Lead Opinion
OPINION
{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.,
{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,
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 eases 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.,
{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 1-023(E) NMRA, to review the reasonableness of any award of fees in a class action. See 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 14:1, at 507 (4th ed. 2002) (“To fully discharge its duty to review and approve class action settlement agreements, a district court must assess the reasonableness of the attorney’s fees.”). A court acts as a fiduciary for class members and, in doing so, weighs the interests of the class in light of class counsel’s efforts on their behalf. In re Copley Pharm., Inc.,
{13} Second, a court must acknowledge the public perception of windfall fees in class actions and use judicial oversight to ensure that fees awarded to class counsel are proportional to the benefit obtained for the class. See Third Circuit Task Force, Third Circuit Task Force Report on Selection of Class Counsel, 74 Temp. L.Rev. 685, 692 (2001) [hereinafter Task Force Report II]. We are sensitive to the criticism of fees that have been awarded in some class actions. See In re Copley,
{14} Third, this Court must be mindful that it does not substitute its judgment for that of the district court. Mayeux v. Winder,
{15} Fourth, we must conserve judicial resources and promote judicial efficiency. See NARAL,
{16} Finally, we note that the approval of the settlement is not before us; we review only the award of attorney fees, as provided by the parties’ Agreement. The provisions in the Agreement are controlling, unless the terms produce a result that is unfair to the Class or contrary to the policies underlying class actions. See Montoya v. Villa Linda Mall, Ltd.,
D. The Settlement Agreement and the Common Fund Doctrine
{17} We begin with a review of the pertinent provisions in the Agreement. Microsoft agreed “to pay reasonable attorneys’ fees and expenses in an amount to be determined by the [district c]ourt.” Microsoft reserved the right to oppose the fee application, and both parties reserved the right to appeal the district court’s award. The Agreement provided that litigation of the fee issues would be subject to the following stipulations relevant to this appeal:
(1) the attorneys’ fees and costs will be paid by Microsoft in addition to the recovery to the New Mexico Settlement Class and the cy pres remedy ...; (2) the amount of the attorneys’ fees will be determined upon the basis of the “common fund” doctrine rather than as a “prevailing party” or statutory fee, with each party being free to argue for what it believe [sic] is a reasonable common fund fee; (3) plaintiffs are free to argue that the value of the “common fund” created by the litigation is any amount up to (but in no case exceeding) Face Value, plus notice and administrative expenses and costs; and Microsoft is free to argue that the “common fund” created by the litigation is any amount less than the Face Value or is the amount of the benefit conferred directly on class members by virtue of this litigation[.]
Since the common fund doctrine is essential to our analysis, we proceed with an overview of the principles and development of the common fund and fee awards.
{18} The common fund doctrine is an equitable exception to the American rule. NARAL,
{19} In this case, Microsoft has contractually agreed to pay attorney fees. A contract providing for attorney fees is enforceable. See NARAL,
{20} Historically, attorney fee awards made on the basis of the common fund doctrine are reviewed for reasonableness. See, e.g., Edwards v. Alaska Pulp Corp.,
E. Benefit to the Class and Proportionality of the Fee Award
{21} Microsoft argues that the district court abused its discretion because the fee award is vastly disproportionate to the benefit obtained for the Class. Microsoft likens the fee award in the instant case to a windfall fee that contributes to the adverse public perception of the legal profession, as vividly described in City of Detroit v. Grinnell Corp.,
1. Value of the Settlement to the Class
{22} When determining a fee award based on a common fund, the district court must make a reasonable estimate of the value of the settlement. In re Prudential,
{23} Microsoft estimated the value of the total settlement in pleadings below: “The total value of the settlement is likely to be $17 million, and the net value to the [C]lass around $3.1 million.” Counsel for Microsoft repeated these estimations at the fee hearing: “The total amount at issue is about $17 million. That’s how much the schools will receive in vouchers, and about 3.1 million will go in vouchers to the [C]lass---- So that’s the total value of the settlement when you really value what’s going to the New Mexico schools and to the [C]lass.” The district court did not abuse its discretion when it relied on these representations made by Microsoft’s counsel.
