Auctioning the Role of Class Counsel in 

Class Action Cases: 

A Descriptive Study 

Laural L. Hooper & Marie Leary 

August 29, 2001 

Federal Judicial Center 2001 

This Federal Judicial Center publication was undertaken in furtherance of the Center’s statutory 

mission to conduct and stimulate research and development for the improvement of judicial administration. The views expressed are those of the authors and not necessarily those of the Federal 

Judicial Center. 

Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Contents 

I. Introduction, 1 

A. Background, 1 

B. Third Circuit Task Force, 4 

C. Overview of the Report, 5 

II. Research Methods, 5 

III. Summary of Cases Auctioning the Role of Class Counsel, 7 

A. Number of Cases and Judge Participation, 7 

B. Type of Case, 7 

C. Case Status, 7 

D. Number of Bids Submitted, 8 

E. Most Frequent Bidder and Winning Bidder, 8 

F. Party Opposition to Auctioning the Role of Class Counsel, 8 

G. Settlement Amounts, 8 

H. Class Recoveries, 9 

I. Attorneys’ Fees, 9 

IV. Auction of Class Counsel as an Alternative to Traditional Appointment, 16 

A. Courts’ Rationales for Soliciting Bids, 16 

1. To replicate the private marketplace and reduce attorneys’ fees, 16 

2. To improve attorney-proposed case representation, 18 

3. To give the class the benefit of the low risk of nonrecovery, 19 

4. To reduce the expenditure of judicial time, 19 

5. To account for the presence of an inadequate or uninterested lead 

plaintiff, 20 

B. Party Opposition to the Courts’ Solicitation of Bids, 25 

V. Auctioning Procedures, 28 

A. Stage of Litigation at Which Counsel Was Appointed, 28 

1. Before dispositive motions, 28 

2. After choosing lead plaintiff, 28 

3. Before Rule 23 certification, 29 

B. Discovery Prior to Bid Submission, 30 

C. Limitations on Field of Potential Bidders, 31 

D. Overview of Court-Imposed Guidelines for Bid Proposals, 32 

1. Guidelines for qualitative submissions, 32 

2. Guidelines for quantitative submissions, 34 

E. Specific Features of Auction Procedures Required by the Courts, 37 

1. Sealed bids, 40 

2. Joint bids, 40 

3. Fee and/or expense caps, 41 

4. Fee proposal required to include attorney fees and expenses, 42 

5. Modification of caps at time of fee award, 43 

6. Structured bids, 43 

7. Use of an X-factor, 44 
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8. Fee proposal required to be based on increasing, decreasing, or straight percentage of 

class recovery, 45 

9. Right of first refusal, 46 

10. Counsel conducting initial investigation expressly permitted to receive compensation 

(even if they do not win the auction), 47 

11. Lead counsel selected by the court expressly permitted to appoint unaffiliated counsel to 

assist with the case, 48 

F. Time Period Court Permitted for Bid Submission, 49 

G. Potential for Collusion in the Auctioning Process, 50 

VI. Selection and Evaluation of Bids, 51 

A. Time Period for Evaluation and Selection of Winning Bidder, 51 

B. Number of Bids Received by the Court, 52 

C. Analysis Used to Select Winning Bidder, 53 

1. District Judge Vaughn Walker, 53 

2. Senior District Judge Milton I. Shadur, 55 

3. District Judge William Alsup, 57 

4. District Judge Alfred J. Lechner, Jr., 58 

5. District Judge William H. Walls, 59 

6. District Judge Joan A. Lenard, 60 

7. District Judge Lewis Kaplan, 60 

D. Characteristics of Winning Bids, 60 

E. Whether Winning Bidder was also Lowest Bidder, 63 

F. Challenges to Lead Counsel Selected as Winning Bidder, 64 

G. Extent to Which Bid Proposals Were Unsealed, 65 

H. Repeat Players and Winners, 69 

VII. Attorneys’ Fees and Class Recovery, 69 

A. Potential Damages, Settlements, and Class Recoveries, 73 

B. Attorneys’ Fee Awards, 74 

1. In re Oracle, 74 

2. In re Wells Fargo, 74 

3. In re Network Associates, 75 

4. In re Bank One, 75 

5. In re California Micro Devices, 76 

6. In re Auction Houses, 76 

7. In re Cendant (non-Prides), 77 

8. In re Cendant (Prides), 80 

9. In re Amino Acid Lysine, 81 

C. Courts’ Treatment of Expenses and Costs, 82 

D. Ex-Post Fee Determinations, 83 

VIII. Summary of Judge Interviews, 86 

A. Judges with Experience Auctioning the Role of Class Counsel, 87 

1. Consideration of the merits of the case prior to auctioning the lead 

counsel role, 87 

2. Consideration of the likelihood and size of recovery prior to auctioning the lead counsel 

role, 87 

3. Common case characteristics of bidding cases, 88 
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4. Large firm versus small firms, 88 

5. Ex parte communication concerns with auctioning the role of lead 

counsel, 89 

6. Management practices with auctioning the role of lead counsel, 89 

7. Special skills needed to auction the role of lead counsel, 90 

8. Problems, if any, with selection of counsel in non-auctioning cases, 90 

9. Suggested procedures to improve the traditional appointment of 

counsel, 90 

10. Judicial resources and auctioning the role of lead counsel, 91 

B. Judges with Experience Managing Securities and/or Antitrust Class Actions, Using Traditional Methods of Appointing Class Counsel, 91 

1. Criteria used to appoint class counsel, 91 

2. Nature of problems, if any, regarding lead counsel appointment, 91 

3. Suggested procedures to improve the traditional appointment of 

counsel, 92 

4. Considered auctioning the role of lead counsel, but subsequently 

rejected, 92 

5. Special skills needed to auction the role of lead counsel, 93 

6. Lodestar versus percentage-of-recovery method, 93 

7. Circuit benchmarks and the awarding of attorneys’ fees, 94 

Appendix A: Guidelines for Bid Submissions, 95 

Appendix B: Firms Participating in Competitive Bidding, 127 
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I. Introduction 

A. Background 

By their nature, class actions tend to be complex and require active judicial oversight.1 In most 

cases, multiple related claims have been filed by numerous plaintiffs’ attorneys, all ultimately desiring to represent the class. Federal Rule of Civil Procedure 23 imposes unique responsibilities on 

the court, as well as on counsel. The attorneys and parties seeking to represent the class assume 

fiduciary responsibilities, and the court has a responsibility to ensure that the interests of the class 

are protected. 

 In class action cases, few decisions by the court will be as important as the appointment of 

lead or class counsel. Because of the high financial stakes involved in some types of cases (not 

typically civil rights or other constitutional litigation), competition for class counsel is often intense. Courts have wide discretion in selecting lead counsel. In carrying out their judicial responsibility, courts must examine the adequacy of proposed lead plaintiff’s counsel, be aware of the 

importance of controlling attorneys’ fees from the outset, and adopt an appropriate procedure to 

achieve those goals. 

 Courts have sometimes appointed as lead counsel the attorney who was first to file the complaint.2

 In the alternative, attorneys representing different plaintiffs or groups of plaintiffs will 

negotiate among themselves to determine who should serve as lead counsel and then propose the 

arrangement to the court. This second approach may result in what has been commonly referred to 

as a plaintiffs’ steering committee composed of various attorney designations such as lead counsel, co-lead counsel, liaison counsel, trial counsel and committees of counsel. Some observers say 

such a “negotiation system” among plaintiffs’ attorneys may not be in the best interest of the class 

because it can create pressure to generate enough work so that all the attorneys can be compensated. 3

 Courts have the authority to control fees and can use that power to create a system that will 

hold down costs to the class. Courts generally award attorneys’ fees in common fund cases under 

one of two approaches: the percentage-of-fund method4

 or the lodestar method. Under the percent-

 

 1. See Manual for Complex Litigation (Third) § 30 Class Actions (1995). 

 2. See S. Rep. No. 104-98 (1995), The Private Securities Litigation Reform Act of 1995, reprinted in

1995 U.S.C.C.A.N. 679. 

 3. Currently, the Advisory Committee on Civil Rules has proposed changes to Rule 23, including two 

new rules: Rule 23(g), covering class counsel appointment, and Rule 23(h), covering attorney fees. The proposed class action appointment rule would encourage counsel and the court to reach early shared understandings about the basis on which fees will be sought. Such a provision has been encouraged by judges emphasizing the importance of judicial control over attorney fee awards. This feature might foster competitive applications; permit innovative approaches such as bidding, where appropriate; obviate later objections to the fee 

request; and serve as a more productive way for the court to deal in advance with fee award matters that seem 

to defy regulation after the fact. The proposed class action attorney fee rule would not endorse the lodestar or 

percentage of recovery methods for attorney fees. Instead, the draft lists factors for the court to consider in its 

determination after the hearing. The proposed rules were distributed for public comment the week of August 

13, 2001. 

 4. Also commonly referred to as percentage-of-recovery. See Blum v. Stenson, 465 U.S. 886, 900 n.16 

(1984) (approving the use of the percentage-of-recovery approach in common fund cases). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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age-of-fund method the court awards attorneys’ fees as a certain percentage of the settlement. Fee 

awards under this method have ranged between 20% to 40% of the gross monetary settlement.5

 Critics of the percentage-of-fund approach say the method “might lead the plaintiffs’ attorney 

to settle the case prematurely as soon as counsel’s opportunity costs begin to mount. Early settlement allows counsel to collect a large fee after investing relatively little time in the case, rather 

than continuing the litigation in order to maximize plaintiffs’ recovery but receiving a lower marginal rate of return on his or her work.”6 

 Under the lodestar method, the court multiplies the number of hours reasonably expended by 

a reasonable hourly rate.7

 That figure, the lodestar, may then be adjusted (usually by applying a 

multiplier) upward or downward to account for several factors, including the quality of the representation, the benefit obtained for the class, the complexity and novelty of the issues presented, 

and the risk of nonpayment.8

 Critics of the lodestar method 9 claim that by focusing on hours expended, it “may induce lead 

counsel to prolong the litigation beyond the optimal point from plaintiffs’ perspective simply in 

order to accrue more hours.”10 Further, 

the lodestar fee structure creates an incentive for the attorney to do unnecessary work such as filing motions with little merit, taking unnecessary depositions, or demanding production of documents, solely in order 

to accrue more hours. This risk is exacerbated where the class is represented by a committee of attorneys, rather than a single firm. The involvement of numerous counsel can create pressure to generate sufficient 

attorney hours to compensate all participating attorneys, and work may 

be allocated in order to further this objective, rather than in the most efficient and cost-effective manner. All of these factors may result in a 

higher lodestar without commensurate benefit to the class.11 

Finally, plaintiffs’ attorney may have “an incentive to settle the case before it reaches the trial 

stage, even if trial is in plaintiffs’ best interests”12 and may be tempted “to agree to a less-thanfavorable settlement for the class while counsel collects a substantial fee.”13

 A new approach that addressed counsel selection and monitoring as well as lead counsel 

compensation appeared in 1990. That method involved “auctioning”14 the role of lead or class 

 

 5. See Thomas E. Willging et al., Empirical Study of Class Actions in Four Federal District Courts: Final Report to the Advisory Committee on Civil Rules 69 (Federal Judicial Center 1996); see also In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 77 (S.D.N.Y. 2000) (stating fee awards generally range from 

20% to 30% of the total fund). 

 6. In re Auction Houses, 197 F.R.D. at 77 (citations omitted); In re Oracle Sec. Litig., 131 F.R.D. 688, 

689–90 (N.D. Cal. 1990). 

 7. See Lindy Bros. Builders, Inc. v. Am. Radiator & Standard Sanitary Corp., 487 F.2d 161, 165 (3d Cir. 

1973) (vacated a percentage fee award in a common fund case and created what has become known as the 

Lindy lodestar for calculating fee awards). 

 8. Id. at 167–69. 

 9. See Court Awarded Attorneys’ Fees, Report of the Third Circuit Task Force, reprinted in 108 F.R.D. 

237, 255–56 (3d Cir. 1985) (examining court-awarded attorneys’ fees and recommending the percentage-ofrecovery method for common fund cases). The Task Force noted the drawbacks of the lodestar method, including it is difficult to apply, time consuming to administer, and capable of manipulation to reach a predetermined result. Id. at 246–53. 

10. In re Auction Houses, 197 F.R.D. at 76. 

 11. Id.

 12. Id.

 13. Id.
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counsel and was an attempt to find a more objective way to award attorneys’ fees without relying 

on the standard percentages routinely awarded in class actions. The auctioning method was a judicial substitute for the free market factors that would control attorney selection in a bipolar traditional lawsuit. Supporters of the auction method believe the winning bidder becomes the “owner” 

of the lawsuit and, consequently, has a vested interest in ensuring the highest settlement or damage 

recovery possible. Once a judge has decided to auction the lead counsel position, the judge will 

develop guidelines describing the bidding procedures and requirements. Once all bids have been 

received and evaluated, the court selects a winning bidder. The first judge to use an auction procedure was Judge Vaughn Walker of the Northern District of California, who employed it in In re 

Oracle Securities Litigation.

15

 Considerable commentary has been written about the advantages and disadvantages of using 

an auction method.16 Some of the advantages include: (1) the procedure does away with the perceived unfairness of many large class actions being awarded to a small number of established and 

connected firms while equally capable firms never get the opportunity to establish their reputations for handling class action cases; and (2) the competitive process lowers attorneys’ fees and 

costs for a greater benefit to the class. Some of the disadvantages include: (1) the suggestion that 

“cheaper” lawyers are not necessarily better advocates and might be worse; (2) the process can 

create incentives for lawyers to bring and settle cases prematurely, without adequate preparation, 

investigation, and discovery, and for inadequate consideration; (3) lead counsel auctions threaten 

the court’s neutrality by casting the judge as auctioneer and referee; and (4) firms that perform 

work early in a case might not be compensated. 

 We found courts have auctioned the role of class counsel in fourteen cases—twelve securities 

and two antitrust actions.17 The procedures used in these cases and the guidelines promulgated by 

 14. To the extent that the term “auction” implies an iterative process by which the parties respond to 

each others’ bids, we do not include that implication in our use of the term “auction.” 

 15. 131 F.R.D. 688 (N.D. Cal. 1990). 

 16. See, e.g., Jill E. Fisch, Aggregation, Auctions and Other Developments in the Selection of Lead 

Counsel Under the PSLRA, 64 Law & Contemp. Probs. 53, 101 (2001); Andrew Niebler, In Search of Bargained-for-Fees for Class Action Plaintiffs’ Lawyers: The Promises and Pitfalls of Auctioning for the Position of Lead Counsel, 54 Bus. Law. 763 (1999); and Randall S. Thomas & Robert G. Haugen, Auctioning 

Class Action and Derivative Lawsuits: A Critical Analysis, 87 Nw. U. L. Rev. 423 (1993). See also In re

Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 00-3653, slip 

op. at 78–81 (3d Cir. Aug. 28, 2001). 

 17. In re Oracle Sec. Litig., 131 F.R.D. 688 (N.D. Cal. 1990) (hereinafter In re Oracle); In re Wells 

Fargo Sec. Litig., 157 F.R.D. 467 (N.D. Cal. 1994) (hereinafter In re Wells Fargo); In re Amino Acid Lysine 

Antitrust Litig., 918 F. Supp 1190 (N.D. Ill. 1996) (hereinafter In re Amino Acid Lysine); In re California 

Micro Devices Sec. Litig., 168 F.R.D. 257 (N.D. Cal. 1996) (hereinafter In re California Micro Devices); In 

re Cendant Corp. Litig., 182 F.R.D. 144 (D.N.J. 1998) (hereinafter In re Cendant); In re Network Assocs. 

Inc., Sec. Litig., 76 F. Supp. 2d 1017 (N.D. Cal. 1999) (hereinafter In re Network Associates); Sherleigh Assocs. LLC v. Windmere-Durable Holdings, Inc., 184 F.R.D. 688 (S.D. Fla. 1999) (hereinafter Sherleigh Associates); In re Lucent Techs. Inc. Sec. Litig., 194 F.R.D. 137 (D.N.J. 2000) (hereinafter In re Lucent); In re

Bank One Shareholders Class Actions, 96 F. Supp. 2d 780 (N.D. Ill. 2000) (hereinafter In re Bank One); 

Wenderhold v. Cylink Corp., 188 F.R.D. 577 (N.D. Cal. 1999) (hereinafter Cylink); In re Auction Houses 

Antitrust Litig., 197 F.R.D. 71 (S.D.N.Y. 2001) (hereinafter In re Auction Houses); In re Quintus Sec. Litig., 

Nos. 00-C-4264 & 00-C-3894, 2001 WL 709204 (N.D. Cal. Apr. 12, 2001) (hereinafter In re Quintus); In re

Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Lead Plaintiff Selection and Class Counsel 

Selection (N.D. Cal. June 27, 2001) (hereinafter In re Commtouch); In re Comdisco Sec. Litig., 141 F. Supp. 

2d 951 (N.D. Ill. 2001) (Memorandum Opinion entering attached Apr. 6, 2001, Memorandum Order) (hereinafter In re Comdisco). Another case, Raftery v. Mercury Finance Co., No. 97-C-624, 1997 WL 529553 

(N.D. Ill. Aug. 15, 1997), deserves special mention. Although not counted as a bidding case in our study, 

Judge Joan Lefkow attempted to combine submissions for lead plaintiff and bidding for lead counsel into one 
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the courts varied considerably. Some of the judges required very detailed proposals, whereas others allowed interested bidders to present their best proposal with little guidance from the court. 

Consequently, how courts analyzed and compared bids varied across the jurisdictions. 

 The full extent to which lawyers have proposed or judges considered auctions but rejected 

their use remains unknown. 

B. Third Circuit Task Force 

In January 2001, Chief Judge Edward R. Becker of the U.S. Court of Appeals for the Third Circuit 

appointed a Task Force to analyze and evaluate the methods of selecting class counsel. “The decision to convene a Task Force was informed by accounts of the practice of an increasing number of 

district judges throughout the nation of selecting class counsel through a bidding process.”18 Judge 

Becker commented “that despite the apparent success of such a process in terms of lowering transactions costs with seemingly greater benefits for the class, many respected judges and lawyers 

have opined that the bidding process is flawed in concept and in practice, and it presents professional responsibility problems.”19 Further, said Judge Becker, critics of the bidding method have 

noted that the traditional method of appointing class counsel, “at the discretion of the assigned 

judge, has not only proved successful, but has achieved excellent results for the class and is preferable.”20

 Judge Becker asked the Federal Judicial Center to provide research assistance to the Task 

Force. The Task Force and the Center determined that the best way the Center could assist would 

to be to (1) comprehensively describe, including summarizing interview results with judges, those 

class action cases in which bidding had been used, and (2) interview a small sample of judges who 

have not used bidding and question them about their experiences in selecting and appointing class 

counsel. 

C. Overview of the Report 

Section II of this report describes our research methods. Section III highlights characteristics of 

cases where auctioning has been used. Section IV describes the judges’ rationale for auctioning 

the role of class counsel. Sections V and VI describe in detail the auctioning procedures used by 

the judges, including the process of evaluating bids and selecting the winning bidder. Section VII 

describes the class recoveries and attorneys’ fees in the terminated cases. The final section describes bidding and nonbidding judges’ experiences with appointing class counsel and summarizes 

their suggestions for improving the traditional method of appointment. 

 step. The two parties objected to the court’s request, but ultimately complied. One party, the interim lead 

plaintiff, failed to address the guidelines set forth in the court’s order and submitted an inadequate proposal. 

After reviewing the two proposals, the court wrote considering the urgency of the pending settlement, “[a]s a 

practical matter, it makes little sense to change pilots at this time, no matter the court’s distress at the [interim 

lead plaintiff’s] conduct in responding to its order.” Id. at *2. The court recommended (assuring a settlement 

could be promptly consummated) “compensation of counsel . . . be determined without the benefit of the 

information critical to establishing reasonableness—the lowest fee that would be paid by a discerning client 

in an arms length negotiation with well-qualified counsel.” Id. at *2–3. The court subsequently approved 

interim lead plaintiff’s settlement agreement. 

 18. Third Circuit Press Release, Creation of Task Force (Jan. 30, 2001) at <http://www.ca3.uscourts.gov 

/classcounsel/public.htm>. 

 19. Id.

 20. Id. 
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 Appendix A contains the courts’ guidelines or requirements for a potential bidder as well as 

any bid grid or other relevant document the court required interested parties wishing to be considered as class counsel to complete. Where available, Appendix B contains the names of the firms 

that submitted bids in the fourteen cases to date, as well as the identity of the winning bidder. 

II. Research Methods 

To determine the universe of bidding cases, we retrieved the docket sheets from a sample of class 

action cases where bidding was used, and we reviewed them to determine the terms generally used 

in docketing and pleading statements in bidding cases. Using this list of terms, we electronically 

searched the entries of federal court docket sheets maintained and updated daily by CaseStream.21

We placed no date restriction on the search. It produced twelve cases in which bidding had been 

used. Since that initial search, bidding procedures have been implemented in two additional 

cases.22 

 In order to describe each bidding case comprehensively, we collected information using a 

“template” that incorporated questions identified by the Task Force. Some of the information collected included the judge’s rationale for using bidding and the stage of litigation at which counsel 

was appointed; the mechanics of the bidding process, including whether the judge permitted any 

preliminary discovery to inform the bidding process, and any guidelines for the submissions of the 

bids that were adopted; how the court selected the winning bid; and whether there were any challenges to the court’s decision to use bidding, and if so, how they were resolved. We also gathered 

information on the post-bidding process, including settlement amounts, class recoveries, and attorneys’ fees. 

 Information about the bidding cases came from different sources, including published opinions, a review of docket sheets and selected pleadings from the case (e.g., motions and orders regarding appointment of class/lead counsel, settlement agreements, and orders regarding attorneys’ 

fees), public hearing testimony, if applicable, and telephone interviews with the judges. During 

interviews we explored a judge’s reasoning for using the bidding procedure in the target case and 

their reasons for not using it in other class action cases assigned to him or her. Our objective was 

to identify characteristics or factors in a case that judges believe might make it an appropriate case 

for using the auction procedure. If a judge deliberately chose not to use bidding in other cases, we 

inquired as to his or her reasons. If a judge did not use it because of a lack of awareness, we inquired whether he or she believed the auctioning procedure could have enhanced the quality of the 

litigation. 

 Although we strove to be as accurate and comprehensive as possible, our description of the 

fourteen bidding cases might contain errors and omissions. We were unable to obtain access to 

every relevant document in certain cases, report certain information in cases which are still pending, and confirm every instance where questions arose pertaining to reported information. More-

 

 21. CaseStream’s historical database is a consolidation of all the docket reports that are available from 

individual federal court’s PACER (Public Access to Court Electronic Records) systems. The company has 

agreements with federal courts that have PACER systems to access their databases and extract updated case 

information on a daily basis. CaseStream also receives quarterly records from the Federal Judicial Center to 

double-check the accuracy and consistency of their on-line historical database. This service gives us access to 

all PACER docket sheets in a centralized database and allows us to search for specific terms within the entries of docket sheets. 

 22. See supra note 17 for the list of fourteen bidding cases. 
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over, we were not privy to the unreported communications and events surrounding these bidding 

cases. In addition, because of the small number of instances of auctioning and the variation in fee 

proposals used in those cases, definitive conclusions cannot be stated regarding the success of auctions. There have been insufficient numbers of bidding cases to allow us to draw inferences about 

whether, in general, using an auction procedure has resulted in a greater benefit to the class than if 

some other method had been used. Notwithstanding these caveats, we believe the experiences described herein will go a long way in informing the debate. 

 The Task Force was also interested in obtaining the views of a sample of judges who have 

used only the traditional non-auction methods of appointing class counsel. The Task Force wanted 

to learn, among other things, the criteria judges use when appointing class counsel, whether certain criteria are more important than others, the problems, if any, that have arisen regarding selection of counsel, and how such problems were resolved. In addition, the Task Force was interested 

in learning the interviewees’ suggestions regarding procedures that might improve the traditional 

method of appointment. 

 We interviewed a small nonrandom sample of judges with experience handling securities 

and/or antitrust cases. At the minimum, judges had to have managed at least five class actions 

within the past five years and also to have been assigned a class action within calendar year 2000. 

The interview results offer a snapshot of judicial experience, and are thus not representative since 

a small nonrandom sample was used. 

III. Summary of Cases Auctioning the Role of 

Class Counsel 

In this section, we present a snapshot of selected characteristics in cases where judges have used a 

bidding process to select class counsel. Many of these are discussed more fully in various sections 

of the report. Below we summarize the characteristics presented in Table 1, which immediately 

follows. 

A. Number of Cases and Judge Participation 

We identified fourteen class actions in which judges have used competitive bidding either in attempting to select or actually selecting class counsel. Seven judges have used the practice to date. 

Judge Vaughn Walker of the Northern District of California has used the procedure most frequently (five cases), followed by Judge Milton Shadur of the Northern District of Illinois (three 

cases) and Judge William Alsup of the Northern District of California (two cases). Judge Alfred J. 

Lechner, Jr., of the District of New Jersey employed it twice in In re Lucent. Judges who have 

used the practice once include Judges William Walls of the District of New Jersey, Joan Lenard of 

the Southern District of Florida, and Lewis Kaplan of the Southern District of New York. The 

practice has occurred most frequently in the Northern District of California (seven times) followed 

by the Northern District of Illinois (three times). 

B. Type of Case 

Of the fourteen cases, twelve are or were securities actions and the other two were antitrust actions 

(In re Amino Acid Lysine and In re Auction Houses). Of the securities actions, three were filed 

before passage of the Private Securities Litigation Reform Act: In re Oracle, In re Wells Fargo, 
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and In re California Micro Devices. The remaining nine securities cases—Cylink, Sherleigh Associates, In re Cendant, In re Bank One, In re Network Associates, In re Lucent, In re Comdisco, In 

re Quintus, and In re Commtouch—were filed after the PSLRA and were subject to the statutory 

presumption that the institutional investor with the largest financial loss should serve as lead plaintiff and select class counsel (with the approval of the court). Some scholars and judges believe that 

presumption precludes the use of competitive bidding. 

 In the post-PSLRA cases, the majority of judges first decided the lead plaintiff issue and then 

asked for bids. In two cases, In re Network Associates and In re Commtouch, the court ordered the 

lead plaintiff to conduct the auction. 

C. Case Status 

Currently, eight of the fourteen cases have terminated and six are pending. One case, In re Cendant, involves two actions: the non-Prides claims (allegations involving, among other things, accounting irregularities) and the Prides claims (allegations involving materials containing false and 

misleading statements). The non-Prides litigation has terminated, and both the settlement and attorneys’ fee award were appealed to the Third Circuit Court of Appeals. The Third Circuit upheld 

the settlement and plan of allocation, but vacated the fee award, holding that the district court 

erred in using an auction to appoint lead counsel and set attorneys’ fees. The Prides litigation is 

still active. The attorneys’ fee award in that action was also appealed to the Third Circuit, which 

vacated the award and returned the case to the district court for resolution. 

D. Number of Bids Submitted 

Based on available information, the number of bids submitted ranged from two to twenty-one. The 

average number of bids submitted was seven and the median was eight.23 

 Overall, bids reflected lower percentage fee awards than the firms might have been expected 

to obtain under a percentage-of-fund method. Information on whether the winning bidder selected 

by the court was also the lowest bidder in price terms alone is only available for cases in which we 

were able to make this determination definitively, often possible only after settlement was 

reached. 

E. Most Frequent Bidder and Winning Bidder 

In several of the cases, the number and identity of the bidders remain under seal. In cases where 

bidder information was known, we found fifty-four firms had expressed an interest in either serving as lead or co-counsel. The most frequent bidder was Leiff, Cabraser & Heimann, which submitted bid proposals in six cases. The following three firms, Milberg, Weiss, Bershad, Hynes & 

Lerach, Weiss & Yourman, and Cohen, Milstein, Hausfeld, & Toll, submitted proposals in five 

cases. The most frequent winning bidders were the law firms of Leiff, Cabraser & Heimann and 

Milberg, Weiss, Bershad, Hynes & Lerach—each was appointed lead counsel in two cases. 

 

 23. See infra note 295. 
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F. Party Opposition to Auctioning the Role of Class Counsel 

In the majority of the cases, parties did not oppose the court’s decision to use bidding. In the few 

cases where parties objected, opposition was not strong enough to deter the judges from using the 

procedure. A common argument raised against the use of bidding was that it contradicts the legislative intent of the Private Securities Litigation Reform Act for the largest institutional investor to 

serve as lead plaintiff and select lead counsel. 

G. Settlement Amounts 

Of the fourteen cases, eight terminated by way of settlement.24 In these cases, gross settlement 

amounts ranged from a high of $3 billion25 to a low of $13 million. Most of the settlements were 

between approximately $25 million and $50 million. 

H. Class Recoveries 

Generally, monetary distributions to the class routinely exceeded attorneys’ fees by substantial 

margins. The majority of class recoveries was over 90% of the settlement fund and ranged from 

approximately 95% in In re Auction Houses to 77.5% in In re Oracle. 

I. Attorneys’ Fees 

Attorneys’ fees were generally less than the reported percentages in other class actions in the respective circuits. The majority of fee awards was less than 9% (may or may not include expenses) 

of the total recovery and ranged from a low of approximately 5% in In re Auction Houses to a high 

of 22.5% in In re Oracle. 

 In two cases, In re Amino Acid Lysine and In re Bank One, the winning bid contained a voluntary cap on the total amount of attorneys’ fees. In both cases, fee awards were approximately 7% 

of the total class recovery. In In re Amino Acid Lysine, the figure represents the attorney fee alone 

and does not include the amount reimbursed for expenses. 

 

 24. In re Cendant is counted as one case even though it involved two actions and two settlements. 

 25. See infra note 57. 
uctioning the Role of Class Counsel—Summary of Case Characteristics

f 

Pre- or PostPSLRA26

Number of Bids Submitted27

Winning Bidder28

Court Chose the Lowest Bidder29

Challenge to Court’s Decision to Use Bidding 

Settlement Amount30

Percentage of Total Recovery That Went to the Class (Recovery Amount) 31

Percentage of Total Settlement That Went to Class Counsel32

(Attorneys’ Fees + Expenses) 

ed Pre-PSLRA Four33 (class 

action against Oracle) Three (class action against Arthur Andersen) 

Lowey, Dannenberg, Bemporad, Brachtl & Selsinger Lowey, Dannenberg, Bemporad, Brachtl & Selsinger34

Yes Yes35 $25 million36 77.5% 

($19,375,000) 

22.5% ($4.8 million in fees + $825,000 in expenses) 

es Litigation Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737 (1995) (codified in various sections of 15 U.S.C.). The 

of requirements governing federal securities fraud, including specific directives about selection of a lead plaintiff and the reten

ubmitted is based on information available at this time and is accurate to the best of our knowledge. 

refers to the one bid chosen by the court from among the competing bids following the court’s analysis of the bids, taking into 

 addition to the proposed fee terms. Thus, “winning bidder” is not necessarily the “lowest bidder” in price terms. The firm or 

ning bid were selected to serve as class counsel, unless the court allowed for a right of first refusal. See infra notes 48 and 54. 

her the winning bidder selected by the court was also the lowest bidder in price terms alone is only available for cases in which 

ermination definitively, often possible only after settlement was reached. See infra Section VI.E. 

mount of recovery to the class prior to the deduction of attorneys’ fees and expenses. Recovery amounts may be approximations. 

l, the information is not available, most likely because the case is currently active. 

mount of recovery to the class after the deduction of attorneys’ fees and expenses. Percentages and amounts may be approxima

dicated, the percentage of total settlement collected by class counsel includes attorneys’ fees and expenses. Percentages and 

ons. 

presenting Oracle shareholders bid to serve as class counsel for the class action against Oracle. For the class action against Ar

ved three bids. Two of these firms had also submitted bids to represent the Oracle shareholders. 

 order a second round of bidding when an additional defendant, Arthur Andersen, was named after the winning bidder had been 

hosen to represent both the Oracle shareholders and those with actions against Arthur Andersen. 

enged both the court’s appointment of a specific lead plaintiff and the competitive bidding process in general. 

23.25 million in the settlement reached with Oracle, and $1.75 million from Arthur Anderson. 
f 

Pre- or PostPSLRA* 

Number of Bids Submitted* 

Winning Bidder* 

Court Chose the Lowest Bidder* 

Challenge to Court’s Decision to Use Bidding 

Settlement Amount* 

Percentage of Total Recovery That Went to the Class (Recovery Amount)*

Percentage of Total Settlement That Went to Class Counsel* (Attorneys’ Fees + Expenses) 

ed Pre-PSLRA Three Leiff, 

Cabraser & Heimann 

Yes No $13,713,709.54 78% 

($10,632,035) 

22% ($2,873,150 in fees + $208,605 in expenses) 

ed Pre-PSLRA Two37 N/A N/A No $26 million38 84.3%39

($21,590,090.20) 

15.7%40($4,028,345.80 in fees and expenses) 

Post-PSLRA Two41 Innelli & 

Molder 

Yes No N/A N/A N/A 

Post-PSLRA Five Weiss & 

Yourman 

Yes Yes42 N/A N/A N/A 

 of category, see supra first page of Table 1, page 10. 

t plaintiffs’ firms had filed suit, only two filed proposals to represent the class. Judge Walker found only one firm’s proposal to 

electing that firm because of its early settlement discussions with the defendants. A replacement institutional lead plaintiff was 

ct class counsel (Hogan & Hartson) and negotiate the terms of class representation. 

 attorneys fees are based on a combination of a settlement reached on May 20, 1997, with all defendants except one, and a set

efendant on May 24, 2001. Note that settlement and attorneys’ fees were not obtained by class counsel chosen from a competi

ra note 37. 

d of bidding only one firm submitted a bid, which was rejected because it did not comply with the court’s directives. The court 

dding in which it received three proposals. Sometime later, the original firm that had submitted its bid withdrew its proposal, 

e winning bid from among the two remaining proposals. 

ition for writ of mandamus with the Ninth Circuit arguing, among other things, that the district court erred by denying the peti

 lead plaintiff, his right under the PSLRA and the Constitution to select counsel of his own choice. 
f 

Pre- or PostPSLRA* 

Number of Bids Submitted* 

Winning Bidder* 

Court Chose the Lowest Bidder* 

Challenge to Court’s Decision to Use Bidding 

Settlement Amount* 

Percentage of Total Recovery That Went to the Class (Recovery Amount)*

Percentage of Total Settlement That Went to Class Counsel* (Attorneys’ Fees + Expenses) 

ed N/A (antitrust 

action) 

Eight Kohn, Swift 

& Graf 

Yes Yes43 $49 million 93% 

($45.5 million)44

7% ($3.5 million)45

ed Post-PSLRA Nine Wechsler 

Harwood Halebian & Feffer LLP 

Yes No $45 million 93% 

($42 million) 

7% ($2.75 million in fees + $250,000 in expenses) 

Post-PSLRA Three Wolf Haldenstein Adler 

Freeman & Herz 

Will depend on stage of recovery and recovery amount 

No N/A N/A N/A 

ed Post- PSLRA Five46 Leiff 

Cabraser Heimann & Bernstein 

Yes No $30 million 92% 

($27,559,187) 

8% ($2,080,000 in fees + $360,813 in expenses) 

Post-PSLRA Bids were 

due on July 20, 2001 

Pending Pending Pending N/A N/A N/A 

 of category, see supra first page of Table 1, page 10. 

fs’ attorneys questioned the efficacy of the auction process as well as noting that such a process violated Supreme Court prece

al recovery to the class prior to the deduction of expenses. 

 attorney fee alone and does not include the amount reimbursed for expenses. 

owledge at least five firms submitted bids. 
us of 

e 

Pre- or PostPSLRA* 

Number of Bids Submitted* Winning Bidder* 

Court Chose the Lowest Bidder* 

Challenge to Court’s Decision to Use Bidding 

Settlement Amount* 

Percentage of Total Recovery That Went to the Class (Recovery Amount)*

Percentage of Total Settlement That Went to Class Counsel* (Attorneys’ Fees + Expenses) 

ing Post- PSLRA Twelve47 Unknown48 (Kirby, McInery 

& Squire) 

Unknown49 No50 $341,480,861 94%51

($319,783,905) 

6% ($19,329,463 in fees + $2,367,493 in expenses)52

 of category, see supra first page of Table 1, page 10. 

appointment as lead counsel to the non-Prides claims, two firms as to both the Prides and non-Prides claims, three firms for 

rm who submitted the lowest qualified bid for the Prides claims was not revealed. See infra note 49. The court gave the original 

intiff for the Prides claims (Kirby, McInery & Squire) the right to step in and match the terms of what the court found to be the 

ey did. 

 still pending regarding plaintiffs representing the Prides claims, the court decided to keep the identity of the firm who submit

nd its analysis in choosing the lowest qualified bidder for the Prides claims as well as the terms of the bids under seal. Thus, we 

d chosen by the court is indeed the lowest bid in price terms alone. The Third Circuit recently decided that Judge Walls abused 

bids and ordered the district court to unseal the bids as well as any other sealed documents related to the bids. In re Cendant 

664 (3d Cir. Aug. 8, 2001) (order vacating sanction for violation of district court’s sealing order and requiring unsealing of all 

. 

appointed lead plaintiffs did submit a letter to the court expressing their concerns that the auction process would result in the 

fs to prosecute the action with attorneys they did not choose and, in fact, with whom they may have conflicts. 

sisted of 29,161,474 Rights valued at $341,480,861. After subtracting the attorneys fees and expenses for lead counsel 

ghts remained. Proofs of Claim were filed with respect to 26,606,422 Rights, of which 22,502,782 Rights were validated by the 

g. 8, 1999. Thus, the class received 100% recovery for their losses from the settlement fund. No claiming class members had or 

ed by class counsels’ attorney fees and expenses. 

, the Third Circuit allowed the settlement to stand, but vacated the fee award, stating, among other things, that the District 

cursory.” In re Cendant Corp. Prides Litig., 243 F.3d 722, 733 (3d Cir. 2001). 
 

Pre- or PostPSLRA* 

Number of Bids Submitted* Winning Bidder* 

Court Chose the Lowest Bidder* 

Challenge to Court’s Decision to Use Bidding 

Settlement Amount* 

Percentage of Total Recovery That Went to the Class (Recovery Amount)*

Percentage of Total Settlement That Went to Class Counsel* (Attorneys’ Fees + Expenses) 

ed Post-PSLRA Twelve53 Unknown54 (Bernstein, Litowitz Berger & Grossman 

LLP and Barrack, Rodos & Bacine)

No55 No56 3,186,500,00057 91.3% 

($2,909,407,337) 

8.7% ($262,468,857 in fees + $14,623,806 in expenses)58

Post-PSLRA Unknown59 Milberg Weiss 

Bershad Hynes & Lerach LLP 

Unknown60 Yes61 N/A N/A N/A 

 of category, see supra first page of Table 1, page 10. 

rm that submitted the lowest qualified bid for the non-Prides claims was not revealed. See supra note 49. The court permitted 

enting the lead plaintiffs for the non-Prides claims (Bernstein, Litowitz, Berger & Grossmann LLP and Barrack, Rodos & Ba

ee to the terms of what the court found to be the lowest qualified bid, which they did. 

e lower in terms of their fees as a percentage of total class recovery. 

combined settlement derived from a $2,851,500,000 cash payment from the Cendant settlement and a $335,000,000 cash pay

g settlement. The settlement was upheld on appeal to the Third Circuit. In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-

2734, 00-2769, 00-3653 (3d Cir. Aug. 28, 2001). 

warded pursuant to the court-ordered auction was vacated by the Third Circuit on appeal. In re Cendant Corp. Litig., Nos. 00-

2709, 00-2733, 00-2734, 00-2769, 00-3653 (3d Cir. Aug. 28, 2001) 

yzing competing bids and choosing the winning bidder has been permanently sealed. 

 a motion for reconsideration arguing they should be allowed to represent the class alone, or alternatively allowed a “right of 

bid. 
 

Pre- or PostPSLRA* 

Number of Bids Submitted* Winning Bidder* 

Court Chose the Lowest Bidder* 

Challenge to Court’s Decision to Use Bidding 

Settlement Amount* 

Percentage of Total Recovery That Went to the Class (Recovery Amount)*

Percentage of Total Settlement That Went to Class Counsel* (Attorneys’ Fees + Expenses) 

Post-PSLRA Three 

(Lucent I) Seventeen (Lucent II) 

Milberg Weiss Bershad Hynes & Lerach LLP (Lucent I) Bernstein Litowitz Berger & Grossman LLP (Lucent II) 

Unknown63 No N/A N/A N/A 

ed N/A (antitrust 

action) 

Twenty-one Boies, Schiller & 

Flexner 

Yes No $512 million 94.8% 

($485.25 million) 

5.2% ($26.75 million in fees and expenses) 

 of category, see supra first page of Table 1, page 10. 

