On Behalf of All Others Similarly Situated: Class Representation & Equitable Compensation

Alexander J. Noronha* February, 2024

Class actions require class representation. In class actions, plaintiffs litigate not only on their own behalf but “on behalf of all others similarly situated.” For almost fifty years, federal courts have routinely exercised their inherent equitable authority to award modest compensation to deserving class representatives who help recover common funds benefiting the plaintiff class. These discretionary “incentive awards” are generally intended to compensate class representatives for shouldering certain costs and risks—which are not borne by absent class members—during the pendency of class litigation.

The ubiquity of permitting class action incentive awards ended in 2020. In an extraordinary ruling, the Eleventh Circuit held that incentive awards are per se unlawful under late nineteenth-century Supreme Court precedent. This holding has ignited a new controversy in the federal courts with far-reaching implications for the future of class actions.

Much of the existing legal scholarship on incentive awards analyzes policy rationales, quantitative trends, and legal standards involving the questions of “When?” and “How much?” to compensate class representatives. Only recently have scholars turned their attention to the more foundational question of whether federal courts have a sound basis to allocate incentive awards to class representatives under any circumstances. This Note weighs in on that debate by revisiting the Eleventh Circuit’s recent decision to categorically ban incentive awards.

More importantly, this Note looks to the future and confronts the reality that other federal circuit courts or the Supreme Court could eventually adopt the Eleventh Circuit’s position on incentive awards. Facing that unsettling prospect, this Note presents three proposals—one for policymakers and two for plaintiff-side class action practitioners—that could save the equitable tradition of compensating class representatives and reinforce the viability of the class action device itself.

Introduction

A decade ago, Lance Slaughter, an experienced financial advisor at Wells Fargo in Washington, D.C., filed a putative class action against his employer.¹ On behalf of himself and all others similarly situated, Slaughter alleged that Wells Fargo was systemically and intentionally engaging in unlawful employment discrimination on the basis of race.² Specifically, Slaughter claimed that Wells Fargo’s “company-wide teaming and account distribution policies and practices” excluded Black financial advisors and trainees from “lucrative teams and client account distributions,” denied them equal business opportunities, and “segregate[d] [Wells Fargo’s] workforce by race.”³

After years of hard-fought litigation, the parties reached an agreement to settle the class claims. The classwide settlement established a $35.5 million fund to compensate 542 potential class members and provided injunctive relief described by Judge Harry Leinenweber as “comprehensive and innovative.”⁴ As part of the court-ordered programmatic relief, Wells Fargo agreed to “implement various revisions to its policies and practices and to take action designed to enhance opportunities for employment, earnings, and advancement” for Black financial advisors and trainees.⁵ Class counsel represented in briefing that the settlement would “bring systemic change to Wells Fargo and the securities industry.”⁶

Such a favorable result for the plaintiff class was far from inevitable. Class counsel and six class representatives—including Slaughter—vigorously litigated the case for almost four years. As a named plaintiff from the lawsuit’s inception, Slaughter “spent many, many hours” conferring with class counsel about litigation strategy, reviewing briefing, assisting class plaintiffs’ expert labor economist and statistician, asking questions on behalf of absent class members, and participating in lengthy, stressful settlement negotiations with defense counsel and Wells Fargo executives—all while continuing to work full-time at Wells Fargo.⁷

Lance Slaughter played an indispensable role in achieving monumental monetary and injunctive relief for hundreds of class members who reaped the settlement rewards but were otherwise “absent” during the pendency of the litigation. These absent class members benefited directly from the costs and risks borne by the class representatives. Lance Slaughter sacrificed earnings opportunities and business development,⁸ experienced emotional hardship and workplace isolation,⁹ and shouldered tangible risks to his future career.¹⁰ In a declaration to the court, Slaughter avowed: “It is hard to explain how it feels to stand before your employer and put your livelihood and your family’s livelihood at risk just to get treated fairly.”¹¹

Lance Slaughter deserved compensation for bearing these substantial costs and risks on behalf of the plaintiff class. Judge Leinenweber agreed.¹² Consistent with an equitable practice “universally accepted” in every federal judicial circuit at the time,¹³ the district court approved incentive awards¹⁴ for Slaughter and the other class representatives to compensate them for their service to the class.¹⁵ No one seemed to bat an eye.¹⁶

