[co-author: Noland Butler]
More than two years ago, the Eleventh Circuit Court of Appeals ruled in Johnson v. NPAS Solutions, LLC, 975 F.3d 1244 (11th Cir. 2020) that incentive payments for lead plaintiffs in class-action lawsuits are improper. After being denied rehearing en banc, the plaintiff has filed a petition for writ of certiorari for the Supreme Court to review the permissibility of incentive payments for class representatives.
As we previously reported, Johnson involves a class action under the Telephone Consumer Protection Act (TCPA). The case has taken a turn to evaluate the legality of incentive awards resulting from class actions. The district court approved a $1.4 million settlement and a $6,000 incentive payment for the lead plaintiff. One class member, Jenna Dickenson, objected to the settlement and subsequently appealed the district court’s approval of the class settlement. In September 2020, the Eleventh Circuit agreed with Dickenson, holding that incentive payments for lead plaintiffs in class-action lawsuits are improper. While no other circuit has come to this conclusion, the court reasoned that incentive awards were analogous to a salary or reimbursement for expenses, which were prohibited by two Supreme Court cases, Trustees v. Greenough, 105 U.S. 527 (1881), and Cent. R.R. & Banking Co. v. Pettus, 113 U.S. 116 (1885). Two years later, the lead plaintiff, Charles Johnson, requested, and the Eleventh Circuit rejected, a petition for an en banc rehearing. Four judges dissented from the rehearing denial, arguing that the panel majority misapplied Supreme Court precedent.
In response, the lead plaintiff filed a petition for writ of certiorari with the Supreme Court this month. The lead plaintiff asks the Supreme Court to certify the following question: Are incentive payments in Rule 23 class-action settlements per se unlawful under Trustees or sometimes permissible subject to judicial oversight? If the Supreme Court grants the petition, its decision could have consequences for class-action litigation nationwide.
Troutman Pepper will continue to monitor developments in this area.