000, the court consolidated the Lucent II complaints (accounting fraud allegations) with the Lucent I actions (dissemination of 

 statements). The court ordered a sealed bid auction in both cases. 

ee structure of the bids were discussed, the actual fee percentages proposed by the bidders (including the winning bidders) were 

 I or II. On August 23, 2001, Judge Lechner issued an order to show cause regarding why the submitted sealed bids should not 

aring is scheduled for September 14, 2001. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

15 

IV. Auction of Class Counsel as an Alternative to 

Traditional Appointment 

A. Courts’ Rationales for Soliciting Bids 

Our review and analysis of case opinions, orders, and other relevant documents reveal a variety of 

reasons that judges in the fourteen bidding cases auctioned the lead counsel position. The reasons 

vary depending on the type of case, but generally fall into five categories: 

(1) to replicate the marketplace for legal services and reduce attorneys’ fees; 

(2) to improve attorney-proposed case representation; 

(3) to give the class the benefit of the low risk of nonrecovery; 

(4) to reduce the expenditure of judicial time; and 

(5) to compensate for the presence of an inadequate or uninterested plaintiff. 

These categories are not mutually exclusive and several served as the bases in a number of cases. 

Below we describe the categories in more detail. 

1. To replicate the private marketplace and reduce attorneys’ fees 

We found the most common reason judges gave for employing bidding was to foster competition 

among counsel by replicating the private marketplace for legal services. The court’s ultimate goal 

was to appoint counsel who would best represent the interests of the class at the lowest cost. Typically, in nonclass cases, plaintiffs negotiate at arm’s length to get the best attorney for the best 

price. In class actions, the scenario is very different. Most of the plaintiffs play no role in deciding 

who should serve as lead attorney and, consequently, have no informed opinion about the quality 

of proposed counsel or the terms of their proposed representation. 

 In In re Oracle, Judge Walker was faced with “two warring camps of lawyers, including a 

very prominent Philadelphia law firm sparring over which group of famous lawyers should be 

designated class counsel. Both sides made scurrilous charges about the other.”64 After observing 

and tolerating that behavior for a period of time, Judge Walker asked the parties to make a presentation to the court about why they should be selected class counsel. Sometime later at a conference, one of the attorneys approached Judge Walker and told him “don’t worry about the case. 

We’ve got the whole thing worked out.”65 Judge Walker interpreted this to mean that the arrangement “was at the lawyer’s benefit and not at the benefit of the class.”66 “[S]hortly thereafter, the 

formerly warring lawyers submitted a proposal for a steering committee of the lawyers to run the 

litigation for a straight thirty percent of the recovery, plus out of pocket expenses.”67 At that point, 

Judge Walker decided to use a bidding procedure, saying it “most closely approximates the way 

class members themselves would make these decisions and should result in selection of the most 

appropriately qualified counsel at the best available price. Moreover, competitive bidding [would 

help] to ensure detachment and impartiality on the part of the court, which are essential to the ju-

 

 64. Third Circuit Task Force on Selection of Class Counsel, Reporter’s Transcript of Proceedings, Judge 

Vaughn Walker at 38 (March 16, 2001). 

 65. Id. at 38–39. 

 66. Id. at 39. 

 67. Written statement of Vaughn R. Walker, Third Circuit Task Force on Selection of Class Counsel 8 

(Philadelphia, Pa. Mar. 16, 2001). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 16 

dicial process.”68 Judge Walker noted “the prospect of competition, it seems, brought peace to the 

fractious lawyers.”69

 In a subsequent securities case, Judge Walker explained that competitive bidding was best 

suited to simulate the outcome of a market process, and because the “court’s task is to approximate as closely as possible the attorney selection and fee bargain that the class itself would strike 

if it were able to do so,” he ordered lawyers interested in representing the class to submit competitive proposals.70

 In In re California Micro Devices, while twelve different plaintiffs’ firms had filed suits, only 

two filed proposals to represent the class, and Judge Walker found only one firm’s proposal to be 

serious. Judge Walker refused to appoint that firm as class counsel because he felt they had undermined the bidding process by engaging in settlement discussions with the defendants and thus 

had obtained an “edge in the bidding process.”71 Judge Walker explained the importance of the 

court acting as surrogate client for the class by setting class counsel’s terms of engagement competitively. Specifically, he wrote, “[w]hen terms of a class counsel compensation are not established through a competitive process or one that emulates the results of such a process, the court 

has failed to guarantee that the class representatives will ‘fairly and adequately protect the interests 

of the class.’”72 Judge Walker commented that “[w]hile . . . the court can always resort to the lodestar or percentage based means of attempting to mock a competition, these methods are no substitute for actual competition.”73 

 Judge Walker saw the competitive bidding process as a monitoring technique designed to 

make the court’s “‘surrogate clients’ capable of ensuring that class action litigation does not become a vehicle which serves class counsel before all others” by enabling the court to monitor fee 

arrangements between class counsel and class members.74

 In an antitrust case, In re Amino Acid Lysine, Judge Shadur addressed some of these same 

issues saying “[i]f these were typical lawsuits—with one party (or more than one party acting 

jointly) suing one or more defendants—the free market process by which each client or set of clients chooses its own lawyer would of course control. Every client makes the choice on the predicate that the lawyer chosen is the best possible choice under all the circumstances, and the courts 

do not interfere with such choices just because clients are often wrong in those judgments. But the 

difficulty comes when a lawyer who is not of one’s choosing is foisted on one, as is inevitable in 

the class action context. And the fact that the putative class representative who brings an action 

has chosen a particular lawyer . . . gives no assurance—or even presumptive assurance—that the 

selected lawyer is the best choice for the absent class members. In that situation, unlike the oneon-one situation where the court properly stays out of the decision-making process, the analogy of 

the direct market breaks down and only the court can bring objectivity to bear on the issue.”75 The 

court “must stand in the position of an intermediary acting for the class members in establishing 

rates.”76 Likewise, in In re Bank One Judge Shadur stated that if bidding “. . . evokes a significant 

 

 68. In re Oracle Sec. Litig., 131 F.R.D. 688, 690 (N.D. Cal. 1990). 

 69. Id.

 70. In re Wells Fargo Sec. Litig., 156 F.R.D. 223, 225–26 (N.D. Cal. 1994). 

 71. In re California Micro Devices Sec. Litig., No. 94-C-2817, 1995 WL 476625, at *5 (N.D. Cal. 

1995). 

 72. Id. (citing Fed. R. Civ. P. 23(a)(4)). 

 73. Id.

 74. In re California Micro Devices, 168 F.R.D. 257, 262 (N.D. Cal. 1996). 

 75. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190, 1194 (N.D. Ill. 1996). 

 76. Id. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 17 

number of bids from well-qualified law firms or law firm combinations it is best calculated to provide precisely the efficient market information that serves as the ‘ideal proxy’ for the one-to-one 

lawyer-client agreement in conventional litigation.”77 

 Similarly, in In re Cendant, Judge Walls adopted the rationale of Judges Walker and Shadur 

that the most effective way to establish reasonable attorney fees is through marketplace or adversarial competition.78 Likewise, in Sherleigh Associates, Judge Lenard explained “[w]hile the Court 

takes no position on the validity of the claims alleged, early selection of class counsel and determination of their compensation serve the interest of the class by enabling these matters to be resolved competitively.”79 The judge indicated that “[a]s several judges and commentators have discussed, ‘auctioning the privilege to serve as class counsel [helps to] promote price competition 

across law firms’ and ensures that a baseline quality of representation will be maintained at the 

lowest possible price.”80

2. To improve attorney-proposed case representation 

Federal Rule of Civil Procedure 23(a)(4) directs the representative parties to fairly and adequately 

protect the interest of the class. In the cases we studied, the courts not only required class protection from the lead plaintiffs, but from those seeking to serve as class counsel as well. For example, 

in In re Oracle, Judge Walker explained that by breaking up the lawyer consortiums identified 

with the lodestar method, competitive bidding “should also increase the effectiveness of monitoring because—professional courtesies, aside—the disappointed bidders are likely to be on the 

lookout for shortcomings in the performance of the winner.”81 

 In Sherleigh Associates, Sherleigh, a profit-sharing plan, was one of approximately thirteen 

lead plaintiff designees that appeared to be represented by a consortium of ten law firms.82 When 

Sherleigh originally filed its suit it was represented by two law firms. Sometime thereafter, another plaintiff, who was represented by three firms, filed a similar class action. As other plaintiffs 

filed suits additional firms became involved, thus creating a hierarchy of firms. One firm sought to 

have itself and another firm designated as lead counsel and also as co-chairs of the proposed Executive Committee. Two other firms would be appointed members of the Executive Committee, 

and so forth. After reviewing the proposed arrangement, Judge Lenard wrote “[r]egardless of 

whether this arrangement constitutes an agreement among the first-to-the courthouse firms with 

their later-arriving colleagues to share any potential recovery (and the risk of no recovery) in this 

endeavor, or the affirmative choice of Sherleigh to enter into an extremely complicated representation arrangement, the Court rejects this proposal as not in the best interests of the class.”83 

Finally, in In re Amino Acid Lysine, Judge Shadur received the case after another judge had 

entered the case’s first pretrial order, which, among other things, had designated lead counsel for 

 

 77. In re Bank One Shareholders Class Actions, 96 F. Supp. 2d 780, 784–85 (N.D. Ill. 2000). 

 78. In re Cendant Corp. Litig., 182 F.R.D. 144 (D.N.J. 1998). But see In re Cendant Corp. Litig., Nos. 

00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 00-3653, slip op. at 111-12 (3d Cir. Aug. 

28, 2001) (vacating the district court’s attorney fee awarded pursuant to an auction holding that “there is no 

need to ‘simulate’ the market in cases where a properly-selected lead plaintiff conducts a good-faith counsel 

selection process because. . . [in cases decided under the PSLRA] the fee agreed to by the lead plaintiff is the 

market fee.”). 

 79. Sherleigh Assocs. LLC v. Windmere-Durable Holdings, Inc., 184 F.R.D. 688, 692 (S.D. Fla. 1999). 

 80. Id. at 693 (citations omitted). 

 81. In re Oracle Sec. Litig., 136 F.R.D. 639, 649 (N.D. Cal. 1991). 

 82. Sherleigh Assocs. LLC V. Windmere-Durable Holdings, Inc., 184 F.R.D. 688, 693 (S.D. Fla. 1999). 

 83. Id. at 693 n.1. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 18 

the entire set of multidistrict cases.84 After reviewing the order, Judge Shadur concluded that not 

all of the plaintiffs’ attorneys had had the opportunity to provide input about the appointment of 

lead counsel. 

3. To give the class the benefit of the low risk of non-recovery 

In In re Auction Houses, Judge Kaplan determined very early on that the case was well-suited for 

selection of lead counsel by an auction. First, the case had received a great deal of media attention 

and consequently attracted large numbers of competent plaintiffs’ attorneys.85 Second, the relief 

being sought was monetary damages rather than equitable relief. Judge Kaplan thought this fact 

would make the comparison of bids easier.86 Third, Christie’s had confessed to price fixing with 

Sotheby’s and agreed to provide evidence to the Department of Justice in exchange for amnesty.87

Consequently, there was a lot of information available about the merits of the case and potential 

damages. Judge Kaplan thought this information alone provided potential bidders with a strong 

base of information to calculate potential damages.88 

4. To reduce the expenditure of judicial time 

Some judges who advocate auctioning suggest that there is less expenditure of judicial time, compared to the ex post review of fee petitions required under other methods. For example, in In re 

Amino Acid Lysine, Judge Shadur was concerned about encountering numerous attorney fee requests at the end of litigation. He thought that the best interests of the plaintiffs’ class would not 

be served by the kind of proliferation of plaintiffs’ counsel that ordinarily marks “cases that so 

often spring up after a triggering event—whether in the field of securities, antitrust or in some 

other area potentially ripe for class treatment.”89

5. To account for the presence of an inadequate or uninterested lead 

plaintiff 

Of the twelve securities cases where auctioning has been used, nine were filed after 1995 and 

therefore subject to the PSLRA. It is generally agreed that the one goal of PSLRA was to 

strengthen the role of the lead plaintiff and replace lawyer-driven litigation with client-driven litigation. Title 15 of the U.S. Code, § 78u-4(a)(3)(B)(iii)(I)(bb) created a presumption that the plaintiff with the largest financial interest in the action should serve as the lead plaintiff.

 In several cases filed after the PSLRA, the court had to address whether the proposed lead 

plaintiff’s choice of counsel was in the best interest of the class, whether the proposed lead plaintiff was an adequate plaintiff, and whether the proposed lead plaintiff possessed the necessary 

skills to select lead counsel. 

 In In re Lucent, after the court had provisionally appointed a lead plaintiff, the lead plaintiff 

sought approval of its selection of the law firm Milberg Weiss to serve as lead counsel. After reviewing lead plaintiffs’ motions, Judge Lechner decided to auction the role of lead counsel because he had seen no evidence that the proposed lead plaintiff had selected and negotiated with 

counsel at arm’s length. He found that a competitive auction was “necessary to protect the inter-

 

 84. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190, 1192 (N.D. Ill. 1996). 

 85. See In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 82 (S.D.N.Y. 2000). 

 86. Id. 

 87. Id. 

 88. Id. 

 89. In re Amino Acid Lysine, 918 F. Supp. at 1192. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 19 

ests of the proposed class.”90 Judge Lechner pointed to the discretion afforded to the court in approving counsel as justification for its intervention.91 “The lead plaintiff owes a fiduciary duty to 

obtain the highest quality representation at the lowest price.”92 The court explained “[b]ased solely 

on a review of the Moving Brief. . . , it is not possible to determine whether the Proposed Lead 

Plaintiffs actively sought out and made an informed decision regarding the choice of lead counsel. 

In support of their selection, the Proposed Lead Plaintiffs state only that they have ‘retained competent and experienced counsel to prosecute these claims...’”93 Further, Judge Lechner explained, 

“Proposed Lead Plaintiffs have provided no evidence or indication of the proposed fee arrangement, its terms, or discussions or proposals leading up to it. They have provided no indication as 

to how the selection of Proposed Lead Counsel was arrived at or what considerations went into the 

decision. Significantly, there is no indication of whether other counsel were interviewed or even 

considered. This is troubling.”94 The court continued, saying “[t]he judgment of a lead plaintiff is 

not dispositive in the appointment of lead counsel. Approval of lead counsel necessarily requires 

an independent evaluation of, among other considerations, the effectiveness of proposed class 

counsel to ensure the protection of the class.”95

 In both In re Network Associates and In re Commtouch, Judge Alsup had the lead plaintiff 

solicit proposals from attorneys or firms interested in serving as class counsel. In In re Network 

Associates, lead plaintiff, carrying out its statutory responsibility under 15 U.S.C. § 78u-4(a)(3)(v) 

to select and retain counsel, proposed that the firm Barrack, Rodos & Bacine be chosen lead counsel.96 Lead plaintiffs in its motion to the court noted the firm’s experience and track record in securities class actions. The court, however, was concerned with the recommendation because of the 

firm’s representation in another case.97 Consequently, the court ordered the lead plaintiff to reopen 

the issue of who would serve as class counsel and set forth the steps it wanted lead plaintiff to 

complete in recommending class counsel, including publicizing a request for written proposals 

from counsel, evaluating the proposals, and interviewing the candidates.98 The court also indicated 

that the lead plaintiff might still “after full consideration of all candidates, recommend the Barrack 

firm, but it should do so only after an honest effort to select the highest quality counsel at the most 

efficient price.”99 

 In In re Commtouch, Judge Alsup was faced with the possibility of having a plaintiff, Mr. 

Jacobi, a resident of Israel with limited English skills, serve as lead plaintiff. Judge Alsup thought 

these factors might interfere with the plaintiff’s ability to monitor the proceedings and to participate in the progress of the suit, including selecting class counsel.100 No other proposed lead plaintiff candidate had overcome the statutory presumption in favor of Mr. Jacobi. 

 In looking at the specifics facts of the case, Judge Alsup indicated 

 

 90. In re Lucent Techs. Inc., Sec. Litig., 194 F.R.D. 137, 156 (D.N.J. 2000). 

 91. Id. at 155. 

 92. Id. 

 93. Id. at 156. 

 94. Id. 

 95. Id. at 155. 

 96. In re Network Assocs. Inc., Sec. Litig., 76 F. Supp. 2d 1017, 1033 (N.D. Cal. 1999). 

 97. The court commented on allegations that the Barrack firm and two others had failed to obtain lead 

plaintiff approval of the settlement in advance from one of ten plaintiffs. Consequently, the court-approved 

settlement is being challenged on appeal. Id.

 98. Id.

 99. Id.

 100. In re Commtouch Software Ltd. Sec. Litig., No. C 01-00719, Order Re Lead Plaintiff Selection and 

Class Counsel Selection 2 (N.D. Cal. June 27, 2001). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 20 

[w]ere the Court faced with an institutional investor as the lead plaintiff, 

experienced in the due diligence of selecting counsel for complex litigation, then the competitive-proposal procedure might well be modified or 

eliminated so long as the institutional investor could otherwise show that 

it had exercised due diligence in carrying out its fiduciary responsibility 

to select counsel in the best interests of the class. Where, however, the 

lead plaintiff is not so qualified, it is necessary to instruct the lead plaintiff on his or her responsibilities and to establish a due-diligence procedure for selection and approval of counsel.101 

Judge Alsup concluded that in this case none of the candidates has any experience in selecting 

such counsel, including the presumptive lead plaintiff, who had not exercised sufficient due diligence in selecting class counsel.102 To address this deficiency, Judge Alsup developed a detailed 

procedure that the lead plaintiff would follow in selecting class counsel, which included a questionnaire to interview class counsel candidates.103 The court also decided, given the unique geographic aspects of this case, that the class would benefit by having counsel in Israel, fluent in Hebrew, as well as trial counsel in the United States. In addition, the court required lead plaintiff to 

certify that the court’s procedures would be followed and that he would work and cooperate fully 

with counsel even if it resulted in approval of class counsel other than his present lawyer.104 

 Recently, Judge Walker had to address, in two similar, but unrelated securities actions, 

whether the lead plaintiffs had exercised due diligence in selecting lead counsel that would act in 

the best interest of the class. In In re Copper Mountain Networks Securities Litigation,

105 Judge 

Walker approved lead plaintiff’s selection of counsel, stating that the lead plaintiff had selected 

counsel on terms that appeared to be in the best interests of the class. This was not the case in the 

other action, In re Quintus. In that case, after analyzing the positions of those seeking to serve as 

lead plaintiff, Judge Walker concluded that he was faced with “disinterested, figurehead plaintiffs.”106 One had not responded to the court’s inquiries and none had been present at a required 

hearing. The court determined that the two potential lead plaintiffs had presented little evidence 

that they had negotiated a competitive fee arrangement or had the incentive and ability to do so.107

The court finding none of the lead plaintiffs to be adequate believed it was left with only two options: (1) decline to appoint any lead plaintiff, finding them all inadequate; or (2) appoint Colin 

Hill as a nominal plaintiff and then intervene in the selection of counsel.108 The court ultimately 

appointed Colin Hill as lead plaintiff and intervened in selecting class counsel. 

 Earlier, we discussed the presumption established by the PSLRA that the plaintiff determined 

to be the most adequate also has the responsibility of selecting counsel. In the cases filed after the 

PSLRA, we were interested in learning how often the courts thought it necessary to address in 

their opinions or orders two issues: (1) whether auctioning was consistent with the lead plaintiff 

 

 101. Id. at 6 (citing In re Quintus Sec. Litig., Nos. 00-C-4264 & 00-C-3894, 2001 WL 709204, at * 4–5 

(N.D. Cal. Apr. 12, 2001)). 

 102. Id. at 4.

 103. See infra Appendix A for a reproduction of the questionnaire. 

 104. In re Commtouch, at 4. 

 105. No. 00-C-3849, 2000 U.S. Dist. LEXIS 8552 (N.D. Cal. May 31, 2001). 

106. In re Quintus Sec. Litig., Nos. 00-C-4264 & 00-C-3894, 2001 WL 709204, at *17 (N.D. Cal. Apr. 

12, 2001). 

 107. Id. 

 108. Id. at *16 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 21 

provision of the PSLRA; and (2) whether the court believed that lead plaintiff’s choice of counsel 

was entitled to deference. 

 We found in the majority of post-PSLRA securities cases, courts believed that the PSLRA 

allowed them discretion to accept or deny the lead plaintiff’s recommendation of counsel, or 

choose some other method to select counsel.109 For example, in In re Cendant Judge Walls indicated the provisions of the PSLRA that give the court discretionary authority to approve or disprove of lead plaintiff’s choice of counsel (15 U.S.C. § 77z-1(a)(3)(B)(v)), and the provisions that 

require the court to only award attorney fees and expenses if they are reasonable in relation to the 

class’ recovery (15 U.S.C. § 77z-1(a)(6)), allow the court to look to other mechanisms (i.e., use of 

an auction and thus simulate the free market in selection of class counsel) to establish reasonable 

attorney fees.110 Judge Walls said “[t]he Court is required to protect the interests of all members of 

the class. If Congress had intended otherwise with its PSLRA, it could have easily permitted lead 

plaintiff to designate and retain counsel without judicial approval. It did not.”111 

However, on appeal of the settlement and the attorneys’ fee awarded pursuant to the courtordered auction, the Third Circuit addressed the question of whether the district court’s decision to 

hold an auction in In re Cendant was consistent with the PSLRA.112 After examining the overall 

structure of the PSLRA’s lead plaintiff section and the legislative history of the PSLRA, the Third 

Circuit concluded that an auction is not generally permissible in an ordinary Reform Act case because it is inconsistent with the PSLRA’s goal to “infuse lead plaintiffs with responsibility (and 

motivation) to drive a hard bargain with prospective lead counsel and to give deference to their 

stewardship.”113 The court explained that “[a]lthough we believe that there are situations under 

which the PSLRA would permit a court to employ the auction technique, this was not one of them. 

Here, inasmuch as the Lead Plaintiff conducted its counsel search with faithful observance to the 

letter and spirit of the Reform Act, it was improper for the District Court to supplant the. . . [lead 

plaintiff’s] statutorily-conferred right to select and retain lead counsel by deciding to hold an auction.”114 

 In Sherleigh Associates the court recognized that the PSLRA assigns the task of selecting 

counsel to the lead plaintiff but it also requires the court to ensure that the attorney fees awarded 

are reasonable.115 Judge Lenard wrote: “[a] court presented with competing claims for designation 

and concerned with ensuring quality representation at a fair price is faced with a conundrum: What 

deference should be paid to the class representative’s choice of counsel, as balanced against the 

court’s obligation to the class to ensure such representation is of high quality and is provided at a 

fair price?”116 “[T]he Court determined that a sealed-bid auction best balances the interests of the 

class in high quality representation at a fair price with the Reform Act’s provision that the presumptive lead plaintiff selects class-counsel, subject to court approval.”117 

 

 109. But cf. In re Razorfish, Inc. Sec. Litig., No. 00-C-9474, 2001 WL 476504 (S.D.N.Y. May 4, 2001);

In re MicroStrategy Inc. Sec. Litig., 110 F. Supp. 2d 427, 437–38 (E.D. Va. 2000); Aronson v. McKesson 

HBOC, Inc., 79 F. Supp. 2d 1146, 1159 (N.D. Cal. 1999). 

 110. See In re Cendant Corp. Litig., 182 F.R.D. 144, 150–51 (D.N.J. 1998). 

 111. Id. at 151. 

 112. In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 

00-3653 (3d Cir. Aug. 28, 2001). 

 113. Id. slip op. at 13, 103–05. 

 114. Id. at 13. 

 115. Sherleigh Assocs. LLC v. Windmere-Durable Holdings, Inc., 184 F.R.D. 688, 693 (S.D. Fla. 1999). 

 116. Id. 

 117. Sherleigh Assocs., 186 F.R.D. 669, 670 (S.D. Fla. 1999) (citations omitted). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 22 

 In Cylink, Judge Walker noted although the PSLRA permits the lead plaintiff to select lead 

counsel to represent the class subject to the court’s approval, he also recognized that the court 

must ensure that the class receives quality representation at a fair price and cannot simply defer to 

lead plaintiff’s choice of counsel. Judge Walker concluded that because of the disadvantages resulting from the lead plaintiff being an individual investor (lacking the expertise and resources of a 

large institutional investor) “together with the inherent conflicts and agency problems in class actions and the limited ability of the court to address such problems through case management . . . 

determination of lead counsel through a competitive bidding process is necessary to protect the 

interests of the putative class members.”118 

 Further, in In re Quintus Judge Walker indicated that “[u]nder the PSLRA, the selection of 

lead counsel is ‘subject to the approval of the Court.’ 15 U.S.C. § 78u-4(a)(3)(B)(v). This statutory 

delegation, along with the ‘court’s fiduciary obligation to the plaintiff class,’ . . . requires the 

Court to ensure that qualified, competitively priced counsel is selected. Thus, if the Court determines that no prospective lead plaintiff has the ability to negotiate with counsel on behalf of the 

class, the court must itself intervene to ensure that interests of the class are protected.”119 

 In In re Bank One, Judge Shadur chose lead plaintiff at the same time he appointed lead counsel.120 After examining each of the submissions seeking lead plaintiff status, he found that the 

shareholders identified as the Pension Group best fit the statutory considerations for presumptive 

purposes. He also made it clear that although the members of the Pension Group were entitled to 

presumptive status under §78u-4(a)(3)(B) as the “most adequate plaintiffs,” this presumption 

would be rebutted (despite the amounts that they have at stake personally) if the presumptive lead 

plaintiffs were to insist on their class counsel (law firms of Schoengold & Sporn P.C. and Quinlan 

& Crisham, Ltd.) handling the action on a materially less favorable contractual basis than by the 

most favorable qualified bidder among the lawyers submitting bids. “It should be remembered that 

although Subsection (a)(3)(B)(v) provides that the most adequate plaintiffs may ‘select and retain 

counsel to represent the class,’ that opportunity is expressly made ‘subject to the approval of the 

court.’”121

 In its recent opinion finding that the district court abused its discretion by conducting an auction in In re Cendant, the Third Circuit disagreed with Judge Shadur’s view that “any movant who 

is unwilling to be represented by the firm or firms that a court determines to be the lowest qualified bidder in a court-conducted auction has necessarily shown that it will not fairly and adequately represent the interests of the class.”122 The court found this argument to be inconsistent 

with the statutory text of the PSLRA, which clearly states that the lead plaintiff is to “select and 

retain” lead counsel and the court is responsible for deciding whether to “approve” that choice. 

“Judge Shadur’s reading of the statute in effect confers upon the court the right to ‘select and retain’ counsel and limits the lead plaintiff to deciding whether to acquiesce in those choices, thus 

eliminating any discretion on the part of the lead plaintiff.”123 The court explained that “[w]hen a 

properly-appointed lead plaintiff asks the court to approve its choice of lead counsel and of a retainer agreement, the question is not whether the court believes that the lead plaintiff could have 

 

 118. Wenderhold v. Cylink Corp., 188 F.R.D. 577, 587 (N.D. Cal. 1999). 

 119. Werner v. Quintus Corp., No. 00-C-4263, 2001 WL 789445, at *4 (N.D. Cal. Feb. 2, 2001) (case 

citation omitted). 

 120. See In re Bank One Shareholders Class Actions, 96 F. Supp. 2d 780 (N.D. Ill. 2000). 

121. Id. at 784. 

 122. In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 

00-3653, slip op. at 107 (3d Cir. Aug. 28, 2001). 

 123. Id. at 108. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 23 

made a better choice or gotten a better deal. Such a standard would eviscerate the Reform Act’s 

underlying assumption that, at least in the typical case, a properly-selected lead plaintiff is likely 

to do as good or better a job than the court at these tasks. Because of this, we think that the court’s 

inquiry is appropriately limited to whether the lead plaintiff’s selection and agreement with counsel are reasonable on their own terms.”124 Elaborating further, the court stated that the “ultimate 

inquiry is always whether the lead plaintiff’s choices were the result of a good faith selection and 

negotiation process and were arrived at via meaningful arm’s-length bargaining.”125

B. Party Opposition to the Courts’ Solicitation of Bids 

We did not find evidence of widespread opposition by plaintiffs’ attorneys to the courts’ use of 

competitive bidding. Nor did we find any instances where the defendants opposed the procedure. 

 Formal objections were made in four cases. We are unaware of objections that were not made 

on the record. Not surprisingly, the first objection to competitive bidding occurred in In re Oracle. 

In that case, a losing bidder motioned the court for reconsideration, challenging both 1) the court’s 

selection of the winning firm and 2) the competitive bidding process, claiming that competitive 

selection of class counsel and determination of their compensation was illegal.126 Sometime later, 

the winning firm and the challenging firm together brought a new class action on behalf of a class 

of Oracle shareholders solely against Arthur Andersen. The winning firm wished to continue 

against the existing defendants under the terms of its bid, but stated that the claim against Arthur 

Andersen should be treated separately. The losing firm argued that the competitive selection of 

class counsel did not and could not take changed circumstances into account.127 

 The court concluded that the competitive selection had worked well. It held that the losing 

firm’s attack on the legality and suitability of competitive selection failed analysis and ignored the 

court’s inherent power to protect against excessive attorney fees.128 The court stated that the 

changed circumstances (Oracle’s press release and the addition of Arthur Andersen as a defendant) demonstrated “a particular strength of competitive selection: increased ability of the court to 

monitor this litigation to protect the class and the integrity of the class action device.”129 It also 

rejected that firm’s contention that the expense reimbursement limitation presented a conflict of 

interest because it would diminish the winning firm’s devotion to maximizing the class’s recovery.130 Ultimately, Judge Walker denied the losing bidder’s motion for reconsideration and confirmed the appointment of the winning firm as class counsel.131 

 In In re Amino Acid Lysine two firms noted their opposition to a lead counsel auction, saying 

that among other things it violated Supreme Court precedent.132 The court wrote counsel’s “flawed 

notion stemm[ed] from the bizarre idea that an up-front bidding process is somehow at odds with 

the need for the court to make a finding as to the extent of plaintiffs’ success in the litigation.”133 

 

 124. Id. at 109. 

 125. Id. 

 126. In re Oracle Sec. Litig., 136 F.R.D. 639, 640–41 (N.D. Cal. 1991). 

 127. Id.

 128. Id. at 641. 

 129. Id.

 130. Id. at 643. 

 131. Id. at 652. 

 132. In re Amino Acid Lysine Litig., 918 F. Supp. 1190, 1192–93 (N.D. Ill. 1996). 

 133. Id. at 1193. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 24 

 And in Sherleigh Associates, once the court announced it was using a sealed bid auction to 

select class counsel, two law firms filed a motion for reconsideration, arguing they should be allowed to represent the class alone, or alternatively allowed a “right of first refusal” to meet the 

“best bid.”134 The firms argued that Judge Walls in In re Cendant allowed original lead plaintiff’s 

counsel in that case to match the lowest bid, and also that as the affirmative choice of Sherleigh, 

they should be given the same opportunity and “be allowed to circumvent the bid process and be 

appointed class counsel directly.”135 

 The court rejected the motion on two grounds. First, the court determined that because of the 

history of representation, “it remained unclear whether these two firms were indeed the affirmative 

choice of Sherleigh, and even if these firms were Sherleigh’s affirmative choice of counsel, the 

Court found the firms had subsumed Sherleigh’s interest in serving as Lead Plaintiff into the 

firms’ own interest in representing whichever lead plaintiff was eventually selected by the Court. . 

. .”136 “Second, unlike the Cendant court, the Court here constructed an auction with both qualitative and price considerations. Therefore, the Court determined a ‘right of first refusal’ would unnecessarily abrogate the Court’s duty to ensure the class receive quality representation at a fair 

price.”137 The court concluded that 

[t]he history of representation in this case, the change in Sherleigh’s representation from two firms to a consortium of ten firms and now back to 

one original and one different firm; the qualitative and price considerations in the bid process; and the need to weigh competing interests, all 

dictate denial of the motion. However, whether a firm is the affirmative 

choice of the Lead plaintiff may be a factor in the qualitative assessment.138

 Finally, in In re Quintus two groups of plaintiffs offered to serve as lead plaintiffs. One group 

consisting of four investors (Quintus investors) with aggregate losses of $4,223,000 retained Milberg Weiss and two other law firms, Cauley, Geller, and Bull & Lifshitz.139 The other group, consisting of two investors with combined losses far less than the Quintus group, were represented by 

Weiss & Yourman.140 The Quintus investors proposed to hire the Milberg, Cauley, and Bull firms 

to represent the class and had negotiated a fee agreement.141 The district court first rejected the 

Quintus investors’ application to serve as a lead plaintiff group because the entire group could not 

represent the entire class.142 Instead, as noted above, the court selected one investor, Colin Hill, 

from the group to serve as lead plaintiff. The court also concluded “that Hill had not negotiated a 

‘competitive fee,’”143 and subsequently ordered a sealed bid auction and chose Weiss & Yourman 

as class counsel. 

 Lead plaintiff Hill then filed a petition for writ of mandamus with the Ninth Circuit seeking to 

enforce his right as lead plaintiff under the PSLRA and “under the Due Process Clause, to retain 

 

 134. Sherleigh Assocs. LLC v. Windmere-Durable Holdings, 186 F.R.D 669, 670 (S.D. Fla. 1999). 

 135. Id.

 136. Id. at 670–71 

 137. Id. at 671. 

 138. Sherleigh Assocs., 184 F.R.D. 688, 701 (S.D. Fla. 1999). 

 139. See In re Colin Barry Hill Petition for Writ of Mandamus 5 (N.D. Cal. May 11, 2001). 

 140. Id. at 5. 

 141. Id. at 6. 

 142. Id. at 6–7. 

 143. Id. at 7. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 25 

and select counsel of his own choice, rather than have the district court improperly intervene to 

select his counsel through competitive bidding.”144

 Petitioner Hill argued the “district clearly erred as a matter of law by denying [him, lead 

plaintiff] his right under the PSLRA and the constitution to select counsel of his own choice. 

Judge Walker decided to ‘intervene in the selection of counsel’ by inviting competitive bids and 

selecting lead counsel itself, simply because the court preferred a lower fee than that negotiated by 

Hill. The court never ruled the fee negotiated by Hill was ‘unreasonable,’ but only that it was not 

‘competitive.’’’145 In addition, Hill argued the district court’s ruling was in direct conflict with the 

plain language of the PSLRA. “Judge Walker introduced competitive bidding prior to the PSLRA 

and has continued to force it upon litigants despite the Act’s express terms to the contrary, that the 

lead plaintiff ‘select and retain counsel.’”146 In addition, petitioner noted “[i]t is not a sufficient 

justification for the court to reject the lead plaintiff’s choice and ‘intervene in the selection of 

counsel’ as Judge Walker did here, simply because the court prefers to select counsel by his own 

self-proclaimed ‘innovative’ bidding process that he controls. In the PSLRA, Congress has chosen 

a different approach: the lead plaintiff selects counsel. Unless the lead plaintiff’s chosen counsel is 

somehow inadequate, there is no statutory basis to reject his choice.”147 On June 14, 2001, the 

Ninth Circuit denied Petitioner Colin Hill’s writ.148

V. Auctioning Procedures 

A. Stage of Litigation at Which Counsel Was Appointed 

In almost all of the cases where class counsel was chosen from a competitive bidding process, the 

judge decided very early on in the life of the litigation that he or she would solicit bids. Class 

counsel was usually chosen before any dispositive motions were decided, prior to addressing Rule 

23 certification issues, but after the appointment of the lead plaintiff in post-PSLRA securities 

cases. 

1. Before dispositive motions 

In all but two of the fourteen cases, class counsel was appointed before the court decided any dispositive motions. In In re Wells Fargo, the complaint was filed on June 25, 1991, but Judge 

Walker deferred from addressing the issue of representation of the class because of a strong motion to dismiss, and allowed the class to be represented by de-facto class counsel.149 In December 

1991, Judge Walker granted the defendant’s motion to dismiss, but the dismissal was reversed and 

 

 144. Id. at 1. 

 145. Id.

 146. Id. at 3. 

 147. Id. at 3. 

 148. A recent article reported that current class counsel (Weiss & Yourman) told Judge Walker that lead 

plaintiff Colin Hill has refused to speak to them and, consequently, the suit was proceeding with a class representative who has no desire to speak with counsel conducting the litigation. It’s reported that Judge Walker 

stated, “[a]t some point or other, I think there is very clearly going to have to be a class representative or a 

group of class representatives to serve as new lead plaintiff.” Attorneys Getting the Silent Treatment, The 

Recorder 1, June 19, 2001. Colin Hill withdrew as lead plaintiff on June 20, 2001, and Weiss & Yourman are 

currently searching for a suitable replacement for lead plaintiff. 

 149. In re Wells Fargo Sec. Litig., 156 F.R.D. 223, 225–26 (N.D. Cal. 1994). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 26 

the complaint was ordered to be reinstated in April 1994.150 Two months later, Judge Walker decided that class counsel would be selected by competitive bidding. Judge Walker admitted that 

with hindsight, regardless of the defendant’s motion to dismiss, “appointment of class counsel and 

determination of the terms of their engagement should have been made when the case began” because “[e]arly selection of class counsel and determination of their compensation serve the interests of the class by enabling these matters to be resolved competitively.”151

 Although Judge Shadur requested bids only two months after the initial complaint was filed in 

In re Bank One, he delayed the selection of lead plaintiff and class counsel until he ruled on the 

defendants’ motion to dismiss. All of plaintiffs’ counsel who were listed in the consolidated complaint (whether or not they submitted bids) and any other counsel who had submitted bids were 

ordered to respond to the motion to dismiss.152 After the motion to dismiss was denied, Judge 

Shadur appointed lead plaintiffs and awarded class counsel representation by competitive bidding.153

2. After choosing lead plaintiff 

In the three securities bidding cases decided prior to the enactment of the PSLRA in 1995, the 

timing of the designation of the class representative in relation to the appointment of class counsel 

was not an issue since the court did not object to the nominally identified class representative. In 

nine post-PSLRA securities cases, courts have used two approaches to appoint lead plaintiff in 

relation to the competitive selection of class counsel. In most of these cases, the court addressed 

first the identity of the lead plaintiff, and then invited bids from attorneys and law firms for representation of the plaintiffs’ class as class counsel.154

 In contrast, in both securities class actions in which Judge Shadur asked for bids, he appointed 

the lead plaintiff at the same time he chose lead counsel.155 When he announced to the parties that 

he was considering using the bidding procedure to select class counsel, Judge Shadur explained 

that bidding would be used as an adjunct to his determination of the “most adequate plaintiff,” 

who he would appoint as soon as practicable, whether or not he decided to award the legal representation of the plaintiff class on the basis of bids.156 In addition, Judge Shadur made it clear that 

the individual or group determined to be entitled to presumptive status under 15 U.S.C. § 78u4(a)(3)(B) as the “most adequate plaintiffs” could have this presumption rebutted (despite the 

amounts at stake personally) if the presumptive lead plaintiffs were to insist on their class counsel 

 

 150. In re Wells Fargo, 12 F.3d 922 (9th Cir. 1993). 

 151. In re Wells Fargo, 156 F.R.D. at 225–26. 

 152. In re Bank One Shareholders Class Actions, No. 00-C-880, Memorandum Order (N.D. Ill. Mar. 13, 

2000). 

 153. In re Bank One, 96 F. Supp. 2d 780 (N.D. Ill. 2000). 

 154. In re Cendant Corp. Litig., 182 F.R.D. 144 (D.N.J. 1988); Wenderhold v. Cylink Corp., 188 F.R.D. 

577 (N.D. Cal. 1999); In re Network Assocs., Inc., Sec. Litig., No. 99-C-01729, Order Supporting Robert A. 

Vatuone as Lead Plaintiff (N.D. Cal. Dec. 15, 1999); Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., 184 F.R.D. 688 (S.D. Fla. 1999); In re Lucent Techs., Inc., Sec. Litig., 194 F.R.D. 137 (D.N.J. 

2000) & In re Lucent Techs., Inc., Sec. Litig., No. 00-C-621, Letter-Opinion (D.N.J. Apr. 17, 2001) (order 

appointing co-lead plaintiff); In re Quintus Sec. Litig., Nos. 00-C-4264 & 00-C-3894, 2001 WL 709204 

(N.D. Cal. Apr. 12, 2001); In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Lead 

Plaintiff Selection and Class Counsel Selection (N.D. Cal. June 27, 2001). 

 155. In re Bank One Shareholders Class Actions, 96 F. Supp. 2d 780 (N.D. Ill. 2000); In re Comdisco, 

01-C-2110, Memorandum Opinion and Order (N.D. Ill. June 25, 2001). 

