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Samuel Jarrad Lassoff, Esquire

PO Box 2142
Horsham, PA 19044

Attorney for Plaintiffs

UNITED STATES DISTRICT COURT


EASTERN DISTRICT OF PENNSYLVANIA

FRANK MUNIZ, on behalf of )


himself, and other U.S. residents similarly situated, )
) CIVIL ACTION
Plaintiffs, )
)
v. ) 10-CV-215
)
MICROSOFT CORPORATION )
)
Defendant. )

AMENDED CLASS ACTION COMPLAINT

Plaintiffs make the following allegations, except as to allegations specifically pertaining


to plaintiffs and plaintiffs’ counsel, based upon the investigation undertaken by plaintiffs’
counsel, which investigation included analysis of publicly-available news articles and reports,
public filings, press releases and other matters of public record.

NATURE OF THE ACTION

1. This is a class action on behalf of several million U.S. customers exposed to point fraud
following fraud, breach of contract, negligence, unjust enrichment, and unfair business practices
on the part of the defendant Microsoft Corporation.

JURISDICTION AND VENUE

2. This Court has jurisdiction over the subject matter of this action and venue is proper in this
District.
PARTIES

3. Plaintiff Frank Muniz is a resident of Los Angeles County, California. Mr. Muniz was a
customer of defendant Microsoft Corporation’s Microsoft Points system, X-box Live, Xbox Live
Marketplace, Windows LIVE, Xbox 360, and Zune services when his account was exposed to
point fraud.

4. Defendant Microsoft is a corporation organized under the laws of the State of Washington,
with its principle place of business in Redmond, Washington. Microsoft Corporation is a
worldwide developer of software and services and provides an online, renewable, stored-value
system called Microsoft Points that lets people buy digital goods and services from Microsoft
services such as X-box Live Marketplace, Windows LIVE, Xbox 360, and Zune throughout the
United States. Purchasers of such Microsoft Point system, X-box Live, Windows LIVE, Xbox
360, and Zune services presumptively include citizens of every state in the United States.

5. Defendant Microsoft Corporation is liable for its fraudulent handling of plaintiffs’ Microsoft
Point system, X-box Live, Windows LIVE, Xbox 360, and Zune accounts and for a failure to
immediately warn Plaintiff of its fraud. Plaintiffs who paid for digital goods and services using
the Microsoft point system paid more than the actual price of the digital good or service they
wanted because the cost to buy Microsoft points is more than the cost of most digital goods or
services being sold leaving a residual non-refundable point value in favor of Microsoft that is
useless until Plaintiffs supplant their accounts with more Microsoft points. It is almost
impossible for Plaintiffs to purchase a specific number of points that would correspond to the
number actually needed to buy a particular digital good or service. Plaintiffs must buy Microsoft
points in unreasonably large non-refundable pre-set blocks, the remainder of which are spent at a
later date, and depending on how often a consumer buys, these unspent non-refundable points
effectively function as a free loan to Microsoft. Plaintiffs must buy Microsoft points in non-
refundable pre-set blocks, the remainder of which serve to unjustly enrich Microsoft for goods
and services never provided to Plaintiffs if unused or unusable by Plaintiffs. Plaintiffs are
required to supplant their X-box Live, Windows LIVE, Xbox 360, and Zune accounts with large
blocks of more Microsoft points to use their remaining residual points or accept no goods or
services for their remaining value. Microsoft Corporation knew about this fraud, or at some
point knew about this fraud, and knowingly continued its fraud on Microsoft point consumers.
There is no way for Plaintiffs to combine non-refundanble Microsoft points with money to make
a purchase for the exact amount of a digital good or service offered by Microsoft. No where did
Microsoft advise Plaintiffs that they would not be able to use the value of all their Microsoft
points unless they purchased an unreasonably large amount of Microsoft points for an
unreasonably large amount of purchases. Microsoft executive Aaron Greenberg, Xbox group
product manager, has admitted knowingly defrauding Microsoft point consumers. Defendant
Microsoft Corporation received and retained money paid by Plaintiffs in response to incomplete
and or partial downloads of digital goods and services.

