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MSFT private settlement denied
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January 11, 2002: 4:58 p.m. ET
Federal judge will not go along with proposal after some attorneys protest.
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NEW YORK (CNN/Money) - A federal judge Friday nixed a proposed settlement that would have resolved dozens of price-fixing lawsuits against software maker Microsoft, saying it would have anti-competitive effects.
U.S. District Court Judge J. Frederick Motz said he would not go along with the multimillion-dollar settlement Microsoft had hashed out in November with more than 100 plaintiffs who joined in a class-action suit alleging that the company used its market dominance to charge unfair prices for its Windows operating system software.
The settlement would have required Microsoft (MSFT: down $0.67 to $68.61, Research, Estimates) to contribute cash, training, support and software to some of the poorest schools in the United States.
Microsoft valued the settlement at roughly $1.1 billion, but critics of the deal have said it could be worth a lot less, a point Judge Motz agreed with in his ruling.
He said he was not satisfied that there was enough value to the settlement and that the charitable institution that was to be created to carry out the terms would have been insufficiently funded.
Class action attorneys from California rejected the settlement, arguing that it would further the company's dominant position in the computer business and give it a leg up over Apple Computer (AAPL: down $0.18 to $21.05, Research, Estimates), which historically has had a strong presence in the education market.
In his ruling, Judge Motz said the settlement "would raise antitrust concerns from the perspective of other software manufacturers" because the donation of free software could be construed as "court-approved predatory pricing."
The California attorneys said the money should be reimbursed directly to customers who were overcharged for Microsoft software.
Microsoft Deputy General Counsel Tom Burt said the company is open to renewed negotiations with the class action lawyers. The cases have been consolidated in Baltimore.
"While we are confident that Microsoft ultimately will prevail in these lawsuits, we are disappointed that we have missed the opportunity to improve education for disadvantaged children while resolving litigation," Burt said in a statement.
The ruling means Microsoft will have to start from scratch in negotiating a new settlement or fight each of the suits individually.
The private suits are separate from the antitrust case being heard in Washington. Microsoft last month agreed to settle that case with the U.S. Justice Department and nine of the states that had joined in the suit. Nine other states have said that settlement is inadequate and proposed their own remedies in a filing with U.S. District Court Judge Colleen Kollar-Kotelly.
Further proceedings in that case are scheduled to begin in mid-March. 
CNNfn's Steve Young and Reuters contributed to this report.
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