BizJournals Portfolio

A Law of Unintended Consequences

A Swindle to Die For A Swindle to Die For

How an audacious scam allegedly turned cemeteries into buried treasure and cheated tens of thousands of frail and elderly people out of up to $80 million. Read More
PREV 2 of 2

Microsoft and Best Buy were sued together by a class of plaintiffs led by customer James Odom. In 2003, Odom sued the two companies after he purchased a computer at a Best Buy store that included a six-month free trial to Microsoft's MSN internet service. After the trial was up, he claims, Microsoft began charging his credit card without his permission.

As is typical in corporate RICO cases, the racketeering claim against Microsoft and Best Buy involves wire fraud from the electronic distribution of the customers' credit card information. The "enterprise" in question is the marketing agreement between the two companies, which was a $200 million arrangement they made in 2000.

Microsoft and Best Buy argued that their marketing agreement should not be seen as a separate enterprise in the eyes of the law.

"Nothing in its text, legislative history, or purpose indicates that RICO was intended to apply to groups of corporations," they argued in its appeal to the Supreme Court to remove the statute from the case.

"Indeed," it continued, "RICO was intended to protect businesses from organized crime, not to impose onerous burdens on them. Yet because of the potential for plaintiffs to extract windfall recoveries, the statute increasingly is used against legitimate businesses."

The U.S. Chamber of Commerce weighed in as well, suggesting that by allowing RICO claims in this case, the High Court would open the floodgates to crippling corporate litigation.

"[T]he court of appeals' ruling has a profoundly negative impact on American business because it unfairly penalizes corporations with the threat of private civil actions for treble damages based on everyday business agreements between corporations," it argued in a friend-of-the-court filing.

But the dire plea from one of the most powerful lobbying groups in Washington did little to sway the justices. Without comment or dissent, they flatly refused to hear the case, and tossed it back to the lower court with RICO claims intact.

If the defendants lose their case, it could end up costing them "well in excess of $100 million," according to Daniel Girard, the plaintiffs' attorney. He says that the RICO statute is the only uniform federal law that governs deceptive business acts and practices.

"Businesses deal with individuals en masse," he says. "If individuals can't deal with companies en masse, then there's an imbalance. RICO is the only general remedy for fraudulent business conduct."

Girard says Microsoft has indicated it will not settle the case, and he expects to go to trial in 2008. Microsoft declined to comment on the ongoing litigation, but it appears to be holding out hope that the issue will eventually be revisited.

"While we are disappointed that the Supreme Court decided not to address this issue now, we very much appreciate the Court's attention to our petition and look forward to the law on this issue being clarified at a later date," it said in a statement.

And as for the future of civil RICO against corporations, Grell says the Supreme Court's denial to hear this case will have little impact. "The floodgates were opened a long time ago," he says. "Where there's money, there are going to be lawyers."


blog comments powered by Disqus
Real Business, Real Results

Did anyone at Microsoft ever watch the (gasp!) offensively funny show Family Guy?

Ex-Morgan Stanley exec Zoe Cruz is now heading her own hedge fund. Are Wall Street's leaders done?

Martha, Bernie and Skilling know that what you wear for court can go a long way in public perception.

spotlight on

Health Care

Bad to the Bone No More

Companies such as General Mills say they're stepping up efforts to change employees' bad behavior and promote healthier lifestyles. Read More