Court rejects Microsoft, Best Buy appeal The Supreme Court Monday rejected an appeal by Microsoft Corp. and a unit of Best Buy Co. Inc. to dismiss a lawsuit alleging violation of racketeering laws through fraudulently signing up customers for Microsoft's online service.
The companies asked the justices to overturn a May ruling by the San Francisco-based 9th U.S. Circuit Court of Appeals, which said the civil suit could proceed. The Supreme Court is letting that ruling stand, which means the class-action lawsuit involving thousands of consumers with complaints against the companies will be litigated in federal district court.
Originally filed by one consumer in northern California, the lawsuit claims the companies' joint venture violated the Racketeer Influenced and Corrupt Organizations Act, or RICO, which is usually used in organized crime cases. Successful RICO claims provide for triple damage awards in civil cases. In a friend-of-the-court filing on behalf of the companies, the U.S. Chamber of Commerce said the filing of civil cases invoking RICO is out of control and urged the Supreme Court to hear the case as a way to determine whether the use RICO should be reined in.
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 store. Odom alleged that Best Buy included a software CD 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 Daniel Girard, a lead attorney on the case in San Francisco. The lawsuit 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," which if tripled would top $100 million, Girard said.
Microsoft has denied illegal conduct in response to these allegations and a Best Buy spokeswoman says the company does not comment on pending litigation.
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