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January 18, 1996

In re AMINO ACID LYSINE ANTITRUST LITIGATION; (This Document Relates to All Actions)

Milton I. Shadur, Senior United States District Judge

The opinion of the court was delivered by: SHADUR

This Court originally received the first-filed of these prospective class actions in this District Court (K&L Feeds, Inc. v. Archer Daniels Midland Co., Inc., 95 C 4587) via reassignment by the Executive Committee from the calendar of this Court's colleague Honorable George Lindberg. Next the four other cases that were later filed in this District Court *fn2" were reassigned to this Court's calendar (also from Judge Lindberg's calendar) on grounds of relatedness under this District Court's General Rule 2.31. Then, as had been regarded a likely possibility, on December 15, 1995 the Judicial Panel on Multidistrict Litigation ("MDL Panel") transferred MDL-1083, In re Amino Acid Lysine Antitrust Litigation, to this Court under 28 U.S.C. § 1407. That transfer carried with it, in addition to the K&L Feeds and General Utility cases, three cases from other districts. *fn3" In the only other case reassignment that has taken place up to now, on December 26 the MDL Panel entered a conditional transfer order to bring two more cases from the Northern District of Alabama *fn4" into the group. *fn5"

 Before the transfer from Judge Lindberg, at the behest of plaintiffs' counsel he had entered Pretrial Order No. 1 (Initial Case Management Order) ("Order No. 1")--an order of the type provided as a sample in the Manual for Complex Litigation (3d). In part Order No. 1 P10 designated lead counsel for the entire set of cases. But by definition not all of the relevant players had the opportunity to provide input for that determination. And at least as importantly, from the time of its initial receipt of this litigation this Court was concerned that the best interests of the putative plaintiff class would not be served by the kind of proliferation of plaintiffs' counsel that ordinarily marks a like proliferation of the number of cases that so often spring up after a triggering event--whether in the field of securities law or (as here) in the antitrust area or in some other area potentially ripe for class treatment.

 This Court therefore advised counsel that, as it had presaged five years ago in the context of its dealing with fee requests from ten sets of lawyers in a just-settled group of securities class actions ( In re Telesphere Sec. Litig., 753 F. Supp. 716, 721 (N.D. Ill. 1990)), it would give serious consideration to the possibility (1) of obtaining sealed bids from any interested law firms and (2) of then designating the class counsel based on those bids. *fn6" To that end this Court ordered the contemporaneous filing of such bids and of submissions from any interested parties as to the desirability or undesirability of employing that bidding procedure rather than some other approach to the appointment and compensation of class counsel.

 Eight sets of lawyers have responded by tendering bids under seal. *fn7" And five submissions have been made (two of those were included as part of the bids) as to the desirability or undesirability of following the bidding procedure. As a logical matter the latter subject will be addressed at the outset, for if a negative answer were given to that question the bids would become moot and would simply be returned to the respective bidders--still under seal.

 Bidding Vel Non

 That flawed notion stems from the bizarre idea that an up-front bidding process is somehow at odds with the need for the court to make a finding as to the extent of plaintiffs' success in the litigation. Of course Hensley, id. at 434-37 spoke of the need for a court to examine such success in order to make the dramatically different determination whether a lodestar calculation--reasonable hours times a reasonable rate--produces a reasonable fee. By sharp contrast, here the bid that was actually submitted by the group of counsel who have also tendered the objection now under discussion, like all of the other bids received by this Court (with one possible exception discussed later), is itself already solely and directly geared to the level of plaintiffs' success--for it expressly predicates the amount of the fee on a percentage-of-recovery formula (rather than a lodestar or enhanced lodestar calculation or some other methodology). It was after all entirely within the discretion of all bidding counsel to decide just how they would formulate their proposals, and what all of them have chosen to submit (just as this Court had expected) clearly calls for the summary rejection of that objection.

 Another of the statements as to whether this Court should employ the bidding process (the one submitted as part of the bid tendered by the three firms headed by Heins, Mills & Olson, counsel for plaintiff in the Munco action originally filed in the Central District of Illinois) favors that process so long as the selection criteria include considerations of quality rather than simply being limited to the cheapest bid:

Competitive proposals to serve as lead counsel for the plaintiff class may be beneficial to the plaintiff class in this antitrust action provided that the selection criteria include qualitative factors affecting representation of the class, as well as attorneys' fees that would be charged by proposed lead class counsel. See In re Wells Fargo Sec. Litig., 157 F.R.D. 467 (N.D. Cal. 1994). *fn8" If the proposals to serve as lead counsel address qualitative factors that proposed lead counsel will bring to bear to the litigation such as their experience, knowledge, reputation, and ability to finance the litigation, as well as a proposal for fees and expenses, submission of proposals to represent the class will put the emphasis where it properly belongs--on the best interests of the class.

 That has indeed been this Court's expected approach from the beginning if it were to consider following the bidding concept. Nothing that this Court has either said or implied during its two oral discussions of the subject with counsel for all the parties could fairly be understood as suggesting otherwise.

 That then leaves for discussion the three submissions that voice other criticisms of the bidding process--one by the four law firms acting as counsel in the Walker Farms case (for convenience that is referred to as the "Simon Memorandum," because it is signed by Leonard Simon of the Milberg Weiss firm), another by the three law firms acting as counsel for plaintiffs in the five cases filed in this District Court in the first instance (for convenience that is referred to as the "Freed Memorandum," because it is signed by Michael Freed of the Much Shelist firm) and the third, which reflects "a few reservations concerning the efficacy of the auction process" and which accompanied the bid by the three law firms acting as counsel in the Horizon Laboratories case (for convenience that is referred to as the "Davidoff Memorandum," because it is signed by Merrill Davidoff of the Berger & Montague firm). This Court has also considered all of those submissions and finds them wanting, not because (unlike the first one mentioned earlier) they lack in thoughtfulness but because they operate from essentially false premises.