{24} On appeal, Microsoft compares the fee award of $6.1 million to the value of the vouchers actually claimed by the Class members — $725,366. The district court did not have this amount before it because the claims period had not expired at the time of the fee hearing and the information was not yet available. Microsoft did not object that the court did not have the actual figures before it. Although the parties stipulated that the “subsequently available claims rate be included in the appellate record,” we decline to consider evidence that was not before the court below. An appellate court does not review a district court decision on the basis of facts that are ostensibly in the record but were not before the court below when it made its ruling. See Rule 12-209(A), (C) NMRA (defining the record proper as papers and pleadings filed in the district court and stating that modification of the record may be made by stipulation “[i]f anything material to either party is omitted from the record proper by error or accident”); Martinez v. N.M. State Eng’r Office,
{25} On appeal, Microsoft cites two New Mexico cases, one saying that the fee award must be “based upon the benefits actually provided to the client” and the other saying that in determining fees, the court is to consider “the amount involved and the results obtained.” These cases establish some general principles regarding fee awards and illustrate fee awards that New Mexico courts have considered proportional or reasonable. However, these cases are distinguishable; they do not address class actions, common funds, or ey pres recoveries. See Calderon v. Navarette,
{26} Microsoft also relies on an Alabama case, Union Fidelity Life Insurance Co. v. McCurdy,
{27} Moreover, the lower court in Union Fidelity estimated that total claims “might reach $10,000 by the end of the class period,” only 0.2% of the $4.5 million face value of the common fund.
{28} Similarly, the federal cases and the unreported state case cited by Microsoft do not support Microsoft’s contention that the fee award in our case is vastly disproportionate to the benefit received by the Class. With these cases, Microsoft asserts that the benefit to the Class must be measured by the “actual amount expected to be received by the class.” Each case clearly supports the proposition that the benefit to the class must be considered in determining the reasonableness of a fee award. See In re Prudential,
{29} In addition, Microsoft discusses the federal Class Action Fairness Act of 2005(Act), § 3, Pub.L. No. 109-2, 119 Stat. 4 (enacted and effective Feb. 18, 2005) (adding 28 U.S.C. § 1712(a), (e) (Supp.2006)), in support of the position that the fee award must be measured against the actual benefit to the Class. The Act limits attorney fees that are based on a recovery of coupons to the value of the coupons that are actually redeemed. See 28 U.S.C. § 1712(a). As noted earlier, we are not bound by federal law when we interpret state law. Moreover, the original actions in this case were filed almost five years before enactment of the Act. Cf. Waters,
{30} Finally, we note the conflict that can exist in a district court between a defendant’s representations regarding benefit to the class in a settlement approval hearing and the defendant’s representations regarding benefit to the class in a fee hearing. See Union Fidelity,
2. Error in the Choice of the Percentage Method
{31} Microsoft relies on United Nuclear Corp. v. Allendale Mutual Insurance Co.,
a. Discretionary Decision
{32} In the majority of jurisdictions, the district court has discretion to determine which method should be used to award fees under the common fund doctrine, depending on the circumstances of each particular case. See, e.g., Goldberger,
{33} Utilization of the percentage method is like calculation of a contingent fee; this method awards to counsel a variable percentage of the amount recovered for the class. In re GM Trucks,
{34} Alternatively, the lodestar method can be used to calculate attorney fees in a common fund case. The lodestar is ordinarily used in statutory fee-shifting cases because it provides adequate fees to attorneys who undertake litigation that is socially beneficial, irrespective of the pecuniary value to the classes. In re GM Trucks,
{35} The lodestar method has been extensively criticized, however, for deficiencies that outweigh its benefits. Task Force Report I,
{36} The Third Circuit led the movement toward use of the lodestar method for common fund cases in Lindy Brothers. Task Force Report I,
{37} The percentage method is preferred in some jurisdictions, including the Tenth Circuit, because this method rewards efficient and prompt resolutions of class actions and because it reflects more accurately the realities of litigation economics in the marketplace. See, e.g., In re Cendant,
{38} The United States Supreme Court has not directly addressed the discretion of the lower courts in choosing a method to award fees based on the common fund doctrine. The only guidance provided by the Court can be found in Blum v. Stenson,
{39} Our extensive review of the case law addressing each method leads us to believe that there are advantages and disadvantages to each method, depending on the circumstances of each case. Because the district court is in a better position to assess the circumstances of each case, we join the majority of jurisdictions and hold that the choice of method is within the district court’s discretiоn.