 156. In re Bank One, No. 00-C-880, 2000 WL 246257, at *2 (N.D. Ill. Feb. 24, 2000); In re Comdisco 

Sec. Litig., 141 F. Supp. 2d 951, 955 (N.D. Ill. 2001) (Memorandum Opinion entering attached Apr. 6, 2001 

Memorandum Order). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 27 

handling the action on a materially less favorable contractual basis than by the most favorable 

qualified bidder among the lawyers submitting bids.157 

3. Before Rule 23 certification 

In all but one of the bidding cases, class counsel was chosen prior to final certification of the 

class158 or prior to the court ruling on or addressing the certification issue at all.159 In re Auction 

Houses is the only case where the class was certified before the court even announced that it was 

considering the use of an auction to select lead counsel.160

 Judge Shadur explained that part of the Rule 23 certification process depends on the adequacy 

of representation, including the adequacy of plaintiff and plaintiff’s counsel.161 In In re Bank One

and In re Comdisco, he inquired of defense counsel as a threshold matter whether they anticipated 

a likely objection to class certification, assuming the ultimate class representative and class counsel met the adequacy of representation requirements. In both cases, defense counsel indicated there 

would not be a problem with certification.162

B. Discovery Prior to Bid Submission 

None of the bidding cases gave any indication that the judge permitted any type of preliminary 

discovery by any of the bidders to assist them with their proposals prior to the commencement of 

the initial bidding period. Discovery either had not yet commenced in the case, or, if it had, once 

the court requested bids, any discovery in the case was stayed.163 

 In several cases, limited discovery was permitted for very specific reasons. In In re Auction 

Houses, prior to the submission of final bids, the court learned that the interim lead counsel had 

engaged in settlement discussions with the defendants in which they had obtained information 

regarding potential damages. On motion by another prospective bidder, the court made this information available to all counsel solely for the purpose of assisting them in preparing their bids.164

Judge Kaplan explained that these documents were ordered disclosed to even the playing field, 

 

 157. In re Bank One, 96 F. Supp. 2d 780, 784 (N.D. Ill. 2000); In re Comdisco, 141 F. Supp. 2d at 953. 

See also supra Section IV.A.5. 

 158. In re Oracle Sec. Litig, No. 90-C-931 (Walker N.D. Cal.); In re Wells Fargo Sec. Litig., No. 91-C1994 (Walker N.D. Cal.); In re California Micro Devices Sec. Litig., No. 94-C-2817 (Walker N.D. Cal.); In 

re Amino Acid Lysine Antitrust Litig., No. 95-C-7679 (Shadur N.D. Ill.); In re Cendant Corp. Litig., No. 98-

C-1664 (Walls D.N.J.); Wenderhold v. Cylink Corp., No. 98-C-4292 (Walker N.D. Cal.); In re Network 

Assocs., Inc., Sec. Litig., No. 99-C-1729 (Alsup N.D. Cal.); In re Bank One Shareholders Class Actions, No. 

00-C-880 (Shadur N.D. Ill.). 

 159. In re Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., No. 98-C-2273 (Lenard S.D. 

Fla.); In re Lucent Techs., Inc., Sec. Litig., No. 00-C-621 (Lechner D.N.J.); In re Quintus Sec. Litig., Nos. 

00-C-4264 & 00-C-3894 (Walker N.D. Cal.); In re Comdisco Sec. Litig., No. 01-C-2110 (Shadur N.D. Ill.); 

In re Commtouch Software Ltd., Sec. Litig., No. 01-C-00719 (Alsup N.D. Cal.). Final class certification is 

either still pending in these cases or has not been addressed yet in the case. 

 160. In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 73 (S.D.N.Y. 2000). 

 161. Telephone Interview with Senior District Judge Milton I. Shadur, Northern District of Illinois (July 

6, 2001). 

 162. Id.

 163. Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., 184 F.R.D. 688, 698 (S.D. Fla. 

1999). Note that for cases filed after the effective date of the Private Securities Litigation Reform Act of 

1995, discovery is stayed until after selection of lead plaintiff and class counsel. 15 U.S.C. § 772-1(b)(1), § 

78u-4(b)(3)(B). 

 164. In re Auction Houses, 197 F.R.D. 71, 74 (S.D.N.Y. 2000). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 28 

facilitate bidders in assessing accurately the value of the case, and improve the overall quality of 

the bids submitted.165

 In In re Oracle, because the winning bidder selected by Judge Walker to represent a class of 

Oracle Shareholders against Oracle was unwilling to add Arthur Anderson as a defendant, Judge 

Walker ordered a second round of bidding to chose a firm to represent a class of Oracle shareholders against Arthur Anderson and any other new defendant. Since discovery had already commenced in the class action against Oracle, the court ordered chosen counsel for the class on claims 

against Oracle (the Lowey firm) to “make any discovery obtained in the litigation which relates to 

Arthur Anderson available to any firm notifying the court and the Lowey firm of an intent to bid 

on representing a class against Arthur Anderson.”166

 Judge Shadur explained that because the object of bidding is to attempt to simulate the market 

as if there was an individual client hiring a law firm, discovery should not be a component of bidding cases since clients and their attorneys negotiate a fee up front without the benefit of discovery. Allowing discovery before addressing selection of counsel puts the cart before the horse, especially in securities cases where the court is supposed to be choosing the most adequate plaintiff 

early in the case. It is also wasteful because it leaves the litigation without lead counsel during the 

discovery period, which can be complex and lengthy in large cases.167

 Although not directly related to bid submission, Judge Alsup explained that early in the litigation when deciding whether to allow aggregation of plaintiffs, he granted the request of two proposed lead plaintiffs to conduct limited discovery as permitted under the PSLRA. The two potential lead plaintiffs were allowed a four-hour deposition of each of the other’s main institutional 

candidate.168 Judge Alsup indicated that the depositions revealed that both of the potential plaintiffs were inadequate to serve as lead plaintiff.169

C. Limitations on Field of Potential Bidders 

With only three exceptions, the courts opened the bidding to any attorney or firm anywhere in the 

country interested in serving as class counsel whether or not they had filed a complaint or were 

somehow previously involved in or connected to the litigation. Bidding was opened to as large a 

potential pool of bidders as possible in hopes of increasing the numbers of bidders and the competition among them. In fact, in In re Cendant the court received bids from law firms who had not 

filed a preliminary complaint in the case.170 Likewise, the winning bidder chosen to represent the 

class in In re Network Associates did not come with a lead plaintiff.171 

 Except for Judge Alsup, none of the other bidding judges took any special action to notify 

other potential bidders. In In re Commtouch, Judge Alsup ordered that a copy of his recent order 

containing guidelines for bid submission was to be posted on the Stanford Securities Class Action 

 

 165. Id. at 84. 

 166. In re Oracle Sec. Litig., 136 F.R.D. 639, 651 (N.D. Cal 1991). 

 167. Telephone Interview with Senior District Judge Milton I. Shadur, Northern District of Illinois (July 

6, 2001). 

 168. In re Network Assocs. Inc., Sec. Litig., 76 F. Supp. 2d 1017, 1027 (N.D. Cal. 1999). 

 169. Telephone Interview with District Judge William Alsup, Northern District of California (June 29, 

2001). 

 170. Telephone Interview with District Judge William H. Walls, District of New Jersey (July 5, 2001). 

 171. Telephone Interview with District Judge William Alsup, Northern District of California (June 29, 

2001). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 29 

Clearinghouse Web site within a week from the Order’s date inviting proposals from candidates 

who wanted to serve as class counsel.172

 The three exceptions were all before Judge Shadur. He limited the bidding to all attorneys of 

record in the actions, and, in his two securities cases, to any other attorneys who timely filed motions for lead plaintiff for any member of the class.173 Judge Shadur explained that bidding should 

be limited to attorneys or firms (1) with preliminary knowledge sufficient to make a judgment 

about what would be an appropriate or fair fee and (2) with a client willing to have the attorney or 

firm represent them by filing a complaint. Bidding should not be open to the world generally because this invites the prospect of bidding by firms with no knowledge of the case merely seeking 

to grab a piece of the representation.174

D. Overview of Court-Imposed Guidelines for Bid Proposals 

The guidelines provided to potential bidders varied greatly among the cases,175 ranging from a 

very detailed list of the necessary submissions to hardly any guidance at all. These guidelines can 

be separated into two categories: (1) guidelines for providing qualitative information; and (2) 

guidelines for providing information regarding the proposed fee structure under which the potential bidder is willing to represent the class. Once again, the level of detail required from the bidders regarding each of these categories varied among the cases. 

1. Guidelines for qualitative submissions 

With the exception of Judge Shadur, who requested a comprehensive curriculum vitae from the 

bidding attorneys or firms, including information on their prior class action experience,176 the 

judges who have used bidding since Judge Walker introduced the procedure in 1990, have required an increasingly detailed array of submissions from potential bidders in terms of qualitative 

information. In fact, this progression is clearly evidenced in Judge Walker’s five bidding cases that 

span the entire eleven-year period covered by the fourteen bidding cases studied in this report. In

In re Oracle, Judge Walker required potential bidders to submit information on the firm’s qualifications to serve as lead counsel consisting of “detailed descriptions of the role such firm played in 

each class action it has brought or assisted in bringing and the contribution such firm made to the 

welfare of the class plaintiffs.”177 In In re Wells Fargo, in addition to the firms’ and relevant attorneys’ experience in securities class action litigation, Judge Walker asked for the potential bidders 

to indicate their willingness to post a completion bond or other security for the faithful completion 

 

 172. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Lead Plaintiff Selection and 

Class Counsel Selection 4 (N.D. Cal. June 27, 2001). 

 173. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190 (N.D. Ill. 1996); In re Bank One 

Shareholders Class Actions, No. 00-C-880, 2000 WL 246257, at *1 (N.D. Ill. Feb. 24, 2000): In re Comdisco 

Sec. Litig., 141 F. Supp. 2d 951, 954 (N.D. Ill. 2001) (Memorandum Opinion entering attached Apr. 6, 2001 

Memorandum Order). 

 174. Telephone Interview with Senior District Judge Milton I. Shadur, Northern District of Illinois (July 

6, 2001). 

 175. See infra Appendix A for a reproduction of the complete guidelines provided by the court in each 

of the 14 bidding cases discussed in this report. 

 176. In re Amino Acid Lysine, 918 F. Supp. 1190, 1200 (N.D. Ill. 1996); In re Bank One, No. 00-C-880, 

2000 WL 246257, at *1 (N.D. Ill. Feb. 24, 2000); In re Comdisco, 141 F. Supp. 2d 951, 955 (N.D. Ill. 2001) 

(Memorandum Opinion entering attached Apr. 6, 2001 Memorandum Order). 

 177. In re Oracle Sec. Litig., 131 F.R.D. 688, 697 (N.D. Cal. 1990). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 30 

of its services to the class, as well as proof of the firm’s insurance coverage for malpractice.178

Judge Walker rejected the contention by the three bidding firms that the need for security toward 

completion of performance was obviated by the firms’ interest in maintaining their reputations. He 

pointed out that “[e]ven prominent, well-respected law firms dissolve, declare bankruptcy or otherwise become unable to carry on their practices.”179

 In In re California Micro Devices, because of Judge Walker’s frustrations over past requests 

for information on the firm and attorneys’ experience in securities class actions leading to submissions of “unhelpful puffery,” Judge Walker requested that each bidder’s qualifications be accompanied by a table that included the title, court, docket number, and date filed for each securities 

class action in which the bidder served as sole class counsel during the past three years; the 

amount of recovery obtained on behalf of the class; the percentage of the securities in the class for 

which claims were submitted; the amount of recovery (if any) distributed to the class; and total 

amounts received by the bidder, including fees and costs (if any).180 In Cylink, he added a request 

for “evidence that the firm has evaluated the case, including specifically the range and probability 

of recovery.”181 Finally, in In re Quintus, Judge Walker did not add any new requirements to his 

previous guidelines for submission of qualitative information from potential bidders.182 

 Except for Judge Shadur (see supra) and Judge Alsup, the remaining bidding judges asked for 

submissions identical or similar to Judge Walker’s requirements for qualitative information, 

adopting a few or all of the above requests.183

 In In re Network Associates and very recently in In re Commtouch, both post-PSLRA cases, 

Judge Alsup adopted a very different approach to auctioning the role of class counsel in that he 

ordered the appointed lead plaintiff to conduct the auction instead of the court, explaining that the 

“lead plaintiff has a fiduciary duty to obtain the highest quality representation for the class at the 

lowest reasonable cost.”184 Thus, his bidding guidelines were very different from those issued by 

the judges in the other bidding cases. The lead plaintiff was required to publicize a request for 

written proposals from counsel; evaluate all of the proposals received; and interview any candidates deemed appropriate. Lead plaintiff was then ordered to submit his recommendations for his 

first and second choices as class counsel to the court under seal, including a full description of his 

selection process, his conclusions, and his reasons.185 In terms of qualitative information, the court 

specified that each proposal was to include “(i) the firm’s experience in securities class actions 

and, by case as practicable, its track record in results achieved (in terms of net dollars to the class); 

(ii) the securities and trial experience of the proposed individual to be lead counsel, the second 

chair and a commitment that the lead or the second chair shall conduct all important depositions, 

 

 178. In re Wells Fargo Sec. Litig., 156 F.R.D. 223, 229 (N.D. Cal. 1994). 

 179. In re Wells Fargo, 157 F.R.D. 467, 471–72 (N.D. Cal. 1994). 

 180. In re California Micro Devices Sec. Litig., No. 94-C-2817, 1995 WL 476625, at *3 (N.D. Cal. 

1995). 

 181. Wenderhold v. Cylink Corp., 188 F.R.D. 577, 587-88 (N.D. Cal. 1999) & 189 F.R.D. 570, 573–74 

(N.D. Cal. 1999). 

 182. In re Quintus Sec. Litig., Nos. 00-C-4264 & 00-C-3894, 2001 WL 709204, at *16–17 (N.D. Cal. 

Apr. 12, 2001). 

 183. See In re Cendant Corp. Litig., 182 F.R.D. 144, 151 (D.N.J. 1998); Sherleigh Assocs., LLC v. 

Windmere-Durable Holdings, Inc., 184 F.R.D. 688, 695–97 (S.D. Fla. 1999); In re Lucent Techs., Inc., 194 

F.R.D. 137, 157 (D.N.J. 2000) & No. 00-C-621, Letter-Opinion 44–45 (D.N.J. Apr. 17, 2001); In re Auction 

Houses Antitrust Litig., 197 F.R.D. 71, 73–74 (S.D.N.Y. 2000). 

 184. In re Network Assocs., Inc., Sec. Litig., No. 99-C-01729, Lead Plaintiff’s Request for Proposals for 

Class Counsel 2 (N.D. Cal. Dec. 22, 1999). 

 185. Id. & In re Network Assocs., 76 F. Supp. 2d 1017, 1034 (N.D. Cal. 1999). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 31 

court hearings and settlement negotiations, and that the lead shall conduct the trial. . .”186 In addition, Judge Alsup required the lead plaintiff to inquire into and eliminate any conflict issue that a 

firm submitting a bid proposal might have before recommending that firm.187

 Likewise, in his recently issued order appointing lead plaintiff in In re Commtouch, Judge 

Alsup once again required the lead plaintiff to invite proposals from candidates for class counsel, 

interview candidates, evaluate the applications and make his recommendations for his top three 

choices for class counsel to the court in a private in-chambers conference.188 Judge Alsup went 

even further in In re Commtouch than he did in In re Network Associates by requiring each bid 

proposal to include responses to a court-provided “Questionnaire for Potential Class Counsel.” 

These additional guidelines may have been necessitated by the unique circumstances in In re 

Commtouch, namely, the lead plaintiff is a resident of Israel with limited facilities in English.189 In 

terms of qualitative information, the Questionnaire required each firm to identify the one individual that would serve as lead class counsel, and provide details concerning the proposed candidate’s 

(1) trial experience as lead trial counsel; (2) experience as lead class counsel in securities-fraud 

class actions for which a resolution at the district court was reached, including details of any settlement; and (3) extent of commitment to the case. In addition, with regard to the candidate for 

lead trial counsel and all other individual lawyers who the firm identifies as having a substantial 

role in investigation, discovery, trial or settlement, the firm’s bid proposal must state whether the 

identified attorneys have ever been subject to any disciplinary action. 190 

2. Guidelines for quantitative submissions 

With respect to guidelines for fee proposals, once again Judge Walker’s cases evidence the increasing specificity in this area. And once again Judge Shadur is the exception to this trend. In In 

re Oracle, Judge Walker asked bidders to specify the percentage of any recovery they would 

charge as fees and costs if a recovery for the class is achieved. Bidders were also requested to certify that its compensation proposal was independently prepared and that no part was revealed to 

any other bidder prior to filing with the court. Potential bidders were barred from conferring with 

other firms as they prepared their bids.191 In In re Wells Fargo, in addition to specifying the percentage of any recovery the firm would charge as fees and costs, potential bidders had to include 

the terms under which such fees and costs would be charged, such as monetary increments, and 

time and event contingencies.192 In re California Micro Devices marked the initial appearance of 

the “bid grid.” All bidders were required to specify fees and costs as a percentage of recovery using a table or grid created by the court with input from the attorneys that set forth specific recovery 

ranges and event contingencies.193 

 

 186. 76 F. Supp. 2d at 1034. 

 187. In re Network Assocs., No. 99-C-01729, Order Supporting Robert A. Vatuone as Lead Plaintiff 2 

(N.D. Cal. Dec. 15, 1999). 

 188. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re: Lead Plaintiff Selection 

and Class Counsel Selection 5 (N.D. Cal. June 27, 2001). 

 189. Id. at 2. 

 190. Id. at 2, app. B. For a reproduction of the entire questionnaire, see infra Appendix A. 

 191. In re Oracle Sec. Litig., 131 F.R.D. 688, 697 (N.D. Cal. 1990). The court left it within an applicants 

discretion whether or not to specify alternative contingent events and the corresponding percentages to be 

charged. However, if they did so the applicant was required to provide an estimate of the amount of recovery 

at each contingent event and the basis for that estimate. Id. at 697 n.22. 

 192. In re Wells Fargo Sec. Litig., 156 F.R.D. 223, 229 (N.D. Cal. 1994). 

 193. In re California Micro Devices Sec. Litig., No. 94-C-2817, 1995 WL 476625, at *3 (N.D. Cal. 

1995). See infra Appendix A for a reproduction of the bid grid. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 32 

 In Cylink, Judge Walker provided bidders with a similar table that set forth specific recovery 

ranges and event contingencies. In addition, potential bidders had to explain why the percentage 

fee arrangement they submitted was based on increasing, decreasing, or straight percentages with 

respect to monetary increments and/or the stage of litigation at which recovery was achieved.194

Although bidders were permitted to chose either rising, falling, or straight percentages, Judge 

Walker clearly stated his strong preference for decreasing percentages as the amount of recovery 

increases and increasing percentages as the amount of attorney effort necessary to produce recovery increases.195 Judge Walker explained that such a fee structure is preferable because “increasing 

amounts of recovery do not require corresponding increased levels of attorney effort and these 

economies of effort should be shared with the class.”196 

 Finally, in In re Quintus Judge Walker required bidders to use a court-provided grid or table 

to specify fees and costs for each level of recovery and stage of litigation. The fee proposals were 

required to take a sliding scale format, meaning that for each incremental monetary level of recovery the fee percentage for that increment applied only to that increment, even if recovery exceeded 

that amount. The table permitted fee proposals to vary the percentage for recovery at one of four 

stages in the litigation: (1) from pleading through motion to dismiss; (2) after motion to dismiss 

through summary judgment; (3) after summary judgment through trial verdict; and (4) after trial 

verdict through final appellate determination.197

 Judge Shadur’s guidelines for fee proposals differed greatly from the guidelines described 

above. In all three of his cases, Judge Shadur left it within the “discretion of all bidding counsel to 

decide just how they would formulate their proposals.”198 In In re Bank One, Judge Shadur explained that “. . . in an effort to maximize the potential for ultimate benefit to the class members, 

this Court (again as in Lysine) did not set its own structural standards for the bids. In that respect, 

any bidding constraints that this Court (not having more than threshold knowledge of the litigation 

and its prospects) might have imposed from the outside in the form of mandated structural limitations would necessarily have generated corresponding limitations on the exercise of imagination 

by bidding counsel in devising proposals that they thought would provide the maximum benefit to 

the class, while at the same time providing the successful lawyers with adequate compensation.”199

 Judge Walls and Judge Lechner both provided potential bidders with bid grids specifying recovery increments and event contingencies.200 In the first round of bidding in In re Lucent (Lucent 

I), Judge Lechner subsequently clarified his original fee guidelines to require that bid proposals 

reflect his preference that the percentage charged as compensation for fees and expenses should 

decline as the fund increases “in order to avoid excessive compensation to counsel, while still providing motivation to class counsel.”201 Again in the second round of bidding to select a co-lead 

counsel (Lucent II), Judge Lechner clearly stated his preference for a “schedule which allows for a 

 

 194. Wenderhold v. Cylink Corp., 188 F.R.D. 577, 587–88 (N.D. Cal. 1999) & 189 F.R.D. 570, 573–74 

(N.D. Cal. 1999). See infra Appendix A for a reproduction of the bid grid. 

 195. 189 F.R.D. at 571. 

 196. Id. at 572. 

197. In re Quintus Sec. Litig., Nos. 00-C-4263 & 00-C-3894, 2001 WL 709170, at *7 (N.D. Cal. May 

31, 2001). See infra Appendix A for a reproduction of the bid grid. 

 198. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190, 1193 (N.D. Ill. 1996). 

 199. In re Bank One Shareholders Class Actions, 96 F. Supp. 2d 780, 785 (N.D. Ill. 2000). 

 200. In re Cendant Corp. Litig. 82 F.R.D. 144, 151 (D.N.J. 1998); In re Lucent Techs. Inc., Sec. Litig., 

194 F.R.D. 137, 157 (D.N.J. 2000). See infra Appendix A for a reproduction of the bid grids. 

 201. In re Lucent Techs. Inc., Sec. Litig., No. 00-C-621, Letter-Opinion 16 (D.N.J. Aug. 2, 2000) (citing 

June 13, 2000 Letter). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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rising fee as the litigation continues, but a declining fee as the total class recovery increases within 

each stage of the litigation” which results in maximum potential recovery for both class members 

as well as the attorneys.202 Further, Judge Lechner stated that this format creates a disincentive for 

the lead counsel to “sell out” the class because at no point should its efforts hypothetically outweigh its potential recovery.203 In all other respects including the bid grid employed, the fee guidelines were identical to those imposed in the first round of bidding.204 

 In In re Network Associates, although the lead plaintiff was in charge of inviting bids (see 

supra), Judge Alsup provided the lead plaintiff with guidelines for the fee portion of the proposals. 

Although bidders did not have to fill in a bid grid, each bidder was required to submit two fee proposals, one based on percentage of recovery and the other based on hourly rates (i.e., lodestar 

method).205 However, in In re Commtouch the proposals to be submitted and evaluated by the lead 

plaintiff had to contain responses to a court-created “Questionnaire for Class Counsel Candidates” 

which required counsel to complete a “Fee Schedule Grid” stating the percentage fees they would 

accept for each of four event contingencies if selected as class counsel.206 Counsel were permitted 

to adjust the monetary brackets. In addition, bidders were required to state the hourly rates they 

would be willing to accept on a lodestar basis. Judge Alsup clarified that the “Court will have to 

assess at the end of the case whether the amounts set forth are fair and reasonable, so there is no 

guarantee that counsel, if appointed, would automatically receive the amounts indicated.”207 Furthermore, Judge Alsup alerted bidders that if approved as class counsel, counsel would have to 

maintain time records in accordance with the format set forth in the form “Time Records” (infra

Appendix A) so he could make an informed fee award, and they would have to agree to advance to 

the lead plaintiff all reasonable expenses incurred pursuant to his duties as lead plaintiff.208

 In Sherleigh Associates, Judge Lenard required each fee proposal to set forth (1) evidence that 

the firm evaluated the case, the range and probability of recovery, and premised the bid on that 

evaluation; (2) a description of whether expenses and costs would be subtracted from the overall 

settlement, or from the attorney fee award portion of recovery; (3) the percentage of recovery the 

firm would charge as fees and costs including an explanation of why the percentage fee arrangement is based on increasing, decreasing or straight percentages with respect to monetary increments and/or stage of litigation at which recovery is reached; and (4) a certification that the firms 

proposal was prepared independently of any other firm, entity, or person not affiliated with the 

firm; that no part of the proposal was disclosed to anyone outside the firm prior to filing the proposal with the Court; and that the proposal was prepared without direct or indirect consultation 

with other firms that have filed actions or entered an appearance in any fashion on behalf of the 

proposed class.209 Judge Lenard gave bidders the option of using a court-provided Fee Grid 

Schedule.210 In addition to these requirements, some or all of which were also contained in the 

 

 202. In re Lucent Techs., No. 00-C-621, Letter-Opinion 44–45 (D.N.J. Apr. 17, 2001). 

 203. Id.

 204. Id. at 45–48. 

 205. In re Network Assocs. Sec. Litig., 76 F. Supp. 2d 1017, 1034 (N.D. Cal. 1999). 

 206. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Lead Plaintiff Selection and 

Class Counsel Selection 5, app. B at 2, 3 (N.D. Cal. June 27, 2001). See infra Appendix A for a reproduction 

of the questionnaire and bid grid. 

 207. In re Commtouch, at app. B, at 2. 

 208. Id. at app. B, at 2, 4–5. See infra Appendix A for a reproduction of the “Time Records” form. 

 209. Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., 184 F.R.D. 688, 696–97 (S.D. Fla. 

1999). 

 210. Id. at 697. See infra Appendix A for a reproduction of the optional Fee Schedule Grid. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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guidelines of most of the other bidding judges (except for Judge Shadur), Judge Lenard asked for a 

“defense of the bid that describes how the fees and cost charges will motivate the firm to adequately represent the class.”211

 Judge Kaplan stands alone in his approach to structuring the bidders’ fee proposals. Each bidder was asked to identify an X factor, below which 100% of recovery would go to the class and 

above which 75% of the recovery would go to the class. The remaining 25% above X would be 

paid to lead counsel as attorneys’ fees and costs.212 

E. Specific Features of Auction Procedures Required by the 

Courts 

Our review of the court-issued guidelines for bid submissions identified a number of practices that 

were used by one or more judges. For each bidding case described in this report, the following 

tables show which of these specific features were implemented by the court in each particular 

case. Immediately following the tables, these features are discussed in more detail. 

 

 211. Id.

 212. In re Auction Houses Antitrust Litig., 192 F.R.D. 71, 74 (S.D.N.Y. 2000). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Table 2: Auction Features Required of or Permitted by the Courts 

Case Name, 

Docket No., and 

Judge 

Sealed 

Bids 

Required 

Joint Bids 

Permitted 

Caps on 

Fees or 

Expenses 

Required 

Fee Proposal 

Required to 

Include 

Expenses 

Modification of 

Caps at Time of 

Fee Award 

Permitted 

Structured 

Bids Required 

In re Oracle 

No. 90-C-931 

(Walker) 

Yes No No Yes No No 

In re Wells Fargo 

No. 91-C-1944 

 (Walker) 

Yes No No Yes No Yes 

In re Cal. Micro 

Devices, No. 94-C2817 (Walker) Yes No No Yes No Yes 

(bid grid) 

In re Amino Acid 

Lysine, No. 95-C7679 (Shadur) Yes No No No Yes No 

In re Cendant 

No. 98-C-1664 

(Walls) 

Yes Yes No No No Yes 

(bid grid) 

Cylink 

No. 98-C-4292 

(Walker) 

Yes No No Yes No Yes 

(bid grid) 

Sherleigh Assocs. 

No. 98-C-2273 

(Lenard) 

Yes No No Yes No 

Yes 

(bid grid optional) 

In re Network 

Assocs., No. 99-C1729 (Alsup) Yes No No No No No 

In re Auction 

Houses, No. 00-C648 (Kaplan) Yes No No Yes No Yes 

In re Bank One 

No. 00-C-880 

(Shadur) 

Yes Yes No No Yes No 

In re Lucent 

No. 00-C-621 

(Lechner) 

Yes No No Yes No Yes 

(bid grid) 

In re Quintus 

No. 00-C-4263 

(Walker) 

Yes No No Yes No Yes 

(bid grid) 

In re Comdisco 

No. 01-C-2110 

(Shadur) 

Yes Yes No No Yes No 

In re Commtouch 

No. 01-C-00719 

(Alsup) 

Yes No No No No Yes 

(bid grid) 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 36 

Table 2 (cont’d): Auction Features Required of or Permitted by the Courts 

Case Name, 

Docket No. and 

Judge 

Use of an 

X-Factor 

Required 

Fee Proposal 

Required to be 

Based on Percentage 

of Class Recovery 

Right of 

First 

Refusal 

Permitted 

Counsel Conducting 

Initial Investigation 

Expressly Permitted to 

Receive Compensation 

Appointment of 

Unaffiliated Counsel to 

Assist with Case 

Expressly Permitted 

In re Oracle 

No. 90-C-931 

(Walker) 

No Yes No No Not addressed 

In re Wells Fargo 

No. 91-C-1944 

 (Walker) 

No Yes No Yes Yes 

In re Cal. Micro 

Devices 

No. 94-C-2817 

(Walker) 

No Yes No No Not addressed 

In re Amino Acid 

Lysine 

No. 95-C-7679 

(Shadur) 

No No No No Yes 

In re Cendant 

No. 98-C-1664 

(Walls) 

No Yes Yes No Yes 

Cylink 

No. 98-C-4292 

(Walker) 

No Yes No No Yes 

Sherleigh Assocs. 

No. 98-C-2273 

(Lenard) 

No Yes No No Yes 

In re Network 

Assocs. 

No. 99-C-1729 

(Alsup) 

No Yes No No Not addressed 

In re Auction 

Houses 

No. 00-C-648 

(Kaplan) 

Yes Yes No No Not addressed 

In re Bank One 

No. 00-C-880 

(Shadur) 

No No No Yes Yes 

In re Lucent 

No. 00-C-621 

(Lechner) 

No Yes No No Yes 

In re Quintus 

No. 00-C-4263 

(Walker) 

No Yes No No Yes 

In re Comdisco 

No. 01-C-2110 

(Shadur) 

No No No No Yes 

In re Commtouch 

No. 01-C-00719 

(Alsup) 

No Yes No No Expressly prohibited 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 37 

1. Sealed bids 

In each of the fourteen bidding cases, the court required the bidders to submit their bid proposals 

under seal (i.e., the contents of the proposal were not available for disclosure to anyone except the 

court). Judge Shadur explained that he requests sealed bids in the possibility he decides not to use 

bidding because of events unforeseen (e.g., bids were extremely difficult to compare) when bids 

were solicited, in which case he will either ask the bidders to submit additional information or 

return the bids to the bidders and no one would be apprised of what counsel would have been prepared to do.213

 In In re Quintus, Judge Walker required sealed bids to ensure their confidentiality up to the 

point of selection of class counsel.214 And Judge Lechner stated that the “proposed bids are to be 

submitted under seal so as to mitigate against the possibility of collusion and maintain the confidentiality of attorney work product to the extent such is revealed in a bid.”215 Although a court’s 

authority to request that documents including bids be submitted under seal was not under scrutiny, 

the Third Circuit recently found that the district court abused its discretion in In re Cendant when 

it issued a confidentiality order keeping the identities of the bidders and the nature of their proposals sealed until the conclusion of the case.216 

2. Joint bids 

Only Judge Walls and Judge Shadur permitted two or more firms to join together and submit a bid 

as a joint effort.217 Judge Shadur barred the submission of joint bids in the first case in which he 

used competitive bidding “in order to maximize competition in the best interests of the prospective 

plaintiff class.”218 Judge Shadur explained that firms associated prior to bid submission did not fall 

under this prohibition of joint bids in Lysine. He wouldn’t force a single firm to divorce itself from 

other firms or attorneys with whom it may have made an up-front arrangement. However, Judge 

Shadur would not permit firms not previously associated at the outset of the case to engage in discussions between themselves because this tends to lessen the quality and freedom of bidding by 

chilling the market.219 However, he later announced in his two subsequent bidding cases that he 

would contemplate appointing co-class counsel.220 Judge Shadur made it clear that if he were to 

appoint co-class counsel to represent the plaintiff class, a joint bid must represent the total fees 

that would be contemplated to be paid to all co-counsel including the bidder.221

 

 213. In re Bank One Shareholders Class Actions, No. 00-C-880, Transcript of Proceedings Before the 

Honorable Milton I. Shadur 17 (N.D. Ill. Feb. 18, 2000). 

 214. In re Quintus Sec. Litig., Nos. 00-C-4263 & 00-C-3894, 2001 WL 709170, at *7 (N.D. Cal. May 

31, 2001). 

 215. In re Lucent Techs. Inc., Sec. Litig., No. 00-C-621, Letter-Opinion 47 (D.N.J. Apr. 17, 2001). 

 216. In re Cendant Corp. Sec. Litig., No. 98-C-1664 (3d Cir. Aug. 8, 2001) (Order vacating sanction for 

violation of District Court’s sealing order and requiring unsealing of all previously sealed documents). See 

infra Section VI.G. 

 217. In re Cendant Corp. Litig., 182 F.R.D. 144, 151 (D.N.J. 1998); In re Bank One shareholders Class 

Actions, No. 00-C-880, 2000 WL 246257, at *1 (N.D. Ill. Feb. 24, 2000); In re Comdisco Sec. Litig., 141 F. 

Supp. 2d 951, 955 (N.D. Ill. 2001) (Memorandum Opinion entering attached Apr. 6, 2001, Memorandum 

Order). 

 218. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190, 1192 (N.D. Ill. 1996). 

 219. Telephone Interview with Senior District Judge Milton I. Shadur, Northern District of Illinois (July 

6, 2001). 

 220. In re Bank One Shareholders Class Actions, No. 00-C-880, 2000 WL 246257, at *1 (N.D. Ill. Feb. 

24, 2000); In re Comdisco, 141 F. Supp. 2d at 955. 

 221. Id. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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 In In re Wells Fargo, although Judge Walker did not ban joint bids altogether, he prohibited a 

joint bid by the two firms who had served as de facto class counsel—the firms were de facto class 

counsel because of their work in the case prior to Judge Walker’s announcement that he would use 

a competitive bidding process to select class counsel. He explained that although a “joint bid by 

two or more firms otherwise too small to take on class counsel responsibilities would introduce a 

new competitor to the selection process,” in this case both Lieff, Cabraser and Milberg, Weiss 

were large, well-financed firms plainly able to handle the litigation without the assistance of another firm and, because of their prior work as de facto class counsel, both firms had a qualitative 

advantage in the bidding process.222 Thus, he concluded that allowing a joint bid by two dominant 

firms “might very well eliminate whatever possibility remains in this case of a meaningful competition to secure class counsel designation. Accepting a joint bid by these two firms would be tantamount to turning over the litigation to a two-firm steering committee.”223

 In In re Commtouch, although Judge Alsup did not permit a consortium of firms to join together in their bid, he did invite bidders to submit proposals to the lead plaintiff for both the appointment of a firm in Israel to serve as special class counsel and a separate firm in the United 

States to serve as lead litigation and trial counsel.224 He explained that “[s]ince Commtouch is an 

Israeli company, the class will be benefited by having a representative in Israel, fluent in Hebrew, 

as well as counsel in the United States.”225

3. Fee and/or expense caps 

Although bidders in several auction cases voluntarily submitted bid proposals containing a cap on 

the total amount of attorneys’ fees and/or a cap on the total amount of expenses for which the bidder could request reimbursement,226 not one judge required bids to include a fee or an expense cap. 

Although bids were not required to contain an expense cap, Judge Walker defended the winning 

bid’s inclusion of an expense cap in In re Oracle explaining that “full reimbursement of expenses 

encourages a form of cheating. The prospect of reimbursement tempts class counsel to allocate a 

portion of their overhead costs to specific litigation. Law office administration, secretarial, docket, 

work processing, accounting, library, clerical and other costs that must be incurred to enable the 

firm to operate at all can under some guise be allocated to the litigation at hand.”227

 Judge Shadur admitted that in In re Amino Acid Lysine he did not anticipate that a bidder 

would voluntarily self-impose a fee cap, which proved to be an enormous benefit to the class. He 

would not have required a cap if he had required structured bids. However, he explained that this 

didn’t convince him to impose fee caps in his subsequent bidding cases because it may not fit or 

be fair to the particular litigation.228

 

 222. In re Wells Fargo Sec. Litig., 156 F.R.D. 223, 226 (N.D. Cal. 1994). 

 223. Id.

 224. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Lead Plaintiff Selection and 

Class Counsel Selection 4–5 (N.D. Cal. June 27, 2001). 

 225. Id. at 2. 

 226. In re Oracle Sec. Litig., 132 F.R.D. 538 (N.D. Cal. 1990) (expense cap); In re Amino Acid Lysine 

Antitrust Litig., 918 F. Supp. 1190 (N.D. Ill. 1996) (fee cap); In re Bank One Shareholders Class Actions, 96 

F. Supp. 2d 780 (N.D. Ill. 2000) (fee cap); In re Comdisco Sec. Litig., No. 01-C-2110, Memorandum Opinion and Order (N.D. Ill. June 25, 2001) (fee caps). 

 227. In re Oracle Sec. Litig., 136 F.R.D. 639, 644 (N.D. Cal. 1991). 

 228. Telephone Interview with Senior District Judge Milton I. Shadur, Northern District of Illinois (July 

6, 2001). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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 Judge Kaplan points out that although an attorney fee cap prevents the investment of needless 

attorney hours in a case, it may create an incentive for lead counsel to settle the case exactly at the 

level at which the fee reaches its maximum, even if that level is suboptimal from plaintiffs’ perspective.229 In addition, if disclosed to defendants, the fee cap can lead defendants to exploit the 

disjuncture of interests between plaintiffs and their counsel by making a firm settlement offer in 

the amount that would exactly maximize counsel’s fee, even if defense counsel otherwise would 

be prepared to go higher. The fee cap gives lead counsel incentive to agree to settle at this amount 

and not press for an award more favorable to the plaintiffs. Likewise, Judge Kaplan explained that 

a cap on expenses, even though it reduces runaway litigation expenses, encourages lead counsel to 

cease prosecuting the case as soon as expenses have reached the cap level.230

4. Fee proposal required to include attorney fees and expenses 

In eight of the fourteen cases, the court required bidders to include all costs or expenses in addition 

to fees in the percentage of total class recovery the bidder would charge in the event of recovery 

by the class. See supra Table 2. Judge Walker followed this approach in all five of his bidding 

cases, clearly stating that “[n]o separate reimbursement for out-of-pocket expenses would be allowed.”231 In fact, in the first round of bidding in Cylink, Judge Walker rejected the sole bidder’s 

proposal and ordered a second round of bidding because the firm’s bid for designation as class 

counsel failed to comply with the court’s bid request in that its percentage-of-the-recovery fee 

schedule did not include litigation expenses.232 Judge Walker explained that divorcing recovery of 

fees and costs “encourages counsel to inflate costs calculations, since any reimbursement of costs 

will supplement the percentage fee award. It creates an incentive for the firm to categorize as costs 

anything that could conceivably be so considered and diminished the incentives for the firm to 

economize by choosing the optimal mix of attorney effort and non-attorney inputs.”233

 Judge Lenard went even further in Sherleigh Associates and ordered the bidders to describe 

and justify how expenses and costs would be borne, whether they would be subtracted from the 

overall settlement itself, or from the attorney fee award portion, including a defense of the firm’s 

ability to fund such costs.234 

5. Modification of caps at time of fee award 

Only Judge Shadur included a provision that would allow the successful bidder to request a fee 

award in excess of the cap on fees voluntarily specified by the successful bidder. Lysine, Bank 

One, and Comdisco were the only bidding cases in which bidders submitted bids with self-

 

 229. In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 80 (S.D.N.Y. 2000). 

 230. Id. See also Joseph A. Grundfest, Attorneys Fees in Class Action Securities Fraud Litigation: A 

Proposal for Addressing a Problem That Has No Perfect Solution 8 (Testimony Presented Before the Third 

Circuit Task Force on Selection of Class Counsel, June 1, 2001) (draft on file with author) & John C. Coffee, 

Jr., Untangling the ‘Auction Houses’ Aftermath, 224 N.Y. L.J. 1, col. 1 nn.6–7 (Nov. 30, 2000) (both criticizing the fee cap voluntarily agreed to by the winning bidder in In re Amino Acid Lysine Antitrust Litig.). 

 231. In re California Micro Devices Sec. Litig., No. 94-C-2817, 1995 WL 476625, at *3 (N.D. Cal. 

1995). 

 232. Wenderhold v. Cylink Corp., 189 F.R.D. 570 (N.D. Cal. 1999). 

 233. Id. at 573. 

 234. Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., 184 F.R.D. 688, 686–97 (S.D. Fla. 

