CHARLES T. JOHNSON, on behalf of himself and others similarly situated, Plaintiff-Appellee, JENNA DICKENSON, Interested Party - Appellant, versus NPAS SOLUTIONS, LLC, Defendant-Appellee.
No. 18-12344
United States Court of Appeals, Eleventh Circuit
September 17, 2020
D.C. Docket No. 9:17-cv-80393-RLR
[PUBLISH]
Appeal from the United States District Court for the Southern District of Florida
(September 17, 2020)
Before MARTIN, NEWSOM, and BALDOCK,* Circuit Judges.
The class-action settlement that underlies this appeal is just like so many others that have come before it. And in a way, that‘s exactly the problem. 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.
First, the district court set a schedule that required class members to file any objection to the settlement—including any objection pertaining to attorneys’ fees—more than two weeks before class counsel had filed their fee petition. In so doing, we hold, the court violated the plain terms of
Second, in approving the settlement, the district court awarded the class representative a $6,000 “[i]ncentive [p]ayment,” as “acknowledgment of his role in prosecuting th[e] case on behalf of the [c]lass [m]embers.” In so doing, we conclude, the court ignored on-point Supreme Court precedent prohibiting such awards.
Finally, in approving class counsel‘s fee request, overruling objections, and approving the parties’ settlement, the district court made no findings or conclusions that
We don‘t necessarily fault the district court—it handled the class-action settlement here in pretty much exactly the same way that hundreds of courts before it have handled similar settlements. But familiarity breeds inattention, and it falls to us to correct the errors in the case before us. We will reverse in part, vacate in part, and remand for further proceedings.
I
This case began in March 2017, when Charles Johnson—on behalf of both himself and a putative class of similarly situated individuals—sued NPAS Solutions, LLC in the U.S. District Court for the Southern District of Florida, alleging violations of the
The case quickly proceeded to the settlement phase. After some preliminary discovery and motions practice, the parties jointly filed a notice of settlement on November 2—less than eight months after Johnson had filed suit. Not long thereafter, Johnson moved to certify the class for settlement purposes; he argued that settlement was in the class members’ best interest because, despite NPAS‘s possible defenses, he had obtained a meaningful recovery of $1,432,000.
On December 4, the district court preliminarily approved the settlement and certified the class for settlement purposes.1 The court appointed Johnson as the class representative and his lawyers as class counsel, and its order stated that Johnson could “petition the Court to receive an amount not to exceed $6,000 as acknowledgment of his role in prosecuting this case on behalf of the class members.” The district court set March 19, 2018 as the deadline for class members to opt out of the settlement and, more importantly for our purposes, to
file objections to the settlement. The court set April 6, 2018—18 days after the opt-out/objection deadline—as the date by which Johnson and NPAS had to submit their motion for final approval of the settlement and their responses to objections, and (more importantly) by which class counsel had to submit their petition for attorneys’ fees and costs.
The following month, class members were notified about the settlement and
When the objection deadline of March 19 arrived, no class member opted out, and only one objected to the settlement—Jenna Dickenson, our appellant. As a procedural matter, Dickenson challenged the district court‘s decision to set the objection deadline before the deadline for class counsel to file their attorneys‘-fee petition, which she contended violated
On the parties’ April 6 filing deadline, Johnson and NPAS opposed Dickenson‘s objection and urged the district court to approve the settlement as fair, reasonable and adequate. Johnson also filed a motion for final approval of the settlement and requested attorneys’ fees, costs and expenses of the litigation, as well as an incentive award, all of which he said were reasonable and in line with the amounts approved in similar settlements.
About a month later, the district court held a final fairness hearing. After class counsel, NPAS, and Dickenson had presented their arguments, the district court announced its intention to approve the settlement. The court explained that it “ha[d] carefully considered all of the submissions before the Court,” including Dickenson‘s objection. The court stated that it was “going to overrule that objection, but nevertheless appreciate[d] the argument [Dickenson‘s] counsel ha[d] made.”
The same day, the district court entered a brief, seven-page order approving the settlement. The court‘s evaluation of the fairness of the settlement consisted of the following sentence:
The Court finds that the settlement of this action, on the terms and conditions set forth in the Settlement Agreement, is in all respects fundamentally fair, reasonable, adequate, and in the best interest of the class members, when considering, in their totality, the following factors: (1) the absence of any fraud or collusion behind the settlement; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and the amount of discovery completed; (4) the probability of the Plaintiff‘s success on the merits; (5) the range of possible recovery; and (6) the opinions of the class counsel, class representatives, and the substance and amount of opposition to the settlement.
Dist. Ct. Order at 4 (citing Leverso v. SouthTrust Bank of Ala., 18 F.3d 1527, 1530 (11th Cir. 1994)).
The order specified that NPAS would create a non-reversionary $1,432,000 settlement fund, from which the following would be deducted before class members received any payout: (1) costs and expenses disbursed in administering the settlement and providing notice to the class; (2) attorneys’ fees in the amount of 30% of the fund (or $429,600), as well as $3,475.52 for class counsel‘s litigation costs and expenses;
This is Dickenson‘s appeal.