{40} Microsoft relies on Burke v. Arizona State Retirement System,
{41} Microsoft also argues that the percentage method should not have been used because the fees have been shifted: they will be paid by Microsoft and not paid proportionally by the Class members. Therefore, Microsoft reasons that there is no “true” common fund. See Burke,
{42} In further support of its contention that the district court should have used the lodestar method, Microsoft cites to three state district court cases and asserts that “every other court that has addressed contested fee applications in virtually identical Microsoft settlements has used the lodestar method.” We are not persuaded by this argument for three reasons. First, the standard for review of a fee application is the same regardless of whether the application is contested or not. Cf. In re S.D. Microsoft Antitrust Litig.,
{43} When comparing resulting percentages, the relative size of the settlement is important. Generally, a reasonable percentage of a common fund decreases as the size of the fund increases. See In re Prudential,
{44} Although the district court in Arizona used the lodestar method, its use of a 3.42 multiplier brought the fee award to 18% of the settlement’s face value of $104.6 million. Friedman,
{45} In state cases that were uncontested, Microsoft agreed to pay fees in amounts between 8.32% and 20%. See In re S.D. Microsoft Litig.,
{46} In its reply brief, Microsoft relies heavily on In re S.D. Microsoft Litigation. After more than four years of proceedings, an evidentiary hearing, and review of the reasonableness factors, see In re S.D. Microsoft Litig.,
b. Propriety of Estimating the Value of the Settlement
{47} Microsoft further contends that the percentage method is not appropriate because “the parties could only estimate the value of the settlement.” In support of its argument, Microsoft relies on Strong: “[S]evеral courts have advocated the use of the lodestar method in lieu of the percentage of fund method precisely in the situation where the value of the settlement is difficult to ascertain}.]”
{48} Other jurisdictions have awarded fees on the basis of common funds that could vary depending on the number of class members who take advantage of a right to share in the common fund. See Van Gemert,
{49} Other courts have conducted reasonable estimates of benefit to the class, even when vouchers or coupons were used, and these courts have recommended use of the percentage method based on the estimate. The settlement in In re GM Trucks consisted of $1,000 coupons redeemable for purchase of any new GM truck or Chevrolet light-duty truck built by the defendant.
{50} The court in O’Keefe v. Mercedes-Benz USA LLC,
{51} Microsoft cites to several cases in support of its assertion that the recovery in this case was difficult to value. None is persuasive because the cases do not involve the question of estimating value; rather, they merely illustrate the discretion afforded the district court in determining which method, percentage or lodestar, is most appropriate. Three cases are district court opinions in which the courts made a discretionary determination that the lodestar was most appropriate under the particular circumstances of each case. See Charles v. Goodyear Tire & Rubber Co.,
{52} Although Microsoft argues that the values are difficult to quantify, it did quantify the value of the settlement. Microsoft represented to the court below that the recovery was about $17 million. It posited that 10% of the face value, $3.1 million, was an acceptable estimate of the vouchers that would be claimed and that $14 million was an acceptable estimate of the benefit through the cy pres award. As discussed earlier, the district court did not err by relying on Microsoft’s representations below.
{53} Finally, the Agreement specifically provided that the parties could argue that the benefit to the Class was face value plus notice and administrative expenses and costs, with Microsoft being able to argue any lesser amount. Nothing was mentioned about attorney hours or hourly rates. The fact that each party under the Agreement was expressly allowed to argue its view of the amount of the common fund provides strong support for the view that the parties committed the decisions on method and value to the district court’s discretion, as well as believed that the percentage method could be central to the court’s decision. Otherwise, the Agreement would have been written in different terms.
3. Error in Application of the Percentage Method — Gross Versus Net Recovery
{54} Microsoft next argues that the district court erred in applying the percentage method because the court included the cy pres award, the fee award, and expenses in its calculation of the recovery. Without citation to authority, Microsoft asserts that benefit to class members derives “not from the transaction costs that it took to deliver that benefit and not from the amount that will be paid to the lawyers’ preferred charitable cause.” They contend that “lawyers should not be rewarded in proportion to the extent that they managed to increase the transaction costs of the litigation.”
