October 3, 2002 12:45 PM PDT

Lawyer in Microsoft antitrust case quits

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WASHINGTON--The government attorney who cut last November's antitrust settlement deal between the Justice Department and Microsoft is stepping down from his post.

Assistant Attorney General Charles James, who is responsible for antitrust matters, will leave his position to pursue a job in the private sector, the Justice Department revealed on Thursday.

James is best-known for his role in brokering the pending Microsoft settlement with the Justice Department and nine of 18 states. U.S. District Judge Colleen Kollar-Kotelly has yet to approve the deal. Her ruling on that matter, and on a request by nine other states to impose stiffer sanctions on Microsoft, could come at any time.

At the time of the settlement announcement, critics said the Justice Department had cut a soft deal with Microsoft. When public comment was garnered after the details were revealed, more than half the respondents opposed the settlement deal.

"Charles James has been a valued asset to the Department of Justice," Attorney General John Ashcroft said in a statement. "He is a man of the utmost integrity and fairness. He has been a dedicated and tireless advocate for consumers and for competition, and he will be missed."

James, who will become the general counsel for Chevron Texaco, was confirmed on June 14, 2001.

"It has been an honor to serve the Department of Justice under strong and solid leadership," James said in a statement. "I am grateful for the opportunity Attorney General Ashcroft has afforded me, and look forward to my future endeavor, which provides me with a unique personal and professional experience."

James' departure shocked antitrust attorneys that have kept a close watch on Microsoft's more than four-year-old antitrust case.

"I'm flummoxed," said Emmett Stanton, an antitrust attorney with Fenwick & West in Palo Alto, Calif. "I hadn't heard any rumors or suggestions he was out of favor."

Rich Gray, a Menlo Park, Calif.-based attorney closely following the trial, expressed similar sentiments.

"That's bizarre," he said. "It's very surprising for someone at his level to leave so early in the administration's life without good reason."

Departure's impact
The timing of James' departure could create some problems for the Justice Department because of the complexity of a ruling Kollar-Kotelly could issue.

Kollar-Kotelly is weighing two matters that in theory are separate and moving on adjacent tracks. But the longer she takes to issue a ruling, the more likely she is to bring the matters together. Depending on her ruling, the Justice Department might have to make some tough decisions, legal experts say.

Regarding the settlement, Kollar-Kotelly has little leeway and can either accept or reject the agreement. She must determine whether the proposed deal is in the public interest, as mandated by the Tunney Act. If she decides it is not, then the Justice department would have to decide whether to join Microsoft in an appeal.

In an earlier case, U.S. District Judge Stanley Sporkin refused to sign a settlement made between Microsoft and the Justice Department. Both sides appealed and won. An appellate court removed Sporkin and put in place a new judge, who signed the settlement.

But the current settlement is complicated by the parallel remedy proceeding underway with the nine states and District of Columbia. The plaintiff states contend the settlement does not meet the mandate of a June 2001 appellate ruling that largely upheld a lower court finding against Microsoft. Should Kollar-Kotelly issue her two rulings at the same time, as many legal experts believe she will, her handling of the second matter could have a great impact on any policy decision the Justice Department makes.

For this reason, James' "departure may not be as meaningful as the choice of his successor," Stanton said. Not only that, a new assistant attorney general could open up some new options for the Justice Department should Kollar-Kotelly reject the settlement.

Technically, the judge cannot require changes, but she could signal the deal would be rejected without them as did the judge overseeing the breakup of AT&T.

"It's somewhat easier for somebody new in the position to take a different direction," Stanton said. "They wouldn't have the baggage of James and more ability to go in a different direction. But the policy of the Justice Department isn't going to change. There would be more nuances of differences."

Legal experts do not expect the Justice Department to suddenly change position on the Microsoft case. But James' departure could turn up the political heat on the Bush administration, which apparently has taken a softer approach to Microsoft than the Clinton White House.

"Having a strong head of the antitrust division does provide some political cover for the White House in the Microsoft case," Gray said. "There your decision's made by a talented, respected conservative antitrust lawyer rather than one politically influenced by the White House."

Potential political influence was a factor earlier in the settlement, as such activity is prohibited by the Tunney Act. In July, Kollar-Kotelly determined that both sides had acted appropriately in negotiating the settlement and that she found no evidence of political deal making in the process.

"Still, the Justice Department will move quickly to replace James, if for no other reason than to give them the requisite political cover," Gray concluded.

Case's casualties
James is by no means the antitrust case's first high-level departure. Joel Klein, the assistant attorney general that brought the case against Microsoft, resigned in September 2000. He was later joined by by David Boies, the high-spirited Justice Department lawyer whose courtroom theatrics impugned Microsoft's credibility before U.S. District Court Judge Thomas Penfield Jackson. In June 2001, a federal appeals court removed Jackson from the Microsoft case for speaking behind closed doors to journalists during the trial.

In November, William Neukom, Microsoft's general counsel, announced his retirement after 22 years with the company. Brad Smith replaced Neukom as general counsel.

The Justice Department and 20 states brought the case against Microsoft in May 1998. One state dropped out almost immediately and another settled separately with Microsoft last year. The case hinged on whether Microsoft used anti-competitive means to thwart rival Netscape, now owned by AOL Time Warner, in the browser market.

In November 1999, Jackson issued his scathing "findings of fact" that determined Microsoft in fact had violated U.S. antitrust laws. He bolstered this with the second part of his ruling, or "conclusions of law," in April 2000. In June of that year, he ordered that Microsoft be broken into separate operating systems and software applications companies. But in its ruling a year later, the Court of Appeals threw out the breakup order, in part because Jackson failed to hold a proper remedy hearing on the matter.

Kollar-Kotelly held that remedy hearing for two months this spring. Legal experts believe that Microsoft Chairman Bill Gates, who did not testify during the original trial, may have given the pivotal testimony. Gates testified in court for about three days.

 

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