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Judge Nixes 'Vista Capable' Class Action

No proof of class-wide causation, judge rules

By Jon Hood
ConsumerAffairs.com

February 20, 2009

Judge Marsha Pechman of the U.S. District Court for the Western District of Washington ruled that the plaintiffs had not proven class-wide causation, a critical element in any class action suit, and decertified the class, which had originally been approved in February 2008.

It was only a few weeks ago that lawyers were claiming Microsoft might have to cough up as much as $8.5 billion to settle the case. They estimated there were 15 million consumers eligible to participate in a settlement.

The $8.5 billion figure came from a report prepared by Keith Leffler, a University of Washington economist and expert witness for the plaintiffs in the case.

The suit, filed by the law firm of Gordon Murray Tilden LLP on behalf of lead plaintiff Dianne Kelley, accused Microsoft of leading customers to believe that all machines labeled “Vista Capable” were able to run either Vista Basic or Vista Premium.

In fact, the machines were only compatible with the Basic version, which lacks key features included in Vista Premium; the plaintiffs asserted that Vista Basic did not qualify as “The Real Vista.” Microsoft gave manufacturers the go-ahead to label machines as “Vista Compatible” in early 2006, almost a year before Vista was released. The machines were originally sold with Windows XP.

The plaintiffs pled a “price inflation” theory, claiming that, by labeling computers as “Vista Compatible,” Microsoft drove up the demand for the machines, causing customers to pay more than they would have had they known the machines were only capable of running Vista Basic. As a result, the plaintiffs contended, manufacturers were able to charge more for the machines than they could have without the Microsoft-approved labeling.

In certifying the class in 2008, the court held that common issues might predominate with regard to “whether Vista Home Basic, in truth, can be called ‘Vista’ and whether Microsoft’s ‘Windows Vista Capable’ marketing campaign inflated demand market-wide” for machines compatible with Vista. However, revisiting the issue nearly a year later, the judge held that the plaintiffs had not sustained their burden to show that this was in fact the case class-wide.

The court’s decertification order noted that the plaintiffs’ primary evidence was anecdotal.

But for ...

Several class members testified that their decision to purchase a computer immediately, rather than waiting, was primarily due to the Microsoft-approved labeling; however, the court pointed out that “[t]he problem with relying on this testimonial evidence is that it would extrapolate individual claims of ‘but for’ causation to the entire class.”

"But for" causation refers to a showing that, but for the defendant’s conduct, a plaintiff would not have engaged in certain activity — here, purchasing one of the subject computers.

Additionally, the plaintiffs failed to rule out additional factors that could have encouraged class members to buy the subject computers. The court noted that lead plaintiff Kelley purchased her laptop during a day-after-Thanksgiving promotion, and at a $200 discount. As Judge Pechman put it, the ability “to isolate the impact on demand from the offensive conduct is critical for establishing ‘but for’ causation.”

While the decertification order is a victory for Microsoft, the judge pointedly refused to grant the corporation’s motion for summary judgment. As a result, plaintiffs can still pursue their claims as individuals, and won’t have to worry about the classwide price-inflation snags that doomed the class.

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