Not that there aren’t already enough fireworks in a pair of Seattle consumer lawsuits against software giant Microsoft and electronics retailer Best Buy, in which claims of racketeering are being tossed around. But after a Best Buy attorney admitted he falsified and concealed some of the court records, one of the cases has essentially had to start over, prompting a review of a massive cache of corporate documents that includes 4.7 million e-mails.
The attorney, Timothy Block, and his firm, Robins Kaplan of Minneapolis, were forced to pull out of the litigation, replaced by Perkins Coie of Seattle. That has led to a laborious and ongoing review of previously submitted computerized records that number in the terabytes—a trillion bytes in storage-capacity lingo. (Printed out, one electronic terabyte would roughly equal 1,000 pickup trucks filled with paper).
Today, a court-appointed forensic electronics expert is plowing through the voluminous records of Best Buy, which last month was also accused of unnecessary delays, an issue that has dogged the five-year legal saga. The allegedly habitual stonewalling by the Minnesota-based chain, which expects $40 billion in sales at its 1,300 stores in North America and China this year, so irritated King County Superior Court Judge Douglass North that he threatened to enter a default judgment last year, telling corporate attorneys the company might have to “write a check for tens of millions of dollars.”
In court, Best Buy insists it is complying, and headquarters spokesperson Dawn Bryant said last week, “We do feel badly that Mr. Block’s wrongful actions delayed the process, and we’re cooperating with the court in a review of all of the materials provided by Best Buy by our former counsel so everyone can be sure that nothing was overlooked.” Block’s actions, she added, were “illegal and completely contrary to the values and ethical standards we set for ourselves and our partners.” Microsoft spokesperson David Bowermaster had no comment.
The companion class-action challenges are being heard in state and federal courts in Seattle, brought by consumers who claim Microsoft and Best Buy plotted to fraudulently charge for MSN Internet access. The federal case specifically alleges that in doing so, the two Fortune 100 corporations violated the Racketeer Influenced and Corrupt Organizations act.
The RICO act has been most famously used to prosecute Mafia dons such as John Gotti for criminal conspiracy. And while nobody’s necessarily calling Bill Gates a gangland boss (though godfather of modern Redmond he may be), the civil case in U.S. District Court does claim Microsoft and Best Buy colluded under RICO to illegally bill consumers for Internet services. The federal case was thrown out at one point, then reinstated when a federal appeals court ruled that racketeering statutes could be used by individuals to file civil suits against corporations. In January, the federal case was put on hold again after the state case heated up over the document alterations. The latter suit alleges fraud and illegal fund transfers in violation of state law.
A California man, James Odom, and a Nevada woman, Katherine Moureaux-Maloney, are the lead plaintiffs in the class-action, and also are among the plaintiffs in the King County Superior Court case. They contend they never sought or used the Internet portal service they were billed for. Odom bought a laptop and Moureaux-Maloney purchased a cell phone at Best Buy, where a computerized cash register also activated an MSN account and trial subscription for them and other consumers.
Microsoft began automatically charging for MSN after the trial period ended if the customer did not contact the company and opt out, the lawsuit claims. Moureaux-Maloney says she didn’t notice the $21.95 MSN monthly credit-card charges for almost a year and a half. Court documents allege “thousands” of Best Buy and MSN customers were unsuspectingly charged in the period from 2000 through 2002, and that Best Buy employees faced termination if they didn’t “indiscriminately establish and activate MSN service accounts for anyone” who made computer-related and cell phone purchases.
The lawsuit claims the arrangement, intended to “generate the greatest possible amount of revenue” for Microsoft and Best Buy, was the result of a marketing partnership launched in 2000, after Microsoft bought into Best Buy for $200 million in stock.
Both corporations deny the racketeering accusations and insist any wrongful charges were unintentional. Credits or reimbursements were later given to those who asked, although Moureaux-Maloney says she has not gotten a refund and that Microsoft made reimbursement difficult, setting up procedures at its call centers “to minimize the amount of money [it] is required to refund…”
Microsoft corporate e-mails, entered into evidence, appear to confirm the sign-up policy and indicate that some company officials didn’t like it. A 2002 interoffice e-mail from a Microsoft manager states that when customers called to cancel at the end of the free trial period, call center personnel would tell them “they cannot give a credit for the first months’s [sic] charge…when the customer claims that they never used the account [or] didn’t want it…” The manager added: “I want to meet with the decision makers regarding this particular policy as we are not in a good position on this one.”
After Judge North threatened to award the consumers damages by default if Best Buy didn’t comply with disclosure requests, the Block bombshell landed. Last summer, the attorney admitted altering four legal documents prepared by his law firm, Robins Kaplan. He also left the attachments off numerous e-mails that were being handed over as part of discovery, he said. Block self-reported the misconduct to his firm, which alerted the plaintiffs and court. According to court records, Block said he “was severely depressed and had been for some time” leading up to the evidence misconduct. Block indicated he altered and deleted documents because he was under stress and “felt isolated in his own firm.”
Block quit the firm and hired his own attorney, and could face legal and professional repercussions. Robins Kaplan, which also had to hire outside attorneys, has been cooperating in a review of the misconduct and document delays.
The altered and ditched records were almost completely recovered, but their contents haven’t been fully revealed. One document that has surfaced, a 2005 e-mail to Block from another Robins Kaplan attorney, shows the law firm was worried about Best Buy’s “lax attitude” toward its obligation to release documents.
“Microsoft,” the e-mail reads, “has produced volumes of documents which list Best Buy employees as recipients but which have not been produced by Best Buy…I do not believe Best Buy is taking this production seriously enough…” The e-mail also revealed that “at least one Best Buy employee has deleted MSN files from his computer…” (Court records indicate Microsoft has been fulfilling its disclosure obligations during the five-year pretrial discovery period.)
Judge North subsequently appointed Blank Law & Technology of Seattle as a special master to review the attorney’s filings. But after the master, Eric Blank, began his forensics electronics research, Judge North ordered an expansion of Blank’s review to include an “investigation into Best Buy’s compliance with its discovery obligations.” Blank is also to determine “whether any non-compliance, if found, was willful.”
The wider investigation of Best Buy’s disclosure efforts was actually sought by Best Buy, whose attorneys characterize it as a show of good faith. In a reassuring court declaration last month, the corporation said it “has agreed to the special master’s unfettered review of all its documents, including [some] protected by attorney-client privilege…”
One of the consumers’ attorneys, Beth Terrell of Seattle, working with lead counsel Girard Gibbs LLP of San Francisco, questioned the corporation’s sincerity, noting Best Buy “has tried to inject delay into this case at every turn,” and the expanded probe would add to that. San Francisco attorney Dan Girard said last week he remained “suspicious” of Best Buy’s move, and notes that the latest review indicates the company’s disclosures are still incomplete.
Either way, it appears that if a settlement isn’t reached, a trial on the merits of the case is still some way off. Blank, the master, says he has so far accessed no less than 7.7 terabytes of Best Buy’s nationwide corporate data contained in computers, servers, and backup tapes. If converted, that’s about 7,700 pickups filled with paper. He’s reading as fast as he can.