II
Dickenson raises several challenges—three, as we categorize them—to the district court‘s approval of the settlement. First, she contends that the district court erred when it required class members to file objections to the settlement—including to attorneys’ fees—before class counsel had filed their fee petition. Second, she insists that the district court‘s approval of Johnson‘s $6,000 incentive award contravenes Supreme Court precedent. Finally, and more broadly, she maintains that the district court didn‘t provide sufficient explanation to enable meaningful appellate review—either in awarding attorneys’ fees, in overruling her objections, or in determining that the settlement was fair. We consider Dickenson‘s arguments in turn.2
A
1
Dickenson‘s first challenge is procedural. In its order preliminarily approving the settlement, certifying the class, and establishing a schedule, the district court required class members to file any objection to the settlement—including any objection pertaining to attorneys’ fees—by March 19, 2018. In the same order, the district court gave class counsel until April 6 to file their fee petition—eighteen days after class members’ objections were due. Dickenson contends that by ordering the deadlines in this manner, the district court inhibited her from objecting to the fee request, in violation of
In a certified class action, the court may award reasonable attorney‘s fees and nontaxable costs that are authorized by law or by the parties’ agreement. The following procedures apply:
(1) A claim for an award must be made by motion . . . at a time the court sets. Notice of the motion must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner.
(2) A class member, or a party from whom payment is sought, may object to the motion.
We hold that Rule 23(h)‘s plain language requires a district court to sequence filings such that class counsel file and serve their attorneys‘-fee motion before any objection pertaining to fees is due. By its terms, the Rule not only authorizes attorneys‘-fee awards but also goes on to specify that “[n]otice” of any attorneys‘-fee motion must be “directed to class members in a reasonable manner,” and then to state that a class member may ”object to the motion.” Id. (emphasis added). As one treatise has explained, “[t]he logical extension of the class members’ right to object to class counsel‘s fee request is that the fee petition itself must be filed prior to the class members’ objection deadline, particularly given the ease with which the petition papers can be made available to the class.” William B. Rubenstein, 5 Newberg on Class Actions § 15:13 (5th ed. 2020).
Johnson asks us to disregard Rule 23(h)‘s clear terms. He says that class members were adequately informed by the class notice, which preceded the objection deadline and which stated that class counsel planned to seek a 30% fee. But “[t]he plain text of the rule requires that any class member be allowed an opportunity to object to the fee ‘motion’ itself, not merely to the preliminary notice that such a motion will be filed.” In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 993-94 (9th Cir. 2010); see also
Reading Rule 23(h) in accordance with its plain text also happens to make good practical sense in at least two respects. First, it ensures that class members have full information when considering—and, should they choose to do so, objecting to—a fee request. While class members may learn from a class notice the all-in amount that counsel plan to request, they would be “handicapped in objecting” based on the notice alone because only the later-filed fee motion will include “the details of class counsel‘s hours and expenses” and “the rationale . . . offered for the fee request.” Redman v. RadioShack Corp., 768 F.3d 622, 638 (7th Cir. 2014); see also Mercury, 618 F.3d at 994 (“Allowing class members an opportunity thoroughly to examine counsel‘s fee motion, inquire into the bases for various charges and ensure that they are adequately documented and supported is essential for the protection of the rights of class members.“); Keil v. Lopez, 862 F.3d 685, 705 (8th Cir. 2017) (raising similar concerns).
Second, a plain-language reading of Rule 23(h) ensures that the district court is presented with a fee petition that has been tested by the adversarial process. While, in theory, class counsel act as fiduciaries for the class as a whole, once a class action reaches the fee-setting stage, “plaintiffs’ counsel‘s understandable interest in getting paid the most for its work representing the class” comes into conflict
For all these reasons, we have no difficulty concluding that by requiring class members to object to an award of attorneys’ fees before class counsel had filed their fee petition, the district court violated Rule 23(h).5
2
The more difficult question is whether, in the circumstances of this case, the district court‘s Rule 23(h) error was harmless. Unsurprisingly, the parties disagree. Johnson contends that class members were advised in the class notice that counsel would seek a 30% award and, further, that Dickenson wasn‘t totally prevented from objecting—not only did she submit written objections before the fee petition was filed, but she also presented oral objections afterwards, at the fairness hearing. For her part, Dickenson responds that the error can‘t be deemed harmless because the district court didn‘t allow for supplemental briefing after the Rule 23(h) violation was brought to its attention, “gave no serious consideration to the objections that [she] filed,” and further, that “other unnamed class members” might have offered “additional cogent arguments that [she] did not.” Reply Br. of Appellant at 5-6.
