Eleventh Circuit Stands Firm ' No Incentive Awards For Class Representatives

• Published date: 15 August 2022
• Subject Matter: Litigation, Mediation & Arbitration, Class Actions, Trials & Appeals & Compensation
• Law Firm: BakerHostetler
• Author: Mr Kamran B. Ahmadian

Nearly two years after it issued its initial decision in Johnson v. NPAS Sols., LLC, in which it held incentive awards for class representatives to be per se unlawful, the United States Court of Appeals for the Eleventh Circuit denied a petition for rehearing en banc, on Aug. 3, 2022. In choosing not to revisit its decision, the court confirmed that class representative incentive awards are prohibited as a matter of law within its jurisdiction - federal district courts in Alabama, Georgia and Florida.

As a refresher, in Johnson, the plaintiff filed a lawsuit on behalf of himself and a putative class against a debt collection agency (NPAS) alleging violations of the Telephone Consumer Protection Act. Eventually, the parties agreed to settle the case on a classwide basis. Based on the terms of the settlement agreement, NPAS would pay $1.432 million into a settlement fund for participating class members - approximately $80 per class member after attorneys fees and costs. The settlement also provided $6,000 from the fund to named plaintiff Mr. Johnson for serving as class representative. Despite the fact that incentive awards for named plaintiffs are commonplace in the class settlement context, a single class member objected to the settlement, arguing, in part, that Supreme Court precedent prohibited the district court from approving the agreed-upon incentive award to Johnson. The district court overruled the objection and approved the settlement.

On appeal, the Eleventh Circuit reversed the incentive award portion of the district court's order, finding that the $6,000 incentive award was akin to a "salary and a bounty," which were explicitly prohibited by very old Supreme Court case law in Internal Imp. Fund Trustees v. Greenough, 105 U.S. 527 (1881) (Greenough) and Cent. R.R. & Banking Co. v. Pettus, 113 U.S. 116 (1885) (Pettus). While the court acknowledged the ubiquitous nature of these types of incentive awards, it ultimately determined that precedent must rule the day.

Although it's true that such awards are commonplace in modern class-action litigation, that doesn't make them lawful, and it doesn't...