Sunday, January 8, 2023

California "gamers' lawsuit" against Microsoft-ActivisionBlizzard reassigned to Judge Corley, March 23 case management conference likely to be YouTubed

A few days before Christmas, two California law firms brought a lawsuit, formally on behalf of gamers but primarily to extract a settlement under which they'd get paid, against Microsoft's acquisition of Activision Blizzard (NASDAQ:ATVI). I don't view that sideshow to the Federal Trade Commission's in-house adjudicative proceeding as an additional threat to the deal, but rather regard it as an opportunity to obtain additional information on the matter. The Northern District of California offers second-to-none transparency.

That high degree of transparency involves that judges don't let parties overredact their filings, and that key hearings may be broadcast via YouTube. On March 23 at 1:30 PM Pacific Time, Judge Jacqueline Scott Corley--to whom the case was randomly reassigned on Thursday after Judge Vince Chhabria recused himself without stating the particular reason--will hold an initial case management conference. She has already informed counsel of her participation in the Cameras in Courtroom Pilot Project. Presumably no one will object (though the notice says it would have "no effect on [a party's] case whatsoever").

A week earlier (March 16), the parties will have to file a case management statement in preparation of the hearing.

Judge Corley granted in part a motion to dismiss another antitrust case piggybacking on an FTC action--a class action against Qualcomm--on Friday. This "gamers' lawsuit" against Microsoft-ActivisionBlizzard (DeMartini et al v. Microsoft Corporation, case no. 3:22-cv-08991-JSC) is a class action by any other name as far as litigation economics are concerned. The fact that such cases are routinely brought in the wake of government lawsuits doesn't mean they never have merit, but doesn't validate the related government actions either: it's just a gamble by class-action law firms, and quite often a crapshoot. I don't see the case against Qualcomm going anywhere, and the one against Microsoft-ActivisionBlizzard is even weaker.

Judge Corley has not vacated any filing deadlines set by her colleague before he recused himself. Microsoft's answer to the complaint--instead of which a defendant can also bring a motion to dismiss--is still due on Wednesday, January 11, and its response to the motion for a preliminary injunction ("PI motion") on Friday, January 20. The PI motion hearing was originally scheduled for February 16, but the PI motion has to be renoticed--as Judge Corley has explicitly stated--and I doubt that the PI hearing will be held on an earlier date than the initial case management conference (March 23). Maybe they'll both take place on the same day.

If Microsoft requested an extension by about a month for its deadline to answer or otherwise respond to the complaint, it would be routinely granted. However, Microsoft is interested in resolving any challenges to the deal at the earliest opportunity, and will have to address the allegations and theories in the complaint in its January 20 opposition to the PI motion at any rate.

The six defenses (of 23) that Microsoft and Activision Blizzard dropped from their answer to the FTC's in-house complaint are FTC-specific, so they won't play a role in the "gamers'" lawsuit.

Lawyers from two firms have given notice of their appearance on Microsoft's behalf. The firms are Wilkinson Stekloff, which also represents Microsoft before the FTC's in-house Administrative Law Judge D. Michael Chappell (including this week's initial case management hearing in Washington, D.C.), and Alston & Bird, a firm whose work for Ericsson (most recently against Apple) and Nokia I've mentioned on a number of occasions. At least for the time being, Weil--whose name appeared on filings with the UK Competition & Markets Authority and in the FTC proceeding--is not involved with the California litigation, though at minimum Weil will give advice in the background due to the huge overlap between the cases. Weil represents Apple against Epic Games (same district, but presently before the Ninth Circuit).

Here's a list of all attorneys who have so far been enlisted by Microsoft in the Northern California case:

From my experience as a litigation watcher, I predict that we will see some additional appearances soon, at the latest right before a PI hearing.

In other Microsoft-ActivisionBlizzard news, Microsoft and the Communications Workers of America (CWA) labor union placed an ad in the Washington Post on Friday that The Verge and other media have reported on. The key messages are that Activision Blizzard employees will benefit from the acquisition with a view to unionization, and that "it’s important to explore solutions that protect competition and consumers while also promoting the needs of workers, economic growth and American innovation."

That ad will have been noticed by Capitol Hill lawmakers. The FTC risks bringing up politicians on both sides of the aisle against itself: Republicans (who have finally managed to elect Speaker McCarthy) are generally not the biggest fans of the FTC, and Democrats favor unionization.

The Washington Post ad shows how difficult it is these days for a "Big Tech" company to make a major acquisition, just because of the political environment and (sadly) regardless of legal merits. But this is a merger that can make a key contribution to loosening the strangehold of two other "Big Techs"--Apple and Google--on mobile app markets. There is bipartisan consensus about the need for competition in mobile app distribution, even though the Open App Markets Act (OAMA) wasn't put to a vote last year.