Wednesday, May 12, 2004

Legal Fees WHAT? WHAT WAS THAT? Lawyers who persuaded Microsoft Corp. to settle their class-action lawsuit accusing the company of price-fixing are asking for $258 million in legal fees, the largest amount ever in an antitrust case.

The bill comes as attorney fees are being examined critically by the American Bar Association and lawmakers across the country. It amounts to about $3,000 per hour for one lawyer, more than $2,000 an hour each for 34 other attorneys and $1,000 an hour for administrative work.

Microsoft agreed to the settlement -allocating $1.1 billion for California consumers -after a small San Francisco law firm sued in state court alleging the company inflated prices by monopolizing the pre-installed software market from 1995 to 2001.

But Microsoft could end up spending much less. The deal enables anyone who bought a computer in California to get vouchers worth $5 to $29 per Microsoft product, but only a small fraction of the millions eligible have applied for the money.

The lead attorney in the case, Eugene Crew, planned to ask the judge Wednesday for the fees. He told the judge in legal briefs that he deserves about $3,000 for each of his 6,189.6 billable hours, "considering the enormity of this undertaking against the most powerful corporation in America."

Lawyers from 35 firms joined the suit, which was filed in 1999 under California's unfair competition law and settled four years later. The requested fees represent about 25% of the settlement.

Normally, attorneys charge clients about a third of what's recovered, but in class-actions they negotiate fees with the losing party and the judge.

Crew told San Francisco County Superior Court Judge Paul Alvarado in briefs that they deserve about five times their normal rate because of the difficulty of maneuvering through the legal system to recover money for consumers.

"Extraordinary deeds warrant appropriate recompense," Crew wrote.

The lawyers spent $11.4 million while reviewing millions of pages of legal documents and taking dozens of depositions, and devoted "marathon days, all-nighters and the entire Thanksgiving holiday weekend" to the case in 2001, he added.

Microsoft opposes the fees.

"No client would pay any lawyer or paralegal at those rates, and this court should not order Microsoft to do so," Microsoft attorney Robert Rosenfeld said.

Rosenfeld said the case was simple because of the federal antitrust case against the software maker.

"Although class counsel would have had difficulty proving that plaintiffs were overcharged, their ability to piggyback on prior proceedings significantly increased the likelihood of a settlement," Rosenfeld said.

Caps on legal fees have been considered in at least 13 states.

A proposal from Common Good, a group committed to "reforming America's lawsuit culture," and the conservative Hudson Institute would cap fees at 10% of a $100,000 settlement and 5% of anything more, said Brent Tantillo, a deputy director at the institute.

"The problem is these cases where the attorneys get a whopping fee and the consumer gets next to nothing," Tantillo said.

The American Bar Association says lawyers can ethically charge whatever is "reasonable."

"That's a big question, what is reasonable," said Steven Lesser, head of an ABA task force investigating attorneys fees.

The California Supreme Court two years ago upheld a lower court decision reducing fees from $88.5 million to $18.2 million for lawyers who won a class action accusing California of illegally charging out-of-state residents $300 extra for auto registration. The court called that request, for $8,000 an hour, "a testament to the unreal world of greed in which some attorneys practice law."

At the same time, a three-member Tobacco Fee Arbitration Panel awarded $1.25 billion in fees to 60 law firms that helped California get $25.4 billion as part of a nationwide tobacco settlement with the industry.

Panelists John Calhoun Wells and Harry Huge said the lawyers' efforts were "an important contributor to a resolution of the tobacco war" in California.

Charles Renfrew, a former federal judge whom the tobacco industry nominated as arbitrator, dissented, saying the fee "truly shocks the conscience."

One benefactor of the Microsoft settlement, Gerry Kaplan of the San Francisco suburb of Hillsborough, figures his vouchers will add up to about $100.

"The attorneys are the ones that are benefiting from this, but so am I and I didn't have to do anything," Kaplan said. "I'm getting a hundred bucks for filling out a form online and took no risk. That's a lot of money for the lawyers, but it is a lot of money for consumers too."

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