In Johnson v. NPAS Sols., LLC, No. 18-12344 (11th Cir. Sep. 17, 2020), the Eleventh Circuit (the “Court”) found a series of errors in an order entered by the Southern District of Florida approving the settlement of a class action alleging violations of the Telephone Consumer Protection Act. Significantly, the Court invalidated the use of incentive awards for named plaintiffs as inconsistent with the Federal Rules. The significant aspects of the Court’s ruling are as follows:
First, the Court agreed with an objection to the settlement based on the timing of the approval order. It held that the trial court violated Federal Rule of Civil Procedure 23(h) by setting the deadline for class members to object to the settlement – including any award of attorneys’ fees – two weeks before the deadline for class counsel to file its fee petition. But it found this procedural error was harmless because the objector did not raise any new objections after she had time to review the actual fee petition that was submitted.
Additionally, the Court found that the approval order lacked sufficient detail. Because the trial court failed to make findings or conclusions as to why it: (a) approved class counsel’s fee request; (b) overruled objections to the settlement; or (c) approved the settlement, the Court remanded the matter for further proceedings.
Finally, in the portion of the decision with the most far-reaching implications, the Court rejected the award of an incentive payment to the named plaintiff. Relying on a pair of Supreme Court cases from the 1880s – Trustees v. Greenough, 105 U.S. 527, 26 L. Ed. 1157 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116, 5 S. Ct. 387, 28 L. Ed. 915 (1885) – it held, “A plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses.” Although it noted that incentive awards are commonplace in class actions, the Eleventh Circuit found them to be unlawful and reversed the district court’s approval of a $6,000 payment to the class representative.
The Court’s ruling presents a major change in class action litigation. Incentive payments are awarded to class representatives in nearly all class action settlements. Since the ruling, the named plaintiff has filed a petition for rehearing en banc that has not yet been decided. If the decision stands, it will likely increase the difficulties parties face in settling class actions brought in the Eleventh Circuit. We will continue to monitor both the outcome of the petition for rehearing and how the decision is received across the country, as the propriety of incentive awards is sure to be challenged in other circuits.