Duane Morris Class Action Review - 2023 - Report - Page 325
E.
Rulings On Service Awards In Class-Wide Settlements
One feature of class-wide settlements consists of a payment to the named plaintiff for
their time, effort, and contribution to prosecution of the class action. The payment known as a service award - must be approved by the court as part of its Rule 23
settlement fairness review. The public policy rationale underlying service awards is to
encourage individuals to take on the role of the named plaintiff in a class action, as well
as to work closely with the class counsel for the benefit of the class.
Service awards are no longer allowed in the Eleventh Circuit by virtue of its ruling in
Johnson, et al. v. NPAS Solutions, 975 F.3d 1244 (11th Cir. 2020). The Eleventh Circuit
opined in Johnson that service awards for named plaintiffs could not be awarded as
“salary” for “services” performed by those named plaintiffs. Id. at 1258. It relied on two
U.S. Supreme Court precedents over a century old - Trustees, et al. v. Greenough, 105
U.S. 527 (1882), and Central Railroad & Banking Co., et al. v. Pettus, 113 U.S. 116
(1885) - to support its reasoning. In explaining its position, the Eleventh Circuit found
that Supreme Court precedent prohibited service awards like those in the Johnson case
because they create a conflict of interest between the named plaintiff and other class
members. One of the criticisms of service awards that the Eleventh Circuit pointed to
was the “promoting” of litigation “by providing a prize to be won (i.e., as a bounty)” by
bringing the lawsuit. Id.
In 2022, one court in the Eleventh Circuit applied Johnson in the context of a settlement
approval review of a wage and hour collective action. In Thomas, et al. v. JSTC LLC,
Case No. 19-CV-1528 (M.D. Fla. Nov. 18, 2022), plaintiffs, a group of delivery drivers,
filed a collective action alleging that Defendant failed to pay overtime compensation in
violation of the FLSA. The parties ultimately settled the matter for $965,000 and
plaintiffs’ counsel filed a motion for final settlement approval that included proposed
service awards for several named plaintiffs. The court granted the motion for settlement
approval, but denied the request for service awards of $10,000 for the three named
plaintiffs. As to the service award analysis, the court requested that the parties brief the
applicability of the Eleventh Circuit’s ruling in Johnson. The plaintiffs contended that the
incentive awards were fair because they were negotiated outside the $956,000
settlement. Further, the plaintiffs contended that the requested payments were for
general releases, and not actually service awards. The court opined that while case law
precedents for collective action settlements have allowed general release payments, the
amounts were generally much less than the amounts requested by the named plaintiffs
in this case. The court ruled that the plaintiffs’ request was for a “larger-than-typical
payment” and was the type of preferential treatment that the Eleventh Circuit’s ruling in
Johnson sought to avoId. Id. at 9. For these reasons, the court granted the motion for
final settlement approval, but denied the request for service awards to the named
plaintiffs.
The Johnson decision is binding in the states of Florida, Georgia and Alabama (the
geographic area covered by the Eleventh Circuit), and has yet to gain any traction with
courts outside of the Eleventh Circuit. Given the conflict between the Eleventh Circuit
and other federal circuits, this issue is likely to reach the Supreme Court for review
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Duane Morris Class Action Review – 2023