{55} Our own research has revealed a wide variety of calculations of common funds used to measure the benefit tо a class, ranging from net benefit distributed to class members to gross benefit to the class. The gross settlement fund is used by most courts applying the percentage method. 4 Conte & Newberg, supra, § 14:6, at 567; of. id. n. 49 (citing district courts that use net recovery). Moreover, the benefit conferred through a cy pres award is ordinarily considered a part of the benefit to the class. See Nat’l Ass’n of Consumer Advocates, Standards and Guidelines for Litigating and Settling Consumer Class Actions,
{56} The Ninth Circuit has expressly held that the percentage method is not limited to calculations based on net recovery. In a securities class action, an unnamed class member challenged a fee award that was based on gross recovery. Powers v. Eichen,
Although the new provision requires reasonable fees and expenses, it does not mandate a particular approach to determining fees. The legislation’s primary purpose was to prevent fee awards under the lodestar method from taking up too great a percentage of the total recovery. The new provision, however, does not еliminate the use of the lodestar approach, nor does it require that fees be based on a percentage of net recovery. It simply requires that the fees and expenses ultimately awarded be reasonable in relation to what the plaintiffs recovered.
Id. (citation omitted).
{57} The court further reasoned that “the choice of whether to base an attorneys’ fee award on either net or gross recovery should not make a difference so long as the end result is reasonable. Our case law teaches that the reasonableness of attorneys’ fees is not measured by the choice of the denominator.” Id. The court stated that “[i]f twenty-five percent of gross is reasonable, perhaps thirty-five percent of net would be reasonable,” and concluded that the district court was not prohibited from calculating the fee award using the gross settlement amount. Id.; see Waters,
{58} In a later class action for race discrimination, the Ninth Circuit concluded that the lower court could include attorney fees in its valuation of a putative common fund created under a consent decree. Staton,
{59} Federal district courts have also included attorney fees as part of the estimated recovery when a court is approving uncontested attorney fees in class action settlements. Varacallo v. Mass. Mut. Life Ins. Co.,
{60} As listed in Microsoft’s brief in chief, the district court determined the value of the common fund by adding the following amounts:
Expected benefit to the [C]lass, based on a 10% claims rate: $ 3,150,000
Expected cypres distribution: $14,200,000
Attorneys’ fees of approximately 25% of $24,475,179: $ 6,100,000
Plaintiffs’ counsel’s claimed expenses: $ 525,179
Settlement administration expenses: $ 500,000
Thus, the district court awarded 25% of a common fund valued at $24,475,179. We explain the court’s calculations in a footnote.
F. Errors in Application of the Lodestar Method as a Crosscheck
{61} The district court used the lodestar method to crosscheck the reasonableness of the award calculated as a percentage of recovery. The court used the lodestar provided by Class Counsel of approximately $2 million. Microsoft asserts 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 contends that Class Counsel failed to provide supporting documentation “for $81,201 worth of lodestar.”
{62} Given our conclusion that the district court did not abuse its discretion by using the percentage method,' our review of the district court’s use of Class Counsel’s lodestar is limited. When used to crosscheck a percentage award, the lodestar is estimated, using information provided by the fee applicant. Manual for Complex Litigation § 14.122, at 193; see Goldberger,
{63} Microsoft relies on Kennedy and Calderon to argue that the district court erred by accepting Class Counsel’s lodestar. As discussed earlier, the New Mexico cases are inapposite because they do not involve class actions. Moreover, we are not convinced that Kennedy’s discussion of a multiplier in a statutory fee case is helpful in using a lodestar to crosscheck a percentage of recovery award. Under federal law, a multiplier based on risk or contingency cannot be used in a statutory fee case. See City of Burlington v. Dague,
{64} In light of our holding that the district court did not err by calculating the fee award using the percentage method, we conclude that the lower court did not err by using an estimated lodestar provided by Class Counsel. In this regard, we examine briefly Microsoft’s specific arguments regarding Class Counsel’s lodestar.
1. Excessive Out-of-State Hourly Rates
{65} The district court has discretion to determine a reasonable hourly rate that reflects the “ ‘prevailing market rates in the relevant community.’ ” Jane L. v. Bangerter,
{66} In addition, we note that Microsoft, in support of its argument regarding hourly rates, cites to cases that do not address the lodestar computation in a class action common fund case. See Ellis v. Univ. of Kan. Med. Ctr.,
2. Supporting Billing Records
{67} Microsoft argues that the district court erred by accepting Class Counsel’s lodestar because the lodestar included time spent on fee litigation, time spent on work performed in Microsoft eases in other states, and time submitted without supporting billing records. Microsoft also challenges the district court’s automatic acceptance of Class Counsel’s claimed expenses. Microsoft contends that the district court did not address its 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 “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.