Although we haven‘t yet applied the harmless-error doctrine to a Rule 23(h) violation, at least one other circuit has. In Keil, the Eighth Circuit held that a similar Rule 23(h) error was harmless because “there [wa]s no reasonable probability that it affected the outcome of the proceeding“—in particular, it said, “even if class members had an opportunity to object to the fee motion, there [wa]s no reasonable probability that their objections would have resulted in the court awarding a lower fee.” 862 F.3d at 705-06. The court explained that the objectors “had an ample opportunity on appeal to respond to the specific arguments contained within class counsel‘s fee motion” and “[d]espite raising a number of objections, none of their arguments [were] meritorious.” Id. at 705.
The Keil court‘s analysis mirrors how we ordinarily conduct harmless-error review—that is, by asking whether the complaining party‘s substantial rights have been affected. See, e.g., Vista Mktg., LLC v. Burkett, 812 F.3d 954, 979 (11th Cir. 2016) (explaining that “the challenging party must establish that the error affected substantial rights to obtain reversal and a new trial“); see also
(en banc) (quoting Kotteakos v. United States, 328 U.S. 750, 764-65 (1946)).
In a similar context, we have held that if a district court‘s misapplication of a Federal Rule doesn‘t deny a party the opportunity to present arguments that would have changed the outcome, the error is harmless. In Restigouche, Inc. v. Town of Jupiter, 59 F.3d 1208, 1213 (11th Cir. 1995), we considered a district court‘s potential violation of
For similar reasons, we conclude that although the district court here violated Rule 23(h), its error was harmless. While a Rule 23(h) error can undoubtedly “handicap[]” class members who oppose an attorneys‘-fee award—because, without the fee petition itself, they lack the requisite information to formulate a compelling objection, see Redman, 768 F.3d at 638—it doesn‘t appear that such harm materialized here. Before class counsel filed their fee petition, Dickenson lodged a detailed objection to the attorneys‘-fee award, challenging it on several grounds, including (1) that the district court should conduct a lodestar analysis and (2) that Johnson‘s incentive award was prohibited by law and otherwise excessive. Then, at the fairness hearing—having had an opportunity to review the fee petition—Dickenson‘s counsel reiterated her objection but didn‘t raise any new arguments. Even now, on appeal—with the benefit of time to consider the fee petition even more carefully—Dickenson‘s objections remain essentially the same. Given the consistency of Dickenson‘s position in response to class counsel‘s attorneys‘-fee
To be sure, Dickenson argues that “[s]he had no way of knowing what rationale or record class counsel would offer as a basis for their motion, let alone any way to frame an objection responsive to their application.” Br. of Appellant at 24. The problem, it seems to us, is that by the time of the fairness hearing—let alone proceedings in this Court—she knew exactly class counsel‘s “rationale [and] record,” and yet she hasn‘t offered any new arguments in opposition to their fee request. Because Dickenson makes essentially the same arguments before us that she did when filing her written pre-petition objection, we cannot conclude that the district court‘s procedural error was harmful—i.e., that it “affected the outcome of the proceeding.” Keil, 862 F.3d at 705.7
B
Dickenson next challenges the district court‘s approval of a $6,000 “[i]ncentive [p]ayment” to Johnson as the class representative. She contends that the Supreme Court‘s decisions in Trustees v. Greenough, 105 U.S. 527 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), prohibit incentive awards like Johnson‘s and, more generally, that the award creates a conflict of interest between Johnson and the other class members. In short, we agree with Dickenson that Supreme Court precedent prohibits incentive awards like the one earmarked for Johnson here. To explain why, we will (1) review Greenough and Pettus, (2) demonstrate their application to modern-day incentive awards, and (3) respond to Johnson‘s counterarguments.
1
Greenough and Pettus are the seminal cases establishing the rule—applicable in
First, and most importantly, Greenough. In that case, Francis Vose, who held bonds of the Florida Railroad Company, sued the trustees of the Internal Improvement Fund of Florida (and others) on behalf of himself and other bondholders. Greenough, 105 U.S. at 528. Vose argued “that the trustees were wasting and destroying the fund by selling at nominal prices” land that had been earmarked to service the bonds that he and the other bondholders held. Id. at 528-29. He was successful. After “[t]he litigation was carried on with great vigor and at much expense, . . . a large amount of the trust fund was secured and saved.” Id. at 529. As a result, “a considerable amount of money was realized, and dividends [were] made amongst the bondholders, most of whom came in and took the benefit of the litigation.” Id. Vose “bore the whole burden of this litigation” himself, and he “advanced most of the expenses which were necessary for the purpose of rendering it effective and successful.” Id. Accordingly, he filed a petition seeking “an allowance out of the fund” to cover “his expenses and services.” Id.