 If these were typical lawsuits--with one party (or more than one party acting jointly) suing one or more defendants--the free market process by which each client or set of clients chooses its own lawyer would of course control. Every client makes that choice on the predicate that the lawyer chosen is the best possible choice under all the circumstances, and the courts do not interfere with such choices just because clients are often wrong in those judgments. But the difficulty comes when a lawyer who is not of one's choosing is foisted on one, as is inevitable in the class action context. And the fact that the putative class representative who brings an action has chosen a particular lawyer (or vice versa, as everyone knows is frequently the case in the real world) gives no assurance--or even presumptive assurance--that the selected lawyer is the best choice for the absent class members. In that situation, unlike the one-on-one situation where the court properly stays out of the decision-making process, the analogy of the direct market breaks down and only the court can bring objectivity to bear on the issue.

 It is worth repeating what this Court said in Telesphere, 753 F. Supp. at 719--albeit made in the different context of passing on the reasonableness of requested hourly rates, the point that was made there is equally valid for present purposes:

When clients choose their own lawyers, the free market operates--whether or not the bargain is made on the basis of truly full information, *fn5" it reflects an agreement between a willing buyer and willing seller of legal services. But in the stockholders' class action it is the lawyers who choose themselves for all practical purposes *fn6" --true enough, there is a one-to-one relationship between the lawyer and the individual class representative, but that relationship cannot equate to a bargained-for retainer by the entire class.
Hence the court must stand in the position of an intermediary acting for the class members in establishing rates.

 And as our Court of Appeals has said in that same context ( In re Continental Illinois Sec. Litig., 962 F.2d 566, 572 (7th Cir. 1992)):

The object in awarding a reasonable attorney's fee, as we have been at pains to stress, is to give the lawyer what he would have gotten in the way of a fee in an arm's length negotiation, had one been feasible. In other words the object is to simulate the market where a direct market determination is infeasible. It is infeasible in a class action because no member of the class has a sufficient stake to drive a hard--or any--bargain with the lawyer. So the judge has to step in and play surrogate client.

 To be sure, both the Simon and Freed Memoranda make the point that this is not like (for example) the class action involving small consumer claims, in which no individual plaintiff has a meaningful stake. Although none of the complaints has quantified the amount of lysine purchased by, or the potential damages suffered by, the respective named plaintiffs, some of the submissions by counsel have indicated that really substantial numbers are involved, so that it is not literally true that "no member of the class has a sufficient stake to drive a hard--or any--bargain with the lawyer." But the identical principle applies nonetheless, because an individual named plaintiff--who may be assumed to be perfectly competent to make judgments for itself and to have the necessary economic interest and leverage to do that--cannot fairly be permitted to impose its own determination, made on its own behalf, as a decision that automatically will bind every other lysine consumer (many of whom are also major buyers) in what has been described as a lawsuit that may involve as much as hundreds of millions of dollars.

 Indeed, the argument that the objecting counsel seek to make on that basis really breaks down even on its own terms. All but one of the bidding law firms has in fact been selected by a presumably well informed client that is a named plaintiff in one of the lawsuits. *fn9" If that is indeed a rational judgment about the quality of the law firm or firms involved, an award to one of the firms or sets of firms so selected--an award predicated on the basis on which that firm or set of firms is prepared to handle the litigation--provides the best possible outcome. Hence the inapplicability to the current situation of the second to the last sentence quoted earlier from Continental Illinois does not at all derogate from the appropriateness of competitive bidding in this litigation.

 It is thus ironic that Simon Memorandum at 1 quotes the same Continental Illinois language that forms the first two sentences of this opinion's quotation from that case, and that in so doing the Memorandum underscores our Court of Appeals' reference to "simulating the market." That irony is particularly poignant in light of the fact (discussed a bit later) that the alternative suggestion in the Simon Memorandum does not at all "simulate the market" in any effective way.

 It should be emphasized that all of the references in the Simon and Freed Memoranda to the undesirability of selecting counsel based on price alone is truly a straw man. Not for a moment has this Court considered the possibility of basing the choice of counsel on the money factor itself. This Court has always recognized full well that it is essential to choose counsel who have impeccable credentials in terms of ability and experience.

 In that respect it is interesting that the Freed Memorandum urges this Court to adhere to Order No. 1, with its designation as lead counsel of the three firms submitting that memorandum. In the course of that presentation the Freed Memorandum understandably emphasizes that the designated lead counsel are highly qualified and experienced in large complex cases such as these. This Court certainly has no reason to doubt that--and the fact that one of those three firms, with demonstrated excellent qualifications (see Freed Mem. 21-24 and the firm resume at Ex. H), turns out to be the successful bidder tends to reinforce (rather than in any way to impeach) the propriety and utility of the bidding procedure.

 What the Simon Memorandum urges instead is that this Court should select the lead counsel in terms of quality ("the best counsel available"--Mem. 5) and should then negotiate a binding fee arrangement "that the Court feels is reasonable" (id.). In that respect the second suggestion (but not the first) has the support of the work product generated by the distinguished Third Circuit Task Force appointed to ...

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