A Practitioner's Perspective on the Selection of Class Counsel, page 3

A PRACTITIONER'S PERSPECTIVE (continued)

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See also Proposed Amendments to Rule 23, Rule 23(h) (including counsel's experience in handling class actions, complex litigation, type of claims asserted in case before court, investigation counsel has conducted, and firm resources to be committed). Basically, counsel's responses to these criteria inform the court about their quality, their creativity and the effort they plan to expend on behalf of the class. In recognition that there are usually a number of qualified firms vying for leadership, the court's application and evaluation of these factors should not be applied or evaluated in such a way so as to create barriers which prevent firms from ever being appointed or which result in the repeated selection of the same firm.

In addition to quality, the selection of counsel should also involve price competition. In any other context where a client hires counsel to represent her, quality and price are twin, paramount considerations. There is no reason one half of this equation should be neglected simply because the client is now a class. Judge Walker has defined the problem facing the court as "how to approximate what the class members would do if they were involved in the decision-making," and has concluded that they would "demand in advance of the litigation the following information: how much their lawyers will charge for their services and the best price available for those services." In re Oracle Sec. Litig., 131 F.R.D. 688, 692 (N.D.Cal. 1990) (emphasis in original). It is this need to know at the outset, coupled with the presence of many qualified firms, who are willing and able to handle the representation, which creates the competition that drives down price and yields the greatest recovery for the class.

The Northern District of California presents some of the clearest examples of competition driving down price. While the Ninth Circuit, in awarding percentage-based fees in class action cases, has recognized a "benchmark" of twenty-five percent see, e.g., Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir.1993); Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir.1989), those cases in which the district courts have employed a market process for selecting counsel have culiminated in fee awards will below that benchmark. See, e.g., In re Oracle Sec. Litig., 85 F. Supp. 1437 (N.D. Cal. 1994) (settlement of $25 million and fee of 19.2%); In re California Micro Devices Sec. Litig., No. 94-2817 (N.D. Cal.) (if pending motion for final settlement approval granted and requested fees awarded, total settlements in case of $31 million and fees of 12.6%); In re Network Associates Sec. Litig., No. 99-01729 (N.D. CAL.) (if pending motion for final settlement approval granted and requested fees awarded, settlement of $30 million and fee of 7%).

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