## Facts

- Multiple actions were filed alleging Sotheby’s and Christie’s conspired from at least 1993 to fix non-internet auction fees, including buyers’ premiums and sellers’ commissions.
- The filings followed public reporting and government investigation into the alleged price-fixing, including cooperation by one defendant with federal authorities.
- The cases were consolidated before a single district judge in the Southern District of New York as a putative antitrust class action on behalf of auction buyers and sellers.
- Numerous plaintiffs’ firms competed for appointment as lead counsel, with the court anticipating substantial potential fee awards given the scale and publicity of the litigation.
- To address the risk that counsel’s fee incentives would diverge from absent class members’ interests, the court chose to select lead counsel through a court-run, competitive bidding process.
- The court required sealed bids proposing contingency fee schedules keyed to recovery size, including tiered structures with declining percentages as recovery increased.
- The court evaluated bids on both economics and quality, considering firms’ experience, resources, and capacity to litigate complex antitrust claims.
- The court selected Boies, Schiller & Flexner LLP as lead class counsel under the terms of its bid and later issued an opinion explaining the legality and rationale of the auction method.

## Issues

1. Whether a federal district court supervising a putative antitrust class action may use a competitive auction to appoint lead class counsel and set an ex ante contingency fee structure.
2. Whether such an auction procedure is consistent with the court’s obligations and authority under Federal Rule of Civil Procedure 23, including protection of absent class members and adequacy of representation.
3. What case characteristics justify using an auction rather than relying on traditional ex post fee petitions and discretionary counsel selection.

## Decision

- The court held that conducting an auction to select lead class counsel and establish a fee schedule was within the court’s discretion and consistent with Rule 23.
- The court approved the auction procedure as a legitimate means to reduce agency costs between class counsel and absent class members and to limit the risk of excessive fees.
- The court rejected objections that an auction was incompatible with Rule 23 or would impair vigorous advocacy, reasoning that counsel’s compensation remained contingent on success and scaled with recovery.
- The court emphasized the auction was not purely price-driven; it also assessed bidders’ competence, experience, and ability to prosecute the case effectively.
- The court confirmed the selection of Boies, Schiller & Flexner LLP as lead class counsel under the bid terms.

## Legal Principles

- A district court in a class action has a fiduciary obligation to protect absent class members, including monitoring counsel selection and compensation.
- Rule 23 grants courts authority to appoint class counsel and to control fee arrangements; an auction may be used as an administrative mechanism to exercise that authority.
- Competitive bidding for lead counsel may be appropriate where there is a substantial pool of qualified firms, reliable information permitting rational ex ante bids, and a strong risk of large fee awards.
- Adequacy of representation requires consideration of counsel’s qualifications and resources; a lower bid does not automatically control if it compromises effective representation.
- Ex ante fee schedules, including tiered and declining-percentage structures, may better align counsel’s incentives with maximizing net class recovery and avoiding windfall compensation.

## Conclusion

The court approved a sealed-bid auction as a permissible and case-appropriate method to appoint lead class counsel and pre-set a contingency fee structure, concluding that the procedure fit within Rule 23 and the court’s duty to protect the class while ensuring capable representation.


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