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A group of nearly three dozen law firms is seeking a hefty $258 million in attorney fees for their pursuit of the Microsoft Corp. in a complex antitrust class action in San Francisco. The lead firm, San Francisco’s Townsend and Townsend and Crew, made the fee request to a San Francisco trial judge last month � and included declarations from a group of high-profile experts and professors backing the effort. The firms are also seeking $11 million in costs they say they incurred in bringing the case. The litigation, brought on behalf of consumers accusing Microsoft of illegal conduct, settled in January 2003. The settlement provided the plaintiffs with $1.1 billion worth of software vouchers and allowed their lawyers to seek attorney fees from Microsoft. The Townsend firm, whose lawyers served as lead counsel in the suit, calculates its share of attorney fees at $92.6 million and costs at $4.5 million. A D.C. firm stands to do well in the case, too. The pleadings recommend that the court award Kellogg, Huber, Hansen, Todd & Evans of the District $69.3 million, plus $3.5 million in costs. Kellogg, Huber “played a prominent leadership role in the case,” the brief states, adding that its “contribution . . . to the success of the case was second only to” Townsend and Townsend and Crew. Kellogg, Huber partner Steven Benz, identified in the brief as a member of the trial team, declined to comment. The remainder of the money is to go to the 33 other firms that worked on the case, Lingo v. Microsoft, in San Francisco Superior Court. “I am very confident that our request is reasonable,” says Townsend partner Eugene Crew, the lead lawyer on the case. “We expect the court to set an award that sends a message to plaintiffs and future lawyers to take a case on.” It’s not unusual for firms to submit declarations to the court supporting fee requests. But the caliber of the lawyers and professors supporting Townsend’s petition underscores the high stakes involved in the case. While Townsend’s request is on the upper end of what firms might seek in such a complex class action, plaintiffs lawyers say the firm has a good chance of winning the court’s approval, for several reasons: the risks involved in taking on a corporate goliath; the near-collapse of the case when lawyers in separate federal multidistrict litigation against Microsoft attempted to settle the California action in a deal that would have left California consumers with nothing; the extensive resources spent on the four-year battle; and the size of the settlement. But Townsend must overcome objections from several class members who filed statements opposing the proposed fees. Microsoft also may put up a fight. “We’re currently reviewing the fee petition and determining if we’ll have questions or will respond to it,” says Microsoft spokesman Jim Desler. Judge Paul Alvarado is to review the settlement agreement and petition for attorney fees at a March 29 hearing. The California action, a consolidation of more than 20 consumer suits, the first of which was filed by Townsend, alleges that Microsoft’s illegal conduct denied consumers competitive prices and free choice among software products. Under the settlement, the 14 million plaintiffs in California who indirectly purchased Microsoft software over the previous seven years can use the vouchers to purchase computer products. Townsend says businesses, which compose about 80 percent of the class, would receive millions in recovery, while individual consumers would receive vouchers worth $60 or $70, though the firm says some may receive as much as several hundred dollars’ worth. Two-thirds of unclaimed settlement funds will go to public schools in the form of software and vouchers for computer equipment, while the remaining third will revert to Microsoft. The software giant is paying attorney fees and costs separately from the settlement pot designated for class claims. In court documents filed in December, Townsend said it devoted 63,000 professional hours to the case at a value of about $16 million. Attorney fees in class actions are determined either as a percentage of the plaintiffs’ award or by a lodestar method. The lodestar is the number of hours expended multiplied by the counsel’s hourly rate, with the result enhanced by a multiplier. Townsend is requesting a 5.75 multiplier of the lodestar, for a total of $92.6 million in attorney fees. Crew said the figure represents about 18 percent of the settlement award. Under the plan submitted to the court, Kellogg, Huber, which put in 63,669 hours, would earn a 5.25 multiplier, for a total fee of $69.3 million. In his declaration to the court supporting the fee request, top Bay Area litigator Joseph Cotchett of Burlingame, Calif.’s Cotchett, Pitre, Simon & McCarthy, said his firm has received awards ranging from 25 percent to 30 percent of settlements or judgments for class actions it has handled on a contingency basis. “My hourly rates range from $550 to $900 per hour, depending on the assignment,” Cotchett said. According to Townsend’s petition, Crew’s hourly rate on the case was $525. Others who submitted declarations in support of Townsend’s request include Jeffrey Brand, dean of the University of San Francisco School of Law; Morton Kamien, an economist at Northwestern University; Geoffrey Hazard Jr. of the University of Pennsylvania School of Law; and O’Melveny & Myers partner Patrick Lynch, who successfully prosecuted an antitrust case against Microsoft several years ago. Brand lauded Townsend’s tenacity in sticking with the case despite pressure to accept a global settlement worked out by counsel in the federal multidistrict litigation. “Had California plaintiffs’ counsel folded their cards and acquiesced . . . the class would have received nothing and counsel would have been handsomely compensated,” Brand said. “They have set an example for the class action bar to follow in performing their fiduciary obligation to do all within their power to protect their class from inadequate or collusive settlements.” Other plaintiffs lawyers uninvolved in the case agree that Townsend has a good chance of getting the court’s approval. “It’s a generous award, but probably justified under the circumstances,” says Joseph Tabacco Jr. of Berman DeValerio Pease Tabacco Burt & Pucillo. “Given the risks � they were challenging one of the biggest monopolists in the world and were the first out of the box � the court could be persuaded.” Solomon Cera, a partner at Gold Bennett Cera & Sidener, also says the award was on the high side but that it was within the range of possibility. “I wouldn’t say that multiplier is crazy,” Cera says, adding that the court’s decision will depend on the “totality of facts,” including the risk involved, the result for the consumers, and whether class members object to the fee request. Those who have weighed in opposing the fee petition include Lawrence Schonbrun, a Berkeley solo practitioner who has built a practice around challenging large class action fee awards. In a filing on behalf of two class members, Schonbrun said a final fee award should not be decided until the court knows how many class members redeem their vouchers. A petition filed by another class member objecting to the award of attorney fees to one firm offers a peek at the infighting between the firms on the case. The petition claims Lieff Cabraser Heimann & Bernstein breached its fiduciary duty by “surreptitiously attempting to settle the class members’ claims” as part of a global settlement of all claims against Microsoft. Crew says Lieff Cabraser partner Robert Lieff called him in October 2001 to report that Lieff Cabraser and other plaintiffs lawyers in the federal multidistrict litigation against Microsoft had reached a national settlement. Under this agreement, which Crew says was negotiated without his knowledge, California consumers would have received nothing. “I was furious,” he says. Lieff Cabraser was punished by being removed from the executive committee overseeing the case and by receiving a very low multiplier, Crew says. In the petition for attorney fees, Lieff Cabraser is designated a lodestar multiplier of 1.5. Nonetheless, Crew says, Lieff Cabraser had done valuable work on the case “up to a point” and should be paid for it. Lieff Cabraser partner Michele Jackson says her firm had worked with Townsend in preparing the fee petition and would file a response to the class member. “We entirely disagree with the objection to our fee request,” she says. “They are entirely off-base.” Brenda Sandburg is a staff writer at The Recorder, the American Lawyer Media daily newspaper in San Francisco, where this article first appeared.

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