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Commentary: A Microsoft Settlement? Don't Bet On It


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Commentary: A Microsoft Settlement? Don't Bet on It

If there's one person in America who can persuade Microsoft Corp. and the government to lay down their swords, it's probably Richard A. Posner. Appointed as a mediator on Nov. 19, he's a longtime intellectual ally of the antitrust skeptics who dominate the U.S. Supreme Court and the District of Columbia Court of Appeals.

As such, he's uniquely positioned to predict how the case would fare in higher courts. That's a key reason Microsoft Chief Executive William H. Gates III and Justice antitrust chief Joel I. Klein are likely to listen when Posner describes the weaknesses of their cases. It's also why he's the ideal person to try to persuade these two stubborn decisionmakers to reevaluate their settlement positions, now far apart. "This process is going to be about trying to inject realism into both sides' expectations. Posner is one of the only people with the stature to do that," says Richard M. Steuer, an antitrust partner at New York's Kaye, Scholer, Fierman, Hays & Handler.PENDING SUITS. Certainly, folks want to get this thing over with. The prospect of years of further litigation cheers no one. With hopes of settlement rising, Microsoft's shares rose 4.4%, to 89 13/16, on Nov. 22 as investors speculated that the Chicago federal appeals judge would be able to pull it off. And, with a half-dozen private antitrust suits now filed against Microsoft, Gates has additional incentive to strike a deal soon. Otherwise, plaintiffs' lawyers will be able to use U.S. District Judge Thomas P. Jackson's anticipated negative ruling as a potent weapon against the company.

Justice is under less pressure, but still has good reason to make peace. Among other things, the Presidential election could mean that Klein & Co. might not even be around when the case is ultimately resolved.

Despite all these factors, however, settlement is still a long shot. Unlike judges, mediators have no power over the negotiators. Posner won't even be able to tell Jackson if he believes one side is bargaining in bad faith. About all he can do is try to help them find some middle ground.

And that's the heart of the problem. Emboldened by their success in the courtroom, the trustbusters want a remedy that will prevent Microsoft from ever abusing its monopoly power again. That means a serious punishment, such as a breakup, or a decree that forces it to share the source code to its Windows operating system. But the company is dead set against either of these options.

This is the type of case that's hardest to resolve through mediation: a dispute about principles. Gates has never budged from the core belief that government may not supervise what can and can't be included in Microsoft's products. Meanwhile, Justice and the states want to establish a precedent for applying antitrust law in the Digital Age. It'll be harder to resolve this ideological battle than it would be to settle a garden-variety tort or employment suit that's "just about money," says Robert P. Taylor, an antitrust litigator at Howrey & Simon in Menlo Park, Calif.ART FORM. Another bad sign for the arbitration process: According to court transcripts, the two sides agreed to mediate their dispute because Jackson told them to do so, not because they wanted to. That means Posner will be facing a tougher task than most mediators. He may also be handicapped by his lack of experience in alternative dispute resolution. Mediation is an art form, involving lots of shuttle diplomacy, arm-twisting, and massaging of egos. It's usually done by full-time professionals and not appellate judges, who inhabit the airy world of legal theory. A final complication: Posner must also fashion a deal that must also be acceptable to 19 state attorneys general.

Because of these problems, Brookings Institution antitrust expert Robert Litan puts the odds of a mediated deal at only about 20%. The sides won't settle "just because some legal superstar parachutes in and tells them it's the right thing to do," he says. Instead, they are only going to make peace if someone comes up with a plan meeting both sides' long-term needs. Right now, it's hard to imagine what that may be.By Mike France; France Is Legal Affairs Editor.


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