Mississippi to Receive $100 Million in Microsoft Settlement

Jim Hood

Attorney General Jim Hood announced today that the state of Mississippi will receive $100 million from a settlement with Microsoft Corporation.

by Adam Lynch
June 11, 2009
UPDATED: June 12, 2009

The Mississippi Legislature may have a new tool to work with in straightening out the state’s fiscal woes. Mississippi Attorney General Jim Hood announced at a June 11 press conference that technology giant Microsoft Corporation has agreed to a $100 million settlement with the state of Mississippi that will be divided among state agencies and residents.

Hood estimates $40 million will be paid to the state within 40 days, pending a settlement order from Hinds County Chancery Court Judge Denise Owens. Up to $60 million in hardware and software vouchers will be provided to consumers, businesses, and all county, local and municipal governments—including public schools and districts—that can prove purchase of Microsoft products. Vouchers amount to $12 per purchase of Windows 95, 98 and ME operating systems, while Microsoft application software like Microsoft Office, Word, Excel and Microsoft operating systems like Windows XP, 2000 and Windows OS software older than Windows 3.0 qualify owners for a $5 voucher per purchase.

Hood said he hoped legislators put the state’s portion of the $100 million settlement to immediate use in hacking out an agreement between the Democratic-led House and the Republican-dominated Senate over the state’s budget standoff. The Senate broke off negotiations with the House last week over a reinstituted hospital tax and the possibility of carrying over funds into the year 2011. The state will have to shut down its agencies if legislators come to no agreement by July 1.

Gov. Haley Barbour had full knowledge of the impending settlement the day he ordered the Senate to pull out of budget negotiations last week, Hood said. Barbour’s office did not return calls.

“I hope this $40 million will help to fill that gap,” said Hood, while admitting that he had no personal leverage over precisely how legislators and the governor choose to handle the new cash influx. “I can’t speak for them, but it will create a kind of a breath of fresh air to know that there may be some light at the end of the tunnel and help them get over the wire. … I think that when the House and Senate know they are going to have $40 million to deal with it could put them close enough together that they could reach some compromise.”

The settlement brings to a close lawsuits launched by 21 states against Microsoft for anti-competitive activity in the 1990s. Many were class-action lawsuits while others, like the Mississippi suit, were limited to a state suit without co-plaintiffs.

Hood said testimony from former Netscape CEO and Jackson native Jim Barksdale allowed the state to fare better in the settlement than many other states. Mississippi was also the final state, according to Hood, that settled with the massive software giant.

“Having (Barksdale) as a sympathetic witness, as a victim saying ‘my company was affected by this, so Mississippi was affected by this,’ certainly weighed in our favor,” Hood said, adding that Barksdale was the main influence spurring the state to add the $40 million exclusive payment to the state in the terms of the settlement.

“Most of this occurred with the states involved before I even took office. I had 18 other states that had already settled with Microsoft. Our pro rata share was all we originally wanted, but then I found out about what the settlement was worth to these states, and as Mr. Barksdale explained the difference with those other settlements out there, we knew that we wanted hard cash, and needed to know what we were getting,” Hood said.

Hood claimed Microsoft violated the law regarding state purchases of Microsoft-based software, including Windows operating systems and application programs, saying the manufacturer designed its programs to unfairly steer computer and software purchasers to use Microsoft applications, rather than allow for competing software, such as Internet browser Netscape. Netscape once dominated the browser market, but lost much of its 90 percent share of usage in the 1990s to Microsoft browser Internet Explorer by 2006.

The terms of the $100 million settlement allow Microsoft to deny “each and every one of the Plaintiff’s allegations of unlawful conduct, damages and other injuries.”

Hood’s means of paying for contracted help could come under scrutiny by other state agencies, and even derail the settlement, however.

Hood contracted with outside attorney Brent Hazzard in pursuing the Microsoft settlement. Hazzard, in turn, subcontracted with Texas firm Susman Godfrey L.L.P. and New York firm Boies, Schiller & Flexner. Hood said the attorneys are expecting to get about $8 million for their services, though Microsoft will be paying the attorney fees separately, with no attorney fee coming from the $100 million settlement.

State Auditor Stacey Pickering is contesting a similar payment structure, suing disbarred attorneys Joey Langston and Timothy Balducci and the Langston Law Firm to return $14 million paid to them by MCI/WorldCom in a $126.2 million tax-fraud settlement with the state in 2005. Like Microsoft, WorldCom agreed to pay the state separately from the attorneys, giving Mississippi $100 million in cash and ownership of some downtown property. Pickering said attorneys acting on the attorney general’s behalf can only receive money from the state, however, not a third party, and is demanding the firm repay the attorney fees after winning the $126.2 million haul for the state.

If Pickering succeeds in nullifying Hood’s contract with the Langston firm, the state may have to pay the attorneys an extra $3 million. According to Hood’s contract, the firm had earned $16.9 million, based on the amount of the WorldCom settlement. They had agreed to a $14 million payment at Hood’s request. Should Pickering nullify their $14 million contract, however, they could seek to fall back on Hood’s original sliding scale contract allotting them $16.9 million.

Hood warned that an attack on attorney fees in the Microsoft case could upend the $100 million settlement.

“The judge is making us wait 40 days because of (Pickering,)” Hood said. “Could he contest this settlement, too? Sure he could, if he’s okay with costing the state all this money.”

Pickering did not return calls on Thursday.

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