1999). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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imposed fee caps.235 Judge Shadur explained that he included the provision to avoid any potential 

for creating increased incentives for lead counsel to sell out the class members by settling too 

early.236

6. Structured bids 

In eight of the fourteen bidding cases, bidders were required to specify the percentage of any recovery the firm would charge as fees and in some cases costs for monetary increments and/or time 

and event contingencies. See supra Table 2. In two of these cases, the court left it up to the bidders 

to define the recovery increments and/or stage of proceeding contingencies, although in Sherleigh 

Associates Judge Lenard did provide the bidders with an optional Fee Schedule Grid.237 In the 

other six cases, the court supplied the values for the monetary increments and defined the stage of 

proceeding contingencies.238 Bidders were required to fill out each block in these “bid grids” with 

a figure that represented fees, and in some cases costs, as a percentage of total class recovery. For 

example, in In re Cendant, for eight different recovery increments stated in dollars (i.e., first 

100m, second 100m, third 100m, next 50m, next 50m, next 50m, next 50m, over 500m) and four 

separate phases at which litigation is resolved (i.e., recovery during pleadings through adjudication 

of any motion to dismiss, recovery during discovery through adjudication of summary judgment 

motion, recovery after adjudication of summary judgment motion through trial verdict, recovery 

posttrial), each bidder was required to state their fees as a percentage of total class recovery.239

 In In re Commtouch, although Judge Alsup required bidders to complete a grid stating the 

percentage fees he or she would accept if selected as class counsel, he stressed that the grid was 

not intended to either encourage or discourage increasing or decreasing percentage bids or flat 

percentage bids, but merely to clarify and standardize presentation.240 The court allowed bidders to 

adjust the brackets as they saw fit.241 As discussed below, although the court in In re Auction 

Houses did provide specific guidelines for how each bid should be structured, this bid structure 

was very different from that required in the other cases discussed above. 

7. Use of an X-factor 

Only Judge Kaplan in In re Auction Houses required bidders to identify an X-factor in their bids—

i.e., a figure below which 100% of recovery would go to the class. For any recovery above the 

 

 235. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190 (N.D. Ill. 1996); In re Bank One 

Shareholders Class Actions, 96 F. Supp. 2d 780 (N.D. Ill. 2000); In re Comdisco Sec. Litig., No. 01-C-2110, 

Memorandum Opinion and Order (N.D. Ill. June 25, 2001). 

 236. In re Bank One Shareholders Class Actions, No. 00-C-880, Transcript of Proceedings Before the 

Honorable Milton I. Shadur 46 (N.D. Ill. June 1, 2001). 

 237. In re Wells Fargo Sec. Litig., 156 F.R.D. 223 (N.D. Cal. 1994); Sherleigh Assocs., LLC v. Windmere-Durable Holding, Inc., 184 F.R.D. 688, 697 (S.D. Ill. 1999). See infra Appendix A for a reproduction of 

the optional Fee Schedule Grid. 

 238. In re California Micro Devices Sec. Litig., No. 94-C-2817, 1995 WL 476625 (N.D. Cal. 1995); In 

re Cendant Corp. Litig., 182 F.R.D. 144 (D.N.J. 1998); In re Lucent Techs., Inc. Sec. Litig., 194 F.R.D. 137 

(D.N.J. 2000); In re Quintus Sec. Litig., In re Quintus Sec. Litig., Nos. 00-C-4263 & 00-C-3894, 2001 WL 

709170 (N.D. Cal. May 31, 2001): In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re 

lead Plaintiff Selection and Class Counsel (N.D. Cal. June 27, 2001). See infra Appendix A for a reproduction of the bid grids. 

 239. In re Cendant Corp. Litig., 182 F.R.D. 144 (D.N.J. 1998). 

 240. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Lead Plaintiff Selection and 

Class Counsel Selection, app. B, at 2 (N.D. Cal. June 27, 2001). 

 241. Id.
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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value of X, 75% of the recovery would go to the class and the remaining 25% above X would be 

paid to lead counsel. In addition, the bid was to be inclusive of all attorney’s fees, disbursements, 

and other charges incurred in connection with the litigation.242 This fee structure was revised from 

an earlier structure that required each bidder to identify both an X-factor and a Y-factor. One hundred percent of any gross recovery less than X would be retained by the class free of attorney’s 

fees; 100% of any gross recovery in excess of X, up to and including Y, would go to lead counsel; 

and one fourth of any recovery in excess of Y would be paid to lead counsel as additional compensation and three fourths to the class.243 The court revised the original guidelines to contain only an 

X-factor after considering comments from amicus submissions and several bidders.244

 Judge Kaplan arrived at this fee structure after an extensive discussion of the problems of 

choosing and compensating counsel; the drawbacks of the lodestar and the percentage-of-recovery 

methods; the collective action dilemma in class actions (i.e., the fee structure motivates the attorney to pursue his or her own economic interest at the expense of the client); and the procedural 

disadvantages for class action plaintiffs.245 In addition he examined specific features used in prior 

cases that have conducted lead counsel auctions discussing their advantages and disadvantages as 

well as possible drawbacks of lead counsel auctions.246 Judge Kaplan stated that he “undertook to 

establish a method of counsel selection and a fee structure that, in the context of this case, would 

begin to address some of these concerns and seek to align counsel’s and plaintiffs’ interests more 

fully.”247

 Judge Kaplan does point out that there is a potential incentive problem with the fee structure 

he ultimately adopted in that it could become apparent at some point that the case cannot be resolved in an amount greater than X, and thus counsel would receive no further compensation, 

leaving counsel with an incentive to settle the case immediately.248 This potential conflict is exacerbated by the fact that lead counsel is required to pay all expenses out of the fee award, making it 

even more costly for counsel to continue with the case. However, Judge Kaplan argued that the 

unique circumstances of In re Auction Houses made this potential attorney–client conflict of interest unlikely because the court can reject an inadequate settlement, and the court’s access to documents the defendants furnished to the government in its criminal investigation as well as the plaintiffs’ damage analysis, gave the court an advantage with which to evaluate the bids to ensure the 

bid selected was not unreasonably high.249

8. Fee proposal required to be based on increasing, decreasing or straight percentages of 

class recovery 

All the bidding cases except for In re Amino Acid Lysine, In re Bank One, and In re Comdisco 

(Judge Shadur) required bidders to structure their fee proposals as a percentage of total class recovery.250 Early on in In re Wells Fargo, Judge Walker examined three alternative methods of 

 

 242. In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 74 (S.D.N.Y. 2000). 

 243. Id. at 73. 

 244. Id. at 74. 

 245. Id. at 75–80. 

 246. Id. at 78–82. 

 247. Id. at 82. 

 248. Id. at 84–85. 

 249. Id.

 250. Note that in In re Network Associates, Judge Alsup required bidders to submit two fee proposals, 

one based on percentage of recovery and the other based on hourly rates (lodestar method). In re Network 

Assocs., Inc., Sec. Litig., 76 F. Supp. 2d 1017, 1034 (N.D. Cal. 1999). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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compensation (blended hourly rate method, percentage fee method, and blended hourly rate with 

percentage cap) and concluded that the “analysis necessary to submit an intelligent bid under all 

three approaches should be identical. A bidder must estimate the range of recovery likely to be 

achieved and the time and effort required to achieve it.”251 However, rather than permitting attorneys to submit bids with any approach they desired (which would result in the “obvious apples 

and oranges problem”), he would require competing attorneys to use the percentage fee approach.252

 In Cylink, Judge Walker informed interested bidders that “it is the court’s belief that a ‘percentage of recovery fee’ calculation holds the best promise of harmonizing the interests of the 

class and its future counsel.”253 Although bidders were permitted to choose either rising, falling, or 

straight percentages, in Cylink Judge Walker clearly stated his strong preference for a decreasing 

percentage scheme (decreasing percentages as recovery increases) and increasing percentages as 

the amount of attorney effort necessary to produce recovery increases.254

 Besides this strong preference expressed by Judge Walker in Cylink and besides requiring 

bidders to explain why they chose either rising, falling, or straight percentages,255 no other judges 

except for Judge Lechner and Judge Kaplan actually required increasing, decreasing, or flat percentage bids. In the first round of bidding in Lucent I, Judge Lechner stated that “although it is the 

view of the court that while fees should be awarded in recognition of work performed, as well as 

the result achieved, the percentage charged as compensation for fees and expenses should decline 

as the fund increases, in order to avoid excessive compensation to counsel, while still providing 

motivation to class counsel.”256 

 Judge Kaplan pointed out the flaws in both the declining and increasing percentage-ofrecovery method. By adjusting downward the percentage of the recovery awarded to counsel as 

plaintiffs’ recovery increases, the declining percentage-of-recovery fee structure may limit windfall attorney’s fee awards, but it may also create an incentive for attorneys to settle quickly and 

cheaply, when the returns to effort are highest, rather than investing additional time and maximizing plaintiffs’ recovery.257 Although the increasing percentage-of-recovery method gives counsel 

an incentive to avoid premature settlement and push for a higher plaintiffs’ recovery, this fee 

structure may also encourage plaintiffs’ lawyers to eschew settlement in search of a very high recovery, even if this strategy is overly risky for plaintiffs. In addition, it is difficult to choose the 

increments of plaintiffs’ recovery that correspond to an increase in counsel fees so as not to set 

them too high or low thus eliminating the positive effect of the increasing percentage of recovery 

method.258 Therefore, in order to avoid these short-comings, Judge Kaplan required bidders to 

adhere to a type of straight percentage scheme in which class counsel would only receive 25% of 

any recovery above the chosen X-factor, regardless of the size of the recovery above X.259

 

 251. In re Wells Fargo Sec. Litig., 156 F.R.D. 223, 227–28 (N.D. Cal. 1994). 

 252. Id. at 228. 

 253. Wenderhold v. Cylink Corp., 188 F.R.D. 577, 587 (N.D. Cal. 1999). 

 254. Cylink, 189 F.R.D. 570, 571 (N.D. Cal. 1999). 

 255. Cylink, 188 F.R.D. at 587–88; Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., 184 

F.R.D. 688, 696–97 (S.D. Fla. 1999). 

 256. In re Lucent Techs., Inc., Sec. Litig., No. 00-C-621, Letter-Opinion 16 (D.N.J. Aug. 2, 2000) (citing June 13, 2000 Letter). 

 257. In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 80 (S.D.N.Y. 2000). 

 258. Id. at 81. 

 259. See supra Section V.E.7. 
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9. Right of first refusal 

Only Judge Walls in In re Cendant permitted the lead plaintiffs’ original counsel to match the 

terms of the court-selected lowest qualified bidder. Although Judge Walls determined that counsel 

would be selected competitively, he recognized that the Private Securities Litigation Reform Act 

gave lead plaintiffs the opportunity to choose counsel subject to the court’s approval.260 Thus, he 

provided that if lead plaintiff’s present counsel was not the lowest qualified bidder and was otherwise qualified, he would give them the “opportunity to agree to the terms of what the Court has 

found to be the lowest qualified bid. If that person or entity accepts those terms, lead counsel 

status will be conferred upon it by the Court. If counsel does not exercise this right of first refusal, 

the lowest qualified bidder will serve the plaintiffs.”261 Both of lead plaintiffs’ original counsel262

exercised their right of first refusal and accepted the terms and fee bid schedules of the lowest 

qualified bidders. 

 In Cylink, Judge Walker rejected the original counsel’s plea that their representation of the 

designated lead plaintiff should entitle the firm to a “right of first refusal.”263 Judge Walker distinguished In re Cendant, explaining that lead plaintiff in Cylink, being an individual investor, 

“shares none of the characteristics that supported respect for lead plaintiffs’ choice of representation in Cendant”, specifically a large institutional investor with a firmly established relationship 

with counsel, and a demonstrated capability and willingness to monitor the conduct of class counsel.264 

 In addition to specifically refusing to provide for a right to match the most favorable attorney 

bid, Judge Shadur in In re Bank One was very critical of the practice. He explained that the “right 

of first refusal is the best way to get an automatic depressing effect on bidders. Certainly fewer 

people are going to be prepared to bid seriously if they know they can lose out even if they turn 

out to have submitted the best offer.”265 Likewise, Judge Kaplan pointed out that a right of first 

refusal “takes control over the selection of lead counsel out of the court’s hands and thereby undermines the court’s ability to ensure that the class receives the highest quality representation.”266

10. Counsel conducting initial investigation expressly permitted to receive compensation 

(even if they do not win the auction) 

Unless expressly provided for, firms involved in the case prior to bidding (even as the lead plaintiffs’ original counsel) were not permitted to share in the winning bidders’ fee recovery or be reimbursed for their fees and expenses incurred up to the selection of class counsel. Two judges in-

 

 260. In re Cendant Corp. Litig., 182 F.R.D. 144, 151 (D.N.J. 1998). But see In re Cendant Corp. Litig., 

Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 00-3653, slip op. at 111 (3d Cir. 

Aug. 28, 2001) (holding that the district court abused its discretion by conducting an auction to select lead 

counsel in an ordinary case governed by the PSLRA and rejecting the contention that the court’s willingness 

to permit counsel chosen by the lead plaintiff to match what the District Court determined to be the lowest 

qualified bid fully protected the lead plaintiff’s right under the PSLRA to “select and retain” lead counsel). 

 261. Id.

 262. Note that due to a conflict of interest, Judge Walls appointed the Public Pension Fund Investors as 

lead plaintiffs for all matters except those involving Prides securities, and Welch & Forbes was appointed colead plaintiff to pursue all claims based on Prides securities. In re Cendant, 182 F.R.D. at 149–50. 

 263. Wenderhold v. Cylink Corp., No. 98-C-4292, Order by Judge Vaughn Walker 3 (N.D. Cal. Nov. 5, 

1999). 

 264. Id.

 265. In re Bank One Shareholders Class Actions, No. 00-C-880, Transcript of Proceedings Before the 

Honorable Milton I. Shadur 20 (N.D. Ill. Feb. 18, 2000). 

 266. In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 82 (S.D.N.Y. 2000). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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cluded express provisions in their bidding guidelines providing for compensation to counsel that 

conducted preliminary work in the case before bidding was ordered. In In re Wells Fargo, from 

the time the complaint was filed on June 25, 1991 up to the Ninth Circuit’s reversal of the district 

court’s dismissal on April 13, 1994, the class was represented by de facto class counsel (the law 

firms of Lieff, Cabraser & Heimann and Milberg, Weiss, Bershad, Hynes & Lerach).267 Although 

Judge Walker refused to appoint these firms as class counsel without competitive bidding, he did 

require bidders to include in their bid proposal the “percentage of any recovery the firm will 

charge in the event of a recovery as fees and costs for all the legal work performed in connection 

with the case, including that already performed by Lieff, Cabraser and Milberg, Weiss.”268 Further, the “total fee for all counsel in the case will be determined by the successful bid; this fee will 

be divided among class counsel, Lieff, Cabraser and Milberg Weiss, or between these two firms if 

one of them is the successful bidder.”269

 In In re Bank One, Judge Shadur promised that the firm listed as co-counsel in a majority of 

the underlying actions and who had prepared the consolidated class action complaint that superseded the original group of individual complaints would be fully compensated, either out of any 

recovery or from plaintiffs collectively, for their services that antedated the designations of the 

lead plaintiffs and of class counsel.270 However, any other law firms that had initially represented 

one or more of the named plaintiffs (in hopes of ultimately representing the plaintiff class) and 

filed actions that were later dismissed in favor of the consolidated class action complaint were not 

permitted to share in class counsels’ fee recovery or receive separate reimbursement of their 

claimed fees and expenses out of the class’s recovery.271

11. Lead counsel selected by court expressly permitted to appoint unaffiliated counsel to 

assist with the case 

In nine bidding cases, class counsel was expressly permitted to farm out work on the case to another law firm or firms after being selected by the court as the winning bidder. See supra Table 2. 

In In re Wells Fargo, although Judge Walker prohibited a joint bid from the two firms that had 

served as de facto class counsel prior to the solicitation of bids, he explained that “[n]othing precludes a firm selected as class counsel from farming out work on the case to another law firm because of specialized knowledge, geographic proximity to witnesses, or evidence or other comparative advantages, or even to spread risk. Allowing subcontracting or joint venturing after a competitive selection of class counsel is, however quite different from substituting a joint venture or plaintiff steering committee for competition in the selection of class counsel and determination of their 

compensation.”272 In Cylink, Judge Walker clarified that although lead counsel could spread its 

risk by farming out tasks, class counsel had to pay any other firm assisting it in prosecuting the 

case out of class counsel’s fee.273

 

 267. In re Wells Fargo Sec. Litig., 12 F.3d 922 (9th Cir. 1993). 

 268. In re Wells Fargo, 156 F.R.D. 223, 229 (N.D. Cal. 1994). 

 269. Id.

 270. In re Bank One Shareholders Class Actions, 96 F. Supp. 2d 780, 790 n.13 (N.D. Ill. 2000). 

 271. In re Bank One, No. 00-C-880, Memorandum Order (N.D. Ill. June 11, 2001). 

 272. In re Wells Fargo, 156 F.R.D. at 227. 

 273. Wenderhold v. Cylink Corp., 188 F.R.D. 577, 587–88 (N.D. Cal. 1999) & 189 F.R.D. 570, 573–74 

(N.D. Cal. 1999). See also In re Cendant Corp. Litig., 182 F.R.D. 144 (D.N.J. 1998). Judge Walls’ guidelines 

for bid submission stated that “payment of fees and costs of any lawyers or firms assisting the lead counsel, if 

any, will be the responsibility of lead counsel.” 182 F.R.D. at 151. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 45 

 Judge Shadur explained in In re Comdisco that he has always left to class counsel to choose 

precisely what structure the successful bidder wished to establish for anyone else’s participation in 

rendition of legal services under class counsel’s supervision and control provided that any such 

arrangement comes within the framework of the bid amount.274 

 In four cases, the court did not specifically address this issue in its bidding guidelines. See

supra Table 2. However, in In re Commtouch, Judge Alsup specifically prohibited the “outsourcing” of work to other firms: “firms selected must do the work themselves and may not associate 

with other counsel.”275

F. Time Period Court Permitted for Bid Submission 

After the court announced to the parties that class counsel would be selected following a competitive bidding process, the potential bidders were given on average twenty-seven calendar days to 

submit their bids to the court, counted from the day the court ordered bids to be submitted to the 

day the court designated as the close of bidding.276 The time period permitted for bid submission 

ranged from only eight calendar days277 to fifty-four days in two cases because of an extension of 

the bidding period in one case and a second round of bidding in another.278

 In four cases, the original deadlines for bid submission were extended either because of 

changed circumstances based on new information or the implementation of a second round of bidding. In the first round of bidding to select class counsel in In re Lucent (Lucent I), after the original thirty-six-day bidding deadline had passed and the court had received three bids, the court informed all claims of record that the bidding format had been clarified. Because of these modifications, Judge Lechner gave any attorney who wished to resubmit or submit an initial bid an additional seventeen days to do so.279 Revised bids were submitted by the three firms that had submitted bid proposals by the original deadline. 

 In In re Comdisco, Judge Shadur pushed the original twenty-two-day deadline up another 

three weeks because of the absence of a bid from the Commonwealth of Pennsylvania State Employees’ Retirement Systems (PASERS), the public pension fund that appeared to be the strongest 

candidate for lead plaintiff based on the information the judge had at that time. Judge Shadur was 

concerned that PASERS might disqualify itself as lead plaintiff because of its insistence (commu-

 

 274. In re Comdisco Sec. Litig., No. 01-C-2110, Memorandum Opinion and Order n.15 (N.D. Ill. June 

25, 2001) (page numbers not available). 

 275. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Invitation for Competitive 

Proposals for Position of Class Counsel 5 (N.D. Cal. June 28, 2001). 

 276. Calculation of the average bidding period was obtained by dividing the sum of the number of calendar days permitted by the court for bid submission in each case (435 calendar days) by the total number of 

cases (16—counting the additional round of bidding in In re Oracle and the additional bidding period in In re 

Lucent separately; see In re Oracle Sec. Litig., 131 F.R.D. 688 (N.D. Cal. 1990) & 136 F.R.D. 639 (N.D. Cal. 

1999); and In re Lucent Techs. Inc, Sec. Litig., No. 00-C-621, Letter-Opinion (D.N.J. Apr. 17, 2000) (Lucent 

I) & Letter-Opinion (D.N.J. Apr. 19, 2001) (Lucent II)). In those cases that either extended the original bidding period or instituted a second round of bidding shortly after the deadline for the first round, the bidding 

period included these additional days. The time period for submission of bids in In re California Micro Devices was estimated at 14 days, because the exact time period was not apparent from the materials available. 

 277. In re Wells Fargo Sec. Litig., 156 F.R.D. 223 (N.D. Cal. 1994). 

 278. Wenderhold v. Cylink Corp., 188 F.R.D. 577 (N.D. Cal. 1999) & 189 F.R.D. 570 (N.D. Cal. 1999) 

(second round of bidding instituted); In re Lucent Techs., Inc., Sec. Litig., No. 00-C-621, Letter-Opinion 

(D.N.J. Apr. 17, 2000) (Lucent I) (bidding period extended). 

 279. In re Lucent Techs., Inc., Sec. Litig., No. 00-C-621, Letter-Opinion 6 & n.1 (D.N.J. Aug. 2, 2000) 

(citing June 13, 2000 Letter). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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nicated in a letter from Milberg, Weiss) that it would only accept Milberg, Weiss as its counsel.280

Judge Shadur wanted to make sure this was indeed the client’s position and that it had thought 

through the decision not to bid. Since Judge Shadur didn’t want to only provide the presumptive 

lead plaintiff at the time with more time to bid and not give it to others equally, he extended the 

bidding for everyone.281

 In In re Auction Houses, after receiving bids from twenty law firms during the first twentythree-day bidding period, the court revised the fee structure and gave bidders eight additional days 

to submit new bids.282 In Cylink, after rejecting the sole bid received in the first round of bidding 

because if failed to comply with the court’s bidding guidelines, Judge Walker ordered a twentyseven-day second round of bidding open to any lawyer or law firm.283

G. Potential for Collusion in the Auctioning Process 

Starting with the very first case that used bidding, judges have included “warnings” against collusion in their bidding guidelines, and many have gone further to require each bidder to certify that it 

has not engaged in such collusion: “Each firm submitting an application shall certify to the court 

that its compensation proposal was prepared independently and that no part hereof was revealed to 

any other bidder prior to filing with the court. Applicants are not to confer in any manner with 

other firms during the preparation of bids.”284

 In In re Comdisco, Judge Shadur took steps to avoid any potential collusion even before he 

announced that he would definitively use bidding to select class counsel. He ordered counsel in 

the twelve different cases filed not to discuss between themselves any aspects of the fee arrangements on which they would be prepared to act as class counsel, and to submit a statement that no 

such discussion with counsel in any of the other cases had taken place before entry of the order or, 

if any such prior discussion had occurred, to submit under seal a statement describing its nature 

and content.285 And members of law firms who were co-counsel in more than one of the twelve 

cases were ordered not to discuss the subject of any prospective fee arrangements in any of the 

cases in which they were acting as co-counsel (to preserve the integrity of a bidding procedure if 

adopted and to avoid conflict-of-interest situations for these law firms).286

 Only one case reported actual problems involving collusion in the auctioning process. In In re 

California Micro Devices, Judge Walker refused to appoint either firm that submitted bids because 

he felt they had colluded to circumvent his bidding process for choosing class counsel. “[T]he 

conduct of the attorneys in this class action was contrary to the legal interests of the purported 

 

 280. Telephone Interview with Senior District Judge Milton I. Shadur, Northern District of Illinois (July 

6, 2001). 

 281. Id.

 282. In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 74 & n.11 (S.D.N.Y. 2000). 

 283. Wenderhold v. Cylink Corp., 191 F.R.D. 600 (N.D. Cal. 2000). 

 284. In re Oracle Sec. Litig., 131 F.R.D. 688, 697 (N.D. Cal 1990). See also In re Wells Fargo Sec. 

Litig., 156 F.R.D. 223, 229 (N.D. Cal. 1994); In re Cendant Corp. Litig., 182 F.R.D. 144, 151 (D.N.J. 1998); 

Wenderhold v. Cylink Corp., 188 F.R.D. 577, 587–88 (N.D. Cal. 1999) & 189 F.R.D. 570, 573–74 (N.D. Cal. 

1999); In re Sherleigh Assocs. v. Windmere-Durable Holdings, Inc., 184 F.R.D. 688, 696–97 (S.D. Fla. 

1999). 

 285. Blitzer v. Comdisco, Inc., No. 01-C-874, Memorandum Order by Judge Shadur (N.D. Ill. Mar. 26, 

2001). 

 286. Id.
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class.”287 “While over a dozen law firms participated early on in this litigation, only two filed proposals to represent the class, and only one of these proposals appears serious. This suggests an 

understanding or collaboration among plaintiff firms engaged in securities class action litigation 

that many would choose not to bid for this litigation in apparent deference to the efforts of Lieff 

Cabraser in negotiating the proposed settlement. . . [I]t is plain that plaintiff firms in this case have 

not competed.”288 Judge Walker ordered the substitution of a public pension fund as representative 

plaintiff and ordered their attorneys to serve as class counsel, a firm which had not submitted a bid 

proposal.289 Judge Walker still considers In re California Micro Devices to be a bidding case because the institutional investor lead plaintiff selected a firm that had not typically represented 

plaintiffs in securities class actions and negotiated the terms of the representation, thus mirroring a 

competitive or arm’s length process.290 

VI. Selection and Evaluation of Bids 

A. Time Period for Evaluation and Selection of Winning Bidder 

Once the bidding deadline had arrived and the court had possession of the bid proposals, the court 

took on average thirty-seven calendar days to analyze the bids and choose a winning bidder, 

counting from the day the court designated as the close of bidding to the day the court announced 

its selection for class counsel.291 The time required by the court to evaluate the bids and choose a 

winning bid ranged from as little as one calendar day292 to seventy-seven calendar days.293 In most 

cases, the court made the necessary comparisons and performed its own unique analysis of the 

submitted bids relatively promptly without acting upon other pending motions. However, in In re 

Bank One, although the bidding period was closed on March 10, 2000, Judge Shadur deferred 

consideration of the bids to rule on the defendant’s Rule 12(b)(6) motion to dismiss, delaying selection of class counsel until May 5, 2000.294 

 

 287. In re California Micro Devices Sec. Litig., No. 94-C-2817, 1995 WL 476625, at *1 (N.D. Cal. 

1995). 

 288. Id. at *4. 

 289. In re California Micro Devices Sec. Litig., 168 F.R.D. 257 (N.D. Cal. 1996). 

 290. Written Responses to Interview Questions by District Judge Vaughn Walker, Northern District of 

California (July 12, 2001). 

 291. Calculation of the average time for bid analysis and class counsel selection was obtained by dividing the sum of the number of calendar days it took the court to compare the bids and choose a winning bidder 

in each case (512 calendar days) by the total number of cases (12). A time period for bid analysis was not 

included for purposes of calculating an average time for In re Commtouch Software since bids were not due 

until July 20, 2001, and at this time we have no further information. In addition, the 140-day evaluation period in In re California Micro Devices was also not included because Judge Walker used this time period to 

evaluate the bids and explain why he would reject them both and permit an institutional investor who came 

forward to make a selection of class counsel on behalf of the class. In re Calif. Micro Devices Sec. Litig., No. 

94-C-2817, 1995 WL 476625 (N.D. Cal. Aug. 4, 1995). 

 292. In re Auction Houses Antitrust Litig., 197 F.R.D. 71 (S.D.N.Y. 2000). 

 293. Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., 186 F.R.D. 669 (S.D. Fla. 1999). 

 294. In re Bank One Shareholders Class Actions, No. 00-C-880, Memorandum Order (N.D. Ill. Mar. 13, 

2000). 
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B. Number of Bids Received by the Court 

As can be seen from Table 1 in Section III, with the exception of In re Cendant (12 bids), In re 

Lucent (Lucent II) (17 bids), and In re Auction Houses (21 bids), the number of bids received by 

the court in the other cases for which this information was available ranged from two bids to nine 

bids. Comparing all cases for which the number of bids submitted was available, the average 

number of bids submitted was seven295 and the median bid was eight. Concern has been expressed 

by others and the bidding judges themselves about the low number of bids in some cases. In In re 

California Micro Devices, Judge Walker notes that despite the fact that twelve different plaintiffs’ 

firms filed suits in the case and seventeen separate firms had entered appearances representing 

members of the plaintiff class, the court only received proposals from two firms and only one of 

them “appear[ed] serious.”296 For the first group of complaints in In re Lucent (Lucent I), Judge 

Lechner pointed out that the lack of interest in both lead plaintiff and lead counsel position was 

problematic.297

 Despite the relatively low number of bids submitted in cases using auction procedures, except 

for Cylink (2 bids) and In re Comdisco (3 bids) it appears that the number of bidders has increased 

in cases filed in the late 1990s and early 2000s. See Table 1 in Section III. In his most recent case 

in which he utilized a bidding procedure to select class counsel, Judge Shadur expressed disappointment at the low number of bidders in In re Comdisco (3 bids submitted) compared to In re 

Amino Acid Lysine (8 bids submitted) and In re Bank One (9 bids submitted)—the other two cases 

in which he employed competitive bidding. Among other reasons, Judge Shadur speculated that 

the low bidder turnout could also have been due in part to fall out from In re Cendant Corp Prides 

Litigation.298 A nonbidding law firm in In re Comdisco perceived the Cendant opinion as placing 

bidders in a “no-win situation, in which if they prove successful in becoming lead counsel, the 

terms of their successful bids would set a ceiling on fees, while on the downside they would be 

subject to ex-post second guessing by the court’s utilization of a lodestar comparison as a benchmark.”299

C. Analysis Used to Select Winning Bidder 

Although each judge who has employed some type of auction procedure to select class counsel 

emphasizes and evaluates certain factors differently when comparing bids and selecting the winning bidder, all judges said they weighed both price considerations and qualitative factors when 

comparing the bids. Although originally articulated by Judge Walker in In re Oracle, all judges 

using bidding appear to ascribe to the following: “Selection of class counsel solely on the basis of 

 

 295. Calculation of the average number of bids submitted was obtained by dividing the sum of the bids 

submitted in cases where available (97 bids) by the total number of cases (14). The two rounds of bidding in 

both In re Oracle and In re Lucent were counted as separate cases. The number of bids submitted in Sherleigh Associates was not included because it has not been disclosed, and In re Commtouch bids were not 

included because they were due on July 20, 2001, and at this time we have no further information. 

 296. In re California Micro Devices Sec. Litig., No. 94-C-2817, 1995 WL 476625, at *4 (N.D. Cal. 

1995). 

 297. Written Responses to Interview Questions by District Judge Alfred J. Lechner, Jr., District of New 

Jersey (Aug. 20, 2001). Judge Lechner noted that the high number of bids (17 bids) received in the auction 

for the Lucent II filings compared to the three bids received in Lucent I may have been a result of the Lucent 

II filings occurring after additional disclosures from Lucent. Id.

 298. 243 F.3d 722, 742–43 (3d Cir. 2001). 

 299. In re Comdisco Sec. Litig., No. 01-C-2110, Memorandum Opinion and Order (N.D. Ill. June 25, 

2001) (page numbers not available). 
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price, without consideration of qualitative factors and possible penalties for poor performance, 

may create an incentive for ‘lemon’ lawyers to drive out the good ones from the bidding process.”300 In addition, many cases evidenced a pattern showing that if the court found either quantitative or qualitative considerations to be equal, or the differences very slight among the bidders, the 

court would look to significant differences between the bidders with respect to the other factor to 

render their final selection of class counsel. Because the approaches for comparing the bids and 

ultimately deciding upon the winning bidder were unique to each judge, we discuss each judge’s 

method of analysis separately below. Note that because the courts’ analysis of the bids and selection of the winning bidder (in cases where provided) were generally very fact-specific and lengthy, 

comprehensive details from each bidding case are not discussed here. The focus in this section is 

on the factors that were important to each judge’s evaluation. Please consult the relevant opinions 

for more details. 

1. District Judge Vaughn Walker 

In Judge Walker’s early bidding cases, he utilized and discussed numerous measures of quality to 

look for when examining a bidder’s qualitative attributes: (1) professional credentials of the firm 

and the firm’s previous experience with securities class action work; (2) treatment of litigation 

expenses, preferably including expenses within the proposed fee award calculations thus giving 

counsel an incentive to minimize the costs of litigation if they absorb all of them; (3) evidence that 

one who proposes to serve as class counsel has evaluated the case, the range and probability of 

recovery and has premised the bid on that evaluation; (4) evidence of an ability and willingness to 

see the case through to recovery, such as posting a completion bond or escrow in an amount that 

would be forfeited in the event class counsel fails to perform; (5) evidence of a willingness and 

financial ability to guarantee a minimal level of recovery for the class; and (6) evidence of financial resources or insurance coverage adequate to compensate the class in the event of malpractice.301

 In addition, in Cylink Judge Walker rejected the competing bidder’s argument that its larger 

size, West Coast office, and securities litigation experience within the circuit were qualitative advantages. Instead, he concluded that the quality analysis favored the other bidder because the 

firm’s smaller size, absence of a West Coast office, and absence of litigation experience in the 

circuit would give it greater incentives to succeed.302 In Cylink, Judge Walker admitted that choosing counsel in the case was a “close one” because the price differences between the two proposals 

were “not great”; and if the losing bidder had offered a significant qualitative advantage it could 

have overcome the small price disadvantage he found between the bids.303

 In In re Quintus, Judge Walker’s most recent bidding case in which Milberg Weiss Bershad 

Hynes & Lerach LLP (Milberg) had filed some of the Quintus complaints and sought to represent 

the class but did not submit a bid, Judge Walker compared the terms of the firm’s proposed representation to those of the other firms who submitted bids—something not done in any other bidding 

case. After discussing the qualitative differences among the bids, Judge Walker posed the question: “In light of Milberg’s pre-eminence in plaintiff securities practice, it is logical to ask whether 

the Court’s decision not to select Milberg as lead counsel in Quintus and Copper Mountain, at the 

 

 300. In re Oracle Sec. Litig., 136 F.R.D. 639, 648 (N.D. Cal. 1991). 

 301. In re Oracle Sec. Litig., 132 F.R.D. 538 (N.D. Cal. 1990) & 136 F.R.D. 639, 648–49 (N.D. Cal. 

1991); In re Wells Fargo Sec. Litig., 157 F.R.D. 467, 470–73 (N.D. Cal. 1994). 

 302. Wenderhold v. Cylink Corp., 191 F.R.D. 600, 603 (N.D. Cal. 2000). 

 303. Id.
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rather high fees it proposed, sacrifices the quality of the classes’ representation simply for a less 

expensive fee.”304 After a careful analysis and review of empirical evidence, Judge Walker concluded that his failure to designate Milberg as class counsel did not sacrifice the quality of the 

class’s representation.305 In fact, “[w]hen the amounts of Milberg and other firms’ settlements are 

measured against potential recoveries, Milberg does no better than other firms in this practice 

area.”306

 Judge Walker’s quantitative comparison of the bids focused on the fee proposals alone and his 

method of analysis progressed in complexity with each of his bidding cases. In In re Wells Fargo, 

Judge Walker compared the prices offered for representation under the three submitted bids by 

first adding the expected values of fees and costs to arrive at an expected total price function for 

each bid which then produced differing values based upon the various time and recovery amount 

possibilities. The court used estimates of expenses based on a 1990 study of 404 successful securities and antitrust class actions to compare the three bids.307

 In addition to examining the fee and expense schedules the court required each bidder to submit, in Cylink Judge Walker created a comparison table of the competing fee proposals expressed 

in terms of net recovery to the class at different stages in the litigation and at various levels of 

gross recovery from defendants. Judge Walker explained that “this method of expressing fee proposals is a useful supplement to the percentage-of-recovery schedule. . . [because it] focuses attention, quite appropriately, on the amount the class will receive, rather than on the lawyers’ take. 

Under this approach, a law firm commits to delivering a set dollar amount to the class upon recovery. This should minimize ex-post haggling over the meaning of percentages.”308

 In In re Quintus, although Judge Walker found requiring bidders to submit a bid grid “helpful” in that it standardized the fee proposals, he found it difficult to compare the fee proposals 

“just by looking at the percentages proposed.”309 Thus, Judge Walker selected a number of hypothetical recoveries and then calculated the fee that recovery would generate for each firm (and the 

percentage of total recovery that fee would equal). From these percentages of total recovery, the 

court constructed a matrix by placing amount of recovery on one axis and stage of recovery on the 

other. In each cell, the firms’ proposals were ranked from first to sixth, with first being the proposal most beneficial to the class.310 Judge Walker, explaining that this matrix allowed him to 

compare the different proposals quickly, found that although no single proposal was best in all 

cells of the matrix, one fee proposal stood out as the most advantageous to the class in a substantial number of cells identified as being more meaningful than others.311

2. Senior District Judge Milton I. Shadur 

In his three bidding cases, Judge Shadur first performed an economic comparison of the bids in 

order to identify the presumptive successful party in economic terms. In In re Amino Acid Lysine, 

 

 304. In re Quintus Sec. Litig., Nos. 00-C-4263 & 00-C-3894, 2001 WL 709170, at *14 (N.D. Cal. May 

31, 2001). 

 305. Id. 

 306. Id. 

 307. In re Wells Fargo Sec. Litig., 157 F.R.D. 467, 474–77 (N.D. Cal. 1994) (tables depicting total fee 

plus costs as percentage of recovery for different stages of recovery). 

 308. Wenderhold v. Cylink Corp., 191 F.R.D. 600, 602, 603 app. A (N.D. Cal. 2000). 

 309. In re Quintus Sec. Litig., Nos. 00-C-4263 & 00-C-3894, 2001 WL 709170, at *15 (N.D. Cal. May 

31, 2001). 

 310. Id. at *15–16. 

 311. Id. at *17. 
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after admitting the difficulties of comparing the bids and that the decision was “a close call” in 

some respects, Judge Shadur made several assumptions “with no assertions of certainty, but arrived at on the basis of the best available judgment at present” in order to select the winning bidder 

in terms of price.312 

 In In re Bank One and In re Comdisco, Judge Shadur first compared the cost to the plaintiff 

class in lawyer’s fees at every level of recovery under the competitive bids to the cost to the class 

in attorneys’ fees under the bid Judge Shadur identified up front as the “yardstick” bid because it 

proved to be most favorable to the class clients.313 Judge Shadur also compared the fee caps submitted by the various bidders (or lack thereof).314 Next, Judge Shadur compared the “crossover 

point” for the competing bids against the yardstick bid. The “crossover point” for any competitive 

bid as against the yardstick bid was defined as occurring when the “competitive bid, which would 

produce a larger net amount for the class at a lower level of recovery (whether by way of settlement or litigation), becomes equal to the yardstick bid in terms of the net class recovery. As a necessary element of that condition of equality defining the ‘crossover point,’ any recovery greater 

than that crossover figure must bring more net dollars to the class under the yardstick bid than it 

would under the competitive bid.”315 Judge Shadur stated that it was a “simple matter to devise the 

necessary inequality formulations for determining such crossover points” which he did for the five 

competitive bids that required such analysis.316 In an effort to provide a simplified explanation of 

this “crossover point” analysis, Judge Shadur explained that if the “two bids were plotted on a 

graph, so that the yardstick bid became a horizontal line after it reached its cap on fees, while the 

competitive bid continued to have an upward slope. . . the crossover point would literally be the 

point of intersection of the graphic depictions of the two bids.”317

 In In re Bank One, Judge Shadur pointed out that because of the variation among the bids, he 

would have to make assumptions about the potential class recovery in order to compare the bids 

(i.e., assumptions regarding the likelihood the plaintiff class had stated a viable claim and the estimated potential recovery for the class). Using those assumptions, he found that all of the various 

crossover points of the other bids in relation to the yardstick bid dropped out of significance at 

very low probabilities of success.318 Judge Shadur explained that it may or may not be true that the 

success of the crossover idea is a function of the ability to estimate the potential recovery correctly. He said that this type of analysis usually lends itself to an easy comparison of the bids. 

However, he admitted that there is likely to be more variation in the bids he receives since he permits lawyers to shape their own bids, although even bids submitted under a grid have the potential 

for one bid to be better for the class at one level of recovery than at another level.319 

 

 312. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190, 1198 (N.D. Ill. 1996). 

 313. In re Bank One Shareholders Class Actions, 96 F. Supp. 2d 780, 785–88, 786 n.6 (N.D. Ill. 2000). 

See also In re Comdisco Sec. Litig., No. 01-C-2110, Memorandum Opinion and Order (N.D. Ill. June 25, 

2001) (page numbers not available). 

