microsoft case, but we believe the evidence we found in our case was even stronger. We found admissions in the documents, going to the
highest levels of Microsoft, for nearly every point we needed to establish in the case. I think Microsoft's lawyers were also a bit surprised at what we found.
6. Push for Discovery Limits. Rule 26(b) Fed.R.Civ. P. allows the court to set reasonable limits on discovery. Thankfully, the court in Caldera set tight limits on discovery. Limits were imposed as to written discovery, the number of depositions to be taken and the length of depositions - eight hours. This case could have turned into the blackest of black holes without those limits. Even though we could have examined Bill Gates and some other witnesses for more than the allotted eight hours, it was well worth the trade-off. Although it is common for witnesses to be grilled for days in complicated cases, that was not necessary here. The court's aggressive discovery order helped us immensely in this regard.
5. Spend Time with Witnesses. Our case was complicated because the product at issue, DR DOS, had been owned by two companies prior to Caldera. It was first owned by Digital Research, Inc., was later purchased by Novell, Inc., and finally purchased by Caldera just before we filed the lawsuit. Very few of the witnesses were employed by Caldera during the litigation. As a result, we had to work hard to locate witnesses, including third-party witnesses and former DRI and Novell employees who were scattered around the world. There was no apparent reason for the witnesses to help us. On our first contact with many of them, they informed us that they either were not interested in being involved, did not want to relive those events, or were hesitant to become involved because they were currently employed with companies doing business with Microsoft. It would have been easy, after that initial contact, to give up on many of the witnesses. We, instead, spent much time meeting with potential witnesses, convincing them that they should testify, and helping them prepare for depositions. This was critical for our case.
A few of the witnesses initially expressed some hesitancy about helping Caldera, but, as they learned more about the case and the evidence, they realized that some of their
initial assumptions were not accurate. Even though many of the witnesses had valid reasons to stay uninvolved in the case, deep down, they all wanted to tell their story. Although it can be time
consuming and expensive, do not give up on witnesses. Find a way to meet with them to talk through the issues. At one point in the discovery process, one of Microsoft's lawyers told me that the most
puzzling and frustrating aspect of the case for him was that these former DRI and Novell employees, who had no interest in the case, were volunteering time and effort to assist Caldera. He would not have
felt that same level of frustration if we had not expended substantial time and effort in locating and meeting with the witnesses. Some critical witnesses, whom we originally could not locate, or who
would not meet with us, later came around because we did not give up on them.
4. Choose the Battlefield (and stay on it.) We asserted several claims in our case, including claims brought under Sections 1 and 2 of the Sherman Antitrust Act. The Section 2 claim was based upon a series of actions we alleged Microsoft had taken to further its monopoly in the disk operating system market. Although we believed that some of the various acts amounted to independent violations of the antitrust laws, we made a strategic decision to assert one broad Section 2 claim. Microsoft attempted to evade the way we pleaded the case by relabelling the various acts which made up the Section 2 claim as though they were separate claims for relief and then filing motions for summary judgment as to each of those separate claims. Microsoft's divide and conquer strategy was clear to us, and to make sure the strategy was highlighted to the court, we filed a motion to strike Microsoft's motions for summary judgment and argued that Microsoft was simply attempting to restate our claims and then knock them down. The court did not grant the motion to strike, but did agree that we could assert the various acts of Microsoft as a single Section 2 claim, rather than several independent claims. Caldera, Inc. v. Microsoft Corp., 72 F.Supp.2d 1295, 1309 (D. Utah 1999). To support our position, we had relied on Aspen Highlands Skiing Corp. v. Aspen Skiing Co.,
738 F.2d 1509 (10th Cir. 1984), aff'd, 472 U.S. 585 (1985), which held that an antitrust plaintiff "should be given the full benefit of [its] proof without tightly compartmentalizing the various
factual components and wiping the slate clean after scrutiny of each." 738 F.2d at 1522, n.18. In Caldera, the court followed the Aspen Highlands holding and found that Caldera could
present all of the evidence of Microsoft's alleged anticompetitive conduct to the fact finder in support of the Section 2 claim. Caldera, 72 F.Supp.2d at 1309. Had we been suckered into fighting
the battle as staged by Microsoft, the result might have been very different.
3. Do Not Overdo it with Experts. Lawyers have a tendency (insecurity?) to overuse expert witnesses. The Caldera case was no exception. Both sides retained many experts to support their claims or defenses. Some of those experts were critical to the parties. However, both sides would have been better off paring down their expert lists. Before the case settled, Microsoft succeeded in removing one of our experts from the case through a motion in limine, based upon the holdings in Daubert
v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999). Other Microsoft motions in limine were pending at the time of the settlement.
Had the case proceeded, Microsoft may have succeeded in limiting or precluding other aspects of our experts' proposed testimony. At the time of the settlement, we were also working on motions to preclude
one or more of Microsoft's expert witnesses, and would have succeeded to some extent. It was reported to us that one of the expert witnesses Microsoft designated in our case had been precluded from
testifying in a prior Microsoft antitrust trial where the judge explained that the expert witness appeared to be nothing more than a "cheerleader" for Microsoft. We felt that this expert had
assumed the same role in the Caldera case. In granting Microsoft's motion in limine to exclude our expert, the court stated something to the effect of "You don't need this expert to recount the facts and explain what they mean, the jury can figure it out on its own." Lawyers should heed the court's sound advice on this point.
2. Mock Try the Case. Both Caldera and Microsoft conducted mock trials. Those mock trials were instrumental in resolving the case. A mock trial is expensive, but if the case is large enough to justify it, a mock trial is a valuable resource for the lawyers. That is not to say that mock juries decide the case the same way the real jury will decide it. In our case, each mock jury looked at the case a little differently, but they showed us the strengths and weaknesses of our case and showed us a reasonable range for the outcome. This information helped us in valuing the case and reaching settlement.
1. Never Overstate the Holding of a Case. Although this point is true in every case, it was strongly reemphasized in Caldera. See Caldera, Inc. v. Microsoft Corp.,
72 F.Supp.2d 1295, 1312-13 (D.Utah 1999) ("Particularly offensive to the Court is the assertion that Ôthe court [in Transamerica] expressly stated that design conduct violates ¤ 2 of the
Sherman Act only if the "design changes had no purpose and effect other than the preclusion of. . . competition."(Id.) This is simply not true.'").
With due respect to David Letterman and his cliche "Top Ten List." Background on the case can be found in Caldera, Inc. v. Microsoft Corp., 72 F.Supp.2d 1295 (D. Utah 1999), and Caldera, Inc. v. Microsoft Corp., 87 F.Supp.2d 1244
(D. Utah 1999). Litigation, American Bar Association, Vol. 23, No. 2, Winter 1997. Sagor, Elliott G., "Victory is in the Documents," Litigation, Winter 1997, at 36. "Discovery," Litigation, Vol. 23, No. 2, Winter 1997, at 5.
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