PLAINTIFF’S CLASS ACTION ALLEGATIONS

6. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a)
and (b)(3) on behalf of a Class, consisting of U.S. customers whose Microsoft Point system, X-
box Live, Xbox Live Marketplace, Windows LIVE, Xbox 360, and Zune accounts were
fraudulently and or negligently handled by Defendant between January 1st, 2002 through April
30th, 2010, inclusive (the “Class Period”), and who were damaged thereby. Excluded from the
Class are Defendant, members of the immediate family of Defendant, any subsidiary or affiliate
of Defendant and the directors, officers and employees of Defendant or its subsidiaries or
affiliates, or any entity in which any excluded person has a controlling interest, and the legal
representatives, heirs, successors and assigns of any excluded person.

7. The members of the class are so numerous that joinder of all members is impracticable.
While the exact number of Class members is unknown to plaintiffs at this time and can only be
ascertained through appropriate discovery, plaintiffs believe that there are thousands of members
of the Class located throughout the United States. U.S. customer members of the Class may be
identified from records maintained by defendants and/or its transfer agents and may be notified
of the pendency of this action by mail, using a form of notice similar to that customarily used in
class actions.

8. Plaintiff’s claims are typical of the claims of the other members of the Class as all members of
the Class were similarly affected by Defendants’ wrongful conduct.
9. Plaintiff will fairly and adequately protect the interests of the members of the Class.

10. Common questions of law and fact exist as to all members of the Class and predominate over
any questions solely affecting individual members of the Class. Among the questions of law and
fact common to the Class are:

 whether the defendant committed fraud against the plaintiffs


 whether defendant negligently handled plaintiffs’ Microsoft Point system, X-box Live,
Windows LIVE, Xbox 360, and Zune account
 whether defendant failed to adequately protect plaintiffs once it discovered plaintiffs’
account was fraudulently charged
 whether defendant participated in and pursued the common course of conduct
complained of herein
 whether statements made by defendant to the public during the Class Period
misrepresented and/or omitted to disclose material facts about the negligent mishandling
of plaintiffs’ Microsoft Point system, X-box Live, Windows LIVE, Xbox 360, and Zune
account
 whether defendant made material misrepresentations and or failed to correct the material
misrepresentations; and
 the extent to which the members of the Class have sustained damages and the proper
measure of damages.

11. A class action is superior to all other available methods for the fair and efficient adjudication
of this controversy since joinder of all members is impracticable. Furthermore, as the damages
suffered by individual Class members may be relatively small, the expense and burden of
individual litigation make it impossible for members of the Class to individually redress the
wrongs done to them. There will be no difficulty in the management of this suit as a class action.

SUBSTANTIVE ALLEGATIONS

12. Plaintiff had non-refundable residual Microsoft points in his X-box Live account he could
not use after making a Microsoft Arcade purchase. The unusable non-refundable residual points
were in effect a free loan to Defendant Microsoft Corporation. In January 2010, in order to use
his remaining Microsoft point balance, plaintiff was required to supplant his account with
additional Microsoft points in order to purchase a digital good. Plaintiff was unable to use both
money and points to make his purchase for the exact points and or purchase price. After the
purchase, Plaintiff again had non-refundable Microsoft points in his account he could not use. In
addition, Plaintiff purchased the full version of a Microsoft Arcade game with Microsoft points
and attempted to download it to his X-box 360 hard drive. Plaintiff had a problem with the
download and was unable to use the full version of the digital good or service he had purchased.
Defendant Microsoft refused to provide any refund to Plaintiff or to allow Plaintiff to re-
download his full purchase. Plaintiff owned a copy of the Microsoft Arcade game and had rights
to Fair Use of his game purchase. Plaintiff was the victim of Microsoft Point fraud.

13. In an attempt to rectify the situation, plaintiff contacted defendant Microsoft Corporation
Xbox Live Customer Support numerous times via telephone, with no response from the
defendant.