 314. In re Bank One, 96 F. Supp. 2d at 785–88. 

 315. Id. at 786 n.7. 

 316. Id. 

 317. Id.

 318. Id. at 788. 

 319. Telephone Interview with Senior District Judge Milton I. Shadur, Northern District of Illinois (July 

6, 2001). If the initial request for bids does not allow the court to make the necessary comparison because it 

turns out to be very difficult, then the court has the option (since the bids are sealed) to impose more structure 

by requiring more information from the bidders. If this second round of information gathering does not leave 

the judge comfortable with being able to chose from among the bids, then the court does not have to use a 

bidding process to award representation. Id. 
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 After identifying the presumptive successful bidder in economic terms, Judge Shadur examined the qualifications of the bidder in terms of its credentials and experience stating that “[n]ot for 

a moment has this Court considered the possibility of basing the choice of counsel on the money 

factor itself.”320 Judge Shadur looked at whether the firm had amply demonstrated its ability to 

handle major litigation, the experience of the firm’s attorneys with principal responsibility for the 

case, and the detail and completeness of the firm’s supporting curriculum vitae submissions.321

3. District Judge William Alsup 

In In re Network Associates and recently in In re Commtouch, Judge Alsup decided that class 

counsel would be selected competitively; however, the designated lead plaintiff and not the court 

would solicit bids, evaluate the bids and recommend to the court under seal their choice for the 

“highest quality counsel at the most efficient price.”322 The court ordered lead plaintiffs to provide 

under seal a full description of their selection process conclusions and reasons, and reserved the 

right to approve the lead plaintiff’s selection of class counsel.323 Because in both In re Network 

Associates and In re Commtouch the lead plaintiffs were ordered to keep the proposals under seal 

and they remain under seal with the court, details of the bid proposals and selection process are not 

available.324 

 However, in In re Network Associates, clues about the qualitative and quantitative factors 

emphasized by the plaintiff in its selection process can be gleaned from the guidelines the court 

required to be included in each bid proposal (i.e., the firm’s experience and results achieved in 

class actions; securities and trial experience of proposed lead counsel; complete disclosure of any 

conflicts and contributions made to lead plaintiff or city officials; fee proposals based both on percentage of recovery and hourly rates).325 The court approved the lead plaintiff’s recommendation 

stating that the “predominant factors were relevant trial and securities litigation experience and 

attractive fee options.”326

 In In re Commtouch bids were required to be submitted to the lead plaintiff by July 20, 2001. 

Although no analysis or selection has taken place, the court did provide the lead plaintiff with very 

specific considerations to guide the selection and approval of class counsel. Judge Alsup stated 

that “[d]ue weight must be accorded the strength, weaknesses and relevant experience of candidates,” including an assessment of the actual trial and securities experience of the specific lawyers 

who will actually be doing the work for the class, especially the lead lawyer who, he said, cannot 

simply be a figurehead.327 Judge Alsup pointed out that the firm size is important in that a “large 

firm with deep pockets may have more ‘staying power’ in advancing costs and time than a smaller 

 

 320. In re Amino Acid Lysine, 918 F. Supp. 1190, 1195 (N.D. Ill. 1996). 

 321. Id. at 1200–01; In re Bank One, 96 F. Supp. 2d at 788–89; In re Comdisco Sec. Litig., No. 01-C2110, Memorandum Opinion and Order (N.D. Ill. June 25, 2001) (page numbers not available). 

 322. In re Network Assocs., Inc., Sec. Litig., 76 F. Supp. 2d 1017, 1034 (N.D. Cal. 1999); In re

Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Lead Plaintiff Selection and Class Counsel 

Selection 5–6 (N.D. Cal. June 27, 2001). 

 323. Id.

 324. See supra Section VI.G for a discussion of the Third Circuit’s recent decision disapproving the 

practice of not disclosing the contents of sealed bids received in a competitive bidding context. 

 325. In re Network Assocs., 76 F. Supp. 2d at 1034. 

 326. In re Network Assocs., No. 99-C-1729, Order Appointing Class Counsel (N.D. Cal. Jan. 24, 2000). 

 327. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re lead Plaintiff Selection and 

Class Counsel Selection 6 (N.D. Cal. June 27, 2001). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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firm with shallower pockets. Staying power is important is resisting the ability of well-financed 

defendants to outlast the opposition and helps to even the field.”328

 With regard to comparing the fees and expenses proposed by the candidates, Judge Alsup 

reminded the lead plaintiff of its obligation to the class to evaluate carefully the differences between the fee proposals. Further, he advised that “[w]here the differences in strength and experience among candidates are not clear. . . a substantial difference in the fee proposals among candidates should ordinarily be decisive. On the other hand, a candidate with experience and strength 

may well be worth a higher fee, for his or her superior skills can be expected to improve any gross 

recovery.”329 To help the lead plaintiff elicit this information from the candidates, Judge Alsup 

created a “Questionnaire for Class Counsel Candidates.”330

4. District Judge Alfred J. Lechner, Jr. 

In both Lucent I and Lucent II, Judge Lechner clearly stated that in choosing among the bids submitted a “structure which demonstrates an incentive to obtain the best result for the class, as well 

as for the bidding firm, was preferred. . . the lowest bid is not necessarily the best bid if it does not 

also appear to contain any incentive for the firm to push for better results.”331 In the second round 

of bidding to choose co-class counsel (Lucent II) Judge Lechner explained that he had undertaken 

more than a simple analysis of the numbers to choose the best-qualified firm because the results of 

a bidding process may be of use to a court in awarding fees at the end of the case, but it cannot 

supplant post-judgment analysis to determine a reasonable fee.332 Further, regardless of the proposed fee arrangement in the accepted bid, Judge Lechner intends to review the fee application at 

the end of the case using a percentage-of-recovery analysis (separate from the winning bid proposal) and checking that against the lodestar method.333 Judge Lechner made it clear that the bid is 

subject to review for fairness and adequacy from both the class point of view and the counsel point 

of view.334

 In both Lucent I and II, Judge Lechner described each bid submitted and explained why a 

particular bid was or was not selected as the winning bid. The percentage of fees and expenses to 

be awarded to the lead counsel was an important factor in his analysis and he disregarded any bid 

that did not comply with his guidelines for bid submission, especially his suggestion that the proposed fee schedule should be on a sliding scale (i.e., allows for a rising fee as litigation continues 

but a declining fee as the total class recovery increases within each stage of the litigation). Judge 

Lechner stressed that this format results in a potential maximum recovery for both the class members, as well as counsel, and creates a disincentive for the lead counsel to “sell out” the class because at no point should effort hypothetically outweigh potential recovery.335

 Judge Lechner explained in both Lucent I and II that in addition to the proposed fee schedule, 

he considered a variety of factors in his selection of class counsel, including the following: firm 

 

 328. Id. at 7. 

 329. Id. at 7–8. 

 330. Id. at App. B. See also infra Appendix A for a reproduction of the questionnaire. 

 331. In re Lucent Techs., Inc. Sec. Litig., No. 00-C-621, Letter-Opinion 13 (D.N.J. Aug. 2, 2000) (Lucent I) & Letter-Opinion 12 (June 12, 2001) (Lucent II).

 332. In re Lucent, No. 00-C-621, Letter-Opinion 12 (June 12, 2001) (Lucent II) (citing In re Cendant 

Corp. Prides Litig., 243 F.3d 722, 735 n.18). 

 333. Written Responses to Interview Questions by District Judge Alfred J. Lechner, Jr., District of New 

Jersey (Aug. 20, 2001). 

 334 Id.

 335. In re Lucent, No. 00-C-621, Letter-Opinion 22-23 (D.N.J. Aug. 2, 2000) (Lucent I). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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experience; serving as lead or co-lead counsel in securities cases; firm investment in the matter 

(i.e., time and interest, including whether the bid contains a thorough and detailed evaluation of 

the case and identifies the defendants from whom discovery would likely be sought); the economic ability of the firm to continue its representation through each stage of the litigation (i.e., 

whether the firm has—and the amount of—malpractice insurance, and the firm’s willingness to 

post a completion bond); the location of the firm’s office or offices; the experience and knowledge 

of the individual attorneys assigned to the case; and the effectiveness of self-enforcing incentives 

incorporated into the fee structure of each bid.336

5. District Judge William H. Walls 

The criteria identified by Judge Walls as the most important to his analysis of the non-Prides bids 

were: (1) litigation experience, including demonstrated ability to try successfully a case, if necessary, and demonstrated ability to achieve an effective resolution by settlement; (2) fiscal ability to 

maintain the litigation; and (3) a fee schedule that represents a realistic incentive to pursue a determined resolution of the plaintiffs’ cause at reasonable cost.337 Judge Walls reviewed the bids for 

the non-Prides claims and described how the bidder or the bidder’s fee schedule did or did not 

meet these criteria. 

 Judge Walls found that two bidders met all of the criteria in that both had a demonstrated history of both trial and settlement success, and both had shown they could shoulder the fiscal burden 

of maintaining the litigation and could easily provide whatever performance bond was required by 

the court. Both bidders proposed fee schedules that were realistic in the context of likely results 

for both discovery and trial, and both represented a “fee calculated to engender and maintain counsel’s pursuit of the optimum recovery for the plaintiff’s.”338 Judge Walls chose the bidder with the 

lower fee schedule.339

6. District Judge Joan A. Lenard 

Because Judge Lenard provided her analysis of the bids received in In re Sherleigh Associates in 

an order that is to remain sealed during the pendency of the case, details of the court’s analysis in 

 

 336. Id at 23 & Letter-Opinion 42 (June 12, 2001) (Lucent II). 

 337. In re Cendant Corp. Litig., 191 F.R.D. 387, 390 (D.N.J. 1998). Note that this opinion originally 

dated October 2, 1998, was unsealed by the court with respect to the non-Prides portions only on April 7, 

2000, when the Notice of Settlement was mailed to class members for non-Prides claims. Because litigation 

is still pending with respect to plaintiffs representing the Prides claims, the court decided to keep its analysis 

in choosing the winning bid as well as the terms of the bids submitted to serve as class counsel representing 

the Prides claims under seal. However, the Third Circuit recently held that Judge Walls abused his discretion 

in sealing the bids and ordered that the district court unseal the bids as well as any other sealed documents 

related to the bids. In re Cendant Corp. Sec. Litig., No. 98-C-1664 (3d Cir. Aug. 8, 2001) (order vacating 

sanction for violation of district court’s sealing order and requiring unsealing of all previously sealed documents). 

 338. 191 F.R.D. at headnote [1]. 

339 On appeal of the attorneys’ fee awarded pursuant to the court-ordered auction in In re Cendant, the Third 

Circuit vacated the fee award holding that the district court abused its discretion by selecting class counsel 

pursuant to an auction and thus the district court should not have considered the fee request submitted pursuant to the fee grid arrived at via the auction. Instead, the court should have appointed lead plaintiff’s original 

counsel pursuant to the Retainer Agreement negotiated between them and the lead plaintiff. In re Cendant 

Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 00-3653, slip op. at 115 

(3d Cir. Aug. 28, 2001). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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selecting the winning bidder are not available.340 Judge Lenard only revealed that “[b]ased on significant qualitative disparity between its bid and the next best bid, as well as price considerations, 

the law firm of Milberg, Weiss, Bershad, Hynes & Lerach LLP shall serve as Plaintiff’s Class 

Counsel in this matter, subject to certain conditions as set forth in the Court’s concurrent, sealed 

Order.”341 Judge Lenard added that the “overall quality of the bids was very high, and the selection process was highly competitive.”342

7. District Judge Lewis Kaplan 

Likewise, in In re Auction Houses, extensive details of Judge Kaplan’s analysis in selecting Boies, 

Schiller & Flexner, LLP as lead counsel, including the terms of the winning bid as well as the 

competing bids were not provided in the judge’s opinion defending his decision to use an auction 

to select lead class counsel.343 Judge Kaplan explained that his choice merely reflects the court’s 

judgment as to which bidder, in all of the circumstances, would most likely best serve the interests 

of the plaintiff class, taking into account the economic terms of the bids as well as the qualifications of the bidder.344 In a later opinion approving the settlement, Judge Kaplan disclosed the 

terms of the winning bid and compared them to the mean “X” bid of $96 million submitted by 

four firms who were members of a proposed executive committee organized by the attorneys for 

the various plaintiffs in order to have that committee designated as lead counsel.345 In addition, he 

compared the winning bid of the mean “X” of $130.3 million submitted by all the conforming 

bids, and found in both cases that the attorneys’ fee would have been significantly higher than the 

fee awarded to Boies, Schiller & Flexner, LLP.346

D. Characteristics of Winning Bids 

Appendix B identifies the name of the firm chosen by the court as class counsel as well as the 

names of firms submitting competing bids for all bidding cases for which this information was 

available. The table below shows whether the fee proposal chosen as the winning bid in each case 

included the following characteristics: expenses; an expense cap; a fee cap; time escalators or 

stage of proceeding escalators; an X factor (i.e., a promise to wave the fee if settlement is below a 

certain number); or rising, falling, or straight percentages. 

To summarize the findings from cases where the information was available: 

1. Expenses included in fee proposal, fee and expense caps: Four winning fee proposals included expenses in addition to attorney fees in the proposed percentage of recovery; three 

winning bids contained expense caps; and two winning bids contained fee caps. 

 

 340. See supra Section VI.G for a discussion of the Third Circuit’s recent decision disapproving the 

practice of not disclosing the contents of sealed bids received in a competitive bidding context. 

 341. Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., 186 F.R.D. 669, 671 (S.D. Fla. 

1999). 

 342. Id.

 343. In re Auction Houses Antitrust Litig., 197 F.R.D. 71 (S.D.N.Y. 2000). See supra Section VI.G for a 

discussion of the Third Circuit’s recent decision disapproving the practice of not disclosing the contents of 

sealed bids received in a competitive bidding context. 

 344. Id. at 74, 84. 

 345. In re Auction Houses, No. 00-C-0648, Memorandum Opinion 41–42 (S.D.N.Y. Feb. 22, 2001). 

 346. Id. at 42. See infra Section VII.B.6. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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2. Time and/or stage of proceeding escalators: One winning bid structure included a pure 

time escalator, one included a combined time and stage of proceeding escalator, and five 

winning fee proposals contained stage of proceeding escalators. 

3. Use of an X-factor: Only one winning bid used an X-factor. 

4. Rising, falling or straight percentages: In seven winning bids the percentage of recovery 

increased with either time periods (1 bid), combined time periods/stages of the case (1 

bid), or with stages of the case (5 bids). In nine winning bids, the percentage of recovery 

decreased as the amount of recovery increased. Only one winning bid increased the percentage of recovery as recovery increased. And only one winning bid kept the percentages constant as recovery increased. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Table 3: Characteristics of Winning Bids

Case Name and 

Judge 

Fee Proposal 

Included 

Expenses 

Caps on 

Expenses 

Caps on 

Fees 

Time and/or 

Stage of 

Proceeding 

Escalators 

Use of an X-factor 

(promise not to take 

fee if settlement below 

certain number) 

Rising, Falling, or 

Straight Percentages 

In re Oracle No. 

90-C-931 (Walker) 

• Class Action 

Against Oracle 

• Class Action 

Against Anderson 

No 

No 

$325,000 

$500,000 

No 

No 

Time escalator347

No 

No 

No 

Percentages increase after 

first 12 months & decrease 

as recovery increases 

Percentages decrease as 

recovery increases 

In re Wells Fargo 

No. 91-C-1944 

(Walker) 

No348 No No Combined 

Time & 

Stage of 

Proceeding 

Escalator 

No Percentages increase for 

three combined time periods/stages of case & decrease as recovery increases 

In re Cal. Micro 

Devices349 

No. 94-C-2817 

(Walker) 

 

In re Amino Acid 

Lysine No. 95-C7679 (Shadur) 

No No $3.5m No No Percentages decrease as 

recovery increases 

In re Cendant350

 No. 98-C-1664 

(Walls) 

No No No Stage of 

Proceeding 

Escalator 

No Percentages increase with 

phase at which litigation is 

resolved & increase as 

recovery increases 

Cylink, 

No. 98-C-4292 

(Walker) 

Yes No No Stage of 

Proceeding 

Escalator 

No Percentages increase 

through 4 stages of the 

case & decrease as recovery increases 

 

 347. This was the only instance where the winning bid contained a pure time escalator (otherwise referred to as an early settlement discount) which could prevent the risk of early and cheap collusive settlements by providing lead counsel with increasing marginal returns to effort over time. However, Judge Kaplan 

pointed out that this practice may fall short by instead motivating counsel not to maximize the class’s recovery, but merely to extend the duration of the litigation, even if it would not be in plaintiffs’ best interests. In 

re Auction Houses Antitrust Litig., 197 F.R.D. 71, 80 (S.D.N.Y. 2000). 

 348. Although expenses were not included in the proposed fee award, the winning bidder proposed to 

deduct its litigation expenses from the total amount of any recovery before application of its fee percentage. 

In re Wells Fargo Sec. Litig., 157 F.R.D. 467, 471–72 (1994). 

 349. The court rejected the two submitted bids, refusing to choose a winning bidder and found that the 

lawyers’ conduct in precipitating a premature and unsanctioned settlement undermined the ability of the bidding process to provide class members the benefits of competition in the selection of class counsel. In re

California Micro Devices Sec. Litig., No. 94-C-2817, 1995 WL 476625, at *4–5 (N.D. Cal. 1995). 

 350. The characteristics in the table describe the winning bid to represent the non-Prides claims in the 

Cendant litigation. Because litigation is still pending with respect to plaintiffs representing the Prides claims, 

the court decided to keep the terms of the winning bid for the Prides claims under seal. In re Cendant Corp. 

Litig., 191 F.R.D. 387 (D.N.J. 1998). However, the Third Circuit recently held that Judge Walls abused his 

discretion in sealing the bids and ordered that the district court unseal the bids as well as any other sealed 

documents related to the bids. In re Cendant Corp. Sec. Litig., No. 98-C-1664 (3d Cir. Aug. 8, 2001) (order 

vacating sanction for violation of district court’s sealing order and requiring unsealing of all previously 

sealed documents). See also In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 

00-2734, 00-2769, 00-3653 (3d Cir. Aug. 28, 2001) (holding that the district court abused its discretion by 

selecting class counsel pursuant to an auction in an ordinary case governed by the PSLRA). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Table 3 (cont’d): Characteristics of Winning Bids 

Case Name and 

Judge 

Fee 

Proposal 

Included 

Expenses 

Caps on 

Expenses 

Caps on 

Fees 

Time and/or 

Stage of 

Proceeding 

Escalators 

Use of an X-factor 

(promise not to take 

fee if settlement below 

certain number) 

Rising, Falling, or 

Straight Percentages 

Sherleigh Assocs.351 

No. 98-C-2273 

(Lenard) 

 

In re Network 

Assocs.352

No. 99-C-1729 

(Alsup) 

 

In re Auction 

House 

No. 00-C-648 

(Kaplan) 

Yes No No No Yes—no fee if settlement below X ($405m) Percentage remained 

constant for any recovery 

above X ($405m) 

In re Bank One 

No. 00-C-880 

(Shadur) 

No No $2.75m No No Percentages decrease as 

recovery increases 

In re Lucent353 

No. 00-C-621 

(Lechner) 

• Lucent I 

• Lucent II 

Yes 

Yes 

No 

No 

No 

No 

Stage of 

Proceeding 

Escalator 

Stage of 

Proceeding 

Escalator 

No 

No 

Percentages increase 

through 4 stages of the 

case & decrease as recovery increases 

Percentages increase 

through 4 stages of the 

case & decrease as recovery increases 

In re Quintus 

No. 00-C-4263 

(Walker) 

No $150,000 

in Stages 1 

& 2 

$300,000 

in Stages 3 

& 4 

No Stage of 

Proceeding 

Escalator 

No Percentages increase 

through 3 stages of the 

case (no increase from 

Stage 3 to 4) & decrease 

as recovery increases 

In re Comdisco, 

No. 01-C-2110 

(Shadur) 

No No No No No Percentages remain constant as recovery increases 

In re Commtouch354 

No. 01-C-00719 

(Alsup) 

 

E. Whether Winning Bidder Was Also Lowest Bidder 

Table 1 shows whether the winning bidder was also the lowest bidder in price terms in cases 

where we were able to make this determination definitively. In some cases it was clear when the 

court evaluated the bids and chose the winning bidder whether the winner was the lowest bidder in 

 

 351. All bids are permanently sealed; details of winning bid are unavailable. Sherleigh Assocs., LLC v. 

Windmere-Durable-Holdings, Inc., 186 F.R.D. 669, 671 (S.D. Fla. 1999). 

 352. All bids remain sealed; details of winning bid are unavailable. In re Network Assocs. Inc., Sec. 

Litig., 76 F. Supp. 2d 1017 (N.D. Cal. 1999). 

 353. The basic structures of the winning bids was provided but the actual fee percentages of the winning 

bids were not disclosed in both Lucent I and II. In re Lucent Techs., Inc. Sec. Litig., No. 00-C-621, LetterOpinion (D.N.J. Aug. 2, 2000) (Lucent I) & Letter-Opinion (June 12, 2001) (Lucent II). See supra note 63. 

 354. Bids were to be submitted to the lead plaintiff by July 20, 2001, and no additional information is 

available at this time. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re lead Plaintiff 

Selection and Class Counsel Selection (N.D. Cal. June 27, 2001). 
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price terms.355 However, for several cases, this determination was only possible once settlement 

was reached because the lowest bidder changed depending on the stage of litigation at which recovery was achieved and the amount of recovery obtained.356

 Judge Shadur explained that the question of whether the lowest bidder was chosen requires a 

value judgment. He admitted that although in hindsight it turned out that he in fact chose the lowest bidder in In re Amino Acid Lysine, there were circumstances under which this may not have 

been the case. He made the best projection based on information available to him at the time 

which indicated the winning bidder would be the lowest, and it turned out to be.357 Likewise, at the 

final fairness hearing in In re Bank One, Judge Shadur admitted that choosing from among the 

submitted bids required “some assumptions about likely recovery if the plaintiffs ended up successful. . . because a number of the bids could have produced better results for the class at certain 

levels of assumed recovery—which my opinion regularly referred to as ‘crossover points.’”358

F. Challenges to Lead Counsel Selected as Winning Bidder 

Based on the information we were able to obtain, the courts’ choices of lead counsel were challenged in three bidding cases. In In re Oracle, a losing bidder moved the court for reconsideration 

arguing that the bid submitted by the winning firm created an unethical conflict of interest between the class and the firm chosen because the winning bidder’s $325,000 limitation on litigation 

expenses would probably force the firm to pay for some litigation expenses out of its own pocket, 

thus deterring it from incurring the expenses necessary to maximize the class’s recovery. Further, 

the losing bidder argued that the expense cap would allow defendants to put the “squeeze” on the 

winning bidder as litigation expenses approach, then exceed, the reimbursable amount.359 The 

court rejected this argument as a misrepresentation of the ethical rules and illogical since expenditures on items typically funded by out-of-pocket expenditures (e.g., expert witnesses, attorney 

travel) produce a larger recovery, and thus class counsel would shortchange themselves by refusing to make these outlays.360

 In In re Amino Acid Lysine, one losing bidder charged that the winning bidder’s self-imposed 

fee cap meant that the firm was unwilling to exercise its best efforts on behalf of its clients (the 

class members) because the firm had nothing to gain in pushing for a larger recovery from the 

defendants.361 Judge Shadur responded by stating that an attorney undertaking such a position is 

 

 355. See In re Oracle Sec. Litig., 132 F.R.D. 538 (N.D. Cal. 1995): Wenderhold v. Cylink Corp., 191 

F.R.D. 600 (N.D. Cal. 2000); In re Quintus Sec. Litig., Nos. 00-C-4263 & 00-C-3894, 2001 WL 709170 

(N.D. Cal. May 31, 2001). 

 356. See In re Wells Fargo Sec. Litig., 918 F. Supp. 1190 (N.D. Ill. 1996). Because figures for net class 

recovery under each bid proposal differed depending upon different levels of likely recovery in In re Comdisco, determination of whether the winning bidder was indeed the lowest bidder cannot be determined until 

the amount of total recovery is known. In re Comdisco Sec. Litig., No. 01-C-2110, Memorandum Opinion 

and Order (N.D. Ill. June 25, 2001) 

 357. Telephone Interview with Senior District Judge Milton I. Shadur, Northern District of Illinois (July 

6, 2001). 

 358. In re Bank One Shareholders Class Actions, No. 00-C-880, Transcript of Proceeding Before the 

Honorable Milton I. Shadur 19–20 (N.D. Ill. June 1, 2001). 

 359. In re Oracle Sec. Litig., 136 F.R.D. 639, 642 (N.D. Cal. 1991). 

 360. Id. at 643. 

 361. In re Amino Acid Lysine Antitrust Litig., No. 95-C-7679, 1996 WL 197671, at *1 (N.D. Ill. Apr. 

22, 1996). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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clearly unethical, and the fee cap in the winning firm’s bid has in no way disadvantaged the plaintiff class.362

 In In re Quintus, the designated lead plaintiff filed a petition for writ of mandamus with the 

Ninth Circuit arguing that the district court clearly erred as a matter of law by denying the lead 

plaintiff his right under the PSLRA and the Constitution to select counsel of his own choice: “Instead, Judge Walker decided to ‘intervene in the selection of counsel’ by inviting competitive bids 

and selecting lead counsel [himself], simply because the court preferred a lower fee than that negotiated by [lead plaintiff]. The Court never ruled the fee negotiated by [lead plaintiff] was ‘unreasonable,’ but only that it was not ‘competitive.’”363 On June 14, 2001, the Ninth Circuit denied the 

writ. The lead plaintiff withdrew from his appointment as lead plaintiff on June 20, 2001. The selected class counsel is currently searching for a suitable substitute. 

G. Extent to Which Bid Proposals Were Unsealed 

In all of the bidding cases, the court required the bids to be submitted under seal and the court kept 

the bids under seal at least until the bids were evaluated and the winning bidder was chosen or the 

bids were rejected. See Section V.E.1 for a discussion of the court’s rationale for keeping bids 

under seal up to the point of selection of class counsel. Judges have taken several different approaches to the question of whether, or to what extent, they should unseal the bids once lead class 

counsel is chosen. In most cases, the court disclosed the terms of the winning bidder as well as the 

proposed terms of the competing bidders when the court announced its choice for lead counsel.364

 In both In re Oracle and Cylink, the losing bidders objected to Judge Walker’s disclosing the 

terms of the winning and losing bidders. Specifically, the losing bidder in Cylink argued that by 

disclosing the terms of their rejected bid, the court was destroying the confidentiality of their bid 

since the court had ordered bids submitted ex parte and under seal. Judge Walker explained that 

the “purpose of soliciting bids in such a manner was only to ensure nondisclosure prior to selection or rejection. For the court to continue to veil bids after that point would defeat a primary objective of the competitive bidding process, namely, dissemination of information about the market 

for legal services in class action cases. . . Rejection rendered the bid a nullity in all respects except 

for its informational value.”365 In In re Oracle, the losing bidder argued that disclosure of the 

terms of the winning bid prejudiced the class by allowing defendants to obtain information about 

the winning bidder’s evaluation of the case, giving defendants powerful motives to delay and outspend plaintiffs.366 Judge Walker rejected this argument, explaining that disclosure of class counsel’s compensation arrangements benefits the class by producing information highly pertinent to 

class counsel’s performance in common fund class litigation, and impedes defendants’ ability to 

 

 362. Id. 

 363. In re Colin Barry Hill Petition for Writ of Mandamus, at 1 (N.D. Cal. May 11, 2001). 

 364. In re Oracle Sec. Litig., 132 F.R.D. 538 (N.D. Cal. 1990) & No. 90-C-931, Order (N.D. Cal. July 

21, 1991); In re Wells Fargo Sec. Litig., 157 F.R.D. 467 (N.D. Cal. 1994); In re California Micro Devices 

Sec. Litig., No. 94-C-2817, 1995 WL 476625 (N.D. Cal. Aug. 4, 1995); Wenderhold v. Cylink Corp., 191 

F.R.D. 600, 604–05 app. B & C (N.D. Cal. 2000); In re Quintus Sec. Litig., Nos. 00-C-4263 & 00-C-3894, 

2001 WL 709170 (N.D. Cal. May 31, 2001); In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190 

(N.D. Ill. 1996); In re Bank One Shareholders Class Actions, 96 F. Supp. 2d 780 (N.D. Ill. 2000); In re Comdisco Sec. Litig., No. 01-C-2110, Memorandum Opinion and Order (N.D. Ill. June 25, 2001). 

 365. Wenderhold v. Cylink Corp., Order by Judge Vaughn Walker 2–3 (N.D. Cal. filed on Nov. 5, 

1999). 

 366. In re Oracle Sec. Litig., 136 F.R.D. 639, 644–45 (N.D. Cal. 1991). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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cut a sell-out settlement with class counsel.367 In the order comparing bids and selecting class 

counsel in In re Quintus, Judge Walker stated that the “bids were submitted under seal to ensure 

their confidentiality up to the point of selection, but are, with this order, unsealed to assure transparency of the selection process.”368

 In both Lucent I and II, although the court identified the bidders and compared qualitative 

factors of the bids when the lead counsel was chosen, the actual percentage fees of the winning 

bidder as well as the losing bidders were not disclosed. Judge Lechner did indicate whether the 

percentages proposed by the firm to recover were “within commonly accepted ranges” or were “in 

line with those proposed by the majority of bidding firms” and he described the structure of the 

bids (i.e., whether the proposed fee schedule allows for a rising fee as litigation continues but a 

declining fee as the total class recovery increases within each stage of the litigation as suggested in 

the court’s guidelines to bidders).369

 Two judges kept the bids under seal until settlement was reached, and even then did not disclose all the details of the bids. In In re Cendant, when the Notice of Settlement was mailed to 

class members for non-Prides claims on April 7, 2000, Judge Walls unsealed his opinion dated 

October 2, 1998, only with respect to the non-Prides portions.370 Although the terms of the winning bid and the losing bids were disclosed for non-Prides claims, Judge Walls decided to keep the 

identity of the bidders under seal because litigation continues with respect to plaintiffs representing the Prides claims. Judge Walls also kept the bids under seal with respect to the Prides claims. 

In In re Auction Houses, bids were due on May 25, 2000, and the court issued an order the next 

day appointing David Boies and Richard Drubel as lead counsel. The court’s analysis in comparing the bids, the identity of the bidders, as well as the details of the bids, were not disclosed until 

the court approved a settlement on February 22, 2001.371 And even though Judge Kaplan gave a 

general description of the winning bid as well as provided overall bid comparisons using the mean 

of all “X” bids and the average bid submitted,372 the identity of the losing bidders as well as their 

specific proposals remains under seal indefinitely.373

 Adopting a different approach, although a settlement was approved on May 21, 2001, in In re 

Network Associates, the details of the winning bid and the competing bids remain under seal indefinitely.374 In Sherleigh Associates, although a settlement has not been reached, when the court 

selected the winning bidder Judge Lenard noted that “because the bids contained proprietary in-

 

 367. Id. at 647. 

 368. In re Quintus Sec. Litig., Nos. 00-C-4263 & 00-C-3894, 2001 WL 709170, at *7 (N.D. Cal. May 

31, 2001). 

 369. In re Lucent Techs., Inc. Sec. Litig., No. 00-C-621, Letter-Opinion (D.N.J. Aug. 2, 2000) & LetterOpinion (June 12, 2001). Note that the court’s June 12, 2001 opinion (Lucent II) was originally filed under 

seal to allow the bidding firms the opportunity to alert the court of any inadvertent disclosures of work product or other privileged information which should be redacted; the opinion was unsealed and mailed to defense 

counsel on June 22, 2001. See supra note 63. 

 370. In re Cendant Corp. Litig., 191 F.R.D. 387 (D.N.J. 1998). 

 371. In re Auction Houses Antitrust Litig., No. 00-C-0648, Memorandum Opinion (S.D.N.Y. Feb. 22, 

2001). 

 372. Id. at 41–43. 

 373. However, upon inquiry, Judge Kaplan did allow us to obtain the names of the 21 or so firms that 

submitted bids if their identities were apparent on the outside envelopes containing their bid proposals. See 

infra Appendix A. 

 374. In re Network Assocs. Inc., Sec. Litig., No. 99-01-1729, Order Awarding Fees and Costs (N.D. 

Cal. May 21, 2001). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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formation, the bids shall hereafter remain permanently sealed by the clerk.”375 In In re 

Commtouch, although bids were not due until July 20, 2001, Judge Alsup has already announced 

that after he chooses lead counsel from among the lead plaintiff’s top three recommendations, the 

Court “may or may not unseal the proposals and/or describe them in an order regarding the approval of counsel.”376

 The Third Circuit recently issued an opinion strongly disapproving of the practice of continuing to keep bids sealed once the court has selected lead counsel pursuant to an auction in a class 

action case.377 The case reached the Third Circuit after one of the unsuccessful bidding attorneys 

in the Cendant Prides Securities Litigation appealed the district court’s decision to sanction him 

with a $1,000 fine for speaking to a reporter from the New York Times about the Cendant bidding 

process. Judge Walls found that the attorney had violated a confidentiality order issued in connection with an in camera hearing where plaintiffs’ attorneys, but not the general public, had access to 

the bids. The confidentiality order required that the identities of the bidders and the nature of their 

proposals were to remain sealed until the conclusion of the case in order to “maintain adversarial 

integrity, that of strategy and tactics, which is the prerogative of all parties, plaintiffs and defendants.”378

 A unanimous three-judge panel of the Third Circuit held that Judge Walls abused his discretion in sealing the bids because the district court did not recognize that the bids were judicial records, subject to the common-law presumption of public access, and thus had failed to provide the 

necessary findings to override the presumption of access when he issued the confidentiality order 

(i.e., the district court should have articulated the “compelling countervailing interests” it found 

that would authorize the continued closure through sealing of the matters it sought to protect).379

In addition, the court wrote that the “right of public access is particularly compelling here, because 

many members of the ‘public’ are also plaintiffs in the class action.”380 Further, the 

information sealed in this case and kept secret from most of the parties 

was of the utmost importance in the administration of the case; it was directly relevant to the selection of lead counsel. This point is crucial. In 

class actions, the lead attorneys have an unusual amount of control over 

information concerning the litigation. By contrast, class members often 

have little input into the conduct of the class action and accompanying 

settlement negotiations, because of the large scale of litigation and disconnect between defendants’ possibly enormous liability and the relatively small recovery available to the individual plaintiffs. The only stage 

at which class members can exercise effective control is in the selection 

of class counsel. Throwing a veil of secrecy over the selection process 

deprives class members of that opportunity. Thus, there should have 

been, in the present case, a strong presumption that the bids and the in 

 

 375. Sherleigh Assocs., LLC v. Windmere-Durable Holdings, Inc., 186 F.R.D. 669, 671 (S.D. Fla. 

1999). 

 376. In re Commtouch Software Ltd. Sec. Litig., No. 01-C-00719, Order Re Invitation for Competitive 

Proposals for Position of Class Counsel 6 (N.D. Cal. June 28, 2001). 

 377. In re Cendant Corp. Sec. Litig., No. 98-C-1664 (3d Cir. Aug., 8, 2001) (order vacating sanction for 

violation of district court’s sealing order and requiring unsealing of all previously sealed documents). 

 378. Id. (page numbers not available). 

 379. Id.

 380. Id.
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camera proceeding would be part of an open process, accessible to the 

public.381

Although the court admitted that the practice of holding auctions to choose lead counsel gave it 

“serious reservations and concern,” if auctions are to be held then the court feels the bidding process should be open because it will “facilitate the monitoring of lead counsel by class members and 

others.”382 The court further cautioned that even if reasons support sealing in a specific case, the 

district court must be prepared to unseal the bids and allow public access as soon as these reasons 

either pass or weaken.383

 Finally, the Third Circuit found that the sealing of bids in In re Cendant contravened the purpose of the PSLRA to transfer control of securities class actions from the attorneys to the class 

members (through a properly selected lead plaintiff): 

Instead of allowing the class plaintiffs in this action to chose lead counsel, the District Court selected class counsel through a sealed bidding 

process which has yet to be unsealed. It also prevented many class plaintiffs and defendants from accessing the bids for lead counsel. Sealing 

bids in this case enabled counsel to ‘litigate with a view toward ensuring 

payment for their services without sufficient regard to whether their clients are receiving adequate compensation in light of evidence of wrongdoing.’384 

 Having vacated the district court’s sanction, the Third Circuit directed the district court to 

enter an order unsealing all sealed bids and documents in the record if it had not already done so. 

H. Repeat Players and Winners 

Whether accurate or not, a common perception exists among judges, attorneys, and potential plaintiffs that class action litigation is dominated by a small number of firms.385 Some have suggested 

that the traditional method of appointment of class counsel exacerbates the problem by not allowing new firms the opportunity to be realistically considered. 

 Some suggest that by using an auction procedure new firms will have an opportunity to serve 

as lead counsel, but it is not clear whether the auction method will ultimately benefit the class, 

especially if the firm is inexperienced and, consequently, ends up litigating more than necessary. 

Another concern is whether an inexperienced firm will be familiar with the costs associated with 

not only litigating a class action, but serving as class counsel. These firms may not have the necessary resources to represent the class effectively. In Cylink, Judge Walker selected the lowest bidder, a two-lawyer Philadelphia firm that had not litigated previously in the circuit over a nineteenlawyer firm with ten lawyers in California. The court indicated the case “presents an opportunity 

for [the low bidder] to establish a reputation in a new and important geographic market.”386

 As previously stated, in several of the cases, the number and identity of the bidders remain 

under seal. In cases where bidder information was known, we found fifty-four firms had expressed 

an interest in either serving as lead or co-counsel. The most frequent bidder was Leiff, Cabraser & 

 

 381. Id.

 382. Id.

 383. Id.

 384. Id. (quoting S. Rep. No. 104-98 (1995), reprinted in 1995 U.S.C.C.A.N. 679, 685). 

 385. Willging, supra note 5, at 87–88. 

 386. See Wenderhold v. Cylink Corp., 191 F.R.D. 600, 603 (N.D. Cal. 2000). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 64 

Heimann, submitting bid proposals in six cases. The following three firms, Milberg, Weiss, Bershad, Hynes & Lerach, Weiss & Yourman, and Cohen, Milstein, Hausfeld, & Toll, submitted proposals in five cases. The most frequent winning bidders were the law firms of Leiff Cabraser & 

Heimann and Milberg Weiss Bershad Hynes & Lerach, each were appointed lead counsel in two 

cases. 

 For a complete listing of firms that have submitted bids as well as those who were selected by 

the court, see infra Appendix B. 

VII. Attorneys’ Fees and Class Recovery 

A recent study of 733 federal class action securities fraud cases filed between January 1991 and 

May 1999 found the average fee award was approximately 30% of the settlement amount.387 Similarly, some courts have commonly relied on the presumption that an appropriate benchmark for a 

fee award is between 25 to 33%.388 A 1996 FJC study of federal class actions also looked at the 

ratios of attorneys’ fees to recoveries and found that “[t]he fee-recovery rate infrequently exceeded 

the traditional 33.3% contingency fee rate. In these cases, median rates ranged from 27% to 30%, 

and most fee awards in the study were between 20% and 40% of the gross monetary settlement.”389 We found in the eight terminated bidding cases the percentage of class recovery awarded 

to counsel was often less than that awarded by the traditional approaches. 

 Below we take a closer look at the settlements, class recoveries, and attorneys’ fees awarded 

in the eight bidding cases which have settled to date. Table 4 summarizes the key features. More 

specific information about these categories and others follows. 

 

 387. Written testimony of Joseph A. Grundfest, Attorneys Fees in Class Action Securities Fraud Litigation: A Proposal for Addressing A Problem That Has No a Perfect Solution 6 (June 1, 2001) (draft on file 

with author) (citing Todd S. Foster, et al., Trends in Securities Litigation and the Impact of PSLAR [sic] (VI), 

August 1999 (Table Captioned “Settlements in Securities Class Action Suits Included in this Study”)). See

also PricewaterhouseCoopers LLP 2000 Securities Litigation Study 5–6 (August 2001) (finding the average 

settlement for all cases filed and terminated post-PSLRA was $13.8 million). 

 388. Id. at 6. See, e.g., In re Pacific Enterprises Sec. Litig., 47 F.3d 373, 379 (9th Cir. 1995) (suggesting 

25% as a reasonable benchmark and approving adjustments up to 33% based on complexity, risk, and nonmonetary benefits) and Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261, 1272 (D.C. Cir. 1993) (affirming that 

since a majority of common fund class action fee awards fall between 20-30%, “[t]he twenty percent [award] 

figure is well within the range of reasonable fees in common fund cases”). 

 389. Willging, supra note 5, at 69. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Table 4: Selected Case Characteristics in Settled Bidding Cases 

Case Name and 

Judge 

Potential 

Damages 

Total Amount of 

Recovery to Class 

and Counsel390

Percentage of 

Total Recovery 

that Went to the 

Class (Recovery 

Amount)391

Percentage of 

Total Recovery 

that Went to 

Class Counsel392

(Attorneys’ Fees 

+ Expenses) 

Necessity of Any 

Ex-Post Fee Determinations393

In re Oracle 

Vaughn Walker 

$102 million 

(plaintiffs’ expert 

estimate)394

$25 million395 77.5% 

($19,375,000) 

22.5% 

($4.8 million in 

fees + $825,000 in 

expenses) 

No 

In re Wells Fargo 

Vaughn Walker 

Unknown $13,713,709.54 78% 

($10,632,035) 

22% 

($2,873,150 in 

fees + $208,605 in 

expenses) 

No 

In re California 

Micro Devices 

Vaughn Walker 

Unknown $26 million396 84.3%397

($21,590,090.20) 

15.7%398

($4,028,345.80 in 

fees and expenses)

No 

In re Amino Acid 

Lysine 

Milton Shadur 

Unknown $49 million 93% 

($45.5 million)399

7% 

($3.5 million)400

No 

 

 390. Refers to the total amount of recovery to the class prior to the deduction of attorneys’ fees and 

expenses. Recovery amounts may be approximations. 

 391. Refers to the total amount of recovery to the class after the deduction of attorneys’ fees and expenses. Percentages and amounts may be approximations. 

