September 22, 2020
A recent Law 360 story by Allison Grande, “11th Circ. Says Class Reps Can’t Get Incentive Awards,” reports that the Eleventh Circuit said a Florida federal judge made several errors that "have become commonplace in everyday class-action practice" when approving a $1.4 million settlement and $6,000 incentive payment for the lead plaintiff in a robocall suit, finding that U.S. Supreme Court precedent prohibits such routine incentive awards.
Jenna Dickenson, who was the lone objector to the deal that resolved a proposed class action accusing medical debt collector NPAS Solutions LLC of violating the Telephone Consumer Protection Act, brought her challenge to the Eleventh Circuit after U.S. District Judge Robin L. Rosenberg granted final approval to the settlement in May 2018. Dickenson argued that the settlement amount should have been higher, that class counsel should not be permitted to recover 30% of the settlement fund and that class representative Charles Johnson shouldn't get a $6,000 incentive award.
The Eleventh Circuit panel held that the federal court had erred in awarding Johnson for his role in the litigation, in setting a deadline for class members to file objections that fell more than two weeks before class counsel had filed their fee petition and in offering only "rote, boilerplate pronouncements" in its order granting final approval to the proposed settlement and class counsel's fee request.
"The class-action settlement that underlies this appeal is just like so many others that have come before it. And in a way, that's exactly the problem," U.S. Circuit Judge Kevin C. Newsom wrote for the panel in a partially divided published opinion. "We find that, in approving the settlement here, the district court repeated several errors that, while clear to us, have become commonplace in everyday class-action practice."
The panel stressed that it didn't necessarily fault the federal court for its missteps, given that "it handled the class-action settlement here in pretty much exactly the same way that hundreds of courts before it have handled similar settlements." "But familiarity breeds inattention, and it falls to us to correct the errors in the case before us," the panel held.
Michael L. Greenwald of Greenwald Davidson Radbil PLLC, who represents lead plaintiff Johnson, told Law360 that his side intends to seek en banc review from the full Eleventh Circuit, saying his client disagrees with the majority's opinion decision to strike down the incentive award. "Incentive awards — when reasonable — are widely accepted as a means to recognize the effort it takes for consumers to bring class actions, the scrutiny and discovery to which they are subjected, and the ultimate benefits they obtain for others," Greenwald said. "While class representatives necessarily put others before themselves when they bring a class action, this ruling, should it stand, could chill consumers' desire to bring meritorious cases against well-heeled corporations — cases that can take years to prosecute."
Debevoise & Plimpton LLP partner Maura Monaghan, counsel for NPAS Solutions, commented that the ruling demonstrates that courts are scrutinizing incentives that can lead to a proliferation of class actions. "By eliminating the named plaintiff's incentive fee and questioning the attorney's fees, the Eleventh Circuit has made it significantly more challenging for plaintiffs' counsel to recruit plaintiffs to bring these actions," Monaghan added.
The contested deal stems from claims lodged by Johnson in 2017, when he filed a putative class action challenging NPAS Solutions' alleged practice of using an autodialer to call numbers that had originally belonged to consenting debtors but had since been reassigned to new owners who hadn't given the company permission to contact them. Less than eight months after the suit was launched, the parties reached their $1.4 million settlement, which covered 9,543 class members who subsequently submitted claims for recovery. No class member opted out, and Dickenson provided the only objection.
In a portion of its ruling that only two judges joined, the Eleventh Circuit agreed with Dickenson that the district court's approval of Johnson's $6,000 incentive award should be thrown out. The majority held that such awards were prohibited by a pair of Supreme Court rulings from the 1880s, Trustees v. Greenough and Central Railroad & Banking Co. v. Pettus.
"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," Judge Newsom wrote. "If the Supreme Court wants to overrule Greenough and Pettus, that's its prerogative. Likewise, if either the Rules Committee or Congress doesn't like the result we've reached, they are free to amend Rule 23 or to provide for incentive awards by statute. But as matters stand now, we find ourselves constrained to reverse the district court's approval of Johnson's $6,000 award."
The full panel also took issue with the timing of the deadline to file objections in the lower court, even though they concluded that the error was ultimately "harmless," as well as the district court's failure to include "findings or conclusions that might facilitate appellate review" in its final approval order. As a result, the circuit judges remanded the case "so that the district court can adequately explain its fee award to class counsel, its denial of Dickenson's objections and its approval of the settlement."
In her partial dissent, U.S. Circuit Judge Beverly B. Martin wrote that she disagreed with her colleague's decision to take the incentive award away from Johnson. "In reversing this incentive award, the majority takes a step that no other court has taken to do away with the incentive for people to bring class actions," Judge Martin wrote, arguing that the majority's decision "goes too far in deciding this issue" and goes against the circuit's binding precedent "that recognizes a monetary award to a named plaintiff is not categorically improper."
She noted that, in addition to spending time and money, class representatives must endure "all the slings and arrows that accompany present day litigation" in order for the class action system to operate. The judge expressed concern that by prohibiting named plaintiffs from receiving "routine" incentive awards, "the majority opinion will have the practical effect of requiring named plaintiffs to incur costs well beyond any benefits they receive from their role in leading the class." "As a result, I expect potential plaintiffs will be less willing to take on the role of class representative in the future," Judge Martin wrote.