A special master recommended that Vose be granted an award from the fund. First, the master recommended that Vose receive an award for “necessary expenditures,” including what amounted to attorneys’ fees and litigation expenses. Id. at 530 (“fees of solicitors and counsel,” “costs of court,” “sundry small incidental items for copying records and the like,” “sundry fees paid in maintaining other suits in New York,” fees paid in appealing to the Supreme Court, “attorneys’ fees for resisting fraudulent coupons,” and “expenses paid to attorneys and agents to investigate fraudulent grants of the trust lands“). Second, and separately, the master “reported in favor of an allowance to Vose for his personal services and expenditures“—in particular, “an allowance of $2,500 a year for ten years of personal services” and reimbursement for Vose‘s “personal expenditures” for “railroad fares and hotel bills.” Id.
The lower court approved the master‘s recommendations in the main, “allowing generally the fees of the officers of the court, and those of the attorneys and solicitors employed in the cause, including charges as between attorney and client,” as well as “sundry expenses for looking after and reclaiming the trust lands.” Id. at 531. The court also approved an award “for the personal expenses and services of Vose.” Id. The court disallowed, however, “certain fees paid to advisory counsel and other items not directly connected with the suit.” Id.
On appeal, the Supreme Court approved of some of the payments to Vose but disapproved of others. It held that it was proper for the lower court to reimburse Vose for “his reasonable costs, counsel fees, charges, and expenses incurred in the fair prosecution of the suit, and in reclaiming and rescuing the trust fund.” Id. at 537.
no doubt,” the Court said, that Vose “expended a large amount of money for which no allowance has been made” and that he gave “his time for years almost exclusively to the pursuit of the action. Id. If Vose wasn‘t compensated out of the fund for these expenses, the Court explained, the other bondholders would be unjustly enriched. See id.
Importantly for our analysis of modern-day incentive awards, however, the Court went on to hold that “there [was] one class of allowances” that was “decidedly objectionable“—namely, “those made for [Vose‘s] personal services and private expenses.” Id. at 537. The Court explained that “[t]he reasons which apply to his expenditures incurred in carrying on the suit, and reclaiming the property subject to the trust“—i.e., those that it approved—“do not apply to his personal services and private expenses.” Id. The Court reasoned that while there might be reasons to award trustees “for their personal services“—e.g., “to secure greater activity and diligence in the performance of the trust, and to induce persons of reliable character and business capacity to accept the office of trustee“—such “considerations have no application to the case of a creditor seeking his rights in a judicial proceeding.” Id. at 537-38. In the case of a creditor, like Vose, “the allowance of a salary for [his] time and . . . [his] private expenses” in carrying on litigation “would present too great a temptation to parties to intermeddle in the management of valuable property or funds in which they have only the interest of creditors.” Id. at 538. The Court thus concluded that “[s]uch an allowance has neither reason nor authority for its support.” Id.
To sum up, then, the Supreme Court in Greenough upheld Vose‘s award of attorneys’ fees and litigation expenses but rejected as without legal basis the award for his “personal services and private expenses“—in particular, the yearly salary and reimbursement for the money he spent on railroad fares and hotel bills.
Pettus came just three years later. In some respects, Pettus broke new ground. We have described Pettus, for instance, as “the first Supreme Court case recognizing that attorneys“—as distinct from the lead plaintiff—“had a claim to fees payable out of a common fund which has been created through their efforts,” and noted that, in Pettus, “a fee was awarded based upon a percentage of the fund recovered for the class.” Camden I Condo. Ass‘n, Inc. v. Dunkle, 946 F.2d 768, 771 (11th Cir. 1991). But as relevant to our analysis of incentive awards, Pettus is significant principally as a reiteration of the dichotomy drawn in Greenough: While a class representative‘s claim for “the expenses incurred in carrying on the suit and reclaiming the property subject to the trust” is proper, his “claim to be compensated, out of the fund or property recovered, for his personal services and private expenses” is “unsupported by reason or authority.” Pettus, 113 U.S. at 122.
2
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. 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.” See, e.g., Chieftain Royalty Co. v. Enervest Energy Institutional Fund XIII-A, L.P., 888 F.3d 455, 468 (10th Cir. 2017) (“[C]ourts regularly give incentive awards to compensate named plaintiffs for the work they performed—their time and effort invested in the case.“); Berry v. Schulman, 807 F.3d 600, 613 (4th Cir. 2015) (similar); Sullivan v. DB Invs., Inc., 667 F.3d 273, 333 n.65 (3d Cir. 2011) (similar).
