A Circuit Split on Incentive Awards

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A few months ago, I posted about a surprising decision of a divided panel of the Eleventh Circuit which held that incentive awards (a/k/a “service awards”) in class action settlements are prohibited by arguably analogous Supreme Court decisions from the 1880s. While we wait to see whether the Eleventh Circuit will grant a pending petition for rehearing en banc in Johnson v. NPAS Solutions, LLC, we should take note of a per curiam decision of the Sixth Circuit reaching a different result. In Shane Group Inc. v. Blue Cross Blue Shield of Michigan, 2021 WL 129067 (6th Cir., Jan. 14, 2021), the court rejected an objection to service awards to be paid to certain named plaintiffs, holding that they did not amount to an unlawful “bounty.” The Sixth Circuit thus implicitly rejected the reasoning of its sister court. In upholding the service awards, it held, “[o]n this record, . . . those payments correlate to the substantial amount of time that the named plaintiffs actually spent producing documents and otherwise advancing the litigation of the case.” Its ruling is consistent with the expectations, understandings, and practices of parties and courts over many decades in countless class action settlements, and therefore represents, at least in one federal appellate jurisdiction, a return to normalcy.

One hopes that the Eleventh Circuit will rehear Johnson v. NPAS Solutions, LLC, and eliminate the controversy the decision has caused. If and when it does, we will be able to recognize its original decision as a tempest in a teapot and get on with the business of resolving class action disputes without undue disruption whenever willing parties wish to do so.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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