In a 7-4 split decision, the Eleventh Circuit declined to rehear en banc a panel decision issued in September 2020, holding a class settlement that included an incentive award to the class representative was improper. The en banc majority did not issue an opinion, but the four dissenting judges criticized the panel decision as wrongly decided and asserted it “far overreached by banning all incentive awards in class actions.”
Dickenson v. NPAS Solutions, LLC, No. 18-12344 (11th Cir. 2022) originated from a TCPA class action in which the district court approved a settlement of $1.4 million and a $6,000 incentive payment for the lead plaintiff. Jenna Dickenson, the lone objector to the settlement, argued the settlement was not fair and reasonable because the settlement amount should have been higher, class counsel should not have been permitted to recover 30% of the settlement fund, and the class representative should not have been granted an incentive award. Dickenson appealed the district court’s approval to the Eleventh Circuit. On September 17, 2020, a majority of the three-judge panel that heard her appeal held that even though the district court “handled the class-action settlement here in pretty much exactly the same way that hundreds of courts before it have handled similar settlements,” the court nevertheless erred in approving the settlement because it “repeated several errors that, while clear to us, have become commonplace in everyday class-action practice.”
The panel held that the settlement improperly set a deadline for class members to file objections more than two weeks before class counsel filed their fee petition, and offered only “rote, boilerplate pronouncements” in its final approval order. Further, the majority held that the grant of an incentive award to the named plaintiff was contrary to two Supreme Court cases, Trustees v. Greenough[1] and Cent. R.R. & Banking Co. v. Pettus,[2] which held that incentive awards drawn from a common fund to the plaintiff who secured the common fund for recovery are improper. Though Greenough and Pettus were not class actions and were decided prior to enactment of the modern Fed. R. Civ. P. 23, the panel majority held that the incentive awards rejected in those decisions were analogous to modern class representative awards and noted that Rule 23 does not make any reference to incentive awards. Thus, the panel majority concluded: “Although it’s true that such awards are commonplace in modern class-action litigation, that doesn’t make them lawful, and it doesn’t free us to ignore Supreme Court precedent forbidding them.” The majority suggested that incentive awards could only be lawful if the U.S. Supreme Court overrules Greenough and Pettus — or if Congress amends Rule 23 to specifically allow for incentive awards. One judge on the panel dissented in part from the decision, disagreeing with her colleagues on the legality of incentive awards.
The plaintiff sought en banc review of the panel’s decision, which the full Eleventh Circuit denied on August 3. Four judges dissented from the rehearing denial, arguing that the panel majority misapplied Greenough and Pettus by ignoring their context and the intervening history and development of Rule 23 class actions. The dissenters claimed that “the panel majority’s opinion threatens the very viability of class actions in this circuit.” Nonetheless, because the petition for rehearing en banc was denied, the majority decision remains the law in the Eleventh Circuit.
[1] 105 U.S. 527 (1881).
[2] 113 U.S. 116 (1885).