If anything, we think that modern-day incentive awards present even more pronounced risks than the salary and expense reimbursements disapproved in Greenough. 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). As our sister circuits have described them—even while giving them general approval—incentive awards are designed “to induce [a class representative] to participate in the suit,” Matter of Cont‘l Ill. Sec. Litig., 962 F.2d 566, 571 (7th Cir. 1992), as amended on denial of reh‘g (May 22, 1992), and “to make up for financial or reputational risk undertaken in bringing the action” and “to recognize [a class representative‘s] willingness to act as a private attorney general,” Rodriguez v. West Publ‘g Corp., 563 F.3d 948, 958-59 (9th Cir. 2009). See also, e.g., Hadix v. Johnson, 322 F.3d 895, 897 (6th Cir. 2003) (explaining that “applications for incentive awards are scrutinized carefully by courts who sensibly fear that incentive awards may lead named plaintiffs to expect a bounty for bringing suit or to compromise the interest of the class for personal gain“).8
The incentive award that Johnson seeks, it seems to us, is part salary and party bounty. Class counsel‘s fee petition asserted that Johnson was entitled to the $6,000 incentive payment because he “took critical steps to protect the interests of the class, and spent considerable time pursuing their claims“—e.g., by “frequently communicat[ing] with his counsel,” “ke[eping] himself apprised of th[e] matter,” “approving drafts before filing,” and “respond[ing] to NPAS Solutions’ discovery requests.” In other words, he wants to be compensated for the time he spent litigating the case, or his “personal services“—an award that the Supreme Court has deemed “decidedly objectionable.” Greenough, 105 U.S. at 537. In his brief to us, Johnson also suggests that he is requesting a bonus for bringing the suit, inasmuch as he has “subjected himself to scrutiny from NPAS Solutions, class members, and the public at large,” “successfully brought a class action that provides meaningful cash benefits to thousands of persons,” and “provided an important public service by enforcing consumer protection laws.” Br. of Appellee Johnson at 48. Whether Johnson‘s incentive award constitutes a salary, a bounty, or both, we think it clear that Supreme Court precedent
3
To Greenough and Pettus, Johnson offers two responses. As an initial matter, he argues that those decisions aren‘t binding here because neither “discusses incentive awards to class representatives, as both pre-date Rule 23 by decades.” Br. of Appellee Johnson at 47. Two problems. First, Johnson fails to engage with the logic of Greenough, which, while not directed to class representatives per se, involved an analogous litigation actor—i.e., a “creditor seeking his rights in a judicial proceeding” on behalf of both himself and other similarly situated bondholders. 105 U.S. at 538. Second, Johnson‘s argument implies that
Separately, Johnson appeals to ubiquity. “[I]ncentive awards are routine in class actions,” he contends, so Greenough and Pettus can‘t possibly prohibit them. Br. of Appellee Johnson at 47. Johnson is partly right; incentive awards do seem to be “fairly typical in class action cases.” Berry, 807 F.3d at 613 (quotation omitted). But, so far as we can tell, that state of affairs is a product of inertia and inattention, not adherence to law. The uncomfortable fact is that “[t]he judiciary has created these awards out of whole cloth,” and “few courts have paused to consider the legal authority for incentive awards.” Rubenstein, supra, § 17:4; see also In re Dry Max Pampers Litig., 724 F.3d 713, 722 (6th Cir. 2013) (“[T]o the extent that incentive awards are common, they are
* * *
In conclusion, we hold that Greenough and Pettus prohibit the type of incentive award that the district court approved here—one that compensates a class representative for his time and rewards him for bringing a lawsuit. Although it‘s true that such awards are commonplace in modern class-action litigation, that doesn‘t make them lawful, and it doesn‘t free us to ignore Supreme Court precedent forbidding them. If the Supreme Court wants to overrule Greenough and Pettus, that‘s its prerogative. Likewise, if either the Rules Committee or Congress doesn‘t like the result we‘ve reached, they are free to amend
C
Finally, we consider Dickenson‘s argument that the district court didn‘t sufficiently explain itself to enable meaningful appellate review. In particular, she contends that the district court failed to adequately explain (1) its award of attorneys’ fees, (2) its denial of her objections, and (3) its approval of the settlement. As we will explain, we agree.
1
First, the district court‘s approval of the attorneys‘-fee award.
The district court here didn‘t make the required findings or conclusions. In its final order, the district court didn‘t explain its approval of the attorneys‘-fee award, the litigation costs, or the incentive payment; instead, it merely said that class counsel‘s request with respect to each was “approved.” Under these circumstances, the appropriate disposition is to remand for additional findings on the fees and costs issues. See, e.g., Compulife Software Inc. v. Newman, 959 F.3d 1288, 1309 (11th Cir. 2020) (”
2
Second, the district court‘s denial of Dickenson‘s objections. When a class member objects to a settlement, “the trial judge must assume additional responsibilities“—most notably, to “examine the settlement in light of the objections raised and set forth on the record a reasoned response to the objections including findings of fact and conclusions of law necessary to support the response.” Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977); see also Home Depot, 931 F.3d at 1089 (explaining that “[t]he level of specificity required by district courts is proportional to the specificity of the fee opponent‘s objections“).
Here, the district court gave no “reasoned response” whatsoever to Dickenson‘s objections in its final order, instead stating simply that “[t]he objection of Jenna Dickenson is OVERRULED.” True, at the fairness hearing, the district court summarized Dickenson‘s objections and stated that it had “carefully considered” them, but it proceeded to dismiss them without further explanation. Nothing else in the record gives any indication that the district court meaningfully considered or responded to Dickenson‘s objections. Because the district court didn‘t “set forth on the record a reasoned response to [Dickenson‘s] objections” and provide “findings of fact and conclusions of law necessary to support [its] response,” we conclude that a remand is necessary so that the district court can do so. Cotton, 559 F.2d at 1331.
