ATLANTA (Legal Newsline) – Lead plaintiffs in class action lawsuits aren’t entitled to more money than the rest of their fellow class members, a federal appeals court has ruled.
In a ruling that could impact how class action lawyers scout for clients, the U.S. Court of Appeals for the 11th Circuit ruled Sept. 17 that incentive payments are barred by U.S. Supreme Court precedent.
“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,” Judge Kevin Newsom wrote for a three-judge panel.
Charles Johnson was the lead plaintiff in a class action against NPAS Solutions and was awarded $6,000 from a settlement reached in Florida federal court.
The lawsuit was brought under a federal telemarketing law that provides for statutory damages of either $500 or $1,500 per call.
The settlement was worth $1.4 million, with $429,600 going to plaintiffs lawyers. If the remainder was split evenly among all 179,642 class members, each would have received $8.
Far less submitted claims. Those who did would have received $79 if the settlement approval stood.
But the 11th Circuit has put that out in doubt, finding three problems with it. The most eye-opening was its stance on the incentive payment, citing two cases from 1882 and 1885.
“We take the rule of Greenough, confirmed by Pettus, to be fairly clear: 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,” the decision says.
“It seems to us that the modern-day incentive award for a class representative is roughly analogous to a salary—in Greenough’s terms, payment for ‘personal services.’”
Modern-day incentive awards are even more troubling than what was litigated in the 19th century cases, Newsom wrote.
“Incentive awards are intended not only to compensate class representatives for their time (i.e., as a salary), but also to promote litigation by providing a prize to be won (i.e., as a bounty),” Newsom wrote.
Judge Beverly Martin disagreed on that point, noting that no other court has gone that far.
“For class actions, the class must be represented by a named plaintiff, who incurs costs serving in that role,” she wrote.
“Those costs may include time and money spent, along with all the slings and arrows that accompany present day litigation. 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.”