Incentive Awards, Bounties, And Adequacy Of Representation

A common feature of class action settlements, whether in employment actions or otherwise, is the payment of an incentive award to the named plaintiff. Such payments are frequently approved by courts, but have been criticized as unduly promoting class claims. Indeed, the 2003 version of CAFA, which passed the House but not the senate, would have characterized such payments as "bounties" and made them unlawful. H.R. 1115, 107th Cong., 2d Sess. (2003).

In the past, courts in employment class actions have refused to approve settlements in which the named plaintiffs were to receive what they perceived to be a disproportionate share of the relief. See Holmes v. Continental Can Co., 706 F.2d 1144, 1145 (11th Cir. 1983) (court rejects settlement in employment discrimination action in which lion's share of monetary relief went to the named plaintiffs); Franks v. Kroger Co., 649 F.2d 1216 (6th Cir. 1981) (a divided Sixth Circuit questions the amount of compensation for the named plaintiff in a sex discrimination class action). In some cases, courts have held that proposing such terms suggests that the named plaintiffs are inappropriate class representatives under Rule 23(a)(4). See Lyon v. Arizona, 80 F.R.D. 665 (D. Ariz. 1978).

Two cases decided outside the employment arena demonstrate that this issue still arises and may demonstrate conflicts between the class and the named plaintiffs. In Vassalle v. Midland Funding LLC, 708 F.3d 747 (6 th> Cir. 2013), the plaintiffs brought a class action regarding debt collection practices. The proposed settlement provided for a $5.2 million fund to be created, with an average payment of $17.28 to each class member. The named plaintiffs, however, also received $2,000 and forgiveness of their underlying...