Microsoft Gets Another Chance, Judge

June 28, 2001 ( - A federal appeals court has reversed the breakup of Microsoft and ordered that a new judge decide the landmark case.

The ruling could provide at least a temporary boost to plans which hold the stock, as well as its likely impact on widely-held S&P 500 funds in 401(k) plans.

In a unanimous 7-0 verdict, the appeals court ruled that US District Judge Thomas Penfield Jackson improperly conducted himself in the case, leaving himself open to the appearance he was biased against Microsoft. The court sited secret interviews with the media and “numerous offensive comments about Microsoft officials in public statements”, although it found no evidence of actual bias.

The judge’s actions “would give a reasonable, informed observer cause to question his impartiality in ordering the company split in two,” the appeals court said.

Back to the “Drawing” Board

The ruling sends the case back to the lower court, but with a different judge appointed to decide on how to punish Microsoft on the alleged anti-competitive practices. The appellate ruling did not affect the conclusion that the software giant violated antitrust rules.

Penfield had ruled that Microsoft used anti-competitive practices in bundling its Explorer Web browser with its Windows operating system. He concluded the company was an illegal monopoly and ordered the software giant broken into two as a penalty. The Justice Department and 17 of the 19 states that had brought the action against Microsoft had recommended that punishment.

The decision, which faces a likely Supreme Court challenge, may embolden several new initiatives that Microsoft has under way to merge its popular software products.

NASDAQ halted trading in Microsoft shares, which had risen more than 5% about noon, ahead of the ruling.

– Nevin Adams