3
Third, the district court‘s approval of the settlement. Before approving a class-action settlement, a district court must “determine that it [is] fair, adequate, reasonable, and not the product of collusion.” Leverso, 18 F.3d at 1530. In so doing, “[a] threshold requirement is that the trial judge undertake an analysis of the facts and the law relevant to the proposed compromise.” Cotton, 559 F.2d at 1330. “A mere boiler-plate approval phrased in appropriate language but unsupported by evaluation of the facts or analysis of the law’ will not suffice.” Id. (quoting Protective Comm. v. Anderson, 390 U.S. 414, 434 (1968)). We have also recognized that a district court must “support [its] conclusions by memorandum
The district court‘s final order approving the settlement agreement falls far short of what our precedents require. There, the court recited the factors that we identified in Leverso v. SouthTrust Bank of Alabama, 18 F.3d 1527 (11th Cir. 1994), and then, without any accompanying analysis, conclusorily asserted that the settlement “is in all respects fundamentally fair, reasonable, adequate, and in the best interest of the class members, when considering” the factors “in their totality.” Dist. Ct. Order at 4.15
While there may be cases in which we can look past the district court‘s lack of reasoning to conduct our own review, see, e.g., Friends of the Everglades v. S. Fla. Water Mgmt. Dist., 678 F.3d 1199, 1201 (11th Cir. 2012), this isn‘t one of them. From the record before us, we can‘t tell whether the district court abused its discretion. “[W]ere we at this juncture to affirm the approval of the settlement[], we would not be reviewing the district court‘s exercise of discretion but, rather, exercising our own discretion on the basis of the record before us.” In re Corrugated Container Antitrust Litig., 643 F.2d 195, 218 (5th Cir. 1981). We must therefore remand to the district court for a fuller explanation. See id. at 206-07 (stating that “we are, under these circumstances, compelled to remand to the district court for findings of fact sufficient for us to determine whether its approval of the settlements was a proper exercise of discretion“).16
* * *
As with the district court‘s approval of Johnson‘s incentive award, it is no answer to say, “That‘s just how it‘s done.” The law is what the law is, and the law requires more than a rubber-stamp signoff. We must conclude, therefore, that the district court failed to adequately explain its award of attorneys’ fees, its denial of Dickenson‘s objections, or its approval of the settlement. Accordingly, we vacate the district court‘s order and remand so that the court can make the required on-the-record findings and conclusions.
III
In sum, we hold that the district court violated
REVERSED IN PART, VACATED IN PART, AND REMANDED.
MARTIN, Circuit Judge, concurring in part and dissenting in part:
This is Jenna Dickenson‘s appeal of the District Court order approving, over her objections, the settlement agreement of this class action brought under the
I write separately because I disagree with the majority‘s decision to take away the incentive award approved by the District Court for the named plaintiff. See Maj. Op. at 23-25. In reversing this incentive award, the majority takes a step that no other court has taken to do away with the incentive for people to bring class actions. For class actions, the class must be represented by a named plaintiff, who incurs costs serving in that role. 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.
The majority‘s analysis also disregards the analysis set forth in this Court‘s ruling in Holmes v. Continental Can Co., 706 F.2d 1144 (11th Cir. 1983), which is binding in our Circuit. I understand Holmes to have required our panel to determine whether the incentive award to Mr. Johnson is fair. That is, we were charged with deciding whether the award creates a conflict between Mr. Johnson and other class members like Ms. Dickenson. I respectfully dissent from the majority‘s failure to conduct this analysis.
I.
My review of class action treatises makes clear that incentive awards (also referred to as service awards or case contribution awards) are routine. As the majority seems to observe, courts have not generally addressed their legal basis for approving incentive awards. See William B. Rubenstein, 5 Newberg on Class Actions §§ 17:2 & n.1, 17.4 (5th ed., June 2020 Update) [hereinafter Newberg]. But a review of the history of incentive awards provides worthwhile background for our discussion here. In the 1980s and 1990s, courts began to approve awards for named plaintiffs and to develop tests to determine the appropriate conditions for granting an award. See Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to Class Action Plaintiffs: An Empirical Study, 53 UCLA L. Rev. 1303, 1310-11 (2006) [hereinafter Incentive Awards]. In discussing the first case to use the term “incentive award,” Newberg says “although labeling the payment an ‘incentive award,’ the rationale that the court employs speaks more to compensation than incentive, suggesting that the class representatives are being
This viewpoint sparked debate. “Even as incentive awards were achieving recognition, however, the pendulum had begun to swing against them.” Incentive Awards, 53 UCLA L. Rev. at 1311. The arguments centered around whether incentive awards create a conflict between the named plaintiff‘s interests and those of the class members she is representing. See id. at 1312-13; see also Newberg § 17:1. Courts across the country discuss the reasons for and against incentive awards, but few have “paused to consider the legal authority for incentive awards.”1 Newberg § 17:4.