14. In an attempt to correct his account, plaintiff spent several hours contacting Microsoft
Corporation numerous times via telephone to appeal the charges, which ultimately led to
litigation.

15. The foregoing required tasks were extremely burdensome and time consuming for plaintiff to
complete.

16. The defendant engaged in a scheme to unjustly enrich itself through their fraudulent handling
of plaintiffs’ account. Plaintiff paid for digital goods and services using the Microsoft point
system and paid more than the actual price of the digital good or service he wanted because the
cost to buy Microsoft points is more than the cost of the digital goods or services being sold
leaving a residual non-refundable point value in favor of Microsoft that is useless until Plaintiff
supplants his account with more Microsoft points. It is almost impossible for Plaintiff to
purchase a specific number of points that would correspond to the number actually needed to buy
a particular digital good or service. Plaintiff was required by Microsoft to buy Microsoft points
in unreasonably large non-refundable pre-set blocks, the remainder of which are spent at a later
date, these unspent non-refundable points effectively function as a free loan to Microsoft.
Plaintiff was required by Microsoft to buy Microsoft points in non-refundable pre-set blocks, the
remainder of which serve to unjustly enrich Microsoft for goods and services never provided to
Plaintiff if unused or unusable by Plaintiff. Plaintiff was required to supplant his X-box Live,
Windows LIVE, Xbox 360, and Zune account with a large block of more Microsoft points to use
his remaining residual points or accept no goods or services for their remaining value. Microsoft
Corporation knew about this fraud, or at some point knew about this fraud, and knowingly
continued its fraud on Plaintiff. There is no way for Plaintiff to combine non-refundable
Microsoft points with money to make a purchase for the exact amount of a digital good or
service offered by Microsoft. No where did Microsoft advise Plaintiff that he would not be able
to use the value of all his Microsoft points unless he purchased an unreasonably large amount of
Microsoft points for an unreasonably large amount of purchases. Microsoft executive Aaron
Greenberg, Xbox group product manager, admitted knowingly defrauding Plaintiff. Defendant
Microsoft Corporation received and retained money paid by Plaintiff in response to incomplete
and or partial downloads of digital goods and services and made no recovery efforts for plaintiff.

COUNT I

FRAUD
17. Microsoft Corporation’s conduct in illegally charging Plaintiff and the class for point fraud,
as alleged hereinabove, violated Pennsylvania, New Jersey, and Federal law because it was
unlawful, unfair and/or fraudulent business act and practice.

18. As a proximate result of Microsoft Corporation’s conduct alleged herein, both Plaintiff and
the class have sustained pecuniary loss.

19. Unless restrained by this Court, Defendant Microsoft Corporation will continue to engage in
the unlawful, unfair, and/or fraudulent business acts or practices alleged above, in violation of
Pennsylvania, New Jersey, and Federal law thus tending to render judgment in the instant action
ineffectual. Plaintiff has no adequate remedy at law, in that Defendant will continue to engage in
such practices, as alleged above, in violation of Pennsylvania, New Jersey, and Federal law thus
engendering a multiplicity of judicial proceedings.

20. Plaintiff and the Class are entitled to the disgorgement of any profits Microsoft Corporation
obtained as a result of charging Plaintiff and the Class for point fraud, restitution of any monies
Plaintiff and the Class paid for incomplete and or partial downloads that could be determined
fraudulent and attorneys’ fees as provided by Pennsylvania, New Jersey, and Federal law.
COUNT II

BREACH OF Contract
21. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth
herein.

22. Defendants either expressly and/or implicitly, contractually agreed to provide an online,
renewable, stored-value system called Microsoft Points that lets Plaintiffs buy digital goods and
services from X-box Live Marketplace, Windows LIVE, Xbox 360, and Zune and only charge
Plaintiffs for the complete, whole and or actual digital goods and services purchased by
Plaintiffs. Defendant breached that contract by collecting revenues for digital goods and services
which were not provided. Accordingly, Plaintiffs seek a refund of all improper and/or illicit
charges.

