The Questionable Case for Using Auctions to Select Lead Counsel
Lucian A. Bebchuk
Harvard Law School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Washington University Law Quarterly, Vol. 80, pp. 889-899, 2002
Harvard Law and Economics Discussion Paper No. 390
This paper analyzes the shortcomings of using auctions for selecting lead counsel in class action cases. In contrast to what proponents of auctions suggest, the outcome of an auction is likely to diverge considerably from what an informed principal would have chosen. In particular, auctions push the percentage of recovery paid to counsel to the lowest level at which law firms would be willing to take the case. Because of the need to provide counsel with incentives to invest effort and resources, however, the class might well be better served by a higher percentage than this minimum level, and auctions might push fees to levels that are too low. The analyzed problems are ones that arise also in those types of cases for which the use of auctions should be considered according to the recent recommendations of a Task Force report.
Number of Pages in PDF File: 15
Keywords: class actions, lead counsel, attorney fees, contingent fees
JEL Classification: K4Accepted Paper Series
Date posted: November 24, 2002 ; Last revised: May 5, 2009
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