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WASHINGTON, D.C. -- A U.S. district court judge has blocked a settlement proposal between Microsoft and plaintiffs represented in more than 100 private antitrust class-action lawsuits that have been consolidated under his jurisdiction.

"I cannot presently determine the adequacy of the proposed settlement because the record has not been sufficiently developed on the question of the underlying value of the class claims," District Court Judge J. Frederick Motz wrote in his opinion Friday.

Mediation talks to hash out disagreements surrounding the proposed settlement failed to produce results by a Thursday deadline, according to officials involved in the negotiations.

The settlement in question was proposed by Microsoft and lawyers as a resolution to over 100 private suits filed across the nation that claim the software company overcharged millions of users for its software. The cases, mainly filed in federal courts, were consolidated under Motz. The proposed settlement would give more than 16,000 schools in the nation's poorer districts about $1 billion worth of software, hardware, training, and support that Microsoft will donate, via an independent foundation, in lieu of paying damages to the plaintiffs.

This settlement is separate from the proposed settlement reached by the U.S. Department of Justice and nine states in the government's antitrust case against Microsoft.

Not Unexpected

Because the parties involved in the talks could not come to agreement, most experts said they did not expect Motz to approve the settlement. Parties include lawyers for Microsoft, a group of attorneys representing class-action cases consolidated under Motz, and attorneys for California cases that are not represented in that group.

Judge Motz gave the parties until January 10 to hold mediation talks. He said he would make a preliminary ruling on the settlement after that date.

"I wouldn't say that [the mediation] failed; it never really got started. Dealing with Microsoft is a unique experience," said Steven Benz, an attorney with Washington, D.C.-based law firm Kellogg, Huber, Hansen, Todd & Evans. The firm, along with Townsend, Townsend & Crew, is representing California plaintiffs.

"We hope there will be a judge's ruling today denying preliminary approval" of the settlement, Benz said.

Even though an agreement was not reached, a Microsoft spokesperson said before Friday's ruling by Motz that the parties complied with Judge Motz's request that they attempt to work out their differences.

"While we are confident that Microsoft ultimately will prevail in these lawsuits, we are disappointed that we have missed this opportunity to improve education for disadvantaged children while resolving litigation," said Tom Burt, deputy counsel for Microsoft. "Microsoft went the extra mile to make this settlement work."

Antitrust Concerns Remain

Apple Computer had criticized the deal, saying that among other things, it would help solidify Microsoft's monopoly in the desktop operating system market by extending it to the education sector.

In Friday's ruling Motz also said, "I have also concluded, as a substantive matter, that the record as it now exists demonstrates that the charitable foundation contemplated by the agreement is not sufficiently funded both to fulfill the eleemosynary purpose ... and to assure that the effectuation of the agreement would not have anti-competitive effects."

Judge Motz held hearings in his Baltimore courtroom in November and December to explore the proposed settlement. During those hearings, conflict erupted between the attorneys for the consolidated cases and those representing California plaintiffs. Lawyers for the California plaintiffs argued that the settlement proposed for the consolidated cases could prevent them from getting the best deal for their own clients. They argued that state law gives the California plaintiffs a stronger case than the plaintiffs in the consolidated, mainly federal cases.

Attorneys from other states with similar laws made the same arguments, but the California coalition was the most vocal and grabbed the attention of Judge Motz, who in mid-December postponed deciding on the proposed settlement for a month in order to give the attorneys from both groups and Microsoft a chance to work out their differences.

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