In re N.M. Indirect Purchasers Microsoft, 25,789.

CourtCourt of Appeals of New Mexico
Citation149 P.3d 976,2007 NMCA 007
Docket NumberNo. 25,789.,25,789.
PartiesIn re NEW MEXICO INDIRECT PURCHASERS MICROSOFT CORPORATION Antitrust Litigation.
Decision Date15 November 2006

Montgomery, McCracken, Walker & Rhoads, LLP, Charles B. Casper, Philadelphia, P.A., Microsoft Corporation, Richard J. Wallis, Steven J. Aeschbacher, Redmond, WA, Sullivan & Cromwell, L.L.P., David B. Tulchin, Sharon L. Nelles, New York, NY, Rodey, Dickason, Sloan, Akin & Robb, P.A., Edward Ricco, Leslie McCarthy Apodaca, Jocelyn Drennan, Albuquerque, NM, for Appellant Microsoft Corporation.

Hinkle, Hensley, Shanor & Martin, L.L.P., Thomas M. Hnasko, Gary W. Larson, Santa Fe, NM, Freedman, Boyd, Daniels, Hollander & Goldberg, P.A., David A. Freedman, Albuquerque, NM, Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, L.L.P., Leonard B. Simon, Pamela M. Parker, Susan G. Taylor, San Diego, CA, for Appellees Class Plaintiffs.

OPINION

CASTILLO, Judge.

{1} In this case, we examine the reasonableness of attorney fees that were awarded on the basis of the common fund doctrine, pursuant to terms in a class action settlement agreement. We conclude that under the circumstances of this case, the settlement provisions regarding the common fund doctrine are dispositive and that the district court did not abuse its discretion in awarding fees by using the percentage-of-recovery method or in its application of the method. Relying on our evidentiary review of the Rule 16-105 NMRA factors used by the district court to evaluate the reasonableness of the fee, we also conclude that the fee awarded in this case was reasonable. Accordingly, we affirm.

I. BACKGROUND

{2} This class action is one of many related suits filed against Appellant Microsoft Corporation (Microsoft) in federal and state courts throughout the country. Numerous complaints were filed after the United States District Court for the District of Columbia issued in July of 1999 findings of fact establishing that Microsoft had engaged in conduct indicating an improper use of market advantage to stifle innovation. See United States v. Microsoft Corp., 84 F.Supp.2d 9, 12 (D.D.C.1999); see also United States v. Microsoft Corp., 87 F.Supp.2d 30, 35 (D.D.C. 2000) (concluding that Microsoft violated the Sherman Antitrust Act and analogous state statutes), aff'd in part and rev'd in part, 253 F.3d 34, 46 (D.C.Cir.2001).

{3} In New Mexico, three class action complaints were filed before March 2000. The three cases were then consolidated by a writ of superintending control issued by the New Mexico Supreme Court. The consolidated amended complaint, alleging that Microsoft had violated New Mexico's Antitrust Act and Unfair Practices Act, was filed in late 2000. Microsoft filed a motion to dismiss, and Class Plaintiffs filed a motion to certify the Class, both of which were fully briefed and argued. The motion to dismiss was granted in part and denied in part, and a second consolidated amended complaint was filed and answered. Extensive discovery began and continued through June 28, 2002.

{4} By late 2002, the district court had certified the Class, and the order granting certification was on appeal to this Court. That appeal was fully briefed, and trial preparation continued while a settlement was negotiated. The Settlement Agreement (Agreement) was finally approved in December 2004, and the pending appeal of the class certification was dismissed. The terms of the Agreement fall into three main categories. First, Microsoft agreed to provide vouchers that could be claimed by a member of the Class and redeemed for a cash reimbursement after purchase of any qualified computer hardware or software. Second, Microsoft agreed to provide a cy pres award of vouchers to eligible schools in New Mexico. The amount of the cy pres award is based on a percentage of vouchers unclaimed and a percentage of claimed vouchers unredeemed by members of the Class. Third, Microsoft promised to pay reasonable attorney fees and expenses, and the parties agreed that the attorney fees would be determined on the basis of the "common fund" doctrine.

{5} Subsequently, after hearing oral arguments regarding Class Counsel's fee application, the district court awarded $6.1 million in attorney fees, plus appropriate gross receipts tax, and $525,179 in expenses. The court used a percentage-of-recovery calculation and then applied the lodestar method to double-check the reasonableness of the fee award. For additional guidance regarding reasonableness, the court below also considered the factors in Rule 16-105 of the New Mexico Rules of Professional Conduct. Microsoft appeals this award. Additional facts will be developed as relevant to our discussion of the issues.

