Blog LenderLaw Watch October 02, 2020

11th Circuit Overrules Incentive Award in Class Action Settlement

On September 17, 2020, the Eleventh Circuit Court of Appeals (Eleventh Circuit) issued an important decision regarding incentive payments in class-action settlements in Telephone Consumer Protection Act (TCPA) cases.  In Johnson v. NPAS Solutions, LLC, Case No. 9:17-cv-80393 (11th Cir. 2020) (Johnson), a TCPA case, the Eleventh Circuit held that incentive payments to class representatives that compensate them for their time and rewards them for bringing a lawsuit are prohibited by the precedent of the Supreme Court of the United States.

Specifically, in Johnson the Eleventh Circuit held that the district court had improperly awarded the named plaintiff a $6,000 incentive payment, finding that the incentive award was similar to a salary—something prohibited by Supreme Court precedent.  Citing to Trustees v. Greenough, 105 U.S. 527 (1882) and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), the Eleventh Circuit noted that “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.”

This decision is significant as it changes the commonly held principles of modern class-action litigation.  In its decision, the Eleventh Circuit acknowledged that the district court’s decision was on par with how most courts handle class action settlements, but instead invited the Supreme Court to overrule Greenough or Pettus or, alternatively, for Congress to amend the law, specifically providing for incentive awards.