{68} We are unpersuaded by Microsoft’s arguments regarding time and expenses for three reasons. First, as discussed earlier, once the percentage method is used in a common fund case, the lodestar is used as a crosscheck, and the lodestar itself is estimated. Second, Microsoft has neglected to cite to any documentary evidence in support of its assertions, other than its expert’s report. Our review of the record has revealed no additional evidence to support Microsoft’s contentions. With regard to time spent on fee litigation, Microsoft’s expert’s report concludes the following, without citation to the billing records:
[In-state Class Counsel’s] affidavit ... states that his firm’s lodestar does not include work on the attorneys’ fee application. It should not, but the fact is that [Class Counsel] charged $14,851 in fees on work relating to petitioning for fees and expenses, even though the firms intended to exclude such time from the lodestar. It is interesting, however, to contrast the time and fees devoted in a very concentrated effort from November 2 through November 28, 2004 on the attorneys’ fees and costs Application. In one month the ... attorneys devoted 591 hours or $151,852 ... to the fee application. That is the equivalent of 22% of the total lodestar for work the firm did on the case in almost five years from January 2000 through September 2004.
The report contains other similar conclusions regarding hours spent on petitioning for fees and expenses, work performed on cases in other states, and fees and expenses. See Case v. Unified Sch. Dist. No. 233,
{69} Class Counsel submitted their own expert report and affidavits that countered Microsoft’s contentions. Although Microsoft does not present its argument as one of substantial evidence to support the facts (e.g., whether the time allocated was time spent preparing the fee application, whether out-of-state counsel’s multi-state time was beneficial to the New Mexico Class, or whether claimed expenses were reasonably incurred), it is clear that substantial evidence exists in Class Counsel’s affidavits to support the lower court’s decision. See Mayeux,
{70} Third, and most importantly, after the court and Microsoft had the opportunity to view the detailed billing records, both parties presented argument regarding these issues, and the court below resolved the issue in favor of Class Counsel. See Case,
{71} In addition, Microsoft argues unconvincingly, in reliance on New Mexico cases, that the time “supposedly spent by the Lerach firm ‘on the overall Microsoft litigation’ ” did not confer a specific benefit on the New Mexico Class. As noted earlier, New Mexico law regarding attorney fees paid by individual clients is not helpful in analyzing attorney fee awards in large class actions that are national in nature. Microsoft ignores the apparently common practice in large class actions of allocating to each state a percentage of overall time spent on “virtually identical” cases. See In re S.D. Microsoft Litig.,
{72} Finally, the parties agree that the district court erred in granting expenses first claimed by Class Counsel in the fee application, in the amount of $525,179. In the reply brief below, Class Counsel revised their request for reimbursement to $521,601 and acknowledged that they had been reimbursed certain expenses after the fee application was filed. Thus, expenses awarded by the court below shall be offset by any payments made by Microsoft after the fee application was filed.
3. Multiplier of Three
{73} Microsoft asserts that the district court erred by concluding that a multiplier of three was an appropriate enhancement of the lodestar in these circumstances. It contends that this case was a tag-along action, “piggybacking” actions from the federal court and other state courts and, as such, “[njeither 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.
{74} As discussed earlier, use of the lodestar to crosscheck a percentage award involves comparing the resulting multiplier with multipliers from similar cases. The district court divided its fee award of about $6 million by Class Counsel’s lodestar of about $2 million, resulting in a multiplier of three. Although this multiplier approaches the high end of multipliers awarded in recent years, see In re Cendant,
{75} We are not persuaded by Microsoft’s assertion that a multiplier of three is not justified by Class Counsel’s risk, efforts, or success because it piggybacked a prior government action. First, Microsoft relies on cases that calculate the fee award using the lodestar method, rather than cases that use the lodestar method as a crosscheck, to support its assertion. See In re Auction Houses Antitrust Litig., No. 00 CIV.0648,
G. Reasonableness of the Award and Rule 16-105
{76} As we discussed earlier, reasonableness is the ultimate question regarding an award of attorney fees. Under either the lodestar method or the percentage method, “the fee awarded must be reasonable.” Gottlieb,
1. Rule 16-105
{77} Rule 16-105(A) establishes the following factors to be considered:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
f2) the likelihood ... that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer performing the services; and
(8) whether the fee is fixed or contingent.
