The U.S. Supreme Court decided Oct. 16 not to take on a case that accuses Microsoft and Best Buy of allegedly violating racketeering laws by deliberately signing up customers for Microsoft's online service and improperly charging them when a trial period expires.

The companies had asked the justices to overturn a May ruling by the 9th U.S. Circuit Court of Appeals in San Francisco, which allowed a civil suit to proceed, but because the Supreme Court opted not to review the case, the class action now will have to be litigated in federal district court.

James Odom, a California resident, sued the companies in 2003 accusing them of violating the Racketeer Influenced and Corrupt Organizations Act (RICO).

According to Odom's suit, under the joint venture Microsoft invested $200 million in Best Buy in April 2000 and agreed to promote the company's online store through its Internet access service, MSN. In turn, Best Buy agreed to promote MSN in its stores by distributing trial versions of Microsoft's MSN Internet access service with certain product purchases. Employees would scan those CDs at the point of sale, and when asked why, would say it was for inventory control. That information was then sent to Microsoft to initiate a trial subscription period without the customer's permission.

Odom also alleges in his suit that thousands of customers have received such treatment, which amounts to violations of racketeering law. When some customers reached Microsoft representatives to dispute the charges, the suit claims, the company would direct them to contest the charges with their debit or credit card providers. No affected customer had been “fully compensated” for his or her losses, including a full refund of the unauthorized charges, any finance charges that occurred, interest on the money during the time Microsoft held it and payback for the “time, effort and expense” associated with canceling the accounts and seeking refunds, Odom alleges.

A similar class action suit is pending in Washington state court.

Microsoft and Best Buy, which have denied any wrongdoing, have received backing from the U.S. Chamber of Commerce, which filed an amicus brief, urging the high court to reverse the 9th Circuit's findings or risk damage to the U.S. economy.

A “garden variety marketing agreement” like the Microsoft-Best Buy one shouldn't be subject to RICO, the chamber said, and allowing the 9th Circuit's “improper” interpretation to stand could undermine future business partnerships. There's potentially a lot of money at stake: RICO violations can lead to triple damages in civil cases.

The companies stated in papers filed in court that the 9th Circuit's decision would “convert a statute designed to eradicate organized crime into a tool to induce settlements from legitimate businesses,” and that most corporations can not risk the possibility of an award of treble damages or the injury to their reputations from being sued under a law associated with racketeers and mobsters.

The U.S. Supreme Court decided Oct. 16 not to take on a case that accuses Microsoft and Best Buy of allegedly violating racketeering laws by deliberately signing up customers for Microsoft's online service and improperly charging them when a trial period expires.

The companies had asked the justices to overturn a May ruling by the 9th U.S. Circuit Court of Appeals in San Francisco, which allowed a civil suit to proceed, but because the Supreme Court opted not to review the case, the class action now will have to be litigated in federal district court.

James Odom, a California resident, sued the companies in 2003 accusing them of violating the Racketeer Influenced and Corrupt Organizations Act (RICO).

According to Odom's suit, under the joint venture Microsoft invested $200 million in Best Buy in April 2000 and agreed to promote the company's online store through its Internet access service, MSN. In turn, Best Buy agreed to promote MSN in its stores by distributing trial versions of Microsoft's MSN Internet access service with certain product purchases. Employees would scan those CDs at the point of sale, and when asked why, would say it was for inventory control. That information was then sent to Microsoft to initiate a trial subscription period without the customer's permission.

Odom also alleges in his suit that thousands of customers have received such treatment, which amounts to violations of racketeering law. When some customers reached Microsoft representatives to dispute the charges, the suit claims, the company would direct them to contest the charges with their debit or credit card providers. No affected customer had been “fully compensated” for his or her losses, including a full refund of the unauthorized charges, any finance charges that occurred, interest on the money during the time Microsoft held it and payback for the “time, effort and expense” associated with canceling the accounts and seeking refunds, Odom alleges.

A similar class action suit is pending in Washington state court.

Microsoft and Best Buy, which have denied any wrongdoing, have received backing from the U.S. Chamber of Commerce, which filed an amicus brief, urging the high court to reverse the 9th Circuit's findings or risk damage to the U.S. economy.

A “garden variety marketing agreement” like the Microsoft-Best Buy one shouldn't be subject to RICO, the chamber said, and allowing the 9th Circuit's “improper” interpretation to stand could undermine future business partnerships. There's potentially a lot of money at stake: RICO violations can lead to triple damages in civil cases.

The companies stated in papers filed in court that the 9th Circuit's decision would “convert a statute designed to eradicate organized crime into a tool to induce settlements from legitimate businesses,” and that most corporations can not risk the possibility of an award of treble damages or the injury to their reputations from being sued under a law associated with racketeers and mobsters.