Wage Law

Most class action settlements include a provision establishing an enhanced settlement share for the class representatives, who take all of the risk, and incur most of the time, pursuing the rights of their class. The case law discussing the standards for such an award is quite scant. Last month, in Edelist v. First USA Bank, the 4th District issued an unpublished opinion dealing with the objections of one Rosie Ross, who complained about certain class action settlement terms and attorney's fees in a consumer class action. The opinion did not address class representative enhancements, but apparently, the objector wanted those discussed, too. Hence, this week, the 4th District added a section to their opinion, still unpublished, discussing the representative's incentive award.

Edelist requested an incentive award of $5000. In a footnote in her preliminary opposition, the objector argued there was no justification or support for the award. The trial court agreed, noting that "Counsel has not offered any evidence justifying the $5000.00 incentive award. There is no indication Mr. Edelist participated in this litigation whatsoever (with the exception of lending his name to the caption)." The trial court then reduced the award to $2500 (a common order in Orange County). The 4th District said that "the trial court apparently felt the $2500 incentive award was an appropriate amount for a plaintiff lending his name to the caption in this case, and held that the case law, though scant, supports the trial court’s conclusion. Here is what the court noted about that case law:

In Staton v. Boeing Company (9th Cir. 2003) 327 F.3d 938, the court refused to approve a class action settlement because, inter alia, it awarded the named class representatives damages averaging sixteen times more that the amount to be received by each unnamed class member. The total payment to the class of 15,000 was over $7 million, and ‘29 named class representatives are designated to receive payments totaling $890,000.’ (Id. at p. 977.) The court found the ‘large differential’ in damages could not stand on the record before it. (Id. at p. 978.) “The Staton court remarked, however, that ‘named plaintiffs, as opposed to designated class members who are not named plaintiffs, are eligible for reasonable incentive payments,’ pointing out that it had approved incentive awards of $5000 each to two named plaintiffs in In re Mego Fin. Corp. Sec. Litig. (9th Cir. 2000) 213 F.3d 454. (Staton v. Boeing Corporation, supra, 327 F.3d at pp. 976-977.) In Mego, the incentive awards were approved without discussion; the opinion revealed no evidence of the extent of the named plaintiffs’ involvement in the litigation. (In re Mego Fin. Corp. Sec. Litig., supra, 213 F.3d 454.) “In In re Continental Illinois Sec. Litig. (7th Cir. 1992) 962 F.2d 566, the court upheld the trial court’s refusal to approve a $10,000 award to a named plaintiff whose involvement consisted of a few hours of deposition and a ‘slight risk of being made liable for sanctions, costs, or other fees should the suit go dangerously awry.’ (Id. at pp. 571-572.) The court observed that the risk was slight ‘because the case was a clear winner and ... if the named plaintiff had dropped out because he couldn’t hope to be compensated for his modest efforts there were plenty of others to take his place without demanding compensation. The implicit reasoning is that the market would have produced a named plaintiff willing to charge a price of zero ....’ (Id. at p. 572.) The court observed, however, that an incentive award was not per se inappropriate. ‘Since without a named plaintiff there can be no class action, such compensation as may be necessary to induce him to participate in the suit could be thought the equivalent of the lawyers’ nonlegal but essential case-specific expenses, such as long-distance phone calls, which are reimbursable.’ (Id. at p. 571.) “Here, there was considerable risk that the case would be unsuccessful, thus exposing Edelist to costs or sanctions. Where the litigation resulted in a $7 million settlement fund and the value of the injunctive relief as much as $50 million, the modest $2500 incentive award to Edelist for merely ‘lending his name to the caption’ was not an abuse of discretion.”

With the modification, we are considering asking the 4th District to publish the case so that we can all stop citing (and attaching copies of) 7th Circuit authority in support of our final fairness motions.