{78} The factors are not of equal weight, and all of the factors need not be considered. Ramah I,
a.Time and Labor, Novelty and Difficulty, and Requisite Skill
{79} This case began more than five years ago and has been vigorously litigated by both parties. Multiple motions and memoranda have been filed. The Class was certified, the certification was appealed, and that appeal was briefed to this Court. In addition, Class Plaintiffs in New Mexico were required to coordinate with attorneys representing similar class actions in other states and federal courts. Further, an indirect purchaser antitrust class action presents novel and complex issues regarding certification, causation, and damages. Moreover, an action against a corporation like Microsoft requires a high level of skill and expertise.
b. Preclusion of Other Employment
{80} The record demonstrates that at specific times during the five-year course of proceedings, Class Counsel would have been precluded from other employment, particularly while preparing for coordination with other jurisdictions, while preparing for class certification and appeal, and while challenging the proposed global settlement.
c. Ordinary Fee for Similar Actions in the Locale
{81} The record contains support for the conclusion that fees awarded in cases recently resolved within New Mexico were based on percentages of 25%, 30%, and 33.33%. In addition, the Federal District Court of New Mexico has noted that percentages usually range from 20% to 30%. Ramah I,
{82} Moreover, in a class action of this size, relatively infrequent in New Mexico, comparison to similar cases throughout the country is appropriate. The record references studies revealing that fee awards nationwide are often based on 25% to 30%. See Manual for Complex Litigation, § 14.121, at 188; see also, e.g., Edwards,
d. Amount Involved and Results Obtained
{88} On a per capita basis, the New Mexico settlement is the fourth highest nationwide. The face value of the settlement, $31.5 million, represents approximately 25% of the total potential damages quantified by the Class’s experts. Microsoft estimated the value of the settlement, excluding attorney fees and costs, at $17.5 million. The actual value of the settlement is less than face value, due to the nature of the voucher system and the two-step process required to take advantage of the direct benefit to the Class. Members of the Class who purchased an operating system may claim a voucher valued at $13; those who purchased application software may claim a voucher for $6.75. A voucher may be redeemed only after the purchase of computer hardware or a non-custom software application. Products that may be purchased to redeem vouchers are not limited to Microsoft-relatеd products; vouchers may be redeemed for the purchase of any type or brand of hardware or non-custom software. The vouchers are transferable and can be aggregated, within limits. Large-volume users, including New Mexico schools as beneficiaries of the cy pres award, will receive substantial and tangible benefits because the vouchers are transferable and can be aggregated.
e. Time Limitations
{84} As noted by the district court, the risk for Class Counsel was significant when it committed to a case that would be vigorously litigated for years. The proceedings have lasted more than five years. It is not the limit placed on counsel’s time that is significant in a ease like the one at hand. Rather, it is Class Counsel’s commitment to represent the Class, despite the probability of years of litigation. If the Agreement had not been reached, the proceedings could have continued for an indeterminate time.
f. Experience, Reputation, and Ability of Class Counsel
{85} In its expert’s report submitted to the court below, Microsoft acknowledged that Class Counsel includes “one of the premier trial attorneys in New Mexico[, who] has extensive experience and recognized expertise in class action litigation ... on behalf of plaintiffs.” The report also recognized that Class Counsel includes a firm with an established national practice in class actions. A nationally established firm brings the significant experience and expertise in large class actions necessary to properly litigate this type of case. See In re Global Crossing Sec. & ERISA Litig.,
g.Type of Fee Arrangement
{86} Class Counsel accepted the ease on a contingent basis. They advanced expenses and worked without payment for five years.
