SEATTLE (Reuters) — Microsoft Corp's
board faces a lawsuit over the way it handled an error with its
Internet Explorer browser that ended up costing the company a
record-breaking $731 million fine by European antitrust regulators.
The lawsuit, brought by shareholder Kim Barovic in federal court in
Seattle on Friday, charges that directors and executives, including
founder Bill Gates and former Chief Executive Officer Steve Ballmer,
failed to manage the company properly and that the board's
investigation was insufficient into how the miscue occurred.
The legal action is the first to emerge from a humiliating episode
for Microsoft, which the software company has never fully explained
and has accounted for only as a "technical error."
In March last year, the European Union levied its largest ever
antitrust fine against Microsoft for breaking a legally binding
commitment made in 2009 to ensure that consumers in Europe had a
choice of how they access the internet, rather than defaulting to
Microsoft's Internet Explorer browser.
Its investigation found that updated software issued between May
2011 and July 2012 meant that 15 million users were not given a
choice. It was the first time the European Commission, the EU's
antitrust authority, handed down a fine to a company for failing to
meet its obligations.
In her lawsuit, Barovic says she asked Microsoft's board to fully
investigate how that mistake occurred and to take action against any
directors or executives that had not performed their duties. She
says Microsoft replied that it found no evidence of a breach of
fiduciary duty by any current or former executives or directors.
In a statement on Friday, Microsoft repeated that stance.
"Ms. Barovic asked the board to investigate her demand and bring a
lawsuit against the board and company executives," said an emailed
statement from Microsoft. "The board thoroughly considered her
demand as she requested and found no basis for such a suit."
The problem on European computers prevented the so-called "ballot"
screen from appearing. Sources close to the company have said it was
connected to updated Windows 7 software.
Ballmer, who was CEO at the time, and Steven Sinofsky, then the head
of the Windows unit, both had their bonuses cut in 2012 after the
error came to light.
The case is Barovic v Ballmer et al in U.S. District Court, Western
District of Washington, No. 14-00540
(Reporting by Bill Rigby; editing by Grant McCool)