 392. Unless otherwise indicated, the percentage of total settlement collected by class counsel includes 

attorneys’ fees and expenses. Percentages and amounts may be approximations.

 393. This category covers those instances where at the end of the litigation the court addressed class 

counsel’s motion requesting that a higher fee be awarded than that agreed to under the terms of their original 

bid. 

 394. See In re Oracle Sec. Litig., 852 F. Supp. 1437, 1459 (N.D. Cal. 1994). 

 395. The class received $23.25 million in the settlement reached with Oracle, and $1.75 million from 

Arthur Anderson. 

 396. Although initially Judge Walker decided class counsel would be chosen by an auction process, he 

rejected both of the bids submitted, replaced the lead plaintiff, and permitted the new institutional lead plaintiff to select class counsel and negotiate the terms of the class representation. Thus, settlement and attorneys’ 

fees were not obtained by class counsel using an auction process. In re California Micro Devices Sec. Litig., 

No. 94-C-2817, 1995 WL 476625 (N.D. Cal. 1995). Total settlement and attorneys fees are based on a combination of a settlement reached on May 20, 1997, with all defendants except one and a settlement with the 

remaining defendant on May 24, 2001. 

 397. Id.

 398. Id.

 399. Figure represents total recovery to the class prior to the deduction for expenses. 

 400. Figure represents the attorney fee alone and does not include the amount reimbursed for expenses. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Table 4 (cont’d): Selected Case Characteristics in Settled Bidding Cases 

Case Name and 

Judge 

Potential 

Damages 

Total Amount of 

Recovery to Class 

and Counsel* 

Percentage of 

Total Recovery 

that Went to the 

Class (Recovery 

Amount)* 

Percentage of 

Total Recovery 

that Went to 

Class Counsel* 

(Attorneys’ Fees 

+ Expenses) 

Necessity of Any 

Ex-Post Fee Determinations* 

In re Cendant 

(non-Prides) 

William Walls 

$8.5–8.8 billion401 3,186,500,000402 91.3% 

($2,909,407,337) 

8.7% 

($262,468,857 in 

fees + 

$14,623,806 in 

expenses)403

No404

In re Cendant 

(Prides) 

William Walls 

$268,250,000 to 

$313,950,000 

$341,480,861 94%405

($319,783,905) 

6% 

($19,329,463 in 

fees + $2,367,493 

in expenses)406

Yes 

In re Auction 

Houses 

Lewis Kaplan 

$286 million 

(plaintiffs’ expert 

estimate)407 $126.6 

million (defendants’ expert 

estimate)408

$512 million 94.8% 

($485.25 million) 

5.2% 

(26.75 million in 

attorneys’ fees and

expenses) 

No 

In re Bank One 

Milton Shadur 

$4.6–4.8 billion409 $45 million 93% 

($42 million) 

7% 

($2.75 million in 

attorneys fees + 

$250,000 in expenses) 

No 

In re Network 

Associates 

William Alsup 

Unknown $30 million 92% 

($27,559,187) 

8% 

($2,080,000 in 

fees + $360,813 in 

expenses) 

Yes 

*Note: See previous page for heading descriptions. 

 

 401. In re Cendant Corp. Sec. Litig., 109 F. Supp. 2d 235, 242 (D.N.J. 2000); In re Cendant Corp. Litig., 

No. 98-1664, Joint Declaration of Max W. Berger and Leonard Barrack in support of Motion for Approval of 

Proposed Settlement of Class Action Plan of Allocation of Net Settlement Funds, and In Support of Petition 

for an Award of Attorneys’ Fees and Reimbursement of Expenses 47 (filed May 5, 2000). 

 402. Figure represents a combined settlement derived from a $2,851,500,000 cash payment from the 

Cendant settlement and a $335,000,000 cash payment from the Ernst & Young settlement. The settlement 

was upheld on appeal to the Third Circuit. In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-

2709, 00-2733, 00-2734, 00-2769, 00-3653 (3d Cir. Aug. 28, 2001). 

 403. The attorneys’ fee awarded pursuant to the court-ordered auction was vacated by the Third Circuit 

on appeal. In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 

00-3653 (3d Cir. Aug. 28, 2001). 

 404. In response to numerous objectors to the fee and expenses requested by lead counsel following 

settlement, Judge Walls refused to adjust the pre-set award nor abandon the increasing percentage of settlement fee scale chosen. 

 405. The settlement consisted of 29,161,474 rights valued at $341,480,861. After subtracting the attorneys’ fees and expenses for lead counsel ($21,696,956), 27,308,617 rights remained. Proofs of claim were 

filed with respect to 26,606,422 rights, of which 22,502,782 rights were validated by the claims administrator 

as of August 8, 1999. In re Cendant Corp. Prides Litig., 243 F.3d 722, 726 n.3 (3d Cir. 2001). 

 406. On March 21, 2001, the Third Circuit allowed the settlement to stand, but vacated the fee award. In 

re Cendant Corp. Prides Litig., 243 F.3d 722, 733 (3d Cir. 2001). 

 407. See In re Auction Houses Antirust Litig., No. 00-C-0648, Memorandum Opinion 15 (S.D.N.Y. Feb. 

22, 2001). 

 408. Id. at 16. 

 409. In re Bank One Shareholders Class Actions, 96 F. Supp. 2d 780, 788 (N.D. Ill. May 8, 2000). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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A. Potential Damages, Settlements, and Class Recoveries 

In the majority of cases, the amount of potential damages was generally unknown or at best speculative. In most instances, there had been no discovery to ferret out or uncover legal wrongs, including the specific nature of damages that might have been sustained. This was aptly described 

by Judge Shadur in In re Amino Acid Lysine. In that case, Judge Shadur stated, “. . . none of the 

complaints has quantified the amount of lysine purchased by, or the potential damages suffered 

by, the respective named plaintiffs, some of the submissions by counsel have indicated that [all 

they really know is] that really substantial numbers are involved. . . .”410 

 Further, assessing the extent of damage in cases filed after the PSLRA is made more difficult 

because under the statute discovery is stayed until after the selection of lead plaintiff and class 

counsel.411 

 Nevertheless, some judges tried to assess potential damages. For example, in In re Bank One, 

Judge Shadur made an assumption about the potential recovery for the class to assist in his comparison of the submitted bids. He stated that if plaintiffs were totally successful in the lawsuit, the 

best-informed number—articulated and explained by counsel during a March 15, 2000, status 

hearing—appeared “to be in the $4.6 to $4.8 billion range.”412 

 After a proposed settlement had been reached between the parties the issue of potential damages was again raised. Plaintiffs’ memorandum in support of the proposed settlement stated “[t]he 

parties have entered into an agreement which provides for a cash payment of $45 million plus accrued interest to class members. Based on the record developed during merits discovery, and after 

consulting with a nationally recognized securities valuation expert, plaintiffs believe that the settlement represents almost a third of the total damages of approximately $148 million that plaintiffs 

could have potentially recovered at trial.”413 Plaintiffs’ lead counsel addressed the fact that at the 

March 15, 2000, status hearing, another plaintiffs’ counsel had indicated that damages could be in 

excess of $4 billion. Lead counsel dismissed this figure as “nothing more than a straight arithmetic 

computation of the number of shares bought during two segments of the Class Period and still held 

as of two particular dates (August 25 and November 10).”414 Lead counsel said that without the 

benefit of discovery and information learned at the mediation sessions, the $4 billion number was 

(and is) unsupportable in that it failed to take many factors into account. Plaintiffs’ damage expert 

recalculated maximum damages at $148 million (representing average damages of $0.37 per damaged share) after discovery and information learned at the mediation sessions.415

 There were cases where experts were hired to assess potential damages. As with any party 

expert, the experts’ opinions varied. For example, in In re Auction Houses, the plaintiffs’ expert 

estimated damages to be $286 million, while the defendants’ expert believed damages were considerably less at $126 million. The case ultimately settled for $512 million, considerably higher 

than both parties’ experts’ estimations. Judge Kaplan in his opinion noted that with the amount of 

public information available in the case, potential damages were calculable. He explained, “significant information is available regarding the market shares of the two companies, and Sotheby’s 

 

 410. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190, 1194 (N.D. Ill. 1996). 

 411. See 15 U.S.C. § 77z-1(b)(1), § 78u-4(b)(3)(B). 

 412. In re Bank One, 96 F. Supp. 2d at 788. 

 413. In re Bank One, No. 00-C-880, Plaintiffs’ Brief in Support of Preliminary Approval of Proposed 

Settlement 1, 4 (Mar. 13, 2001). 

 414. Id. 

 415. Id.
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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is a publicly held company, the financial statements of which are available and informative.”416

And in In re Oracle, plaintiffs’ expert estimated damages to be over $100 million. The case settled 

for considerably less at $25 million. Finally, in In re Cendant (Prides), the plaintiffs submitted 

opinions of experts that the total damages fell within a range of $268,250,000 to $313,950,000.417

The total amount of recovery to the class was over $340 million. 

 Overall, with regard to settlement amounts and total class recovery, we found that gross settlement amounts ranged from a high of approximately $3 billion to a low of roughly $13 million. 

Monetary distributions to the class routinely exceeded attorneys’ fees by substantial margins. The 

percentage of class recoveries ranged from approximately 95% in In re Auction Houses to 77.5% 

in In re Oracle. 

B. Attorneys’ Fees Awards 

The percentage of total recovery that went to attorneys ranged from approximately 5% in In re 

Auction Houses to 22.5% in In re Oracle. Below we highlight some aspects of the fee awards. We 

have not attempted to note the specific details of the awards in each of the cases. We suggest that 

for more detailed information about the fee awards, the specific opinion be reviewed. 

1. In re Oracle 

In the Oracle case, class counsel proposed a basic rising calendar-based contingency fee schedule 

with an early settlement discount, and a proposed cap or limit of $325,000 on the amount of litigation expenses to be charged to the class. Class counsel obtained a recovery of $25 million and received a fee of $4.8 million, or 22.5% of the settlement recovery. Judge Walker noted that the bidding process had resulted in “a fee schedule that represented substantial savings to the class.”418 

Similarly, Judge Kaplan in In re Auction Houses noted that this fee “compared favorably to what 

counsel would have been awarded using a standard 25 percent recovery method—$6.25 million.”419 

2. In re Wells Fargo 

Judge Walker awarded attorneys’ fees pursuant to the terms of class counsel’s bid, which specified 

that for any recovery obtained on or before July 8, 1995, the base fee would be 24% of the first $3 

million of recovery (net of reimbursable expenses); 22% of any incremental recovery from $3 

million to $10 million; and 20% of any incremental recovery above $10 million. In the event of 

settlement after July 8, 1995, but before trial: prior percentages would be increased by 3%. If the 

matter proceeded to trial, the fee would increase by an additional 5%. Because settlement was 

reached within one year, the winning firm received $2,873,150.45 in attorneys’ fees and 

$208,604.81for reimbursement of litigation costs and expenses. Thus, class counsel received a 

total of $3,081,755.26 in fees and expenses or 22% of the settlement fund.420 

 

 416. In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 82 (S.D.N.Y. 2000). 

 417. See In re Cendant Prides Litig., No. 98-C-2819, Affidavit of Roger W. Kirby in Support of Application for Approval of the Proposed Settlement and for Attorneys’ Fees and Reimbursement of Expenses and 

also in Opposition to Objection 1–2 (D.N.J. filed May 14, 1999). 

 418. In re Oracle Sec. Litig., 852 F. Supp. 1437, 1458 (N.D. Cal. 1994). 

 419. In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 79 (S.D.N.Y. 2000). 

 420. In re Wells Fargo Sec. Litig., No. C-91-1944, Order Granting Application for Award of Attorneys’ 

Fees and for Reimbursement of Costs and Expenses (N.D. Cal.) (filed Mar. 31, 1995); In re Wells Fargo Sec. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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3. In re Network Associates 

Total recovery to the class was $30 million; class counsel was awarded 8% of the settlement fund 

net of costs, or approximately $2,080,000 plus interest. They were also reimbursed for their expenses, which had been advanced in connection with the litigation. The court determined that the 

fees awarded were fair and reasonable under either the percentage or lodestar method for calculating attorneys’ fees and that the costs for which reimbursement was requested were reasonable.421

In a subsequent opinion describing the fee award in this case, Judge Alsup explained that “the fee 

proposals of the candidates varied from as low as eight percent to over twenty-five percent. No 

other candidate provided substantially more strength and experience compared to the eight-percent 

candidate. Accordingly, in [this] case, the lead plaintiff selected and the court approved the eightpercent candidate. The difference between eight percent and twenty-five percent translated to 

more than five million dollars for the investor class.” 422

4. In re Bank One 

In this case, the winning bidder proposed to charge 17% of the first $5 million recovered, 12% of 

the next $10 million and 7% of the next $10 million, with no fee charged for any amount recovered in excess of $25 million (thus setting a cap of $2.75 million on the total fees). Since the settlement amount was $45 million or greater than $25 million, the fee cap of $2.75 million was activated to limit lead counsel’s fee recovery. The firm’s bid proposal included a request for the consideration of a possible bonus fee if more than $25 million were recovered. The total amount of 

recovery to the class was a $45 million all-cash settlement fund, plus any accrued interest.423 The 

class ultimately received 93%, or $42 million. 

 Although Judge Shadur would have allowed the successful bidder to request an added reward 

at the end of the litigation, class counsel did not request a bonus fee even though recovery exceeded the voluntary $2.75 million expense cap. Judge Shadur explained that he included the provision in his bidding guidelines to avoid any potential for increasing incentives for lead counsel to 

sell out the class members by settling too early.424

 In a later opinion discussing the fee award, Judge Shadur stated that the fact that the winning 

firm’s fee was just a bit over 6% of the total recovery provides “renewed strong support for the 

process of competitive bidding in awarding legal representation for class members”425 and provides the necessary grounds to show that the winning firm’s fee meets the necessary standard of 

reasonableness, especially in light of the fact that the 6% fee award is “only a fraction of what 

many cases and even treatises describe as the ‘norm’ for class action settlements.”426 

 Litig., No. C-91-1944, Order Granting Motion to Distribute Net Settlement Amount (N.D. Cal.) (filed Dec. 

22, 1995). 

 421. In re Network Assocs., Inc. Sec. Litig., C-99-01729, Order Awarding Fees and Costs 1 (May 21, 

2001). 

 422. In re Commtouch Software, Ltd. Sec. Litig., No. C-01-00719, Order Re Lead Plaintiff Selection 

and Class Counsel Selection 7 (N.D. Cal. June 27, 2001). 

 423. See In re Bank One Shareholders Class Actions, No. 00-C-880, Stipulation of Settlement (N.D. Ill. 

Mar. 1, 2001). 

 424. See In re Bank One Shareholders Class Actions, No. 00-C-880, Transcript of Proceeding Before 

the Honorable Milton I. Shadur 46 (N.D. Ill. June 1, 2001). 

 425. See In re Bank One Shareholders Class Actions, No. 00-C-880, Memorandum Opinion (N.D. Ill. 

June 26, 2001) (no page numbers available). 

 426. Id. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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5. In re California Micro Devices 

The law firm that ultimately ended up representing the plaintiff class in this case (Hogan & Hartson) was not chosen by competitive bidding. We present the attorney fee award description for 

informational purposes only. 

 Comparing the total fee ($4,028,345.80) covering the work done by class counsel with the 

total of both settlements ($25,618,436), the percentage of fees was approximately 15.7%. In this 

case, the class received $21,590,090.20, or 84.3% of the total settlement fund. The total fee 

awarded to counsel was $4,028,345.80, which represented the hours expended by counsel multiplied by counsel’s present hourly rate, and did not include any kind of multiplier. It also included 

expenses. Judge Walker pointed out that this was the fee arrangement that lead plaintiffs had negotiated with counsel prior to the settlement and fees were within and indeed substantially less than 

the Ninth Circuit’s 25% benchmark guidelines. Judge Walker stated that the “best indication that 

the fee requested is a reasonable one is that it was calculated under a fee arrangement negotiated 

by sophisticated, informed institutional investors serving as lead plaintiffs.”427 

6. In re Auction Houses 

Class counsel obtained a total recovery for the class of $537 million. This amount included $412 

million in cash and $125 million in certificates. At the time the case settled, the net present value 

of the certificates reduced the total settlement to $512 million in current dollars.428 The attorneys 

received approximately 5% of the recovery for a total of $26.75 million. 

 Judge Kaplan explained after comparing the six bids, 

the mean ‘X’ bid by the four bidding members of the counsel-selected 

group of interim lead counsel was $96 million. Had such a bid been accepted, the attorneys’ fee in this matter would have been $104.3 million, 

or 20.3 percent of the recovery. Similarly, the mean of all ‘X’ bids was 

$130.4 million. Had the same settlement been achieved by lead counsel 

submitting such a bid, the attorneys’ fees would have been $95.4 million, 

or 18.6 percent of the recovery.429

7. In re Cendant (non-Prides) 

Judge Walls approved two settlements between the lead plaintiffs (Public Pension Fund Investors: 

New York State Common Retirement Fund, the California Public Employees’ Retirement System, 

and the New York City Pension Fund) on behalf of themselves and the class: one settlement with 

Cendant Corporation and the HFS Individual Defendants, and one settlement with Ernst & Young 

LLP. The total amount of recovery to the class from the combined settlements was 

$3,186,500,000. 

 The settlement provided for a payment to the class of $2,851,500,000 in cash, provided for 

additional payment to the class from Cendant and the HFS Individual Defendants in the event they 

recover damages in their suits against Ernst & Young (50% of any recovery), and imposed certain 

corporate governance changes on Cendant Corporation. 

 

 427. In re California Micro Devices Sec. Litig., Reporter’s Transcript of Proceedings of May 24, 2001 

Final Fairness Hearing 18, 20 (Judge Vaughn Walker, N.D. Cal.). 

 428. In re Auction Houses Antitrust Litig., No. 00-C-0648, Memorandum Opinion 23 (S.D.N.Y. Feb. 

22, 2001). 

 429. Id. at 42. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 71 

 The Ernst & Young settlement provided for a cash payment of $335,000,000 to the class. In 

exchange, the class agreed to release all claims that were, or could have been, brought against the 

CUC Defendants (who were not parties to the stipulation), Cendant, and the HFS Individual Defendants.430 

 Lead counsel for the Public Pension Fund Investors described the settlement as 

the largest securities class action settlement in United States history. The 

Cendant Settlement is more than three times the highest recovery ever 

previously obtained in a securities class action, and approximately ten 

times the recovery in the next largest securities class action involving 

fraudulent financial statements. In addition, the Cendant Settlement provides for an additional 50 percent interest in any net recovery that Cendant or the HFS Individual Defendants may obtain from Ernst & Young 

in resolution of claims they have or are litigating against E&Y, and important corporate governance improvements that could only have been 

achieved through settlement of the Action. The Ernst & Young Settlement is the largest amount ever paid by an accounting firm in a securities 

class action.431

 The class received 91.725% of the combined settlements with Cendant and Ernst & Young. 

The court awarded lead counsel (the law firms of Bernstein Litowitz Berger & Grossman LLP and 

Barrack, Rodos & Bacine) an award of attorneys’ fees in the amount of 8.275% of the net class 

action settlement (after deducting costs and expenses of litigation), for a total fee award of 

$262,468,857; and allowance of expenses in the amount of $14,623,806. 432 The fee request was in 

adherence with the 9% fee established by auction for recoveries over $500 million during discovery through adjudication of a summary judgment motion. 

 Judge Walls found that lead counsel’s request for 8.275% of the net settlement fund to be an 

appropriate and reasonable percentage of recovery given that the market set the fee. Judge Walls 

explained that 

[t]his Court need not speculate as to what fee percentage the relevant 

market would have set for a case of this size. No ‘simulation’ of the market is necessary when the open legal market has actually defined the 

lowest responsible fee: 8.275 percent of the settlement. Twelve auction 

bids, most from law firms national in practice and prominent in the field, 

reflected the force of market activity to determine appropriate costs. The 

lowest qualified bid is the result of that market competition. Such result 

will be accorded weight by this Court as a ‘benchmark of reasonableness’ where a large number of firms, some fifteen—many national in 

practice and reputation—bid to provide legal services to the class. In the 

absence of demonstrated collusion, or even a hint of it, among these bid-

 

 430. In re Cendant Corp. Sec. Litig., 109 F. Supp. 2d 235, 239, 242 (D.N.J. 2000). 

 431. In re Cendant, No 98-C-1664, Joint Declaration of Max W. Berger and Leonard Barrack in Support 

of Motion for Approval of Proposed Settlement of Class Action and Plan of Allocation of Net Settlement 

Fund, and In Support of Petition for an Award of Attorneys’ Fees and Reimbursement of Expenses 46–47 

(filed May 5, 2000). 

432. In re Cendant, 109 F. Supp. 2d 285 (D.N.J. 2000). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 72 

ders, the Court has no reluctance to accept and find the auction’s lowest 

qualified bid as representative of the market.433

There were objections to the 8.275% attorney fee award. The co-lead plaintiff, New York City 

Pension Fund, objected to the fee request, alleging that instead of producing reduced costs for the 

class, the auction process resulted in an increased cost to the class of $76 million—money the 

class would have received under the fee proposal originally agreed to between the lead plaintiffs 

and their original counsel before Judge Walls called for an auction to select lead counsel. Thus, the 

city wanted the court to reject the fee sought and seek a reasonable fee or reinstate the retainer 

agreement it had negotiated with lead counsel prior to the auction, and ask lead counsel to negotiate a fee with lead plaintiffs pursuant to the terms of the retainer.434

 Others objected because they thought, among other things, the fee award was “excessive, outrageous,” and a windfall.435 Another thought the settlement documents did not contain sufficient 

information regarding the lodestar figure. In response to these objections, Judge Walls explained, 

“[a]bsent circumstances of bid collusion, bad faith, inadequate numbers of qualified bidders or 

some other infirmity in the auction process, no cross-check is warranted.”436 “To reduce the fee 

award set by auction would be anti-ethical to the Task Force’s recommendation that a fee agreement be reached early in the litigation and not later re-adjusted once recovery is known.” “[T]his 

Court will not adjust the pre-set fee award nor will it abandon this approach because the fee scale 

used provided for an increasing rather than decreasing, percentage of settlement.” Judge Walls 

defended his use of an increase in fee percentage as recovery increases stating that it was “designed to stimulate counsel to strive for ever-increasing recovery.”437

 On August 28, 2001, a three-judge panel of the Third Circuit (Chief Judge Becker, Judge 

Dolores Sloviter, and Judge Thomas Ambro, a Task Force member) affirmed the district court’s 

approval of the settlement and the allocation plan, finding that the district court did not abuse its 

discretion in finding overall that the settlement was fair, reasonable, and adequate under Rule 

23(e) and the nine-factor test the Third Circuit developed to make this determination.438 Although 

the court described situations under which the PSLRA would permit a court to employ the auction 

technique, the Third Circuit found that the district court abused its discretion by holding an auction to select lead counsel in In re Cendant because the reasons provided by the district court for 

holding an auction were not found to be sufficient justification to overcome the Third Circuit’s 

belief that the PSLRA does not allow an auction in the ordinary case where there is a sufficient 

showing that a properly selected lead plaintiff made its lead counsel choice as a result of a “good 

faith selection and negotiation process and [was] arrived at via meaningful arm’s-length bargaining.”439 Thus, because in In re Cendant prior to the court-ordered auction the lead plaintiff selected and retained counsel through a “sufficiently sophisticated and sincere search,” the district 

court should not have conducted an auction but instead should have appointed counsel whom the 

 

 433. Id. at 300. 

 434. Id. at 291. 

 435. Id. at 294. 

 436. Id. at 302–03. 

 437. Id.

 438. In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 

00-3653, slip op. at 53 (3d Cir. Aug. 28, 2001). 

 439. Id. at 109. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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lead plaintiff sought to have appointed in the first place pursuant to the retainer agreement negotiated between them.440

 Because the valid retainer agreement required lead counsel to obtain prior approval of the lead 

plaintiff before submitting a fee application to the court and because there was insufficient evidence that lead plaintiff gave prior approval, and because the fee request was submitted pursuant 

to the fee grid arrived at via the auction rather than the fee arrangement contained in the retainer 

agreement, the Third Circuit found that the district court erred in considering and ruling upon lead 

counsel’s fee application.441 The Third Circuit set aside the fee award and remanded the case instructing the district court to dismiss the fee application and refuse to accept any other applications 

that are submitted without lead plaintiff’s prior approval.442 In order to assist the district court on 

remand with evaluating the resubmitted counsel fee application, the Third Circuit set forth standards that the court should follow in evaluating a properly submitted fee request in class action 

cases that are governed by the PSLRA.443

8. In re Cendant (Prides) 

Judge Walls approved the settlement whereby Cendant agreed to issue rights to new Prides shares, 

with a stated value of $11.71, in exchange for existing Prides shares. The total possible number 

and amount of rights to be distributed pursuant to that agreement was 29,161,474, with an approximate stated value of $341,480,861 (29,161,474 rights at $11.71 per share).444 

 Lead counsel applied to the court for an award of fees not to exceed 10% of the aggregate 

stated value of 29,161,474 rights, or approximately $34,148,081, plus reasonable expenses. Lead 

counsel argued that because most, if not all, of its fee would come from unclaimed rights, the 

“class will be charged less than it would be under the bid.”445

 Judge Walls found lead counsel’s argument that its fee request would not impair the class’s 

rights because they would come from unclaimed rights to be speculative at the time. Using lead 

counsel’s October 7, 1998, acceptance of the lowest qualified bid percentage in the courtsponsored auction for lead counsel “as a benchmark of reasonableness” (and recognizing that the 

winning bid called for a lesser percentage of the total class recovery than lead counsel’s 10% fee 

request), Judge Walls examined the fee request under the lodestar analysis. Finding that lead counsel spent 5,600 hours at an hourly rate of $495, he determined this would have resulted in a lodestar fee of $2,772,000.446

 Having found that expenses of $2,367,493 were necessary and reasonable, that amount in 

equivalent rights (202,177) was deducted from the gross value of rights, $341,480,861 (or 

29,161,474 rights), and given to lead counsel. The court found that 5.7% of the net balance of 

$339,113,368 (28,959,297 rights) was reasonable. Lead counsel was to receive 1,650,680 rights 

equivalent to 5.7% of 28,959,297 rights, approximately $19,329,463.447 Lead counsel was directed 

to satisfy payment of fees and expenses first from any unclaimed rights; then, to the extent that 

such fees and expenses have not been satisfied, any deficiency was to be assessed against and 

 

 440. Id. at 115. 

 441. Id. at 116–17. 

 442. Id. at 117. 

 443. Id. at 117–24. 

 444. In re Cendant Corp. Prides Litig., 51 F. Supp. 2d 537, 540 (D.N.J. 1999). 

 445. Id. at 540–41. 

 446. Id. at 541–42. 

 447. Id. at 542. 
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borne by the class. Any rights unclaimed after authorized class claimants and lead counsel were 

issued their entitled rights were to be canceled by Cendant Corporation as provided under the 

terms of the settlement.448 

 On March 21, 2001, the Third Circuit vacated the district court’s award of attorney fees.449

The Third Circuit found that “[a]s in Gunter, the District Court’s fee opinion in this case was too 

cursory for us to ‘have a sufficient basis to review for abuse of discretion.’ The district court did 

not even specify whether it was using the percentage-of-recovery method or the lodestar method to 

set attorneys’ fees. Nor, if the district court intended to utilize the lodestar method, did it calculate 

the lodestar multiplier.”450 Although the Third Circuit found that the use of the percentage-ofrecovery method is appropriate in this case, it criticized the district court for not explicitly considering any of the at least seven factors articulated in Gunter to be considered by district courts in 

setting percentage fee awards in common fund cases.451 Further, the Third Circuit stated that although the district court indicated that it was using the bid that Kirby had agreed to “as a benchmark of reasonableness” in setting the fee, “a preliminary bidding process cannot replace subsequent analysis of the factors listed in Gunter. The circumstances and progression of every case are 

different, and these unique factors must be taken into account by district courts awarding attorneys’ fees. Therefore, though the result of a bidding process may be of use to the district court in 

awarding fees at the end of the case, it cannot supplant post-settlement analysis to determine a 

reasonable fee.”452

9. In re Amino Acid Lysine 

In this case, the winning firm proposed a “fee of 20 percent for the first $5 million dollars recovered, plus 15 percent of the next $10 million and 10 percent of the next $10 million.”453 The firm’s 

bid set a cap on attorney fees of $3.5 million dollars, which was met because the case ultimately 

settled for $49 million. 

 One losing bidder, Melvyn Weiss of the Milberg Weiss firm, charged that the existence of a 

cap on fees, which was self-imposed by the winning firm as part of its bid, meant that the latter 

firm was unwilling to exercise its best efforts on behalf of its clients, the class members, because 

the firm had nothing to gain in pushing for a larger recovery from the defendants.454 The court 

responded to these comments by stating that “an attorney undertaking such a position is clearly 

unethical.”455 The court emphasized that it is a “total red herring to suggest that either the bidding 

process to obtain the best quality representation at the lowest cost to the plaintiff class members, 

or the cap on fees that the [winning] firm chose to include in its ultimately successful bid, has in 

any respects disadvantaged the plaintiff class. Instead precisely the opposite is true.”456 

 After receiving the proposed settlements, Judge Shadur inserted the relevant figures into the 

eight different bid proposals and determined that if the settlements had been approved at that particular time, and even if no added recovery were to be made from the non-settling defendants—in 

other words even on the worst case scenario—the [winning] bid would have provided the greatest 

 

 448. Id.

 449. In re Cendant Corp. Prides Litig., 243 F.3d 722 (3d Cir. 2001). 

 450. Id. at 733 (citing Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 196 (3d Cir. 2000)). 

 451. Id at 734. 

 452. Id. at 735 n.18. 

 453. In re Amino Acid Lysine Antitrust Litig., 918 F. Supp. 1190 (N.D. Ill. 1996). 

 454. In re Amino Acid Lysine, No. 95-C-7679, 1996 WL 197671 at *1 (N.D. Ill. Apr. 22, 1996). 

 455. Id. at *3. 

 456. Id. 
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benefit for the clients in comparison with all of the other bids. 457 The court determined that the 

other bids would have “required at least $5 million more from the Archer Daniels Midland before 

the plaintiff class would have come out as well as the clients would realize under the [winning 

bid], taking into account its $3.5 million cap on fees.”458 

C. Courts’ Treatment of Expenses and Costs 

One of the qualitative factors courts considered when reviewing bid proposals was the treatment of 

expenses and costs. In In re Wells Fargo, Judge Walker wrote, “[a]n attorney generally has no 

incentive to minimize litigation expenses unless his fee award is inversely related to such expenses. Second, when an attorney treats a resource devoted to litigation as a reimbursable expense, 

the attorney has a clear incentive to substitute that resource for those paid for out of the attorney 

fee, even if it increases the overall cost of the litigation to the client.”459

 In eight of the fourteen cases, courts either required or preferred bidders to include all costs or 

expenses in addition to attorneys’ fees in the percentage of total class recovery the bidder would 

charge in the event of a class recovery. See Table 2 supra. Of these eight cases, five have since 

settled. Although the court expressed the above-described preference in its guidelines, in only one 

of the five settled cases, In re Auction Houses, did the winning bidder include expenses in its fee 

proposal. Thus, the percentage of the final settlement fund awarded to class counsel in In re Auction Houses included both attorneys’ fees and reimbursement for all costs and expenses. 

 Because the court chose the winning bidder in the other four cases despite the failure of these 

bidders to follow the courts’ preference of combined fees and expenses, the courts seem willing to 

award fees and expenses separately if they found the terms proposed by the winning bidder, as 

well as their other qualifications, in the best interest of the class compared to the other bidders. For 

example, in In re Wells Fargo, the court accepted the winning bidder’s proposal, even though the 

bidder did not follow Judge Walker’s preference for bidders to include expenses in their fee proposal, because the winning bidder agreed to deduct its litigation expenses from the total amount of 

any recovery before application of its fee percentage.460 Under this method, the court determined 

that “each incremental dollar of expenses simultaneously results, on average, in a twenty-five cent 

reduction in attorney fees.”461

 With the exception of In re Auction Houses, in the other seven cases that have settled the 

court reimbursed class counsel for their costs and expenses out of the total class recovery separately and in addition to the amount awarded to class counsel for attorneys’ fees. For example, in 

In re Network Associates, the winning firm received fees in the amount of approximately $2 million and expenses in the amount of $360,813.462 Similarly, Judge Walls in In re Cendant allowed 

for separate reimbursement of fees and expenses. In that case, the winning firm received a fee 

award of $262,468,857463 and reimbursement of expenses in the amount of $14,623,806, which 

included fees and expenses of experts and consultants retained by the lead plaintiffs on behalf of 

the class ($14,094,994 for an international investment banking firm, a damages expert, an account-

 

 457. Id.

 458. Id.

 459. In re Wells Fargo Sec. Litig., 157 F.R.D. 467, 470 (1994). 

 460. Id. at 471–472. 

 461. Id. at 471. 

 462. In re Network Assocs. Inc., Sec. Litig. No. C-99-01729, Order Awarding Fees and Costs 1 (May 

21, 2001. 

 463. In re Cendant Corp. Sec. Litig., 109 F. Supp. 2d 285 (D.N.J. 2000). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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ing firm, and an investment banking expert) and $528,812 in law firm costs, which included expenses such as photocopying and electronic research. Although we were unable to definitively 

ascertain the method used in the other settled cases, such as in In re Wells Fargo, Judge Walls 

deducted costs and expenses from the net settlement fund prior to awarding class counsel fees of 

8.275% of the fund. The firm also sought the interest earned on fees and costs.464 The court concluded that the expenses were reasonable and necessary to the class. Judge Walls pointed out that 

lead counsel had discussed the need for such experts informally with him early on—Judge Walls 

had no objection and expected counsel to seek competent assistance, if required, in a case of this 

magnitude.465 “This Court does not recognize ‘reasonable’ as a synonym for ‘cheap.’ Reasonableness of price reflects the force of market competition by qualified providers of requested services.”466 However, the court did deny lead counsel’s request for interest on fees and costs. 

 Although courts did not place caps on expenses or costs, in In re Oracle the winning bidder 

voluntarily agreed to a cap of $325,000 on expenses incurred in prosecuting the class claims 

against the Oracle defendants and $500,000 on expenses incurred in pursuing the class claims 

against Arthur Andersen.467 The firm incurred $320,065.95 in expenses on the Oracle claims and 

$472,342.43 in expenses on the Andersen claims (these expenses equal $791,408.38 in the aggregate).468 In addition, class counsel recorded $188,176.77 in notice expenses469 and $174,176 for 

processing 24,446 proofs of claim.470 Lead counsel asked the court to reconsider the cap, and the 

court denied the request for reconsideration. Judge Walker explained that the costs of administering the settlement and costs associated with giving notice to the class fall within class counsel’s 

expense caps. 

 Because of the limited amount of data on caps of fees or expenses, it is premature to suggest 

that such caps influence case outcomes. 

D. Ex-post Fee Determinations 

Some judges have noted that one advantage of using an auction method to select counsel is it 

minimizes an indeterminate ex-post assessment of fees. We found in most cases, judges refused to 

reconsider fees set by the winning bid. They were unwilling to adjust the fees agreed to up front 

either upwards or downwards. However, in two cases with fee caps, In re Amino Acid Lysine and 

In re Bank One, Judge Shadur noted attorney fees might be reconsidered “so long as the ultimate 

fee awarded ‘leave[s] the class meaningfully better off financially than under any of the other 

original bids. . . .”471 Despite this provision in both cases, class counsel never requested a bonus 

fee, even though the fee caps were implemented because the total recovery exceeded the fee cap. 

 Notwithstanding the courts’ lack of desire to revisit the fee issues, there were two instances 

where judges actually did. In In re Network Associates a number of firms that had submitted bids 

but were not selected requested that they be reimbursed from the settlement fund for expenses and 

work that had conferred a benefit on the class. All but one of the fee petitions were rejected on the 

 

 464. See In re Cendant, Petition of Lead Counsel for an Award of Attorneys’ Fees and Reimbursement 

of Expenses 3–4 (D.N.J. filed May 5, 2000). 

 465. In re Cendant, 109 F. Supp. 2d at 305. 

 466. Id.

 467. In re Oracle Sec. Litig., 852 F. Supp. 1437, 1457 (N.D. Cal. 1994). 

 468. Id. at 1457. 

 469. Id.

 470. Id. at n.12. 

 471. In re Amino Acid Lysine Antitrust Litig, 918 F. Supp. 1190, 1199 (N.D. Ill. 1996). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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record. The court did allow one firm, McManis, Faulkner & Morgan, which had been representing 

the lead plaintiff prior to the court’s appointment of Leiff, Cabraser as class counsel, to meet and 

confer with class counsel about a reasonable fee award. The court ordered that any resulting 

agreement or recommendation by class counsel had to be filed no later than June 11, 2001.472

McManis, Faulkner & Morgan requested $112,944.00 in attorneys’ fees and $14,991.00 in costs473

from either the settlement fund or class counsel’s portion of the settlement fund.474 On June 18, 

2001, the court denied awarding any fees to McManis, Faulkner & Morgan stating the firm’s “billing records fail to show what time, if any, furthered the interests of the class as opposed to attempting to further the interest [of the firm] in becoming lead counsel.”475 The court stated “[t]he 

request is so excessive, so overreaching, that it is impossible to discern any portion of it that benefited the class.”476

 In In re Cendant Prides, lead counsel had requested a fee of 10% of the stated value of the 

total amount of rights to be distributed at settlement. The court awarded counsel considerably less 

at 5.7% of the number of net settlement rights (after deducting for expenses).477 The Third Circuit 

in reviewing the fee award criticized the district court because it had not employed the factors 

which the circuit court has indicated district courts should consider when awarding fees using the 

percentage-of-recovery method in common-fund class actions.478 In discussing the factors the district court should have considered, the Third Circuit said among other things, that the district court 

had had not accounted for the fact the case was relatively simple since Cendant had conceded liability.479 In addition, the case settled at a very early stage in the litigation with little or no discovery.480 Further, the Third Circuit criticized the district court for not examining other cases in which 

the common fund exceeded $100 million.481 In those cases, fee awards ranged from 2.8% to 36% 

of the total settlement fund. The Third Circuit found that although the 5.7% fee award in In re 

 

 472. In re Network Associates, Inc. Sec., Litig., No. C-99-01729, Further Order Re Motion For Fees and 

Costs By McManis, Faulkner & Morgan (June 6, 2001). 

 473. In re Network Associates, Inc. Sec. Litig. No. C 99-01729, Order Denying Motion for Fees and 

Costs By McManis, Faulkner & Morgan 1 (N.D. Cal.) (filed June 18, 2001). 

 474. In re Network Associates, No. 99-C-01729, Notice of Motion and Motion and Memorandum of 

Points and Authorities in Support of Lead Plaintiff’s Former Counsel’s Application for Attorney’s Fees and 

Reimbursement of Expenses, or Alternatively, Objection to the Proposed Settlement of Class Action 2, 11 

(N.D. Cal. filed Apr. 16, 2001). 

 475. See supra note 473. 

 476. Id.

 477. In re Cendant Corp. Prides Litig., 51 F. Supp. 2d 537 (D.N.J. 1999). 

 478. In re Cendant Corp. Prides Litig., 243 F.3d 722 (3d Cir. 2001). In a recent decision disapproving of 

the district court’s selection of class counsel pursuant to an auction and vacating the fee awarded pursuant to 

the court-sponsored auction in In re Cendant Corp. Litigation, the Third Circuit held that in a typical PSLRA 

case, courts should accord a presumption of reasonableness to any fee request submitted pursuant to a retainer agreement that was entered into between a properly-selected lead plaintiff and a properly-selected lead 

counsel. In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 

00-3653, slip op. at 119 (3d Cir. Aug. 28, 2001). Further, a modified Gunter review should be applied to 

determine whether the presumption of reasonableness has been rebutted in order to take into account some of 

the changed circumstances brought about by the PSLRA. Id. at 121. In re Cendant Corp. Prides Litigation

was distinguished because the district court’s decision to use an auction to select and retain lead counsel was 

not challenged on appeal and thus the case was no longer a typical PSLRA case since an auction is inconsistent with the assumptions underlying the PSLRA (i.e., the auction method relies on the court, instead of the 

lead plaintiff, to serve as the class’s agent with regard to selecting and retaining lead counsel). Id. at 122 n.56. 

Thus, the full Gunter review was warranted. Id. 

