A recent decision by the Eleventh Circuit struck down a practice that is commonplace in class action settlements—providing a modest incentive award to a named plaintiff. In Johnson v. NPAS Solutions, LLC, No. 18-12344, 2020 WL 5553312 (11th Cir. Sept. 17, 2020), the district court, as part of the final approval of a class action settlement, approved a $6,000 incentive award for the named plaintiff. An objector to the settlement challenged the incentive award along with other objections, and the Eleventh Circuit held (with one judge dissenting) that the incentive award was improper. The court found that, although such awards are routine, no court had thoroughly evaluated the basis for its authority to approve them. The court relied on two 1880s decisions of the U.S. Supreme Court, which held, prior to invention of the modern class action, that plaintiffs who recovered on behalf of others (such as a trustee who sued on behalf of himself and other bondholders) could not recover an allowance for “personal expenditures” or “personal services” out of a common fund that was obtained. Id. at *8. The Eleventh Circuit majority concluded that, under these decisions, “[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,” and “the modern-day incentive award” was “roughly analogous to a salary” or “payment for ‘personal services.’” Id. at *9. The majority further concluded that the same result would be warranted if the incentive award were characterized as a “bounty.” According to the majority, such awards, although they have been routine, can be authorized only if the Supreme Court overrules its old precedent, Rule 23 is amended to authorize such awards, or Congress enacts a statute authorizing such awards. Id. at *9, 10-12.

Judge Martin dissented from this portion of the opinion, concluding that the majority’s decision was inconsistent with a 1983 decision of the Eleventh Circuit that had set forth a fairness test for such awards, similar to the approach taken by other circuits (albeit without thoroughly evaluating the authority to make such awards). Judge Martin wrote that: “By prohibiting named plaintiffs from receiving 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.” Id. at *15 (Martin, J., dissenting).

It will be interesting to see whether this decision results in a decrease in class action filings in the Eleventh Circuit, or if plaintiffs’ attorneys are still able to recruit named plaintiffs without the possibility of an incentive award. It seems unlikely that this decision will make class actions more difficult to settle, although perhaps that could happen if named plaintiffs cannot obtain more than a small amount that absent class members are receiving. Given that the old Supreme Court decisions are focused on circumstances in which a “common fund” was created, perhaps the Eleventh Circuit would reach a different result if the settlement is on a claims-made basis, and provides for the incentive award to be paid by the defendant separately, not as part of a “common fund.” In those circumstances, the court is simply approving the parties’ agreement and not involved in the allocation of a “fund.”

The Eleventh Circuit also found that the district court erred in two other respects that demonstrate some good practice tips for class action lawyers. First, the court of appeals found that the district court improperly set the deadline for objections to the plaintiff’s attorneys’ fee award prior to the filing of the plaintiff’s attorneys’ motion for the fee award, which the court concluded was not in compliance with Fed. R. Civ. P. 23(h). The court concluded, however, that this was harmless error because the objector to the settlement had adequate opportunity to present its position in the district court after the fee motion was filed and on appeal. This problem can easily be avoided when the parties propose a schedule for the class action settlement process to the district court. Such a schedule can require the fee motion to be filed sufficiently in advance of the objection deadline. Second, the court of appeals concluded that the district court failed to make sufficient findings or conclusions to support its decision granting final approval of the settlement and the proposed fee award. Given that it is common practice in most federal courts for the parties to submit a proposed order to the district court, this problem also potentially can be avoided by presenting a thorough proposed order for the district court’s consideration.

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.