Impact Fund & Amici to Eleventh Circuit: Eliminating Service Awards Endangers Class Actions

Drea Núñez, Law Fellow

A recent decision by the Eleventh Circuit Court of Appeals stunned the class action and civil rights community.

In Johnson v. NPAS Solutions., LLC,975 F.3d 1244 (11th Cir. 2020) a 2-1 majority ruled that service awards for class representatives in class actions are categorically unlawful. Charles Johnson, who represented a class of individuals harassed by debt collectors in violation of federal consumer protection law, was awarded $6,000 for his work on behalf of the class in a settlement approved by a district court in Florida. Such one-time “service awards” are routinely approved to compensate class representatives for the remarkable work they perform and the risks they incur during litigation. A class member who objected to the settlement appealed to the Eleventh Circuit, which reversed the district court’s decision. The majority held that Johnson’s service award contravened two Supreme Court decisions from the 1880s and created a conflict of interest between Johnson and other class members. The court clarified that a class representative “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.”

Judge Beverly Martin warned that the majority’s decision would make potential plaintiffs less amenable to serve as class representatives in future litigation.

The court found that Johnson’s payment and all modern-day service payments are “roughly analogous to a salary” and “promote litigation by providing a prize to be won.” In her dissent, Judge Beverly Martin warned that the majority’s decision would “requir[e] named plaintiffs to incur costs well beyond any benefits they receive from their role in leading the class,” making potential plaintiffs less amenable to serve as class representatives in future litigation.

On October 29, the Impact Fund filed an amicus brief calling on the full Eleventh Circuit to review the decision en banc. Our amicus brief on behalf of civil rights groups argues that service payments and incentive awards appropriately compensate plaintiffs for the considerable responsibility they undertake in class action cases and on behalf of fellow class members. Their duties include investigating and developing the case, helping coordinate decision-making among class members, reviewing major filings, responding to document requests, preparing for and participating in depositions and mediations, and most importantly, discussing available remedies and settlement options with their attorneys. Using concrete examples from cases alleging workplace discrimination, lack of access for people with disabilities, and unlawful price-fixing and collusion, we described the tremendous amount of time and resources class representatives invest over the course of often lengthy litigation. We told the stories of the substantial risk they faced, the retaliation and stress they endured, and the difficulty they had finding employment even after the cases had been settled or decided.

Lance Slaughter worked tirelessly for justice for African-American advisors at Wells Fargo and was inducted into the Class Action Hall of Fame for his sacrifices.

For example, Lance Slaughter, the lead plaintiff in a large class action by Black financial advisors alleging racial discrimination against Wells Fargo, testified in court documents that he “maintained an active role in the prosecution of [the] case” during all four years of litigation. Mr. Slaughter worked closely with his attorneys to explain and provide evidence of the operations at Wells Fargo and the discrimination class members faced. He also assisted attorneys by discussing litigation strategies based on the defenses Wells Fargo raised and by communicating with other African-American advisors at the firm, even when they were too afraid to be publicly associated with the lawsuit. Mr. Slaughter declared, “While my visible support for the case was difficult and put me in the spotlight in the eyes of many senior managers at Wells Fargo, I believed it was important to let management know that we would not be deterred in our pursuit of this case or in seeking redress for past wrongs and reform of the way African-American brokers would be treated at Wells Fargo in the future.” Mr. Slaughter spent “substantial time” traveling, attending meetings, and conferring with other class members, which took time away from servicing his clients and resulted in lost earnings for him. He also dealt with professional isolation, describing how it was not easy to “keep [his] head up and keep [his] mind focused” while “faced with the pointed stares of colleagues and the unease of [his] management team” and the likely long-term public association with this lawsuit. The Impact Fund honored Mr. Slaughter for his tireless advocacy by inducting him into the Class Action Hall of Fame in 2019.

Our amicus brief on behalf of civil rights groups argues that service payments and incentive awards appropriately compensate plaintiffs.

The Johnson decision sets the Eleventh Circuit apart from all other Courts of Appeals—none of which have issued a similar categorical prohibition on service awards—and previous decisions by the same court that have upheld service awards in class settlements. These payments have been used by courts for over three decades and are largely uncontroversial. Service awards are not automatically approved, and there are safeguards to prevent their misuse. Rule 23 of the Federal Rules of Civil Procedure requires district courts to evaluate the fairness and reasonableness of class settlements, including any service awards. Plaintiffs’ counsel must submit detailed declarations in support of the settlement and of the amount requested for service awards for named plaintiffs. Judges have the discretion to approve, reject, or adjust service awards based on the submitted evidence. These safeguards have long guaranteed that service awards are not, as the Johnson majority characterized them, “part salary and party [sic] bounty” for class representatives. By barring service awards entirely, the Johnson decision sets a dangerous precedent that could have a chilling effect on class actions by deterring future potential class representatives from pursuing litigation on behalf of themselves and the rest of the class.

Class actions are a crucial tool to vindicate the rights of individuals that would otherwise lack the power to seek justice on their own. Many of our nation’s civil rights laws have long relied on private persons banding together in group litigation for their enforcement. But class actions are impossible without class representatives. Service awards ensure that class representatives are fairly compensated for their efforts and the hazards they face. We hope the Eleventh Circuit will reconsider its decision on this important issue and realign with its sister circuits and the majority of courts in this country.

The Impact Fund is grateful for the support of their fellow amici: American Civil Liberties Union, Bet Tzedek, the Civil Rights Enforcement and Education Center, Disability Rights Advocates, Equal Justice Center, Equality Florida Institute, Inc., the Florida National Organization for Women, Justice Catalyst Law, LatinoJustice PRLDEF, Legal Aid at Work, the National Women’s Law Center, Public Citizen, Public Justice Center, and the Washington Lawyers’ Committee for Civil Rights and Urban Affairs.