II. DISCUSSION
A. Standard of Review

{6} An award of attorney fees is reviewed for an abuse of discretion. N.M. Right to Choose/NARAL v. Johnson, 1999-NMSC-028, ¶ 6, 127 N.M. 654, 986 P.2d 450; Gavin Maloof & Co. v. Sw. Distrib. Co., 106 N.M. 413, 415, 744 P.2d 541, 543 (1987) ("[T]he amount of an award of attorney fees lies within the sound discretion of the trial court."); Hertz v. Hertz, 99 N.M. 320, 331, 657 P.2d 1169, 1180 (1983) ("It is well[ ]settled that an award of attorney's fees on the basis of reasonable compensation is a finding not to be disturbed unless patently erroneous as reflecting an abuse of discretion." (emphasis, internal quotation marks, and citations omitted)). A discretionary decision based on a misapprehension of the law is an abuse of discretion that must be reviewed de novo. NARAL, 1999-NMSC-028, ¶ 7, 127 N.M. 654, 986 P.2d 450. Thus, the question of whether the correct law has been applied and the district court's application of that law to the facts are reviewed de novo. Id. ¶¶ 7-8. After we determine whether the correct law has been applied, we review a discretionary decision for an abuse of discretion and reverse "only if it [is] contrary to logic and reason." Id. ¶ 8 (internal quotation marks and citation omitted). "The test is not what we would have done had we heard the fee request, but whether the trial court's decision was clearly against the logic and effect of the facts and circumstances before the court." In re Estate of Greig, 107 N.M. 227, 230, 755 P.2d 71, 74 (Ct.App.1988).

B. Microsoft's Arguments

{7} Microsoft makes three main arguments that the district court abused its discretion by awarding attorney fees in an amount that is vastly disproportionate to the benefit obtained for the Class. First, Microsoft asserts that the district court erred by applying the percentage-of-recovery method (percentage method) to calculate the fee award and that in these circumstances, the lodestar method should have been used to calculate the fee. Microsoft alternatively contends that even if the percentage method were permissible, the district court erred in its valuation of the recovery and that this error resulted in a fee that was disproportionate to the recovery.

{8} Second, Microsoft argues that the district court erred by automatically accepting Class Counsel's proffered lodestar because out-of-state Class Counsel's hourly rates were not defined by market rates in New Mexico and because Class Counsel improperly submitted hours spent both on fee litigation and on work performed for Microsoft cases in other states. Microsoft also asserts that Class Counsel failed to provide supporting documentation "for $81,201 worth of lodestar."

{9} Third, Microsoft argues that the district court erred by concluding that a multiplier of three was an appropriate enhancement of the lodestar in these circumstances. Microsoft contends that this case was a tag-along action, "piggybacking" actions from the federal court and other state courts, and that "[n]either the efforts expended, nor the risks assumed, nor the results obtained . . . were exceptional" enough to justify a multiplier of three. Microsoft asserts that a proper lodestar would be $1,509,023 and that this lodestar, enhanced by a multiplier of 1.5, would produce a reasonable fee of $2,263,534, a reduction of almost $4 million from the amount actually awarded.

{10} In addition to the arguments regarding the disproportionality of the fee, Microsoft also challenges the district court's automatic acceptance of Class Counsel's claimed expenses. Microsoft contends that the district court did not address Microsoft's objections to the claimed expenses and "gave no reason at all for its finding that expenses . . . were reasonable." Moreover, Microsoft asserts that out-of-state Class Counsel claimed $225,833 in expenses without a requisite "showing that those expenses were reasonably and necessarily incurred in the New Mexico case . . . . [and thereby] failed to satisfy their burden of proving that the expenses . . . provided any benefit" to the Class.

C. Preliminary Considerations

{11} The reasonableness of attorney fees awarded after a class action settlement is an issue of first impression for this Court. Where New Mexico law is not instructive, we find guidance in other jurisdictions. Law from other jurisdictions is not binding on us, however, even though it may be persuasive. See Breen v. Carlsbad Mun. Sch., 2005-NMSC-028, ¶ 14, 138 N.M. 331, 120 P.3d 413 ("Federal case law is certainly informative, but only to the extent it is persuasive."); Sec. Ins. Co. of Hartford v. Chapman, 88 N.M. 292, 298-99, 540 P.2d 222, 228-29 (1975) (noting that the decisions of other states with similar statutes are persuasive but not binding).

{12} Generally, the determination of a fee award after settlement of a class action and the subsequent review of that determination involve consideration of a variety of competing interests and responsibilities. First, the judiciary has a duty, pursuant to Rule...

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