23. Defendants, by their negligent handling of Microsoft Point control, X-box Live Marketplace,
Windows LIVE, Xbox 360, and Zune accounts, breached their contract to plaintiff and the Class,
causing damages to Plaintiff and the Class.

COUNT III

NEGLIGENCE
24. Plaintiff repeats and realleges each and every allegation contained above.

25. The Defendant owes and owed a duty to plaintiff and the Class to monitor its online,
renewable, stored-value system called Microsoft Points for point fraud and to protect plaintiff
and the Class from point fraud to ensure that Plaintiff and the Class were charged only for
complete, whole and or actual digital goods and services purchased by Plaintiffs.

26. Microsoft Corporation has breached its duty to plaintiff and the Class to adequately monitor
its Microsoft Point system for point fraud and to protect plaintiff and the Class from point fraud,
and by charging plaintiff and the Class for incomplete and or partial downloads of digital goods
and services; and refusing to refund same.
COUNT IV

UNJUST ENRICHMENT
27. Plaintiff repeats and realleges each and every allegation contained above.

28. Microsoft Corporation has received and retained money belonging to plaintiff and the Class
resulting from incomplete and or partial downloads of digital goods and services. Plaintiffs have
a right to own and or rent, view and or download and fairly use these digital goods and services
in accordance with their various purchased copyrights from Microsoft and other providers. A
common issue among the Plaintiffs is that each Plaintiff did not get what they paid for; and
Plaintiffs were refused any kind of refund after notifying and or contacting Microsoft
Corporation of same.

29. Under principles of equity and good conscience, Microsoft Corporation should not be
permitted to retain the money belonging to Plaintiff and the Class which Microsoft Corporation
has unjustly received as a result of its actions.

COUNT V

UNFAIR BUSINESS PRACTICES


30. Plaintiff repeats and realleges each and every allegation contained above.

31. Microsoft Corporation’s conduct in charging Plaintiff and the class for point fraud, as
alleged hereinabove, violated Pennsylvania, New Jersey, and Federal law because it was
unlawful, unfair and/or fraudulent business act and practice.

32. As a proximate result of Microsoft Corporation’s conduct alleged herein, both Plaintiff and
the class have sustained pecuniary loss.

33. Unless restrained by this Court, Defendant s Microsoft Corporation will continue to engage
in the unlawful, unfair, and/or fraudulent business acts or practices alleged above, in violation of
Pennsylvania, New Jersey, and Federal law thus tending to render judgment in the instant action
ineffectual. Plaintiff has no adequate remedy at law, in that Defendant will continue to engage in
such practices, as alleged above, in violation of Pennsylvania, New Jersey, and Federal law thus
engendering a multiplicity of judicial proceedings.

34. Plaintiff and the Class are entitled to the disgorgement of any profits Microsoft Corporation
obtained as a result of charging Plaintiff and the Class for point fraud, restitution of any monies
Plaintiff and the Class paid for incomplete and or partial downloads and attorneys’ fees as
provided by U.S., Pennsylvania, New Jersey, and Federal law.

WHEREFORE, plaintiff prays for relief and judgment, as follows:

1. Determining that this action is a proper opt-out class action and certifying Plaintiff as class
representative under Rule 23 of the Federal Rules of Civil Procedure;
2. Awarding compensatory damages in favor of Plaintiff and the other Class members against
defendant, jointly and severally, for all damages sustained as a result of defendant’s wrongdoing,
in an amount to be proven at trial, including interest thereon;
3. Pre-judgment interest and post judgment interest from the date of entry until the date of
satisfaction at the highest rates allowable by law;
4. Punitive and exemplary damages to the extent permitted by law;
5. Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action,
including attorneys fees and expert fees; and
6. Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED


Plaintiff hereby demands a trial by jury.

DATED: February 2, 2010

By: Samuel J. Lassoff /s


PO Box 2142
Horsham, PA 19044

Attorney for Plaintiffs