 479. Id. at 735. 

 480. Id.

 481. Id. at 736. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Cendant Prides appeared in line with the awards in other cases, upon further review, it was clear 

that the 5.7% was not justified in light of time and effort exerted by the attorneys.482

 Finally, the Third Circuit criticized the district court for not using the lodestar method to cross 

check its initial percentage fee calculation and for not explaining how the application of the multiplier was justified by the facts of the case.483 Specifically, the Third Circuit found that the district 

court’s allowance of such a high lodestar multiplier (7 using Kirby’s senior partner rate as the rate 

for all hours) “without even calculating it, much less explaining how it is justified” was an abuse 

of its discretion, “particularly where the district court appeared to be attributing more responsibility to Kirby for the quality of the settlement than may be legitimately warranted” and where “this 

case was neither legally nor factually complex, and did not require significant motion practice or 

discovery by Kirby, and the entire duration of the case from the filing of the Amended Complaint 

to the submission of a Settlement Agreement to the District Court was only four months.”484

 The Third Circuit subsequently vacated the district court’s fee award and remanded the issue 

of attorneys’ fees. “On remand of this case to the District Court, we strongly suggest that a lodestar multiplier of 3. . . is the appropriate ceiling for a fee award, although a lower multiplier may 

be applied in the District Court’s discretion. The 3 multiplier would result in an award of no more 

than $8.3 million for Kirby (calculating the lodestar at $495/hour).”485 

 The Third Circuit decision motivated one judge to address the court’s rationale in a case still 

pending when the Third Circuit issued its decision. Prior to the settlement fairness hearing in In re 

Bank One, Judge Shadur issued a Memorandum Order to address the issues that were raised by the 

Third Circuit’s opinion. Judge Shadur disagreed with the opinion and believed it was “particularly 

inappropriate to employ that demonstrably flawed method [the lodestar approach] of determining 

fees as the benchmark by which the reasonableness of a percentage-of-recovery fee arrived at in 

the crucible of competition should be measured.”486 Nevertheless, Judge Shadur believed it would 

be irresponsible to not obtain the information appropriate to the lodestar approach to provide a 

complete record if an appeal were to ensue. Thus, he ordered (1) plaintiff class counsel to submit 

input called for under the lodestar approach (both the time spent by, and the customary hourly rate 

for, each lawyer involved in the litigation); and (2) “purely for comparative purposes,” defense 

counsel is to submit a statement separately setting out the total number of hours spent by partners 

and associates (including time expenditures by Bank One’s in-house counsel).487

 At the final fairness hearing, Judge Shadur in In re Bank One once again criticized the Third 

Circuit’s opinion as “defying logic and common sense for utilizing the lodestar method as a ‘yard-

 

 482. Id. at 738. 

 483. Id. at 742. In a recent decision holding that the district court abused its discretion by using an auction to select lead counsel and vacating the attorneys’ fee awarded by the court-ordered auction, the Third 

Circuit implied that the decision in In re Cendant Corporation Prides Litigation may have elevated the lodestar cross-check from being a “recommendation” to a requirement in cases not decided as a typical PSLRA 

case due to the use of an auction to select class counsel. In re Cendant Corp. Litig., Nos. 00-2520, 00-2683, 

00-2708, 00-2709, 00-2733, 00-2734, 00-2769, 00-3653, slip op. at 123 n.57 (3d Cir. Aug. 28, 2001). In addition, the Third Circuit held that the court may need to utilize a lodestar cross-check in addition to the Gunter

factors, to test the presumption of reasonableness, if challenged, of fee agreements between lead plaintiff and 

lead counsel governed by the PSLRA. Id. at 123 & n.58. 

 484. Id. 

 485. Id. 

 486. See In re Bank One Shareholders Class Actions, No 00-C-880, Memorandum Order 2, 4–6 & n.5 

(N.D. Ill. Apr. 10, 2001). 

 487. Id.
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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stick’ for measuring the award that is obtained as a result of a well-crafted bidding process.”488

Judge Shadur explained that second guessing the bidder by requiring a post-hoc lodestar justification “deprives the bidding law firm of the benefit of the bargain, in violation of I think the unexceptionable principles of freedom of contract,” and “creates for the bidder a risk on the downside 

without any corresponding upside potential.”489 Judge Shadur also claimed that this lack of confidence in the sanctity of the bid has chilled the bidding in another securities class action in which 

he is currently awarding class counsel based on bidding.490 

VIII. Summary of Judge Interviews 

In this section, we summarize the results of our telephone interviews with judges who have and 

have not used the bidding method to select counsel. Interviews were conducted between June 2001 

through mid-August 2001. During that time, all seven bidding judges agreed to be interviewed. 

We contacted over fifteen judges experienced in managing securities and antitrust class actions but 

with no experience using the bidding procedure—only four responded to our request to be interviewed. Of these four judges, three were from the same district. We believe this low response rate 

may have been due to the time of year as well as the short time frame. Consequently, we present 

their results as illustrative examples and not as a basis for generalizing to the universe of those 

judges experienced using nonbidding methods to select counsel. 

 From both groups of judges, we were interested in learning generally about their experiences 

using traditional methods of appointment of counsel, including the nature of problems if any, and 

how such problems were resolved. Also, we were interested in the interviewees’ suggestions regarding procedures that might improve the traditional methods of appointment and whether auctioning the role of lead counsel requires any special skills. 

 We also asked the judges who have used bidding to address to what extent they considered 

the merits of the case and likelihood of recovery prior to choosing the auction method. Further, we 

asked whether they believe certain types of cases are more suitable for auctioning, and if so, the 

characteristics of those cases. 

A. Judges with Experience Auctioning the Role of Class Counsel 

1. Consideration of the merits of the case prior to auctioning the lead 

counsel role 

Two judges who used bidding indicated that the merits of the case were considered to some extent 

prior to deciding to use an auction. In one case, the court pointed out that it recognized that liability was not going to be a formidable issue in the case because of the defendant’s public admission 

of accounting errors. Another judge explained that the merits of a case are explicitly considered in 

connection with selection of class counsel to the extent that counsel seeking designation as class 

counsel offer an assessment of the case in their bid proposals. In addition, the same judge suggested that inferential assessments about the merits of a case could possibly be made from the 

number of counsel interested in assuming representation of the class and the enthusiasm they dis-

 

 488. In re Bank One, No. 00-C-880, Transcript of Proceeding Before the Honorable Milton Shadur 23 

(N.D. Ill. June 1, 2001). 

 489. Id. at 26. 

 490. See In re Comdisco Sec. Litig., 141 F. Supp. 2d 951 (N.D. Ill. 2001) (Memorandum Opinion incorporating attached April 6 Memorandum Order). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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play for the assignment, as well as the fee percentages proposed by the bidders if a bid grid is 

used. 

 Although recognizing that a general familiarity with the issues was naturally obtained from 

reviewing the complaint and other relevant documents submitted by counsel, the other five bidding judges reported that they did not consider nor did they seek to gain more information about 

the specific merits of the case. One judge said that the merits of the case had nothing to do with 

how lead counsel was selected, instead stating that the high interest in the case from eight or nine 

firms and the uncommonly large amount of losses involved were the definitive factors in the 

judge’s decision to use competitive bidding. Another judge pointed out that it wasn’t necessary to 

consider the merits since the defendants had publicly admitted to price-fixing and a grand jury was 

investigating the matter, making the issue of liability in the case clear. 

2. Consideration of the likelihood and size of recovery prior to auctioning the lead counsel 

role 

Only one judge reportedly did not consider the likelihood and size of recovery prior to soliciting 

bids for the role of class counsel. The other judges reported considering the extent of liability to 

some degree prior to deciding to use bidding. One judge said that the likelihood and size of recovery were given more importance in the decision to use bidding in a case where the government 

was investigating the defendant and there was widespread publicity. 

 To estimate the size of recovery, one judge relied on general knowledge from experience 

about ranges of likely success in litigation. Another judge pointed out that clearly the higher the 

settlement value, the less risk of not having a recovery. One judge admitted that despite the attempt to estimate the extent of liability, the court was never expecting the recovery that was ultimately settled on in the case. Finally, although not going as far as attempting to estimate actual 

damages, one judge acknowledged that because of the public information of the defendants’ guilt, 

damages would be fairly easy to calculate and defendants’ would want to settle quickly to diminish the damage to their public trust and confidence. This judge was bothered by the likely possibility that the plaintiffs’ attorneys would try to demand a large sum for attorneys’ fees in what was 

considered a relatively easy case. 

3. Common case characteristics of bidding cases 

The bidding judges reported the following characteristics as those that made certain types of cases 

better candidates for auctions than others: clearly accepted or stipulated liability; information from 

a criminal investigation; publicly known details about the case; clearly defined case; multiple 

cases consolidated in one jurisdiction; substantial market losses (i.e., potential for very large recovery); solvent corporate defendant; existence of a well-defined class; multiple firms competing 

for lead class counsel position; and common fund cases. 

4. Large firm versus small firms 

After noting that the one firm that dominated plaintiff securities class action practice in nonauction cases had won lead counsel position in only two bidding cases, one bidding judge concluded that the auction process appears to afford smaller firms greater opportunity to be selected 

class counsel in securities class actions than the traditional method of selecting class counsel. 

However, the same judge pointed out that since plaintiff class action practice requires capital to 

finance the litigation and receivables constitute a large part of the assets of any plaintiff class ac-
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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tion firm, the courts seldom, if ever, consider the financial responsibility that those receivables 

demand when selecting class counsel. 

 Another judge felt that a large firm would have the advantage to the extent a small firm 

couldn’t afford to maintain the litigation by, for example, being capable of putting up a performance bond. 

 Two bidding judges reported that whether the auction process benefits large or small firms 

depends on the firms involved or the characteristics of the case. Large firms have financial resources and experience not often found in smaller firms. They can provide benefits to the class in 

their representation of the class and in litigating of claims. In addition, in large stakes cases it may 

be easier for a large firm to absorb risk by advocating a no fee position. However, a smaller firm 

may fare better in a less risky case, such as a one where liability is clear or not formidable. 

 Another judge pointed out that the auction process could benefit both large and small firms by 

giving small firms the opportunity to prove their experience thus enabling them to compete with 

larger firms while allowing large firms to emphasize their financial resources, their ability to 

spread risk, and their staying power in the litigation. One judge explained that bidding neither advances nor disadvantages either large or small firms because the bidding process defines itself. For 

example, if the case requires a large firm then by definition there would be fewer small firms able 

to handle it which would be the case regardless of bidding. Likewise, a suit may be comfortably 

managed by a firm of small to moderate size with assistance from other firms as needed. Finally, 

another judge who had awarded counsel to firms smaller than some of the more well-known players in the plaintiff’s class action bar said that the important factors were experience, competency, 

and proposed compensation rather than firm size. 

5. Ex parte communication concerns with auctioning the role of lead counsel 

All of the bidding judges dismissed criticism that submitting sealed bids amounts to ex parte 

communication of information relevant to the merits of the dispute. Many of the judges pointed 

out that information about the quality of a firm and their attorneys, and details regarding how a 

firm is willing to represent a client (i.e., a fee proposal) do not disclose information relevant to the 

merits of a case or legal strategies describing how the attorneys will win their case. Although recognizing that a sealed bid is an ex parte communication, another judge did not feel this was problematic because the data set forth in the bid are relied on only for selecting lead class counsel and 

not used thereafter, except at the end of the case when reviewing the fee application. Two judges 

called the criticism “silly” because there was no discovery or requests for discovery prior to bid 

submission; bidders bid based upon the information they had; the judge took no part in discussing 

with the bidders beforehand what they would bid or the judge’s evaluation of the case; and the 

bids concerned economic transactions instead of legal strategies. 

 One judge explained that in his bidding cases the bids were disclosed when class counsel was 

selected, at the outset of litigation before consideration of the merits of the case. The judge concluded that the submissions were not truly ex parte although their disclosure to defendants and any 

other non-bidding parties was delayed until the selection of class counsel was made. 

6. Management practices with auctioning the role of lead counsel 

Several bidding judges reported that bidding allowed them to handle the class action more efficiently than under the traditional method of appointment because it was necessary to only deal 

with one firm on each side of the case, both during settlement negotiations and for submission of 

the fee application. There were no liaison committees or multiple parties that needed to engage in 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 82 

mass communication in order to respond to any inquiry which delays many aspects of the case. 

One judge stated that more effective management of the case was achieved because bidding permitted the judge to become familiar with the bidders, especially the winning bidder, and learn 

what their desired fee range was. Commencing the case with the auction procedure enabled another judge to get a handle on the case early on, set parameters, and move the case along. Another 

judge explained that although bidding does not necessarily eliminate the duty of the court to scrutinize fee applications at the conclusion of the litigation, it does give the court a significant and 

true market benchmark by which to assess fee applications. 

7. Special skills needed to auction the role of lead counsel 

Most bidding judges did not feel that a judge needs any special skills to auction the role of class 

counsel other than prudent decision making and confidence in their decisions. One judge felt that 

familiarity with auctions in general may be helpful—also helpful is carefully setting up the terms 

of the auction. Three judges felt that some experience handling complex civil litigation and some 

exposure to managing large class actions and assessing damages was necessary to avoid a judge 

being overwhelmed in an attempt to implement an auction procedure. Having time to evaluate the 

bids thoroughly and the ability to keep an open mind regarding bidding was also reported as important. 

8. Problems, if any, with selection of counsel in non-auctioning cases 

The most commonly reported problem with the traditional method of selection of class counsel 

concerned the ex-post evaluation of the attorneys’ fee applications usually submitted by teams of 

attorneys. One judge complained that the high overlap and duplicative activity resulting from multiple counsel costs the class in terms of total class recovery and results in fee applications so time 

consuming and difficult to evaluate that they warrant appointing a special master to analyze the 

fees. Another judge said that the lodestar method is simply not well suited to evaluating fee petitions, especially in very large complex cases with, for example, forty to fifty depositions and two 

million documents; it is very difficult to attempt to evaluate these fee petitions with no assistance 

and relying on recollection. Another judge reported that the current system requires very active 

judicial oversight in order to compensate the risk involved in securities class actions instead of 

attorneys’ greed since the attorneys are supposed to be fiduciaries for the class. 

 One judge turned to bidding to address the difficulties inherent in lodestar fee determinations 

and to solve the problem of selecting class counsel when plaintiffs’ attorneys could not agree on 

the appropriate composition of the plaintiffs’ steering committee. Another judge reported dissatisfaction with the common approach of appointing the attorney who gets to the courthouse first because these attorneys may not have conducted sufficient investigation of the case before filing the 

complaint and may not provide the best representation for the class. 

9. Suggested procedures to improve the traditional appointment of counsel 

Several judges suggested that, in addition to competitive selection by a court-directed auction, 

appointing a presumptive lead plaintiff and permitting the lead plaintiff to engage in its own competitive search for lead class counsel may prove to be very helpful in obtaining class counsel who 

effectively represents the interests of the class. 

 Another judge felt that although the traditional method is satisfactory in some cases, Rule 23 

should put more emphasis on the court’s gatekeeper role and its responsibility for protecting the 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 83 

class in class action litigation by endorsing the use of competitive bidding so that other judges 

may try it in appropriate cases. 

10. Judicial resources and auctioning the role of lead counsel 

Most of the bidding judges felt that judicial resources were saved by auctioning the role of class 

counsel rather than employing the traditional method of appointment and payment of attorney’s 

fees. One judge pointed out that although auctioning may require more effort at the outset of the 

case, it facilitates and informs decisions that ultimately need to be made and result in an overall 

savings of judicial time. Another judge said that resources are saved because the court is only 

dealing with one firm and competing fee petitions are eliminated. 

 Another judge felt that addressing the fee arguments up front definitely saves judicial resources, except if the court still has to conduct a lodestar analysis at the end of the case. This judge 

explained that the purpose of an auction is to obtain a market price for counsel fees, and this market price represents reasonableness if there are a sufficient number of bidders, no collusion, and 

bidding is open to everyone. If this reasonable market price is still subject to an ex-post lodestar 

review, this judge further explained, it does not make sense for a firm to submit to a bidding process when their bid could be upset by a lodestar determination. 

 Three judges reported that the potential savings of judicial resources played a significant role 

in their decision to use bidding, while two judges said that potential savings was an afterthought or 

not an important factor. 

B. Judges with Experience Managing Securities and/or Antitrust 

Class Actions Using Traditional Methods of Appointing Class 

Counsel 

1. Criteria used to appoint class counsel 

There was little variation in the criteria used by judges to appoint lead counsel. In most instances, 

attorney or firm competence and reputation and experience handling similar types of litigation 

were the most common criteria used by the judges. One judge commented that in addition to the 

factors listed above, he also considers to what extent, if at all, an attorney has been sanctioned by a 

federal or state court. This same judge also considers which attorneys emerge by consensus from 

those desiring to serve as lead counsel. Another judge reviews the complaint to determine generally whether the case has merit and whether the party that brought the suit performed the necessary 

research for a ruling on class certification. For those judges who have routinely interacted with the 

same firms and have had favorable experiences, they noted that they generally do not give the appointment of lead counsel a second thought, especially if attorneys’ fees have been reasonable and 

the firm was competent in handling previous litigation. 

2. Nature of problems, if any, regarding lead counsel appointment 

In the majority of cases, judges did not experience problems using the traditional method to appoint lead counsel. In the few instances where issues did arise, excessive counsel fees and attorney 

sanctions were mentioned as problems. With respect to fees, one judge indicated that he now requires counsel to file their time records by the fifteenth of the following month. The judge stated 

he requires this filing for two reasons: (1) to place counsel on notice that the judge is concerned 

with fees, and (2) to have an interim or ongoing record of attorney time. When asked whether a 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 84 

bidding procedure would have minimized an attorney or firm charging excessive fees, the judge 

responded that just the possibility of invoking bidding tends to reduce the temptation for charging 

excessive fees. In addition, the judge noted that the fact that bidding is part of a judge’s arsenal has 

had a salubrious effect. 

 The other problem cited involved a judge unknowingly appointing as lead counsel an attorney 

who had been sanctioned by a court for discovery abuses in a different state. The judge indicated 

that not only was he embarrassed, but he was also very frustrated because the attorney engaged in 

similar behavior in his case. The judge noted that had he known the attorney had been sanctioned 

previously he would have never appointed the attorney to serve as lead counsel. The judge expressed frustration and concern over not having more information available to him and other 

judges about attorneys who have been sanctioned by other federal and state courts. Further, this 

judge stated that the level of information currently available is not sufficient nor consistently reported by judges. 

3. Suggested procedures to improve the traditional appointment of counsel 

One judge thought requiring attorneys to file monthly time records would encourage more accurate timekeeping by attorneys. Another judge would like to see the creation of a federal–state database that contained information on attorneys who have been sanctioned by a court. The judge 

thought this information would be useful for judges who have attorneys appearing before them 

from other districts, and therefore the judge is not familiar with the reputation of the attorney(s) or 

firm. 

 The remaining two judges believed the current system of appointment is working and consequently did not see any need to suggest changes. 

4. Considered auctioning the role of lead counsel, but subsequently rejected 

One judge indicated that he had considered bidding, but subsequently rejected it because his current method of selecting counsel was satisfactory and in his opinion had produced the same results 

that bidding would have and was somewhat less antagonistic to the bar. Another judge said he 

would consider using bidding, although he doubted that as a senior judge he would be assigned the 

large class action case where bidding would appear to be most appropriate. Yet another judge 

commented that he had never considered bidding because he had never been faced with a situation 

where counsel was competing for the lead counsel position. This same judge indicated that he 

would, however, consider using bidding in a situation where numerous attorneys were competing 

for the position of class counsel. 

5. Special skills needed to auction the role of lead counsel 

The majority of the judges did not believe any special skills were needed to auction the role of 

lead counsel. One judge indicated that judges commonly handle a lot of complicated procedures 

and using an auction procedure was just a different type of procedure. Another judge commented 

that with auctioning, the judge is looking for quality representation at the best possible price. This 

same judge continued saying federal judges are as good as anyone in evaluating the quality of potential counsel and did not think that any special skill other than what a judge already possesses is 

necessary. Similarly, other judges noted the judge’s responsibility to protect the class by appointing competent counsel. However, one senior judge believed that bidding works best if done by an 

experienced judge who has a trial practice background. This judge would not recommend that a 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 85 

recently appointed judge use bidding to select lead counsel. If a newly appointed judge wishes to 

go forward with using such an approach, the judge thought it would be best if the judge appointed 

a special master to conduct the bidding process. 

6. Lodestar versus percentage-of-recovery method 

We asked judges what types of case characteristics determine whether they use the lodestar or 

percentage-of-recovery method to award attorneys’ fees. Almost all the judges indicated that it 

really depends on the nature of the case and whether their circuit has a preference for a particular 

method. One judge said he usually requests that the attorneys calculate their fee based on both the 

lodestar and percentage-of-recovery methods. This judge then compares both fee schedules to determine if one is clearly higher than the other. If one is clearly higher, the judge said he would 

probably choose the method of calculating fees that generated the lower recovery (which is probably the lodestar method). After this analysis is done, the judge compares that information to what 

he has awarded in the past in similar types of cases, as well as what other judges have awarded in 

fees under either the lodestar or percentage-of-recovery in his district or circuit or nationwide to 

determine if the attorneys are entitled to more or less in attorneys’ fees. 

 Another judge, stating his preference for the lodestar method, said he first assesses whether 

the class action was truly necessary (i.e., merits of the class and the amount of money involved). 

This judge noted that in many class actions, the class ultimately ends up receiving very little while 

the attorneys receive the lion’s share of the settlement. Further, the judge said that he has a difficult time awarding hundreds of thousands of dollars for minimal results. For example, the judge 

looks at what counsel accomplished for the class and what the recovery was worth. Was the result 

an illusory recovery (e.g., coupons) that is probably more beneficial to the defendant than to the 

class or was there a real cash recovery? In sum, the judge commented that the results of the case 

weigh heavily in his fee award decision regardless of which method was used to award fees. 

7. Circuit benchmarks and the awarding of attorneys’ fees 

Two of the judges could not recall whether their circuit had a benchmark. The remaining two 

thought their circuit did, and indicated a range between 20% and 40%. Both judges believed that 

they awarded fees in accordance with their circuit’s benchmark, but also qualified their statements 

by saying fee awards are determined by the facts of a case. One judge stated that class action settlements can be so different, a judge really has to look closely at the facts of the case and the role 

lead counsel played to determine whether there is a real recovery before fees are awarded. 

Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Appendix A: Guidelines for Bid Submissions 

In re ORACLE SECURITIES LITIGATION 

90-C-0931 

131 F.R.D. 688 

N.D. California 

Aug. 3, 1990 

 IT IS HEREBY ORDERED THAT each law firm wishing to compete for the position of lead 

class counsel shall, on or before August 24, 1990, submit an in camera application to the court (1) 

establishing its qualifications to serve as lead counsel and (2) specifying the percentage of any 

recovery such firm will charge as fees and costs in the event that a recovery for the class is 

achieved.22 Payment of the fees and costs of firms assisting in these actions, if any, will be the 

responsibility of the firm appointed as lead class counsel. 

 The court envisions that material relating to a firm’s qualifications will consist of detailed 

descriptions of the role such firm played in each class action it has brought or assisted in bringing 

and the contribution such firm made to the welfare of the class plaintiffs. 

 Each firm submitting an application shall certify to the court that its compensation proposal 

was prepared independently and that no part thereof was revealed to any other bidder prior to filing with the court. Applicants are not to confer in any manner with other firms during the preparation of bids. 

 Upon receipt of all bids, the court will determine whether supplemental information is necessary. 

 

 22. An applicant may specify alternate contingent events and the corresponding percentages to be 

charged. If so, the applicant shall also provide an estimate of the amount of recovery at each contingent event 

and the basis for that estimate. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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In re WELLS FARGO SECURITIES LITIGATION 

91-C-1944 

156 F.R.D. 223 

N.D. California 

June 30, 1994 

Accordingly, any law firm which seeks to be designated class counsel for claims against one or 

more defendants shall submit its proposal for such representation on or before July 8, 1994. The 

proposal shall identify *229 each defendant from which recovery is sought and set forth: 

 (a) the firm’s experience in securities class action litigation and the background and experience of those lawyers in the firm who, it is anticipated, will be engaged in representing the class in 

the present litigation; 

 (b) the bona fide qualifications of the firm to complete the work necessary for representation 

of the class, including the willingness of the firm to post a completion bond or other security for 

the faithful completion of its services to the class, the terms of any such bond or security; 

 (c) the firm’s insurance coverage for malpractice; 

 (d) the percentage of any recovery the firm will charge in the event of a recovery as fees and 

costs for all the legal work performed in connection with the case, including that already performed by Lieff, Cabraser and Milberg Weiss; 

 (e) the terms under which such fees and costs will be charged (i.e., recovery, time and event 

contingencies); and 

 (f) a certification on behalf of the firm that (1) its proposal was prepared independently of any 

other firm, entity or person not affiliated with the firm, (2) no part of the proposal was disclosed to 

anyone outside the firm prior to filing with the court and (3) the proposal was prepared without 

direct or indirect consultation with other firms which have filed actions on behalf of the above 

class. 

 After the court has received the proposals, class counsel will be selected on the combination 

of monetary and nonmonetary factors as discussed in the Oracle decisions. The total fee for all 

counsel in the case will be determined by the successful bid; this fee will be divided among class 

counsel, Lieff, Cabraser and Milberg Weiss, or between these two firms if one of them is the successful bidder, on the basis of hours reasonably devoted and expenses reasonably incurred in the 

prosecution of the case. 

 The court has noted the concern expressed by various counsel that the selection process 

should proceed promptly. The court will endeavor to select class counsel on the basis of the proposals as soon as reasonably practicable. The court anticipates that a status conference will be 

scheduled to take place approximately three weeks after the selection is announced. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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In re CALIFORNIA MICRO DEVICES SECURITIES LITIGATION 

No. 94-C-2817 

1995 WL 476625 

N.D. California 

*3 Bids were to include: 

 (a) The bidder’s experience in securities class action cases and the particular relevant experience of individual lawyers likely to participate in the litigation. Because past requests by the court 

for such information have often led to submissions of unhelpful puffery, the court further requested that the bidder's qualifications be accompanied by a table that included: (1) the title, court 

and docket number of each securities class action in which the bidder served as sole class counsel 

during the past three years; (2) the date on which the complaint was filed; (3) the amount of recovery obtained on behalf of the class; (4) the proportion or percentage of the securities in the class 

for which claims were submitted; (5) the amount of the recovery distributed to the class, if any; 

and (6) total amounts received by the bidder, including fees and costs, if any. 

 (b) The quality of performance assurance the bidder would offer to complete representation of 

the class in this litigation. This includes, for example, the amount the bidder would to deposit with 

the court in escrow for the class or the amount and terms of a completion bond. 

 (c) The amount, terms and provider of the bidder's insurance coverage for malpractice. 

 (d) The percentage recovery the bidder would charge in the event of recovery by the class, 

including all costs for which the bidder will seek reimbursement from the class. No separate reimbursement for out-of-pocket expenses would be allowed. 

 To facilitate comparison of bids, the court worked out with lawyers from all the firms that 

filed complaints in this litigation the event contingencies and recovery ranges set forth on the following table. Accordingly, all bidders were required to use the following table to specify fees and 

costs as a percentage of recovery: 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Time to Judgment 

Recovery 

Range 

(Millions) 

Before 

Def 

Depo 

Before 

Close 

Merits Disc

Before 

Close 

Expert Disc

Before 

Trial 

During 

Trial 

After Trial During or 

After 

Appeal 

$0-1.999 

$2.0-4.999 

$5.0-9.999 

$10.0-14.999 

$15.0-19.999 

$20.0-24.999 

$25.0-29.999 

$30.0-39.999 

$40.0-49.999 

>$50.0 

Finally, bids were to be accompanied by a certification that (1) the information contained therein 

is accurate; (2) the bidder prepared its bid independently of any other firm, entity or person not 

affiliated with the bidder; (3) no part of the bid was disclosed to anyone outside the bidder prior to 

filing with the court; (4) the bid was prepared without direct or indirect consultation with firms or 

lawyers which have filed complaints in this action. 

 The court also proposed that plaintiff counsel's compensation be based on the amount of damages actually claimed by class members following notification rather than on a lump-sum settlement amount. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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In re AMINO ACID LYSINE ANTITRUST LITIGATION 

No. 95-C-7679 

918 F. Supp. 1190 

N.D. Illinois 

Jan. 18, 1996 

This Court therefore advised counsel that, as it had presaged five years ago in the context of its 

dealing with fee requests from ten sets of lawyers in a just-settled group of securities class actions 

(In re Telesphere Sec. Litig., 753 F. Supp. 716, 721 (N.D. Ill. 1990)), it would give serious consideration to the possibility (1) of obtaining sealed bids from any interested law firms and (2) of then 

designating the class counsel based on those bids. [FN6] To that end this Court ordered the contemporaneous filing of such bids and of submissions from any interested parties as to the desirability or undesirability of employing that bidding procedure rather than some other approach to the 

appointment and compensation of class counsel. 

 FN6. As Telesphere, id. reflected and as is well known to all practitioners who are at all active 

in class action litigation, District Judge Vaughn Walker of the Central District of California is the 

first federal judge to have adopted that procedure. To date he has had occasion to employ it in several cases, although this Court is unaware of any other courts that have done so at all. But as this 

opinion reflects, the factors favoring such an approach are compelling under the circumstances 

here. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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In re CENDANT CORPORATION LITIGATION 

No. 98-C-1664 

182 F.R.D. 144 

D. New Jersey 

Sept. 8, 1998 

The Court shall conduct an auction to determine the lowest qualified bidder to represent the class 

as counsel. Any attorney or attorneys interested in serving as counsel to either of the two lead 

plaintiffs shall submit a sealed bid to the Court not later than 4:00 p.m., September 17, 1998 

E.D.T.: 

 

1. Each bidder shall submit his, her, or their professional qualifications to be lead counsel. 

Among anything else deemed relevant, this shall include a history of involvement in 

similar litigation, case titles, docket numbers, relevant dates, courts involved, the result, 

whether by trial or appeal, settlement or resolution and the time during litigation when 

such resolution or settlement occurred. 

2. Bidders shall indicate their ability to undertake and maintain all costs of this litigation, 

and should express their readiness to post a performance bond and its amount, if required 

by the Court. 

3. Bidders shall indicate how costs are to be deducted in the event of resolution favorable to 

the plaintiffs. 

4. Applicants shall state their percentage fee bids according to one or both of the following 

"litigation milepost" grids: [FN8]

In re: Cendant: Application for Lead Counsel 

Fee Bid Schedule (Excluding Prides Claims) 

Fees as Percentage(%) of Total Class Recovery 

 PHASE AT WHICH LITIGATION IS RESOLVED 

Recovery 

Increments in Dollars 

During pleadings 

through adjudication of any 

motion to dismiss 

During discovery 

through adjudication 

of SJ motion 

After adjudication of 

SJ motion through 

trial verdict 

Post-trial 

First 100m 

Second 100m 

Third 100m 

Next 50m 

Next 50m 

Next 50m 

Next 50m 

Over 500m 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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In re: Cendant: Application for Lead Counsel 

Fee Bid Schedule (Prides Claims) 

Fees as Percentage(%) of Total Class Recovery 

 PHASE AT WHICH LITIGATION IS RESOLVED 

Recovery Increments 

in Dollars 

During pleadings 

through adjudication of any 

motion to dismiss 

During discovery 

through adjudication 

of SJ motion 

After adjudication of 

SJ motion through 

trial verdict 

Post-trial 

First 40m 

Next 40m 

Next 40m 

Next 40m 

Next 40m 

Next 40m 

Over 240m 

FN8. Applicants may, of course, bid on both available positions. However, for obvious reasons, if 

one firm emerges as lowest qualified bidder for both lead plaintiffs, it shall be forced to choose. 

The remaining position shall go to the firm submitting the next lowest qualified bid. 

5. Each bidder shall certify that its bid is made in good faith and has been formulated, determined, prepared and forwarded to the Court without any assistance, revelation or collusion, direct 

or indirect, with any other party or competing law firm before submission to the Court. 

 

6. Payment of the fees and costs of any lawyers or firms assisting the lead counsel, if any, will 

be the responsibility of lead counsel. 

7. The Court reserves the right to reject any and all bids it deems not to have been made in good 

faith or which are contrary to the interests of the consolidated plaintiffs. In its discretion, the 

Court may solicit additional bids from any source. 

Recognizing that the Reform Act affords an opportunity to lead plaintiffs to choose counsel subject to the approval of the Court, the Court maintains the same in the auction process. Upon determination of the lowest qualified bidder by the Court, if present counsel to a designated lead 

plaintiff is the lowest qualified bidder, that person or entity will be appointed by the Court. If not, 

that person or entity, if otherwise qualified, will have the opportunity to agree to the terms of what 

the Court has found to be the lowest qualified bid. If that person or entity accepts those terms, 

lead counsel status will be conferred upon it by the Court. If counsel does not exercise this right of 

first refusal, the lowest qualified bidder will serve the plaintiffs. 

 As mentioned, the Court acknowledges lead plaintiffs’ statutory opportunity. However, 

whether under the present statute or earlier discipline, the Court is the final arbiter of fees sought 

by successful plaintiffs' lawyers in this action. See F.R.Civ.P. 23(e); 15 U.S.C. § 77z-1(a)(6). The 

mechanism of an auction gives to the Court a measure of needed foresight to meet its obligations 

to members of the group. The Court need not be compelled to learn by hindsight--to be told at the 

end of months or years of litigation, “this is what we seek for services rendered.” 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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 The Court is required to protect the interests of all members of the class. If Congress had intended otherwise with its PSLRA, it could have easily permitted lead plaintiff to designate and 

retain counsel without judicial approval. It did not. 

 *152 The auction will not obviate the Court's final review of fees and costs pursuant to Rule 

23(e), see e.g. In re General Motors, 55 F.3d at 819 ("a thorough judicial review of fee applications is required in all class action settlements"), and/or 15 U.S.C. § 77z-1(a)(6) if this matter is 

ultimately resolved in favor of the putative class. During the requisite post-resolution evaluation, 

the results of the auction will serve as a benchmark of reasonableness. 

 This is not an invitation for cheapness of costs resulting from cheapness of quality. The Court 

is confident that professional skills of high order will be forthcoming by this procedure. Additionally, notwithstanding the absence of proof of pay-to-play, the auction is salutary because it removes any speculative doubt about that issue. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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WENDERHOLD v. CYLINK CORPORATION 

No. 98-C-4292 

189 F.R.D. 570 

N.D. California 

Oct. 26, 1999 

 Any lawyer or law firm that seeks to be designated class counsel for claims against one or 

more defendants shall submit its proposal for such representation in the clerk’s office on or before 

4:30pm, November 22, 1999, and shall file the bid ex parte, under seal. Joint proposals will not be 

considered. Class counsel will, however, be allowed to spread its risk by farming out tasks in its 

prosecution of its case; but class counsel shall be required to pay any other firm participating in 

prosecuting the action out of class counsel’s fee. The submitted proposals shall identify each defendant from which recovery is sought and set forth: 

 (1) the firm’s experience in securities class action litigation and the background and experience of those lawyers in the firm who, it is anticipated, will be engaged in representing the class in 

the present litigation, including the terms and fee arrangements under which such representation 

took place; 

 (2) the bona fide qualifications of the firm to complete the work necessary for representation 

of the class, including the willingness of the firm to post a completion bond or other security for 

the faithful completion of its services to the class, and the terms of any such bond or security; 

 (3) the firm’s insurance coverage for malpractice; 

 (4) evidence that the firm has evaluated the case, including specifically the range and probability of recovery; 

 (5) the percentage of any recovery the firm will charge in the event of a recovery as fees and 

costs for all work performed in connection with the case set forth on the Fee Schedule Grid, affixed as Appendix B below. This shall include an explanation of the percentage fee arrangement 

involving a straight, increasing or decreasing fee percentage based on the overall amount of recovery through monetary increments and/or stage of recovery at which litigation is reached; 

 (6) a certification on behalf of the firm that (a) its proposal was prepared independently of any 

other firm, entity or person not affiliated with the firm, (b) no part of the proposal was disclosed to 

anyone outside the firm prior to filing with the court and (c) the proposal was prepared without 

direct or indirect consultation with other firms that have filed actions on behalf of the proposed 

class in this matter, or entered an appearance in any fashion. 

 *574 The court notes that counsel located within this district will not necessarily receive more 

favorable consideration simply because of their location. This order in no way prevents any individual member of the putative class who opts out of the class from hiring the attorney of his or her 

choice in this matter. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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APPENDIX B—FEE AND EXPENSE BID SCHEDULE 

Fees and Expenses as Percentage (%) of Total Class Recovery 

 From Pleading 

through Motion to 

Dismiss 

After Motion to 

Dismiss through 

Adjudication of 

Summary Judgment 

After Adjudication 

of Summary 

Judgment Motions 

through Trial 

Verdict 

After Trial Verdict 

Through Final 

Appellate 

Determination 

First $500,000 

$500,001-

$1,000,000 

 

$1,000,001-

$5,000,000 

$5,000,001-

$10,000,000 

$10,000,001-

$15,000,000 

$15,000,001-

$20,000,000 

Over $20,000,000 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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BANK ONE SHAREHOLDERS CLASS ACTIONS 

No. 00 C 880 

2000 WL 246257 

N.D. Illinois 

Feb. 24, 2000 

All attorneys of record in any case included within the “all actions” category, and any other attorneys who have timely filed motions under 15 U.S.C. § 77z-1(a)(3) for any member of the putative 

class to serve as lead plaintiff, are authorized to file in this Court’s chambers, on or before March 

10, 2000, sealed bids as to the fee arrangements under which they will be prepared to represent the 

plaintiff class if they are appointed as class counsel or co-class counsel in this entire class action 

litigation (if co-class counsel were to be appointed, each such bid must represent the total fees that 

would be contemplated to be paid to all co-counsel including the bidder).2

 All such bids shall be 

accompanied by a comprehensive curriculum vitae regarding the bidding lawyers or law firm or 

firms, including appropriate information as to their prior class action experience. As provided in 

this Court’s In re Amino Acid Lysine Antitrust Litigation opinion (reported at 918 F. Supp. 1190, 

1192 (N.D. Ill. 1996)), any bidder or any interested party not submitting a bid may include or 

make a written submission on or before March 10 as to the asserted desirability or undesirability 

of employing the bidding procedure rather than some other approach to the appointment and compensation of class counsel. In all other respects the bidding procedure will follow the principles set 

forth in the Lysine opinion and in the February 11 Order.3

 *2 This Court contemplates the possible utilization of the bid procedure as an adjunct to its 

determination of the "most adequate plaintiff" as called for by statute. That latter determination 

will be made as soon as is practicable whether or not the legal representation of the plaintiff class 

is awarded on the basis of bids. 

 

 2. This provision is intended to anticipate the possibility that the lowest responsible bidder among the 

lawyers or law firms electing to bid may prove to be other than the lawyers or law firm or firms who or that 

already represent the person or group of persons that would otherwise appear to qualify as the "most adequate 

plaintiff" within the meaning of 15 U.S.C. § 77z-1(a)(3)(B)). 

 3. As this Court stated at the status hearing, the request of Thales Fund Management for a right to match 

the most favorable attorney bid if this Court elects to employ a bidding procedure is denied. No similar request will be entertained from anyone else. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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SHERLEIGH ASSOCIATES LLC v. WINDMERE-DURABLE HOLDINGS, INC. 

No. 98-C-2273 

184 F.R.D. 688 

S.D. Florida 

March 9, 1999 

Therefore, the Court shall accept bids for representation of this putative class separate and apart 

from any work done on this case to date, by any counsel who has entered an appearance in this or 

related cases. Because the Court is concerned with fairness and fostering competition among 

firms, the Court specifically rejects the proposal by certain proposed lead plaintiffs’ attorneys that 

a “steering committee” of all attorneys to date be appointed. Furthermore, the Court will not allow 

attorneys who have so far entered an appearance to submit a “joint proposal” to complete the litigation on behalf of the class. 

 All attorneys who have thus far entered an appearance, in addition to any licensed attorney or 

firm of attorneys may submit a bid in this matter. As Judge Walker explained in Wells Fargo, 156 

F.R.D. at 227, firms should be allowed to “spread the risk” or leverage expertise by farming out 

work; but in the interest of fostering competition, submitting joint proposals will not be allowed. 

The firm selected as class counsel may refer work to other law firms because of specialized experience, geographic proximity to witnesses or evidence, to utilize any other comparative advantage, or to spread risk. Some very prominent and capable law firms have entered an appearance in 

this matter already, and nothing in this Order should be construed as an evaluation of any work 

completed thus far. 

 [6][7] The decision to award lead counsel designation by auction requires the court to select 

some method by which to calculate a fair and reasonable fee. See Niebler, supra, at 770. Among 

the several methods of remuneration available, the Court is persuaded that a contingency fee arrangement best aligns interests of the class and the attorneys.[FN7] As one commentator has suggested, *696 the alternatives of utilizing a flat percentage fee arrangement, an increasing fee percentage as the overall settlement increases, or a decreasing fee percentage as the overall settlement 

increases—each contain agency pitfalls. See Niebler, supra, at 783–95. These agency problems 

revolve around a firm's opportunity costs and willingness to invest resources in the instant litigation vis-à-vis other work.[FN8] 

 [FN7] This decision is not an obvious one. Problems of asymmetric information cannot easily 

be discounted. Bidding firms must evaluate the case once the auction is announced, with little 

information available and little time to investigate. Where courts have decided upon an auction 

process after consultation with firms, however, problems of collusion have been encountered. See 

In re California Micro Devices Sec. Litig., 168 F.R.D. 257, 260-63 (N.D. Cal. 1996) (Walker, J.); 

Wells Fargo, 156 F.R.D. at 226–27; In re Oracle Sec. Litig. 136 F.R.D. 639, 640 (N.D. Cal. 1991)

(Walker, J.) (“Oracle II”); Lysine, 918 F. Supp. at 1192–93. Yet firms that have already begun the 

"race" by filing early (and often) have a competitive advantage once the auction begins. 

