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The auction system used to select lead plaintiffs’ counsel in the price-fixing class action against Christie’s International PLC and Sotheby’s Holdings Inc. had its desired effect, U.S. District Judge Lewis A. Kaplan told attorneys on Friday. Plaintiffs will recover hundreds of millions of dollars more, and their lawyers will earn tens of millions less than would have been the case had the traditional methods of lead counsel selection been employed, the judge said. “I have absolutely no doubt at all that the procedures used in this case have been successful beyond my imaginings,” Kaplan said during a Friday hearing on whether to approve a $537 million settlement in the case. The $537 million figure includes $125 million in sellers’ coupons provided by the auction houses. The initial settlement figure was $512 million, but the auction houses upped their offer after Kaplan and others questioned the value of the coupons. While lead counsel auctions are being used with increasing frequency by judges in class actions, Kaplan’s formula was an example of the fine-tuning of an incentive system that is designed to minimize conflicts between the interests of the class and those of plaintiffs’ attorneys. The formula called for contenders to submit bids based on a figure that represented an amount to go entirely to the plaintiffs, with 25 percent of any recovery over that amount to be awarded in attorneys fees. The highest figure submitted by the more than 20 law firms who participated in the auction was $405 million, an amount that was bid by two firms. David Boies and his firm, Boies, Schiller & Flexner, prevailed in the auction, and absent any changes, the firm stands to earn $26.75 million for its lead role. Judge Kaplan said the average bid submitted by the competing firms was $130 million. Had that been the prevailing bid, and the winning firm had obtained a settlement equal to the $537 million obtained by the Boies firm, the attorneys’ fees in the case would have been $95.4 million, or more than three times the amount that will be paid to Boies. And the average bid of the firms that served as interim lead counsel in the case was even lower, Kaplan said, coming in at $96 million, a bid that would have resulted in $104 million in fees. Veteran plaintiffs’ class action attorney Frederick P. Furth of the Furth Firm, one of the interim lead counsel, told the judge that never in his “fondest dreams” did he imagine that “defendants would pay $512 million dollars.” Furth added that it was “the most outstanding result I have ever heard of” in a class action. Another interim lead counsel, Robert Skirnick, of Meredith, Cohen, Greenfogel & Skirnick, said “Mr. Boies did a heck of a job.” “We entered into preliminary settlement talks with the defendants and we had good, hard solid numbers from these guys and we didn’t think we could get that kind of money,” Skirnick said. SETTLEMENT COUPONS Most of Friday’s hearing dealt with the use of coupons, or certificates, in the settlement. The initial agreement called for Christie’s and Sotheby’s to pay $412 million in cash and $100 million in coupons. Skepticism about the value of the coupons on the part of Judge Kaplan and objectors within the plaintiffs’ class led the auction houses to improve their offer to $125 million in coupons. And this time, the auction houses said the certificates, which can be applied to sellers’ commissions or certain consignment-related costs, can be redeemed by holders for cash value after four, instead of five, years as originally envisioned. Kaplan, who appointed his own experts to evaluate the certificates and estimate their value in a proposed secondary market, said he would rule shortly on whether or not to accept the settlement. Boies has already indicated to the court that his firm would accept certificates and cash for his fees in the same ratio that certificates correspond to cash in the overall settlement. Kaplan indicated that at a minimum, the firm would receive that amount in certificates, but he also hinted that the amount of certificates dedicated to attorneys’ fees could be higher. GUILTY PLEA With the settlement near approval, and with last week’s dismissal of claims brought by victims who had bought or sold items at auctions outside of the United States, Judge Kaplan finally accepted Sotheby’s guilty plea in the criminal case on Friday. Christie’s agreement to cooperate with the government last year spared the company any meaningful criminal liability. Kaplan called it an “especially serious case,” involving “price fixing planned at an extremely high level.” “These are people who knew a lot better,” he said. “And they certainly didn’t need the money.” Nonetheless, because Sotheby’s is a public company that is about to finalize a $70 settlement of a shareholders’ suit prompted by the price fixing case, Kaplan said that a $45 million fine was sufficient for the auction house, even though it was less than that called for under the Federal Sentencing Guidelines. “The risk to competition of further burdening Sotheby’s outweighs any added benefit from a larger fine,” he said. “It is more than adequate to serve the public interest.” Kaplan then turned to fee requests for lawyers who worked on the case prior to the lead counsel auction — requests that he said filled a file cabinet. Both Furth and Skirnick asked Kaplan to grant their fee applications. And both said they had done a great deal of work to set the case up for settlement before Boies and his firm took the lead role. “I feel that we teed up the ball for the new Tiger Woods of the plaintiffs’ antitrust bar,” Furth said. “Give credit where credit is due,” Kaplan interjected. “Skadden Arps [Slate, Meagher & Flom] teed up the ball when they advised Christie’s to cooperate with the government.”

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