The lead counsel auction has attracted increasing attention. Auction advocates mgue that auctions introduce competitive market forces that improve the selection and compensation of class counsel. The benefits of the auction, the;' claim, include lower legal fees and better representation. Careful scrutiny reveals that auction advocates have overlooked substantial methodological problems with the design and implementation of the lead counsel auction. Even if these problems were overcome, the auction procedure is flawed: Auctions are poor tools for selecting firms based on multiple criteria, compromise the judicial role, and are unlikely to produce reasonable fee awards. Although the existing record is insufficient to permit rigorous empirical evaluation, early results raise concerns. This Article therefore considers an alternative: negotiation by an empowered lead plaintiff The Article analyzes recent deuelopments under the Private Securities Litigation PL£fonn Act to demonstrate that client empowennent is a more effective way of incmpomting market forces into the selection and compensation of class counsel. The Article concludes with interj;retive guidance on fwther develojJmen t of the model and its extension beyond securities litigation.
Legal Profession, Law and Economics, Litigation, Courts, Civil Procedure
102 Colum. L. Rev. 650 (2002).