Incentives for Plaintiffs in Class Actions Allowed?

A recent Eleventh Circuit ruling overturned a common practice in class action settlements of granting a modest incentive award to a named plaintiff. In Johnson v NPAS Solutions, LLC, No. 18-12344, 2020 WL 5553312 (11th Cir. 17 Sep 2020), the district court, in connection with the final approval of a class action settlement, approved an incentive indemnity of $ 6,000 for the named applicant. An opponent of the settlement disputed the incentive bonus along with other objections, and the Eleventh Circuit ruled (with a dissenting judge) that the incentive bonus was inappropriate. The court found that although such sentences are common, no court has thoroughly assessed the basis of its authority to approve them. The court relied on two 1880s decisions of the United States Supreme Court, which held, before the invention of the modern class action lawsuit, that plaintiffs who have recovered on behalf of others (such as a trustee who sued on behalf of himself and other bondholders) could not recover an allowance for “personal expenses” or “personal services” out of a common fund that was obtained. Identifier. at 8. The majority of the Eleventh Circuit concluded that, by virtue of these decisions, “[a] a plaintiff suing on behalf of a group may be reimbursed for legal fees and expenses incurred in connection with the dispute, but he may not receive a salary or be reimbursed for his personal expenses “, and” the price Modern incentive “was” “roughly analogous to a salary” or “pay for” personal service. ” ” Identifier. at 9 o’clock. The majority further concluded that the same result would be justified if the incentive bonus were qualified as a “bonus”. According to the majority, such rewards, although they have been common, can only be authorized if the Supreme Court overturns its old precedent, rule 23 is amended to allow such rewards, or Congress enacts a law authorizing such rewards. rewards. Identifier. at * 9, 10-12.

Judge Martin disagreed with this part of the opinion, concluding that the majority’s decision was inconsistent with a 1983 Eleventh Circuit decision which established a fairness test for such awards, similar to the approach adopted by other circuits (although without thoroughly evaluating the authority to grant such rewards). Justice Martin wrote: “By prohibiting named plaintiffs from receiving incentive bonuses, the majority opinion will have the practical effect of requiring named plaintiffs to incur costs far beyond the benefits they derive. of their role in the management of the group. As a result, I expect that potential complainants will be less willing to take on the role of class representative in the future. ” Identifier. at * 15 (Martin, J., dissenting).

It will be interesting to see if this ruling results in a decrease in the number of class actions in the Eleventh Circuit, or if plaintiffs’ lawyers are still able to recruit named plaintiffs without the possibility of incentive reward. This ruling seems unlikely to make class actions any more difficult to settle, although it could possibly happen if named plaintiffs can only get a small amount that absent class members receive. Since older Supreme Court rulings have focused on the circumstances in which a “common fund” was created, Circuit 11 might achieve a different result if the settlement is based on claims and provides for payment of the incentive allowance. by the defendant separately, and not as part of a “common fund”. In these circumstances, the court simply approves the parties’ agreement and does not intervene in the allocation of a “fund”.

The Eleventh Circuit also found that the district court erred in two other respects, demonstrating some good practice advice for class action lawyers. First, the court of appeal found that the district court improperly set the time limit for objections to the award of the plaintiff’s attorney fees before the filing of the petition of the plaintiff’s attorneys for the award of fees, what the court found was inconsistent with the Fed. R.Civ. P. 23 (h). The court concluded, however, that this was a harmless error because the opponent of the settlement had had an adequate opportunity to present its position in the district court after the filing of the costs and appeal. This problem can easily be avoided when the parties come up with a timeline for the class action resolution process in the district court. Such a timetable may require that the request for costs be filed sufficiently before the opposition deadline. Second, the appeals court found that the district court did not make sufficient findings or conclusions to support its decision to grant final approval of the proposed settlement and cost award. Since it is common practice in most federal courts for parties to submit a draft order to the district court, this problem can also potentially be avoided by presenting a detailed draft order for the court to consider. district.

Copyright © 2021 Robinson & Cole LLP. All rights reserved.Revue nationale de droit, volume X, number 265

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