What is an Incentive Award in a Class-Action?
An incentive award is a monetary award typically given by the court to the named plaintiff in a class-action case. This is done to compensate the named plaintiff for all of his or her personal time and effort devoted to the case. The public policy behind incentive awards has always been to encourage individuals to take on the role of the named plaintiff in a case, to work closely with the class’s attorneys and other members of the class.
What Did Johnson v. NPAS Solutions Decide?
In Johnson v. NPAS Solutions, the Court held that incentive awards for named plaintiffs could not be awarded as “salary” for “services” performed by those named plaintiffs. In that case, the Eleventh Circuit Court of Appeals primarily relied on two Supreme Court precedents – Trustees v. Greenough, 105 U.S. 527 (1882) and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885). The Court has been subsequently criticized by legal scholars for relying so heavily on these two decisions from the 19th century. In explaining its position, the Court stated that the Supreme Court in its own precedent prohibited incentive awards like those in the Johnson case in the aforementioned cases. The Court also held that such incentive awards create a conflict of interest between the named plaintiff and other class members.
One of the criticisms of incentive awards that the Eleventh Circuit pointed to was the “promoting” of litigation “by providing a prize to be won (i.e., as a bounty).” – the incentive award for the named plaintiff bringing the litigation. Id. The Court made mention of other Circuit Courts’ decisions that defined incentive awards similarly, namely the Seventh Circuit, Ninth Circuit and the Sixth Circuit. The Court specified that the compensation that the named plaintiff was seeking in the Johnson case fell into the category of “personal services” and was, therefore, prohibited by the Supreme Court.
Is the Johnson v. NPAS Solutions Decision Binding?
This Eleventh Circuit decision is binding in the states of Florida, Georgia and Alabama. However, because it is a federal Circuit decision, other courts in other states could rely on it in their decision-making process. Certain legal scholars have opined that this decision is likely to reach the Supreme Court for review because of its strong reliance on 19th century’s precedent as well as its controversial outcome that could dissuade potential plaintiffs from bringing class action suits against large companies.