 The court as auctioneer must then evaluate these bids with little information regarding a 

firm’s opportunity costs and incentive structure. When trying to make a qualitative assessment the 

court has little recourse but to devise a bid process requiring detailed information upon which a 

good decision can be made. 

 [FN8] This is because “[a] lawyer who could earn more by investing his or her time in another 

case would not choose to pursue higher recoveries simply because the lawyer could earn some 

additional amount of money through additional effort.” Niebler, supra, at 784 n. 112.
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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 Courts have coupled the percentage of recovery with a qualifier, based on the stage of litigation at which any settlement is realized, such as pre-discovery, pre-trial, etc. See, e.g., Cendant, 

182 F.R.D. at 151 (utilizing “litigation milepost” grid); see also infra Fee Bid Schedule (Appendix 

A). This process too has pitfalls. For example, a firm may avoid settlement toward the end of one 

phase of the case in order to gain a higher percentage fee associated with a later-stage agreement, 

and as defense attorneys likely bill by the hour, little incentive exists on their part to settle early or 

to otherwise weigh overall class returns. 

 Still, lead counsel auctions can provide both an approximation of the free market process and 

reduce uncertainties faced by counsel when any ex ante determination of fees occurs. See Niebler, 

supra, at 774–75. Therefore, while providing guidance to potential bidders and requiring detailed 

information therein, the Court will not dictate the exact form to which bids must adhere beyond 

certain minimum requirements, described below. The Court will evaluate bids based on the pricequality continuum, giving appropriate consideration to agency issues. A successful bidder might 

address not only the minimum requirements, but also discuss these additional issues in some fashion. 

 Therefore, as with the procedure established by the court in Wells Fargo, 156 F.R.D. at 224–

25, and Cendant, 182 F.R.D. at 150–51, the Court shall employ a contingency fee arrangement. 

Once proposals have been received, class counsel will be selected on the combination of monetary 

and non-monetary factors. Specifically, the Court will weigh both quality and price of the bid, 

based on the several factors listed below. The total fee for all counsel in the case will be determined by the successful bid; this fee will be divided among class counsel. 

 C. Bid Proposals Accepted and Evaluated based on Specific Criteria 

 Accordingly, any law firm that seeks to be designated class counsel for claims against one or 

more Defendants shall submit its proposal for such representation in the clerk's office on or before 

4:30 p.m., March 19, 1999 E.S.T., and shall file the bid ex parte, under seal. The proposal shall 

identify each defendant from which recovery is sought and set forth: 

(a) the firm’s experience in securities class action litigation and the background and experience of those lawyers in the firm who, it is anticipated, will be engaged in representing 

the class in the present litigation, including the terms and fee arrangements under which 

such representation took place; 

(b) the bona fide qualifications of the firm to complete he work necessary for representation 

of the class, including the willingness of the firm to post a completion bond or other security for the faithful completion of its services to the class, and the terms of any such bond 

or security; 

(c) the firm’s insurance coverage for malpractice; 

(d) evidence that the firm has evaluated the case, and the range and probability of recovery, 

and has premised the bid on that evaluation; 

(e) the percentage of any recovery the firm will charge in the event of a recovery as fees and 

costs for all the legal work performed in connection with the case. This shall include an 

explanation of the contingency fee arrangement involving a straight, increasing, or decreasing fee percentage based on the overall amount of recovery through monetary increments and/or stage of recovery at which litigation is reached; 

(f) a description of how expenses and costs shall be borne--whether subtracted from the 

overall settlement itself, or from the attorney fee award portion, including a justification 

for this arrangement and the ability of the firm to fund such costs; 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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(g) A defense of the bid that describes how the fees and cost charges will motivate the firm 

to adequately represent the class; 

(h) a certification on behalf of the firm that (1) its proposal was prepared independently of 

any other firm, entity or person not affiliated with the firm, (2) no part of the proposal 

was disclosed to anyone outside the firm prior to filing with the Court and (3) the proposal was prepared without direct or indirect consultation with other firms that have filed 

actions on behalf of the proposed class in this matter, or entered an appearance in any 

fashion. 

 Additionally, the Court notes that counsel located within this district will not necessarily receive added consideration in this process. Any competitive bid by a law firm located outside of 

the district, which details how or whether local counsel may be utilized, will be considered. However, this in no way abrogates the duty of any firm submitting a bid to comply with the Court's 

requirement of independent bidding--local counsel could be designated at a later date. Finally, this 

Order in no way prevents any individual member of the putative class from hiring the attorney of 

his or her choice in this matter.
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APPENDIX A- FEE BID SCHEDULE 

Sherleigh Associates, et. al. v. Windmere- Durable Holdings, Inc. et. al.:

98-2273-CIV- LENARD (S.D. Fla.) 

Application for Lead Counsel 

Fee Bid Schedule 

Fees as Percentage (%) of Total Class Recovery 

PHASE AT WHICH LITIGATION IS RESOLVED 

 During pleading 

through adjudication 

of any motion to 

dismiss 

During discovery 

through adjudication 

of SJ motion 

After adjudication of 

SJ motion through 

trial verdict 

Post-Trial 

First $500,000 

 

$500,000-$1,000,000 

 

$1 million-$5 million 

 

Next $5 million 

 

Next $ 5 million 

 

Next $ 5 million 

 

R

E

C

O

V

E

R

Y 

 

I 

N

C

R 

E

M

E

N

T 

S Over $ 20 million 

 

This schedule may be modified as part of any bid proposal. However, a firm making such modification shall provide an explanation as part of its submission. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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In re NETWORKS ASSOCIATES, INC. 

No. 99-C-1729 

76 F. Supp. 2d 1017 

N.D. California 

November 22, 1999 

*1034 Accordingly, the Board must re-open its consideration of counsel; promptly publicize a 

request for written proposals from counsel; evaluate the proposals; and interview candidates as 

appropriate--all to obtain the highest quality representation at the lowest price. The Board must 

then recommend a single law firm and provide under seal to the Court a full description of the 

Board's selection process, its conclusion, and its reasons. All of the proposals received should also 

be submitted under seal to the Court by the Board. The Board may still, after full consideration of 

all candidates, recommend the Barrack firm, but it should do so only after an honest effort to select the highest quality counsel at the most efficient price. The Board should also identify the single law firm which would be its second choice and should state its reasons, all under seal. The 

Board shall make its sealed recommendations to the Court by December 17, 1999. 

 Each law firm proposal shall at least include (i) the firm's experience in securities class actions and, by case as practicable, its track record in results achieved (in terms of net dollars to the 

class); (ii) the securities and trial experience of the proposed individual to be lead counsel, the 

second chair and a commitment that the lead or the second chair shall conduct all important depositions, court hearings and settlement negotiations, and that the lead shall conduct the trial; (iii) a 

complete disclosure of any conflicts and contributions made to Board or City officials within the 

last three years; (iv) two fee proposals, one based on percentage of recovery and the other based 

on hourly rates (lodestar method). Joint proposals by two or more law firms will not be approved. 

If a firm with a higher fee proposal is recommended, a convincing reason must be given. The 

Board should make whatever additional inquiries it believes appropriate to select the best counsel. 

 Through an officer with knowledge, the Board must also certify under oath that the selection 

in no way directly or indirectly has been influenced by campaign contributions and must (if the 

Barrack firm is recommended again) address and explain the suggestions in the articles provided 

by the Weiss firm that the Board’s choice of counsel has been influenced by campaign contributions. See Declaration of Elizabeth Lin, filed Nov. 10, 1999, Exhibits F and G. 

 Once selected and approved, (i) class counsel shall regularly inform the Board of the progress 

of the case and shall present all major litigation decisions to the Board for its decision in advance 

and in a timely manner; (ii) the firm shall log its time on a daily basis, tracking its activities by 

timekeeper, by individual task, and by quarter-hour increments; and (iii) duplication of effort 

within the firm shall be prohibited.
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In re AUCTION HOUSES ANTITRUST LITIGATION 

No. 00-C-648 

197 F.R.D. 71 

S.D. New York 

September 22, 2000 

B. First Proposed Fee Structure 

 The bids contemplated by the Court's initial order were to contain three parts. 

 First, each bid was to include information concerning the bidder's qualifications and evidence 

that the bidder had evaluated fully the risks and potential rewards of the litigation. 

 Second, each bid was to contain two figures, X and Y, on the basis of which the bidder was 

prepared to serve as lead counsel. The X and Y figures were to be determined based on the bidder's evaluation of the case and the following fee structure: One hundred percent of any gross recovery obtained by the class or class members up to and including X would go entirely to the class 

or class members, free of attorney's fees. One hundred percent of any gross recovery in excess of 

X, up to and including Y, would go to lead counsel. One fourth of any recovery in excess of Y 

would be paid to lead counsel as additional compensation and three fourths to the class. 

 Third, each bidder was to submit a brief memorandum setting forth the basis for and supporting the bid. The briefs were to explain the bidders' respective evaluation of the case, including 

their assumptions as to possible and likely recoveries in the event liability were established, and 

the bases therefore. [FN8] The order stated that, if the Court decided to use the bids in selecting 

lead counsel, lead counsel would be selected on the basis of both the economic terms of the bids 

and the qualifications of the bidder. [FN9] 

 FN8. This was proposed in a second order issued several days later. Order, Apr. 26, 2000 (DI 

32). 

 FN9. In addition to submitting the X and Y figures, each bidder was required to submit a 

sworn certification that the bidder had not, directly or indirectly, communicated with (1) any other 

bidder concerning the terms of the bid or its position with respect to whether the Court should 

adopt this method, (2) any defendant or prospective defendant following the issuance of the order 

concerning settlement or possible settlement of any or all of the actions, or (3) any other attorney 

or firm concerning its possible performance of legal or other services for the bidder in connection 

with this litigation in the event the bidder were selected as lead counsel. Order, Apr. 20, 2000 (DI 

119). On April 27, 2000, the Court denied a request by interim counsel that they be permitted to 

submit joint comments on the proposed bid structure. Memo-Endorsement on Apr. 26, 2000 letter 

from Interim Executive Committee. (DI 33). 

 The order provided also that any compensation awarded to the successful bidder was to be 

inclusive of all costs, disbursements and other charges incurred in connection with the litigation. 

Further, the Court reserved the right to compensate lead counsel on a different basis in the event 

the litigation were resolved in a manner that did not permit determination of a gross recovery by 

the class or if justice otherwise required. Finally, it noted that, in the event that lead counsel other 

than interim counsel were appointed and plaintiffs prevailed, it would accept a fee application on 

behalf of interim counsel for services performed on behalf of the class. Order, Apr. 26, 2000 (DI 

32). 

 The bids were to be submitted sealed ex parte to the Court on or before May 12. The Court 

ordered also that it would receive on or before that date submissions from bidders, interim lead 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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counsel and any class members or their counsel as to the advisability of employing this or a similar structure. Order, Apr. 20, 2000 (DI 119), at 3. 

 C. Second Proposed Fee Structure 

 After considering the comments of the amici and bidders, the Court issued a second order 

revising the fee structure and soliciting a new round of bids. [FN11] This second proposed fee 

structure included only one variable, X, rather than two. One hundred percent of any gross recovery up to and including X was to go to the class. And twenty-five percent of any recovery in excess of X would be paid to counsel, with the remainder going to the class. Each bid was to state 

the value of X pursuant to which the bidder was prepared to serve as lead counsel. As before, bidders were required to submit explanatory memoranda and sworn certifications. As with the previous round of bidding, the Court stated that it would select lead counsel based on its judgment as to 

which bidder was likely best to serve the interests of the class, taking into account the economic 

terms of the bids as well as the bidder's qualifications. 

 FN11. Order, May 17, 2000 (DI 61). 

 All additional terms contained in the first proposed fee structure were included in the Court's 

second proposal as well, including the provision that the attorney's fee would be inclusive of all 

costs, disbursements and other charges incurred in connection with the litigation. The Court noted 

further that it did not intend to disclose any of the bids prior to the earlier of (a) final adjudication 

of the action, or (b) notice to the class of a proposed settlement, and it ordered that lead counsel 

thus selected not disclose the terms of its bid to defendants or anyone else without approval of the 

Court. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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In re LUCENT TECHNOLOGIES, INC. 

No. 00-C-621 

194 F.R.D. 137 

D. New Jersey 

April 26, 2000 

 Bidding for Lead Counsel Position 

 [24] As mentioned, the Pension Trust Fund has been provisionally appointed as lead plaintiff, 

pending receipt of motions from other interested members of the class to serve as lead counsel. In 

an effort to keep this matter moving and in recognition of the possibility that the Pension Trust 

Fund may decline to continue as lead plaintiff or may be replaced following receipt of a motion 

from other members of the class, a determination of lead counsel will be made through a competitive bid process. It is clear this procedure is necessary to protect the interests of the proposed class. 

See In re Cendant Corp. Litigation, 182 F.R.D. 144, 150–52 (D.N.J. 1998); Wenderhold, 188 

F.R.D. at 587. It is also clear that attorney compensation of a *157 percentage of the recovery fee, 

including costs, will provide the best avenue to coordinate the interests of the Proposed Class and 

future counsel. 

 A sealed-bid auction will occur. Any law firm, including those presently unconnected with 

this litigation, seeking to be designated class counsel for the Proposed Class in this action shall 

submit a proposal for such representation to the Office of the Clerk, United States District Court, 

District of New Jersey on or before 4:00 o’clock p.m., 2 June 2000. The bid shall be filed ex parte 

under seal. The joint proposals are not to be submitted and will not be considered. Nevertheless, 

counsel selected to represent the class will be permitted to assign tasks to other lawyers. Each proposal to be submitted must identify each defendant from which or whom discovery is sought and 

further state: 

1. The experience of the firm in securities class action litigation together with the background 

and experience of those particular lawyers in the firm who will be assigned to represent the 

class; 

2. The qualifications of the firm to perform all work required for representation, including 

whether the firm will post a completion bond, or other type of security, for the rendering of 

services to the proposed class, together with a description of the terms of such bond or security; 

3. A description of the malpractice insurance coverage for the firm and each of the lawyers to be 

assigned to representation; 

4. A demonstration that the firm has thoroughly evaluated the case and a specification of the 

range, and probability of, recovery; 

5. A statement of the dollar amount, as well as percentage, of any recovery the firm will charge 

in the event of a recovery as fees and costs for all work performed, such a statement is to be 

provided for each of the following four contingencies: 

a. for pleading through motions to dismiss; 

b. following the completion of the motion to dismiss through adjudication of motions of 

summary judgment; 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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c. following completions of the motions for summary judgment through verdict at trial; 

d. following verdict at trial through appellate determination. 

Such bid should indicate for each of the four contingencies on both a dollar amount and percentage basis of the net recovery to the class after fees and costs in at least the following recovery 

situations: 

Dollar Amount of 

Total Class 

Recovery 

Dollar Amount of 

Total Class 

Recovery Net of 

Attorney Fees and 

Expenses 

Percentage of Total Class Recovery 

Net of Attorney 

Fees and Expenses 

Dollar Amount of 

Attorney Fees and 

Expenses for Total 

Class Recovery 

Percentage of 

Attorney Fees and 

Expenses from 

Total Class 

Recovery 

The first $500,000 

$500,001-

$1,000,000 

 

$1,000,001-

$5,000,000 

$5,000,001- 

$10,000,000 

$10,000,001- 

$15,000,000 

$15,000,001- 

$20,000,000 

$20,000,001- 

$25,000,000 

Over $25,000,000 
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In re QUINTUS SECURITIES LITIGATION 

In re COPPER MOUNTAIN NETWORKS SECURITIES LITIGATION 

Nos. C-00-4264, C-00-3894 

2001 WL 709204 

N.D. California 

April 12, 2001 

 In the February 16, 2001, order, the court mentioned the possibility of engaging a special 

master to oversee the process of selecting lead counsel. The parties, however, have not embraced 

this idea, apparently believing the risk of the court prejudging the case if it engages in the selection 

process to be minimal. In the absence of concerned parties, the court will not deviate from its past 

procedures and will supervise the selection of counsel itself. 

 [22]Toward this end, any counsel interested in serving as lead counsel for the class in this 

action should submit a proposal to the court by May 14, 2001. The proposals may be filed ex parte 

and under seal. Joint proposals will not be considered but lead counsel will be allowed to out 

source work to other firms and lawyers. The proposals should set forth: 

1. The firm’s experience in securities class action litigation, the terms and fee arrangements 

under which past representation took place and the background and experience of those 

lawyers in the firm who, it is anticipated, will be engaged in representing the class in the 

present litigation; 

2. The firm’s insurance coverage for malpractice; 

3. Evidence that the firm has evaluated the case, including specifically the range and probability of recovery; 

4. The percentage of any recovery the firm will charge as fees and expenses for all work 

performed in connection with the case. This should be set forth on the Fee Schedule Grid, 

affixed to this order as Appendix B. The proposal should also include an explanation of 

why the fee arrangement was chosen including a discussion of the increasing or decreasing nature of the fee structure as well as the importance of the changes in percentage of 

recovery based on the size of recovery and the stage of the litigation at which recovery 

occurs; and 

5. A certification on behalf of the firm that: (a) its proposal was prepared independently of 

any other firm, entity or person not affiliated with the firm, (b) no part of the proposal 

was disclosed to anyone outside the firm prior to filing with the court and (c) the proposal 

was prepared without direct or indirect consultation with other firms that have filed actions on behalf of the proposed class in this matter, or entered an appearance in any fashion. 

 

 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Appendix A: Lead Plaintiff Inquiry 

1. Did you investigate the legal or factual basis of the claims asserted in your complaint or 

did you rely solely on counsel to do this? 

2. Did you seek out counsel or did counsel or someone else seek out you to serve as representative plaintiff? 

3. Did you contact any lawyers other than your present counsel about this action and, if so, 

whom did you contact and when did you do so? 

4. What did you do to negotiate a fee and expense reimbursement arrangement that promotes the best interests of the class? 

5. What arrangements do you have with proposed class counsel concerning their fees and 

expenses? 

6. What benchmarks do you have in place to measure class counsel's performance during 

the progress of the litigation? 

7. How do you plan to monitor class counsel's conduct of the litigation? 

8. Do you have any prior business, professional, family or other relationships with proposed 

class counsel and, if so, what are those relationships? 

9. What prompted you to purchase or sell the securities at issue here on the dates on, and at 

the prices at, which those transactions were made? 

10. Did you make inquiry or do you know whether any intermediaries through whom you 

made your transactions in the securities at issue have any business, professional, family 

or other relationships with proposed class counsel? 
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Appendix B: 

Fee Schedule Grid 

Fees and Expenses as a Percentage (%) of Total Class Recovery 

 From Pleading After Motion After Summary After Trial 

 Through Motion to Dismiss Judgment Verdict 

 to Dismiss Through Through Through Final 

 Summary Trial Appellate 

 Judgment Verdict Determination 

$0- 

$4,000,000 

 

$4,000,001- 

$8,000,000 

$8,000,001- 

$15,000,000 

 

$15,000,001- 

$20,000,000 

Over 

$20,000,000 
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In re COMDISCO SECURITIES LITIGATION 

No. 01 C 2110 

2001 U.S. Dist. LEXIS 5173 

N.D. Illinois 

April 12, 2001 

 In further implementation of this Court’s March 26, 2001 memorandum order (“March 26 

Order”), and in conjunction with this Court's anticipated determination of the “most adequate 

plaintiff” (see 15 U.S.C. § 78u-4(a)(3)(B)1

) to represent the putative plaintiff class in these actions, 

all attorneys of record in these actions, and any other attorneys who have timely filed motions under Subsection (a)(3)(B) for any member of the putative class to serve as lead plaintiff, are authorized to file in this Court's chambers, on or before May 4, 2001, sealed bids as to the fee arrangements under which they will be prepared to represent the plaintiff class in all actions other than 

Case No. 01 C 1177 if they are hereafter appointed to serve as class counsel or as co-class counsel 

in this entire class action litigation except for Case No. 01 C 1177 (if co-class counsel were to be 

appointed, each such [*12] bid must represent the total fees that would be contemplated to be paid 

to all co-counsel including the bidder).2

 Each such bid shall be accompanied by a comprehensive 

curriculum vitae regarding the bidding lawyers or law firm or firms, including appropriate information as to their prior class action experience. 

 Although this memorandum order has thus established a bidding procedure, it should be understood that this Court has not reached [*13] a firm conclusion as to whether the class counsel 

will be selected on the basis of such bidding. Accordingly, as was provided in this Court’s In re 

Amino Acid Lysine Antitrust Litigation opinion (reported at 918 F. Supp. 1190, 1192 (N.D. Ill. 

1996)), any bidder or any interested party not submitting a bid may include or make a written 

submission on or before May 4, 2001 as to the asserted desirability or undesirability of employing 

the bidding procedure rather than some other approach to the appointment and compensation of 

class counsel. In that regard this Court is well aware of, and will take into account, the In re Cendant Corp. PRIDES Litig., 243 F.3d 721, 2001 U.S. App. LEXIS 4246, 2001 WL 276677 opinion 

issued on March 21, 2001 by the Court of Appeals for the Third Circuit (the same court that now 

has a Task Force study under way to address that subject). In all other respects the bidding procedure will follow the principles set forth in the Lysine opinion and in the March 26 Order.3

 As it has done in the Bank One Securities Litigation, this Court contemplates the possible 

utilization of the bidding procedure as an adjunct to its determination of the “most adequate plaintiff.” That latter determination will be made as soon as is practicable, whether or not the legal representation of the plaintiff class is awarded on the basis of bids. If the award is not made on that 

basis, each bid will be returned to the bidder or bidders involved without disclosure to the other 

bidders or to the clients represented by such bidders. 

 

 1. Each future reference to any subpart of 15 U.S.C. § 78u-4 will omit that portion of the statutory designation, reading simply “Subsection--.” 

 2. In part the procedure established here is intended to anticipate the possibility that the lowest responsible bidder among the lawyers or law firms electing to bid may prove to be other than the lawyers or law firm 

or firms who or that already represent the person or group of persons that would otherwise appear to qualify 

as the "most adequate plaintiff" within the meaning of Subsection (a)(3)(B)). 

 3. As was true in this Court's handling of the In re Bank One Securities Litigation, 00 C 880, this Court 

will not entertain any proposal by a prospective class plaintiff for a right to match the most favorable attorneys' fee bid if this Court elects to employ a bidding procedure. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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In re COMMTOUCH SOFTWARE, LTD. 

No. 01-C-00719 

N.D. California 

June 27, 2001 

 Accordingly, to assist both the lead plaintiff in his selection and the Court in its approval 

process, the following procedure will be used: 

1. By July 6, 2001, the Court shall post a copy of this order on the Stanford Securities Class Action Clearinghouse website and thereby invite proposals from candidates for class counsel. 

2. By July 20, 2001, all counsel wishing to serve as class counsel shall file under seal and serve 

on the lead plaintiff at 56 Ha’atzmaut Boulevard, Bat-Yam, Israel, their respective proposals 

for representing the class. Provisionally, the Court anticipates that two firms, one in Israel as 

special class counsel and one in the United States as lead litigation and trial counsel, may be 

approved. The firms selected must do the work themselves and may not associate other counsel. Proposals for both positions are invited, including a proposal by Jacob Sabo, Esq., of Israel. Any proposal for Israel-based counsel should explain the need for such counsel. The 

proposals for litigation and trial counsel shall respond fully to each of the questions set forth 

in the appended Questionnaire for Potential Class Counsel. Once filed and served (on the lead 

plaintiff), a proposal may not be supplemented or improved. Counsel should, therefore, submit their best proposals at the outset. Mr. Sabo must serve and file his proposal before reviewing any other proposal or discussing the proposals with Mr. Jacobi. 

3. By August 3, 2001, and after receipt of the proposals, the lead plaintiff shall complete interviews of candidates. In carrying out his due diligence in this regard, the lead plaintiff shall interview at least five candidates or, if fewer apply, at least as many as submit proposals. Given 

his residence abroad, Mr. Jacobi may interview candidates in New York on a single visit to 

the United States, with all of his travel expenses to be advanced by the interviewees equally. 

4. In evaluating the applications, Mr. Jacobi may consult with Jacob Sabo, Esq., his primary 

counsel contact in Israel. Mr. Sabo may be present at the interviews to assist Mr. Jacobi. In 

deciding on and making his recommendation, the lead plaintiff and Mr. Sabo shall not disclose the terms of any proposal to anyone else. 

5. On August 3, 2001 at 2:00 pm, the Court shall hold a private in-chambers conference with the 

lead plaintiff and Mr. Sabo to receive the recommendation of the lead plaintiff as to the selection of class counsel. Mr. Jacobi must be prepared to recommend his top three choices for 

both the United States counsel and Israel counsel. No other counsel for any party shall attend 

the conference or be entitled to a record thereof. The sole subject to be discussed shall be the 

selection and approval of class counsel. 

6. After the conference, the Court shall approve the selection of class counsel. The Court may or 

may not unseal the proposals and/or describe them in an order regarding the approval of counsel. Class counsel shall then meet with the lead plaintiff and chart a course of action for the 

case. 

PERCENTAGE METHOD 

FEES AS A PERCENTAGE (%) OF TOTAL CLASS RECOVERY 

BEFORE RECOVERY FOR REASONABLE EXPENSES 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

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Pleading Through and 

Including Motion to 

Dismiss (including 

any appeals re any 

dismissal) 

After Motion to 

Dismiss Through and 

Including Summary 

Judgment 

After Summary 

Judgement Through 

Trial Verdict 

After Trial Verdict 

Through Final 

Appellate 

Determination 

$0 - $4,000,000 

$4,000,001- 

$8,000,000 

$8,000,001- 

$15,000,000 

 

$15,000,001 

$25,000,000 

 

Over 

$25,000,000 

 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 113 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

 

IN RE COMMTOUCH SOFTWARE LTD. No. C 01-00719 WHA 

SECURITIES LITIGATION. 

AND CONSOLIDATED CASES. CERTIFICATION BY 

 LEAD PLAINTIFF 

I have read and understand the Court’s Order Re Lead Plaintiff Selection and Class Counsel Selection, including the duties of lead plaintiff and the procedure for selecting and approving class 

counsel. I agree and promise to faithfully execute those provisions and to abide by the order. Once 

class counsel are selected and approved, I will work and cooperate fully with such counsel for the 

benefit of the investor class and will do so regardless of whether the selection and approval process for counsel results in appointment of lawyers other than my initial choice. 

Dated: _________________ ________________________ 

 MICHAEL JACOBI 

Address:________________ 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 114 

QUESTIONNAIRE FOR CLASS COUNSEL CANDIDATES 

1. Lead Counsel: State the name, address, telephone number and fax number of the one individual you propose as your lead class counsel and append his or her resume. This must 

be a single person, not a group or an entire law firm. 

2. Trial Experience: Please list (by case name, number and court) the last ten trials taken to 

verdict, judgment or dismissal by the proposed lead counsel as lead trial counsel. Omit 

settlements before verdict, judgment or dismissal; otherwise, please state the precise outcome and whether it was a trial by jury. Please state the name, address and telephone 

number of opposing counsel. Cite published or available trial decisions. Please do not 

limit the trial experience list to securities cases. 

3. Securities Experience: Please list (by case name, number and court) the last ten securities-fraud class actions in which the proposed lead class counsel acted as the lead class 

counsel (or as a co-lead class counsel) and for which a resolution at the district court has 

been reached. Omit any case still pending but include any case now resolved at the district court level by way of settlement, verdict, judgment or dismissal Explain the outcome. If the case was settled or won, please state the gross cash settlement, the net cash 

settlement (after fees and expenses) and the net cash recovery per share. Please state 

whether any proposed settlement was disapproved by the court at any stage. If the case 

was lost, dismissed or withdrawn, please state the reason. Please state the name, address 

and telephone number of opposing counsel. Cite any decisions publicly available on the 

ease. 

4. Commitment to Case: Does the lead counsel candidate commit to supervising the preparation of all pleadings and motion practice, conducting the most important depositions 

(including at least all named defendants, the chief executive officer, the chief financial 

officer, and all experts), actively supervising discovery and investigation, being lead trial 

counsel, conducting all settlement negotiations, and consulting regularly with the lead 

plaintiff? 

5. Other Counsel: Name all other individual lawyers who will have any substantia1 role in 

investigation, discovery, trial or settlement, and provide their resumes with the equivalent 

information requested for Question Nos. 2 and 3. 

6. Disciplinary Action: Have any of the lawyers mentioned above been sanctioned by a 

court for any discovery violation, Rule 11 vio1ation, or other ethical violation or been the 

subject of any attorney-disciplinary proceeding since January 1, l996? If so please state 

the circumstances and the outcome. 

7. Fee Proposal: Please complete the table appended hereto as “Fee Schedule Grid,” stating 

the percentage fees you would accept if selected as class counsel. The grid is not intended 

to either encourage or discourage increasing or decreasing percentage bids or flat percentage bids, but merely to clarify and standardize presentation. You may adjust the 

brackets as you see fit. In addition, please state the hourly rates you would be willing to 

accept on a lodestar basis. The Court will have to assess at the end of the case whether 

the amounts set forth are fair and reasonable, so there is no guarantee that counsel, if appointed, would automatically receive the amounts indicated. Counsel, however, would be 

deemed to agree that any amounts indicated shall be fair and reasonable. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 115 

8. Time Records: Approved counsel must maintain time records that can be presented in the 

format set forth in this appendix (without inclusion to the Court of privileged material), 

so that the Court can make an informed fee award. Will you maintain your time records 

accordingly? 

9. Expenses of Lead Counsel: Will you advance all reasonable expenses of the lead plaintiff 

incurred pursuant to his duties as lead plaintiff? 

10. Other Information: Please provide any other information you wish in support of your proposal. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 116 

Lodestar Method 

 For each lawyer and paralegal who will work on the matter, please state the proposed hourly 

billing rate. 

Time Records 

 Counsel are advised that under either the percentage or the lodestar method, they will be required at the conclusion of the case to submit to the Court a description of work done in the case 

to allow a comparison of fees requested with the hourly work done and the efficiency of the work. 

Such description would likely take the form of a declaration setting forth each discrete project and 

breaking down all attorney and paralegal time sought to be recovered. For each project, there must 

be a detailed description of the work, giving the date, hours expended, attorney name, and task for 

each work entry, in chronological order. A “project” means a deposition, a motion, a witness interview, and so forth. It does not mean generalized statements like “trial preparation” or “attend 

trial.” 

The following is an example of time collected by a project: 

PROJECT: ABC DEPOSITION (2 DAYS IN FRESNO)

Date Time- Description Hours x Rate = Fee 

 Keeper 

01-08-01 XYZ Assemble and photocopy 2.0 $100 $200 

 exhibits for use in deposition 

01-09-01 RST Review evidence and prepare 

 to examine ABC at deposition 4.5 $200 $900 

01-10-01 XYZ Research issue of work-product 

 privilege asserted by deponent 1.5 $100 $150 

01-11-01 RST Prepare for and take deposition 8.5 $200 $1700 

01-12-01 RST Prepare for and take deposition 7.0 $200 $1400

 

 Project Total: 23.5 $4350

Although the manner of presentation of the information can be dealt with later, the important point 

for present purposes is that the timekeeping system used by counsel must capture the foregoing 

data fields. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

117 

Appendix B: Firms Participating in Competitive Bidding 

Case Name, Docket No., and 

District Judge 

Firm Selected as Class 

Counsel Competing Bidders 

In re Oracle Sec. Litig., No. 90-

CV-931, N.D. Cal. 

• Class Action Against Oracle 

• Class Action Against Anderson 

Walker 

Lowey, Dannenberg, Bemporad, Brachtl & Selsinger 

Lowey, Dannenberg, Bemporad, Brachtl & Selsinger 

(1) Abbey & Ellis 

(2) Berger & Montague 

(3) David B. Gold 

(1) David B. Gold 

(2) Stamell, Tabacco, & Schager 

In re Wells Fargo Sec. Litig., 

No. 91-C-1944, N.D. Cal. 

Walker Leiff, Cabraser & Heimann (1) Lowey Dannenberg Bemporad & 

Selinger 

(2) Milberg Weiss Bershad Hynes & 

Lerach 

In re California Micro Devices 

Sec. Litig.,491 No. 94-C-1944, 

N.D. Cal. 

Walker (1) Gold & Bennett 

(2) Lieff, Cabraser, Heimann & Bernstein 

Wenderhold v. Cylink Corp., 

No. 98-C-4292, N.D. Cal. 

Walker Innelli & Molder (1) Weiss & Yourman 

In re Quintus Sec. Litig., No. 00-

C-4263, N.D. Cal. 

Walker Weiss & Yourman (1) Beatie & Osborn 

(2) Berman DeValerio Pease & 

Tabacco 

(3) Cohen Milstein, Hausfeld & Toll 

(4) Lieff, Cabraser, Heimann & 

Bernstein 

In re Network Assocs., Inc., No. 

99-C-1729, N.D. Cal. 

Alsup Lieff, Cabraser, Heimann 

& Bernstein, LL 

(1) Allen Ruby 

(2) Cohen, Milstein, Hausfeld & Toll, 

P.L.L.C. 

(3) Cotchett, Pitre & Simon 

(4)Weiss & Yourman 

In re Commtouch Software Ltd. 

Sec. Litig.,492 No. 01-C-00719, 

N.D. Cal. 

Alsup 

Sherleigh Assocs. v. WindmereDurable Holdings, Inc.,493 No. 

98-C-2273, S.D. Fla. 

Lenard Milberg Weiss Bershad 

Hynes & Lerach, LLP 

 

 491. Judge Walker rejected both bid proposals and did not select either firm to serve as class counsel. 

For more details see Sections IV.A.1 & V.G. 

 492. Bids were to be submitted to the lead plaintiff by July 20, 2001. In re Commtouch Software Ltd. 

Sec. Litig., No. 01-C-00719, Order Re lead Plaintiff Selection and Class Counsel Selection (N.D. Cal. June 

27, 2001). At this time we have no information regarding the number or identity of the bidders. 

 493. The number and identity of firms that submitted competing bids remains sealed. Sherleigh Assocs., 

LLC v. Windmere-Durable holdings, Inc., 186 F.R.D. 669, 671 (S.D. Fla. 1999). 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 118 

Case Name, Docket No., and 

District Judge 

Firm Selected as Class 

Counsel Competing Bidders 

In re Bank One Shareholders 

Class Actions, No. 00-C-880, 

N.D. Ill. 

Shadur Wechsler Harwood Halebian & Feffer LLP (1) Cohen, Milstein, Hausfeld & Toll, 

P.L.L.C. 

(2) Bid for Appointment as Co-Lead 

Counsel: 

•Berger & Montague,P.C. 

•Keller Rohrback 

(3) Krislov & Associates, LTD 

(4) Lowey Dannenberg Bemporad & 

Selinger, P.C. 

(5) Bid for Appointment as Co-Lead 

Counsel: 

•Schoengold & Sporn, P.C. 

•Quinlan & Crisham, LTD 

(6) Spector, Roseman & Kodroff, P.C. 

(7) Weiss & Yourman 

(8) Bid for Appointment as Co-Lead 

Counsel: 

•Wolf Haldenstein Freeman 

Adler & Herz LLP 

•Miller Faucher Cafferty and 

Wexler LLP 

In re Comdisco Sec. Litig., No. 

01-C-2110, N.D. Ill. 

Shadur Wolf Haldenstein Adler 

Freeman & Herz LLC 

(1) Spector Roseman & Kadroff

(2) Wechsler Haldenstein Adler Freeman & Herz LLC 

In re Cendant Corp. Litig.,494

No. 98-C-1664, D.N.J. 

Walls (1) Bernstein, Litowitz, 

Berger & Grossman 

LLP 

(2) Barrack, Rodos & Bacine 

In re Cendant Corp. Prides 

Litig.,495 No. 98-C-2819, D.N.J. 

Walls Kirby, McInery & Squire 

 

 494. The identity of the winning bidder remains under seal. The Court permitted lead plaintiff for the 

non-Prides claims’ original firms (Bernstein, Litowitz, Berger & Grossmann LLP, and Barrack, Rodos & 

Bacine) to “match” the bid and agree to the terms of what the Court found to be the lowest qualified bid. The 

identity of the competing bidders also remains under seal. Seven firms bid for appointment as lead counsel to 

the non-Prides claims, and two firms as to both the Prides and non-Prides claims. In re Cendant Corp. Litig. , 

191 F.R.D. 387 (D.N.J. 1998). However, the Third Circuit recently decided that Judge Walls abused his discretion in sealing the bids and ordered the district court to unseal the bids as well as any other sealed documents related to the bids. In re Cendant Corp. Sec. Litig., No. 98-C-1664 (3d Cir. Aug., 8, 2001) (Order vacating sanction for violation of district court’s sealing order and requiring unsealing of all previously sealed 

documents). 

 495. The identity of the winning bidder remains under seal. The court permitted the lead plaintiff for the 

Prides claims’ original firm ( Kirby, McInery & Squire) to “match” the bid and agree to the terms of what the 

Court found to be the lowest qualified bid. The identity of the competing bidders also remains under seal. 

Three firms bid for appointment as lead counsel for the Prides claims only, and two firms bid as to both the 

Prides and non-Prides claims. In re Cendant Corp. Litig., 191 F.R.D. 387 (D. N.J. 1998). See discussion supra note 494 of the recent Third Circuit opinion ordering the bids to be unsealed. 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 119 

Case Name, Docket No., and 

District Judge 

Firm Selected as Class 

Counsel Competing Bidders 

In re Lucent Techs., Inc., No. 

00-C-621, D.N.J. 

•Lucent I 

•Lucent II 

Lechner 

Milberg Weiss Bershed 

Hynes & Lerach LLP 

Bernstein Litowitz Berger 

& Grossman LLP 

(1) Goodkind Labaton Rudoff & 

 Sucharow, LLP 

(2) Leiff Cabraser Heimann & Bernstein, LLP 

(1) Barrack, Rodos & Bacine 

(2) Berman DeValerio & Pease, LLP 

(3) Law Offices of Bernard M. Gross, 

P.C. 

(4) Cauley Geller Bowman & Coates, 

LLP 

(5) Cohen, Milstein, Hausfeld & Toll, 

P.L.L.C. 

(6) Goodkind Labaton Rudoff & 

Sucharow LLP 

(7) Johnson & Perkinson 

(8) Kirby McInerney & Squire, LLP 

(9) Lovell & Stewart, LLP 

(10) Rodriguez & Richards, LLC 

(11) Schatz & Nobel, P.C. 

(12) Scott + Scott, LLC 

(13) Spector, Roseman & Kodroff 

(14) Weinstein Kitchenoff Scarlato & 

Goldman, Ltd. 

(15) Weiss & Yourman 

(16) Wolf Haldenstein Adler Freeman 

& Herz LLP 
Auctioning the Role of Class Counsel in Class Action Cases • Federal Judicial Center 2001 

 120 

Case Name, Docket No., and 

District Judge 

Firm Selected as Class 

Counsel Competing Bidders 

In re Auction Houses Antitrust 

Litig.,496 No. 00-C-948, S.D. 

N.Y. 

Kaplan Boies, Schiller & Flexner, 

LLP 

(1) Abbey, Gardy & Squitieri, LLP 

(2) Beatie & Osborn, LLP 

(3) Bernstein, Litowitz, Berger & 

Grossman LLP 

(4) Bradley, Arant, Rose & White, 

LLP 

(5) Cohen, Milstein, Hausfeld & Toll, 

PLLC 

(6) Cotcheit, Pitre & Simon 

(7) The Furth Firm 

(8) Goodkind, Labation, Rudoff & 

Sucharow, LLP 

(9) Heins, Mills & Olsen, PC 

(10) Kaplan, Kilsheimer & Fox, LLP 

(11) Kirby, McInery & Squire LLP 

(12) Kohn, Swift, & Graf, PC 

(13) Leiff, Cabraser, Heimann & 

Bernstein, LLP 

(14) Levin, Fishbein, Sedran & Berman 

(15) Liebenberg, White, Sandals, 

Langer & Taylor LLP 

(16) Lovell & Stewart, LLP 

(17) Milberg, Weiss, Bershad, Hynes 

& LeRach LLP 

(18) Nechsler, Harwood, Halebian & 

Feffer, LLP 

(19) Pomerantz, Hauder, Block, 

Grossman & Gross LLP 

(20) Rabin & Peckel LLP 

(21) Reinhardt & Anderson 

(22) Shapiro, Haber & Urmy, LLP 

(23) Sussman, Godfrey LLP 

 

 496. Although Judge Kaplan has not released a list of the competing bidders, he permitted us to obtain 

the list by asking the clerk to provide us with the firm names if they were listed somewhere on the outside of 

the envelopes containing the bid proposals.