No Incentives For Class Plaintiffs in Eleventh Circuit

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Last week, a panel from the Eleventh Circuit in Johnson v. NPAS Solutions, LLC, No. 18-12344 (11th Cir.) reversed in part, and vacated in part, a class action settlement that would have resolved allegations that NPAS violated the Telephone Consumer Protection Act by using an automatic telephone dialing system to place calls to his cell phone without his consent.
 

The class settlement was approved over the objection of Jenna Dickenson by the United States District Court for the Southern District of Florida.  Dickenson appealed the final approval order, arguing that: (1) the District Court erred when it required class members to file objections to the settlement and attorneys’ fees application before class counsel’s deadline to file their fee application; (2) the $6,000 incentive award to the named Plaintiff contravened two Supreme Court cases from the 1880s; and (3) the District Court’s analysis was not sufficient to provide meaningful appellate review.  The Eleventh Circuit agreed with Dickenson on all three points.

The panel’s decision regarding the timing of objections and the sufficiency of the analysis is consistent with other decisions around the country.  The decision with respect to Plaintiff’s incentive award, however, is an extreme departure from what has become commonplace in federal class action practice.  Dickenson argued that the Supreme Court’s decisions in Trustees v. Greenough, 105 U.S. 527 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), prohibit inventive awards like the one awarded to Plaintiff by the District Court, and the Eleventh Circuit agreed.

The panel described Greenough and Pettus as “the seminal cases” establishing the rule that attorneys’ fees can be paid from a common fund, but explained that these cases also limit on the types of awards that attorneys and litigants may recover:  “A plaintiff suing on behalf of a class can be reimbursed from attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses.”  The panel reasoned “that the modern-day incentive award for a class representative is roughly analogous to a salary” and payment for personal services.  Such incentive awards, according to the panel, “present even more pronounced risks” than the payment at issue in Greenough because they are also intended “to promote litigation by providing a prize to be won (i.e., as bounty).”  The panel concluded that “[w]hether [Plaintiff’s] incentive award constitutes a salary, a bounty, or both, we think it clear that Supreme Court precedent prohibits it.”

The $6,000 incentive award in the Johnson settlement is unremarkable and, in fact, larger incentive awards are routinely approved by federal courts.  It will be interesting to see whether the Eleventh Circuit’s decision has any impact on future plaintiffs’ forum shopping. While Florida is generally a plaintiff-friendly jurisdiction, time will tell whether plaintiffs start filing in other jurisdictions where a sizable incentive award is less likely to be met with objection.

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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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