Around the 1990s, courts “tended to limit incentive awards to cases where the representative plaintiff had provided special services to the class—for example, providing financial or logistical support to the litigation or acting as an expert consultant.” Incentive Awards, 53 UCLA L. Rev. at 1310. For instance, the Seventh Circuit upheld the District Court‘s rejection of a proposed $10,000 award to a named plaintiff “for his admittedly modest services.” Matter of Cont‘l Ill. Sec. Litig., 962 F.2d at 571-72, as amended on denial of reh‘g (May 22, 1992).
But over time, circuits began to endorse the sort of incentive awards we see today. Courts recognized that incentive awards
II.
Many other circuits, including this one, look to the fairness of an award to a named class representative. If it does not appear that an incentive award “compromise[s] the interest of the class” for the class representative‘s personal gain, courts routinely uphold them. See Hadix v. Johnson, 322 F.3d 895, 897 (6th Cir. 2003); see id. at 898 (holding that “this case is clearly not a case where an incentive award is proper“). This Court has approved of this analysis. In Holmes v. Continental Can Co., 706 F.2d 1144 (11th Cir. 1983), we recognized that courts routinely “refuse[] to approve settlements on the ground that a disparity in benefits” between the named plaintiffs and the absent members of the class “evidenced either substantive unfairness or inadequate representation.” Id. at 1148. Therefore, “[w]hen a settlement explicitly provides for preferential treatment for the named plaintiffs in a class action, a substantial burden falls upon the proponents of the settlement to demonstrate and document its fairness.” Id. at 1147; see id. at 1146-1147 (explaining that eight named plaintiffs were not entitled to receive approximately one-half of the common fund based on their meritorious individual claims). The “inference of unfairness” associated with such unequal distributions “may be rebutted by a factual showing that the higher allocations to certain parties are rationally based on legitimate considerations.” Id. at 1148.
Our approach tracks the case law of our sister circuits. For example, the Ninth Circuit requires district courts to “individually” evaluate the award to each named plaintiff, “using relevant factors including the actions the plaintiff has taken to protect the interests of the class, the degree to which the class has benefitted from those actions, the amount of time and effort the plaintiff expended in pursuing the litigation . . . .” See Staton v. Boeing Co., 327 F.3d 938, 977 (9th Cir. 2003) (alterations adopted and quotation marks omitted). In In re U.S. Bancorp Litigation, 291 F.3d 1035 (8th Cir. 2002), the Eighth Circuit relied on similar factors to approve as fair $2,000 payments to five named plaintiffs out of a class potentially numbering more than 4 million in a settlement of $3 million. Id. at 1038 (citing, inter alia, Cook v. Niedert, 142 F.3d at 1016). Several other circuits have also recognized the proper inquiry as being whether the incentive award is fair. See, e.g., Chieftain Royalty Co. v. Enervest Energy Inst. Fund XIII-A, L.P., 888 F.3d 455, 468-69 (10th Cir. 2017) (rejecting percentage-based incentive award because, among other things, it encouraged a class representative to favor monetary remedy over injunctive relief, “creating a potential conflict between the interest of the class representative and the class“); Berry v. Schulman, 807 F.3d 600, 613-14 (4th Cir. 2015) (rejecting objector‘s argument that incentive award created a conflict of interest and upholding award); Cobell v. Salazar, 679 F.3d 909, 922 (D.C. Cir. 2012) (holding that incentive award was fair and did not create “an impermissible conflict” because the settlement agreement “provided no guarantee” that class representatives would receive incentive payments; agreement left it to discretion of the district court); Sullivan v. DB Invs., Inc., 667 F.3d 273, 333 n. 65 (3d Cir. 2011) (holding that district court did not abuse its discretion in approving incentive award because it “discussed the role played by the several class
This fairness-to-ensure-no-conflict analysis goes to the heart of Ms. Dickenson‘s stated concerns, and its application would dispel her fear of collusion here. See Br. of Appellant at 53 (“Johnson . . . did nothing to dispel the presumption of unfairness.“). Our court adopted this analysis in Holmes. And it addresses the concerns about incentive awards raised by at least one member of the Supreme Court. In Frank v. Gaos, 586 U.S. __, 139 S. Ct. 1041 (2019), a majority of the Supreme Court acknowledged that a proposed settlement award included incentive payments for the named plaintiffs, and did not question the viability of those incentive awards.2 Id. at 1045. The majority of the Court remanded the case to the Ninth Circuit for that court to decide standing. Id. at 1046. Again, the majority did not address the merits of the settlement award. Id. Justice Thomas dissented, however, and in doing so, took issue with the cy pres payments to non-party nonprofits on behalf of the class as well as the incentive awards to the named plaintiffs. Justice Thomas noted that the cy pres-only arrangement did not obtain any relief for the class, while securing “significant benefits” for class counsel and the named plaintiff. Id. at 1047 (Thomas, J., dissenting). Justice Thomas said this “strongly suggests that the interests of the class were not adequately represented.” Id. I read Justice Thomas‘s brief dissent in Frank to address his concern about whether the cy pres arrangement in that case was fair, as opposed to whether disparate awards in class actions are legally permissible as a general matter. I continue to have confidence that the fairness analysis developed by many circuit courts, including our own, can protect against conflicts between a class representative and absent class members.
