Wednesday, January 11, 2023

Microsoft moves to stay so-called gamers' lawsuit over Activision Blizzard purchase pending regulatory proceedings in other jurisdictions

Earlier this week I published a chart that shows the key deadlines in the Microsoft-ActivisionBlizzard investigations and cases in the U.S., EU, UK, and New Zealand. That chart was based on the deadlines found on the court docket.

According to that chart Microsoft had a deadline today (Wednesday, January 11) to answer or otherwise respond to what is styled as a "gamers' lawsuit" but actually just a lawyers' lawsuit in the Northern District of California. Microsoft just made its responsive filing, and it's a motion to stay the case:

DeMartini et al. v. Microsoft Corp., case no. 3:22-cv-08991-JSC (N.D. Cal.): Defendant Microsoft Corporation's Notice of Motion and Motion to Stay Case

This is the language of the proposed order:

"Defendant Microsoft moved to stay all proceedings in this case pending the completion of any regulatory proceedings that would prevent Microsoft and Activision Blizzard King from closing their proposed transaction. [emphasis added]

"After considering the briefs, the arguments of counsel, and the evidence of record, the Court GRANTS Defendant’s Motion to Stay and STAYS the case pending further action from this Court. Defendant SHALL provide timely updates regarding any material developments in the regulatory proceedings that would affect the timing of closing the transaction."

The motion points to pending reviews in such jurisdictions as the EU and the UK, with the UK deadline (of April 26, 2023) alone ensuring that the deal cannot close until at least that date. Microsoft argues that as a result, there is no basis for the preliminary injunction the class-action lawyers are seeking. For the avoidance of doubt, the case is not formally a class action, but the firms that brought it are primarily in the class-action business and the economic rationale here resembles that of class actions, if not worse.

Shortly after the motion to stay, Microsoft filed a motion to expedite briefing on its motion so stay:

DeMartini et al. v. Microsoft Corp., case no. 3:22-cv-08991-JSC (N.D. Cal.): Defendant Microsoft Corporation's Notice of Motion and Administrative Motion to Expedite Briefing

There are two key reasons for which Microsoft asks United States District Judge Jacqueline Scott Corley to expedite briefing on the motion to stay:

  • Without an expedited schedule, Microsoft would have to file, in a little over a week from today (January 20 to be precise), its opposition to the class-action lawyers' motion for a preliminary injunction, while briefing on the motion to stay would take until February 1. By granting the motion for expedited briefing, Judge Corley can adjudicate the motion to stay before Microsoft would have to defend itself "on two fronts" (the FTC's in-house case and the private action in the Northern District of California).

  • A declaration attached to the motion says that the class-action lawyers "explained that they intended to begin fact discovery as soon as possible, including by attempting to notice depositions of high-ranking Microsoft executives and third-parties and demanding the production of voluminous sensitive business documents." Those high-ranking Microsoft executives were not named, and U.S. courts don't easily grant so-called apex (C-level executive) depositions, but just based on what I've seen in somewhat similar cases, I believe the class-action lawyers would at a minimum have sought to depose Microsoft Gaming/Xbox CEO Phil Spencer and possibly even Microsoft CEO Satya Nadella.

The expedited-briefing order that Microsoft proposes comes with blanks for the key dates (opposition brief by the plaintiffs, optional reply by Microsoft, and hearing date), leaving it to Judge Corley to decide. For the expedited-briefing schedule to achieve its purposes of avoiding an immediate start of discovery and to obviate the need for Microsoft to file its opposition to the PI motion, I believe the class-action lawyers (who according to today's filings told Microsoft they would oppose both the motion to stay and the motion for expedited briefing) would have to file their opposition in a matter of days (Friday or, at the latest, Monday). Whether a hearing would actually be necessary is doubtful. I think Judge Corley could simply resolve the motion on the papers during the course of next week.

As a litigation watcher I welcome any additional information I can glean from a federal court docket, especially in that district, but I can't see how the class-action lawyers could reasonably argue that their case must go forward right here and now. As Microsoft's motion notes, the FTC said at a hearing last week that it would seek a preliminary injunction in federal court if necessary. If the FTC determined that there is no urgency, why can't the class-action lawyers wait?

It is the normal course of business that private lawsuits piggyback on governmental actions. It also happened after the FTC sued Qualcomm. In that case, too, the private action was put on hold. While FTC v. Qualcomm is already over (the Ninth Circuit overruled the FTC, which then didn't even seek Supreme Court review), a private lawsuit is still pending in the Northern District of California, though the same Judge Corley dismissed parts of it last week and indicated between the lines that the remnants of that case were facing an uphill battle.

When I saw those new Microsoft filings, I was actually reading the just-released full-length version of the Chilean antitrust authority's unconditional decision to clear the transaction. I will discuss that one in my very next post as it contains really interesting revelations, such as the results of a consumer survey that further strengthens the case against the case against this deal.