2. District Court’s Consideration of the Factors
{87} After careful consideration, the district court concluded that the majority of the factors weigh in favor of the reasonableness of the fee award. The district court’s application of these factors to our case revealed that experienced and highly skilled attorneys made a significant investment of time and expense in a case with a substantial risk of no payment in order to successfully resolve a complex class action. We cannot say that “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,
{88} In summary, the district court reached its decision after careful consideration of all pleadings, evidence, and oral argument. The judge presided over the entire course of the consolidated litigation and settlement approval. Our review of the record reveals that the district court’s award was reasonable based on the facts before it; we will not second-guess the court below, nor can we redo the reasonableness analysis based on facts different from those before the court below. Although Microsoft argues that it was Class Counsel’s burden to prove that the expenses they incurred benefitted the Class, Class Counsel adequately rebutted those contentions in their pleadings and at oral argument below, thereby carrying their burden. On appeal, Microsoft carries the burden of showing that the district court erred in concluding that Class Counsel met its burden below. See Martinez v. Sw. Landfills, Inc.,
III. CONCLUSION
{89} We hold that the district court did not abuse its discretion by choosing to use the percentage method to calculate the fee award on the basis of the common fund. We also conclude that the court did not abuse its discretion in awarding expenses, with the proviso that the expenses awarded in the order are offset by any expenses reimbursed after the filing of the fee application. Accordingly, we affirm. In light of our opinion, we do not deem it necessary to rule on the motion to supplement the record with material that we have nоt referenced.
{90} IT IS SO ORDERED.
WE CONCUR: LYNN PICKARD, Judge and JONATHAN B. SUTIN, Judge (specially concurring).
Notes
. An algebraic equation is used to determine the unknown attorney fees when the fees are included in the common fund. Using the known variables (the numbers for the estimated claims, cy pres award, counsel's expenses, and settlement expenses), the unknown variable (attorney fees) can be determined. In our case, the relevant equation is 3,150,000 + 14,200,000 + 525,179 + 500,000 + .25x = x, x being the total recovery, or benefit to the Class, including expenses and fees, and .25x being 25% of the total recovery including expenses and fees. The equation is then solved as follows:
3,150,000 + 14,200,000 + 525,179 + 500,000 = x - ,25x
18.375.179 = ,75x
18.375.179 = ,75(x)
.75 .75
Thus, x = 24,500,238.66, which is the total recovery. If the fee award is 25% of the total recovery, we use the value we have for x: .25x = .25(24,500,238.66) = 6,125,059.66. Thus, it appears that the district court rounded down to reach an even $6.1 million, the amount of the fee award.
Concurrence Opinion
(specially concurring).
{91} I concur in the majority opinion’s analyses and results. I write separately only to emphasize a few points in regard to Microsoft’s shortcomings in this case, shortcomings that have made it easier for me to concur as I have in the majority’s analyses and results.
1. Microsoft’s Positions on the Common Fund Doctrine and Use of the Percentage Method
{92} A district court invokes the common fund doctrine in order to supervise the fund and to place the burden of class counsel’s fees on the class. In doing so, the court has a choice of employing either the percentage method or the lodestar method to determine fees. Where the fee burden is placed on the class, it does not follow that either method must necessarily or logically be the primary determinant of fees. The common fund doctrine appears to have little significance except where equity demands that the class is to bear the burden of attorney fees.
{93} Where, by agreement of the parties, the burden of attorney fees is placed on the defendant and not the class, why would the parties agree, as they did in the present case, that the common fund doctrine would be used to determine fees? And why, after agreeing that the fees it would have to pay were to be determined based on the common fund doctrine, would Microsoft state that (1) because it contractually аgreed to pay the fees, “the Settlement Agreement’s reference to the common fund doctrine is superfluous,” (2) there “is no common fund,” and (3) “there is no ‘true’ common fund belonging to the class that could have allowed the district court to spread the burden of paying attorney[ ] fees to all class members by awarding a percentage of the fund to counsel for their fees?”
{94} Microsoft and its trial attorneys, sophisticated and experienced in class actions, appear to have intentionally agreed to language that is vague, or worse, arguably meaningless or subject to attack. How Microsoft can agree to the wording “based on the common fund doctrine” and agree to ranges of valuation of the common fund, yet later essentially argue that the agreement language is meaningless in addressing the issue of the method of determining fees, is difficult to comprehend. The reasonable and logical view of the language used is that the parties intended there to be a valuation of a “common fund,” giving the court discretion to use the percentage method as the primary method of determining fees, but nevertheless did not intend to rule out the use of the lodestar method as the primary method, leaving open the right of the parties to argue value and which method the court should use as a primary determiner of fees.
