Ted Frank’s Radical Proposal: Reverse Auction for Lead Counsel in VW MDL

Reuters' Alison Frankel covers CEI's latest amicus brief in the Volkswagen clean diesel emissions litigation.

Lead counsel reverse auctions fell out of favor amid academic criticism and a 2002 report on class action legal fees by a 3rd U.S. Circuit Court of Appeals task force. Detractors said competitive bidding would backfire because it encouraged plaintiffs' firms to cut corners and settle quickly. But class action maverick Ted Frank of the Competitive Enterprise Institute wants to bring back reverse bidding to pick lead counsel in the Volkswagen clean diesel emissions litigation.


CEI's brief argued that the very circumstances that make the VW case such a magnet for plaintiffs' lawyers also make it an ideal candidate for a reverse auction. Judge Breyer need not worry the competition for appointment will be too thin, the brief said, nor that the case will not be adequately investigated, since car owners "will be able to piggyback off of government investigations of Volkswagen's conduct."

Meanwhile, CEI argued, the benefit of transparent competitive bidding for lead counsel appointments is not only a better recovery for class members but also public faith that plaintiffs' firms didn't collude with one another to take advantage of the class. The brief called for Judge Breyer to unseal plaintiffs' firms' fee bids 48 hours after they are submitted.

"This court's use of a bidding process would cause putative lead counsel to bid away the windfall traditionally built into fees for such low-risk but high-payment cases, returning that amount to the class members harmed by the defendants' admitted wrongdoing," CEI said. "Public bidding promotes class members' confidence in the fair administration of their casegives them a fuller view of the process, and also deters the possibility of fraud or other injustice against the class.

Read the full article at Reuters.com.