The lead counsel auction has attracted increasing attention. Auction advocates argue that auctions introduce competitive market forces that improve the selection and compensation of class counsel. The benefits of the auction, they claim, include lower legal fees and better representation. Careful scrutiny reveals that auction advocates have overlooked substantial methodological problems with the design and implementation of the Lead counsel auction. Even if these problems were overcome, the auction procedure is flawed: Auctions are poor tools far selecting firms based on multiple criteria, compromise the judicial role, and are unlikely to produce reasonable fee awards. Although the existing record is insufficient to permit rigorous empirical evaluation, early results raise concerns. This Article therefore considers an alternative: negotiation by an empowered lead plaintiff. The Article analyzes recent developments under the Private Securities Litigation Reform Act to demonstrate that client empowerment is a more effective way of incorporating market forces into the selection and compensation of class counsel. The Article concludes with interpretive guidance on further development of the model and its extension beyond securities litigation.