2. Valuation of the Fund
{95} The valuation issue concerns the elements that can be included in the valuation of the common fund. Microsoft wants to include only the in-hand amounts received by Class members pursuant to the voucher claims they exercised. Yet (1) Microsoft agreed to the court ascertaining a fund value for attorney fee determination purposes well before the voucher claims were exercised and the in-hand amounts were known and before the court, and (2) Microsoft presented quite different values to the court for its consideration in ascertaining a fund value for attorney fee determination purposes. Again, Microsoft appears to have taken one avenue only to switch and attempt another avenue when it appeared later on to be advantageous to do so. It is difficult to side with Microsoft under these circumstances.
{96} Further, there is adequate, if not plentiful, authority for the court’s inclusion of the cy pres amount, as well as attorney fees and expenses, in the valuation of the benefit to the Class. Based on the abuse of discretion standard of review we employ, I cannot say that the court abused its discretion in including those items in the valuation.
3. Reasonableness of the Fee
{97} The majority is correct in stating that “[a]n appropriate fee is determined by reasonableness.” Majority Opinion ¶ 58. Reasonableness is judged by whether there is a rational connection between the amount of the fee and the benefit to the class.
{98} Settlement amounts (1) to be paid by a class action defendant to the class (e.g., the value of vouchers expected to be redeemed), (2) to satisfy a financial burden of the class (e.g., attorney fees), and (3) to benefit the public (e.g., cy pres vouchers), should all be considered a benefit to the class. If other than this broad and accepted view of benefit is intended by the parties, the intent should be made clear in the settlement agreement. Again, Microsoft must take the consequences of a vague settlement agreement. Thus, as in the present case, where there is an agreed-to cy pres voucher availability, and an agreed-to shifting of the attorney fee burden from the Class to the defendant, without a clearly expressed intent to the contrary each can and should be considered a benefit to the Class for the purposes of determining whether the fee award, based on a valuation of the fund, is reasonable.
{99} Again, I cannot say that the court abused its discretion in awarding the fee, nor can I say that the majority’s analysis of the reasonableness of the fee is defective. The award is neither irrational nor arbitrary. Microsoft has not shown how the law was incorrectly applied to the facts. The valuations of the cy pres and class voucher amounts are essentially based on Microsoft’s own estimated figures presented to the court. Microsoft has not attacked the 25% figure as arbitrary. And Microsoft does not contest the district court’s methodology by which it first implanted the fee into the commоn fund only to afterwards derive that fee from the common fund. Nor does Microsoft persuade me that the multiplier of three was irrational or arbitrary in this case.
{100} Because of the broad discretion given to a trial court in measuring the reasonableness of an award of fees based on the benefit to the class, from both the circumstances in this case and fees awarded in similar cases, I am unable to say that the court in the present case abused its discretion. I agree that appellate courts must be vigilant in their oversight role to assure that the fees awarded are reasonable. Majority Opinion ¶¶ 12-13. On the flip-side, however, we must be careful not to substitute our judgment for that of its district court, and we are to reverse the district court only if the court’s ruling “exceeds the bounds of all reason,” is arbitrary or capricious, or is an erroneous application of law. Majority Opinion ¶ 14.
4.Other Microsoft Contract Language Arguments
{101} In its reply brief, Microsoft argues that “under the settlement agreement, if all of the class vouchers had been claimed, class counsel could not have argued that the common fund included its attorney[ ] fees.” Microsoft bases this belated argument on the following language in the agreement: “[P]laintiffs are free to argue that the value of the ‘common fund’ created by the litigation is any amount up to (but in no case exceeding) Face Value, plus notice and administrative expenses and costs.” In Microsoft’s view, it follows that “there is no basis for including attorneyf ] fees in the value of the recovery simply because fewer than all of the vouchers were claimed.” By footnote, Microsoft indicates that class counsel switched positions between trial and appeal on the issue of whether attorney fees were to be included in the class “recovery.”
{102} Microsoft is in no position to isolate wording in the agreement that might be beneficial to Microsoft after the fact. Microsoft cannot show that the wording on which it relies was intended by the parties to bring about the result Microsoft asserts. The wording of the Settlement Agreement in regard to awarding fees is sufficiently unclear to hold against Microsoft’s interpretations. It was Microsoft’s burden to assure that the language in the agreement was clear.