- The Washington Times - Wednesday, January 30, 2002

Microsoft Corp. is paying more than $9 million to a group of nine states that settled their antitrust lawsuit against the company in November.
Illinois, Kentucky, Louisiana, Maryland, Michigan, New York, North Carolina, Ohio and Wisconsin are receiving checks this week from the Redmond, Wash., software company to cover the expenses they incurred during more than three years of litigation.
Each of the nine states joined the federal government last Nov. 6 and endorsed a settlement proposal with Microsoft. A federal appeals court last year upheld a lower court's decision that Microsoft violated the Sherman Antitrust Act by abusing its monopoly power to maintain its share of the market for personal computer operating systems.
A defendant that loses an antitrust case is obligated to pay plaintiffs' legal costs, according to a federal statute. An order last week from U.S. District Judge Colleen Kollar-Kotelly reaffirmed that Microsoft must pay the expenses of the nine settling states.
While substantial, the $9.4 million Microsoft is paying the states likely represents a small expense for the company.
"It won't even be noticed in their bottom line," said Robert H. Lande, a law professor and antitrust expert at the University of Baltimore School of Law.
Two weeks ago Microsoft reported $7.74 billion in revenue for its second quarter, which ended Dec. 31. That was up 18 percent from $6.55 billion a year ago.
The company said it will take a $660 million charge to cover expenses related to settling more than 100 consumer class-action antitrust suits that were tried in federal court in Baltimore. That charge lowered second-quarter earnings by 8 cents per share.
Settling the antitrust suit filed by the Justice Department and the states in May 1998 probably will not have an impact on the company's quarterly earnings because the cost is small, Microsoft spokesman Jim Deslar said.
New York recorded $4.4 million in legal fees. Stephen Houck, formerly with New York's attorney general's office, was the lead attorney for the states until he left for private practice.
Wisconsin, Illinois and Ohio also are getting sizeable checks from Microsoft. Each state logged over $1 million in fees.
Attorneys from Ohio and New York represented the states in court-ordered mediation mandated by Judge Kollar-Kotelly and were present while all sides drafted the settlement agreement.
Wisconsin had three assistant attorneys general and one paralegal working on the antitrust case. Wisconsin Assistant Attorney General Kevin O'Connor took over as the lead attorney for the states after Mr. Houck and logged an estimated 4,000 hours in the case.
Attorneys fees account for the bulk of the costs. The reimbursements also include money for everything from travel to making photocopies. None of the nine settling states hired attorneys from private firms to help with the antitrust suit, so private law firms aren't getting a share of the $9.4 million. The states still involved in the lawsuit did hire trial attorney Brendan Sullivan on Oct. 24.
Microsoft isn't finished writing checks. It will have to pay at least some of the costs of the states that have not settled, but it remains to be seen how much it will be liable for. Nine other states and the District of Columbia are pushing for tougher sanctions than those outlined in the Justice Department's proposed settlement agreement.
If Judge Kollar-Kotelly decides Microsoft will not face more sanctions than those outlined in the federal settlement agreement, the states will have to pay the legal fees incurred after Nov. 6, Mr. Lande said. If the judge sides with the states and levies further penalties against the company, Microsoft will have to pay the all the states' legal fees.
Microsoft also paid an estimated $100,000 to New Mexico last July after that state settled its antitrust suit with the company.
Microsoft is not obligated to pay the Justice Department's legal fees, according to the federal statute. The Justice Department estimates it spent $11.6 million to litigate the case from 1995 to June 2000, and there has been no more recent accounting of costs.
The expenses of the federal government and the nine settling states likely pales in comparison to what Microsoft has spent defending itself during nearly four years of litigation, Mr. Lande said.
"I can't imagine it would be less than $100 million," he said.
Mr. Deslar declined to discuss Microsoft's legal costs.
States have broad authority to use the money from Microsoft as they wish.
The order signed by Judge Kollar-Kotelly allows states to use the money to pay expenses incurred because of the lawsuit, use it for antitrust or consumer protection enforcement or place the funds in any other state account.

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