Supreme Court Pursues Microsoft, Best Buy RICO Case

The Supreme Court Monday rejected an appeal in the racketeering case against Microsoft and Best Buy that alleges consumers had MSN accounts activated and were charged for them without their knowledge when they purchased new PCs at the big box store.

The two companies were trying to overturn the reinstatement of the 7-year-old case that was handed down in May 2007 by the 9th U.S. Circuit Court of Appeals in San Francisco.

In that ruling, the court reinstated the case, which accuses Microsoft and Best Buy of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act.

The Supreme Court allowed the ruling to stand.

The two companies will now face a class-action lawsuit involving thousands of consumers and potentially hundreds of millions of dollars in damages.

Allegation of RICO violations are typically seen in cases of organized crime, such as the conviction of mobster John Gotti. RICO, however, is now being used in some civil cases and plaintiffs can be awarded triple the amount of their claimed damages.

In the Microsoft/Best Buy case, plaintiff James Odom complained that during the purchase of a new computer at Best Buy he was enrolled in a free-trial subscription to Microsoft's MSN Internet service without his knowledge and then his credit card was charged for the service once the trial period had expired. He says other customers paying with credit or debit cards also were enrolled in the same fashion.

The suit alleges wire fraud in the transferring of his financial data and, therefore, a violation of the RICO Act.

Odom charged the pair violated RICO in part due to an agreement under which Microsoft invested $200 million in Best Buy and agreed to promote Best Buy's online store through its MSN service. In return, Best Buy agreed to promote MSN service and other Microsoft products in its stores and advertising. The agreement, Odom alleged, led to the MSN enrollment issue.

We conclude that plaintiffs have alleged facts that, if proved, provide sufficient evidence that the various associates function as a continuing unit', the 9th Circuit Court wrote in its findings. The continuing ruling means the behavior by Microsoft and Best Buy was ongoing and not an isolated incident. The court also wrote that if the allegations are true that they establish that the pair shared a common purpose to increase MSN subscribers through fraudulent means.

In papers filed with the Supreme Court, the two companies said their joint marketing did not constitute an ongoing enterprise.

Microsoft officials told Bloomberg News in May after the 9th Circuit Court's decision that the ruling was procedural and did not reflect on the merits of the case. The MSN subscription program at Best Buy concluded in 2003 when Microsoft began to offer refunds to customers.

This story, "Supreme Court Pursues Microsoft, Best Buy RICO Case" was originally published by Network World.

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