Based on this Court‘s precedent in Holmes, and in keeping with the approach taken by other circuits, I believe it was the job of our panel to determine, in light of the totality of the circumstances, whether the District Court abused its discretion in finding the $6,000 award to Mr. Johnson was fair in this case. See Holmes, 706 F.2d at 1147; Hadix, 322 F.3d at 897-98. And I do not believe the District Court abused its discretion in finding that the $6,000 award was fair.
The settlement agreement here was not contingent on Mr. Johnson receiving an incentive award. It merely allowed him to seek one. If the District Court had denied Mr. Johnson an incentive award, the class still would have had the benefit of his representation under the terms of the settlement fund set out in the agreement. I think this arrangement mitigates any concern that the settlement was unfair to the class. Cf. Holmes, 706 F.2d at 1146-47 (scrutinizing a settlement agreement that required, rather than merely allowed, the court to approve disparate treatment of class members); In re Dry Max Pampers Litig., 724 F.3d 713, 722 (6th Cir. 2013) (reversing a settlement approval where the settlement required $1,000 payments to named plaintiffs). The record also contains class counsel‘s affidavit attesting to the fact that Mr. Johnson invested his own time and effort in litigating the action, including by regularly conferring with his
III.
Now back to the majority‘s holding. The majority opinion observes that Trustees v. Greenough, 105 U.S. 527 (1881), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), “seem to have been largely overlooked in modern class-action practice.” Maj. Op. at 18. It holds that the “modern-day incentive award” is equivalent to a salary and is barred by Greenough and Pettus. Id. at 23, 25. At the same time, the majority opinion recognizes that no other court has directly confronted the issue here: whether Greenough and Pettus prohibit awards like the $6,000 awarded to Mr. Johnson in this case. See id. at 24 n.8.
I believe the majority‘s decision goes one step too far in deciding this issue and does so in the face of our binding precedent that recognizes a monetary award to a named plaintiff is not categorically improper. See Holmes, 706 F.2d at 1147 (setting standards for what an appropriate award looks like). True, Holmes mentioned that the proposed preferential treatment was based on the named plaintiffs’ meritorious individual claims, id., but the analysis itself matters. This approach from Holmes has been adopted by several other circuits and applied to awards that look to me more like salaries than awards for litigation expenses. Indeed, one legal basis for an incentive award is the services performed by a named plaintiff, which may include “their time and effort invested in the case.” Chieftain Royalty, 888 F.3d at 468. And that is the basis on which Mr. Johnson sought compensation here. I don‘t think the majority opinion does enough to directly grapple with why it is not sufficient for us, like other circuits, to determine whether there is evidence of a conflict between Mr. Johnson and class members like Ms. Dickenson.3 See Maj. Op. at 8, 33 (citing Holmes for the abuse of discretion standard); see also id. at 29 n.13 (acknowledging that Holmes, which answered the question of whether there was “an apparent inequity” between named plaintiffs and the remaining class members in the distribution of a settlement fund, “is binding“). I would not reverse the award to Mr. Johnson based on Greenough and Pettus. Because the $6,000 award to Mr. Johnson seems to provide “for preferential treatment” for a named plaintiff, I believe our Circuit precedent binds us to determine whether Mr. Johnson has demonstrated the settlement agreement is fair. See Holmes, 706 F.2d at 1147. I think he has.
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The majority‘s decision to do away with incentive awards for class representatives in class actions takes our court out of the mainstream. To date, none of our sister circuit courts have imposed a rule prohibiting incentive awards. Indeed, none has even directly addressed its authority to approve incentive awards. But upon deciding to undertake this issue here, the majority skips any analysis about our modern
I respectfully dissent.
Notes
But the restitution analogy doesn‘t fit squarely within the unjust enrichment doctrine because a person who does not seek services does not generate any entitlement to payment. Incentive Awards, 53 UCLA L. Rev. at 1313. Rather, the traditional attorneys’ fee award in common fund cases can be viewed as an “exception” to the traditional unjust enrichment rule, which is “typically justified by the fact that class counsel are providing professional (legal) services to the class.” Id. In other words, a person providing professional services should be compensated so that the person receiving services is not unjustly enriched. Yet even this possible basis for incentive awards does not typically apply to a named plaintiff, because the class representative generally is not providing professional services. See id. (“If you dive into a lake and save a drowning person, you are entitled to no fee.” (quotation marks omitted)).