43 F.4th 1138
11th Cir.2022Background
- Charles Johnson sued NPAS Solutions under the TCPA as a class representative after repeated robocalls to his cell phone; he participated actively in the litigation.
- NPAS agreed to a $1.432 million settlement fund; the settlement gave Johnson a $6,000 incentive/service award and would distribute the remainder pro rata (approx. $80 per claimant); the district court approved the settlement as "fundamentally fair."
- One objector argued the Supreme Court decisions in Greenough and Pettus categorically bar incentive awards; the district court overruled the objection and approved the settlement.
- A panel of the Eleventh Circuit (Johnson v. NPAS Sols., 975 F.3d 1244) reversed the district court as to the incentive award, holding Greenough and Pettus prohibit incentive/service awards in class-action settlements.
- A petition for rehearing en banc was denied; Judge Jill Pryor dissented from the denial, arguing the panel misread 19th-century precedent, that Rule 23 and Holmes’s fairness standard control, and that the panel’s rule threatens class-action viability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Greenough and Pettus categorically bar incentive/service awards in class-action settlements | Objector: Greenough/Pettus prohibit paying named plaintiffs extra from a common fund | Settling parties: Incentive awards are permissible when courts approve them under Rule 23 and fairness review | Panel (prior decision): Greenough/Pettus bar incentive awards; rehearing en banc denied, leaving panel holding intact |
| Proper legal standard for approving incentive awards | Objector: 19th-century equitable principles forbid such awards | Settling parties: Rule 23(e) fairness analysis (and Holmes fairness-burden) governs incentive awards | Dissent (Pryor): Holmes/Rule 23 fairness standard should control; Greenough is inapposite |
| Relevance of Rule 23, its history, and subsequent practice | Objector: Historical precedent controls despite Rule 23 | Settling parties: Modern Rule 23 framework, decades of practice, and procedural safeguards permit incentive awards | Dissent: Greenough pre-dates Rule 23; Rule 23(e)(2)(D) protects absent class members and supports, not forbids, approved incentive awards |
| Practical effect on class-action litigation | Objector: Incentives risk unfairness and collusion | Settling parties: Incentives encourage representative participation in low-value claims and are cabined by judicial review | Dissent: Panel rule will deter class representatives, harm small-dollar consumer and small-business class suits, and conflict with other circuits |
Key Cases Cited
- Trustees v. Greenough, 105 U.S. 527 (1881) (Supreme Court allowed recovery of litigation expenses from a trust fund but rejected collateral personal compensation to a creditor-plaintiff)
- Cent. R.R. & Banking Co. v. Pettus, 113 U.S. 116 (1885) (reiterated Greenough’s limits; attorneys could be paid from a recovered fund but creditor compensation remained restricted)
- Holmes v. Continental Can Co., 706 F.2d 1144 (11th Cir. 1983) (established a fairness-based rule requiring proponents to justify preferential settlement terms to named plaintiffs)
- Johnson v. NPAS Sols., LLC, 975 F.3d 1244 (11th Cir. 2020) (Eleventh Circuit panel reversed district court approval of incentive award, holding Greenough/Pettus bar such awards)
- Melito v. Experian Mktg. Sols., Inc., 923 F.3d 85 (2d Cir. 2019) (Second Circuit rejected the argument that Greenough/Pettus forbid incentive awards)
- China Agritech, Inc. v. Resh, 138 S. Ct. 1800 (2018) (Supreme Court acknowledged in dicta that class representatives might receive payments above their individual claims)
- Frank v. Gaos, 139 S. Ct. 1041 (2019) (case involving incentive payments remanded on standing; Court did not resolve validity of incentive awards)
- In re Equifax Inc. Customer Data Sec. Breach Litig., 999 F.3d 1247 (11th Cir. 2021) (post-Johnson Eleventh Circuit panel applied Johnson to reverse an incentive award)