Just three years later, however, a split Eleventh Circuit panel held in Johnson v. NPAS Solutions, LLC that federal courts are categorically barred from allocating incentive awards to class representatives, basing its holding on novel interpretations of two Supreme Court cases from the 1880s.¹⁷ Legal practitioners, law professors and students, and court watchers across America were stunned by the decision and its potential far-reaching implications for future class litigation,¹⁸ especially in light of the broader legislative and judicial erosion of the class action device in recent decades.¹⁹ The Eleventh Circuit, after all, had thrown a wrench into what was a common equitable practice in federal courts—causing the initial crack in a new circuit split that continues to widen.²⁰ Almost two years after the filing of a petition for rehearing en banc, the Eleventh Circuit declined to rehear the case, with four judges filing a dissental.²¹ In April 2023, the Supreme Court denied a petition for certiorari in Johnson,²² but the issue will invariably continue to be contested in the federal courts and the Supreme Court may grant certiorari in due course after more circuits weigh in on the controversy.²³

Prior to Johnson, much of the existing legal literature on class action incentive awards assessed policy rationales, quantitative trends, and judicial standards relating to the questions of “When?” and “How much?” to compensate class representatives.²⁴ After Johnson, however, the conversation has shifted to the more foundational question of whether federal courts have any authority to grant incentive awards to class representatives in class actions producing aggregated monetary relief.²⁵

Part I of this Note presents an abbreviated history of class actions and incentive awards, and then examines the policy rationales, legal authorities, and opposition from critics relating to incentive awards within that historical framework. Part II deconstructs the Eleventh Circuit’s Johnson decision, discusses its practical implications for the future viability of class litigation, and explains why Johnson was wrongly decided. Part III looks to the future: it offers three proposals—one for policymakers and two for plaintiff-side class action practitioners—that could save the equitable tradition of compensating class representatives if additional circuit courts or the Supreme Court embrace the Eleventh Circuit’s holding.

I. Incentive Awards: A Half Century of Ubiquity

Courts have woven incentive awards into the fabric of federal class action practice throughout the past half century. Though these awards have become ubiquitous over time, there remains significant scholarly debate over their underlying public policy and legal foundations. Section I.A presents a brief historical overview of representative litigation and class action incentive awards. Section I.B summarizes the primary policy rationales that courts and scholars have articulated to justify incentive awards. Section I.C details the prevailing legal theories behind granting incentive awards. Finally, Section I.D highlights several examples of pre-Johnson opposition to incentive awards.

A. Abbreviated History of Class Actions and Incentive Awards

1. Evolution of the Modern Class Action

Historians trace the genesis of the modern class action back almost a millennium.²⁶ One of the earliest instances of plaintiff-initiated and judicially crafted representative actions, the Channel Islands case,²⁷ dates back to medieval England.²⁸ Circa 1309, Sir Otes Grandison, the lord of the Channel Islands, ordered his tenants to pay rents in French currency instead of the islanders’ debased local coinage—effectively trebling their debts.²⁹ In response, several aggrieved islanders filed a bill of complaints “for themselves and their parceners” seeking redress from the Crown for alleged trespasses.³⁰ King Edward II commissioned a General Eyre (a medieval circuit court) to adjudicate the dispute and “do justice.”³¹ The appointed justices in eyre, in turn, held that “a single complainant should argue the case for all, and that the determination of the King’s Council in that one case would govern the judgment in all similar complaints.”³² Though the Channel Islands complainants lost their case against Sir Otes, they succeeded in organizing one of the first representative plaintiff actions.³³

In the early 1800s, Justice Joseph Story transported the longstanding English tradition of representative litigation across the Atlantic to the United States.³⁴ Soon thereafter, Equity Rule 48, a procedural rule governing joinder of parties, permitted representative actions as a “matter of convenience” but included a saving clause guaranteeing that judgments would not prejudice claims or rights of absent parties.³⁵ In 1912, Equity Rule 48 was reformulated as Equity Rule 38, with an express provision binding absent parties.³⁶

Before 1938, American courts of law and equity were governed by distinct procedures, and each boasted its own jurisprudence.³⁷ At that time, class actions were “exclusively the province of equity.”³⁸ But the 1938 adoption of the Federal Rules of Civil Procedure revolutionized civil litigation in the United States and “abolished the distinction between actions at law and those in equity, creating instead a single form of civil action.”³⁹ Though the 1938 version of Rule 23 ostensibly mirrored much of the purpose and procedure engrained in former Equity Rule 38,⁴⁰ Professor John Coffee, Jr. observes that the drafters “did not simply restate the prior precedents on class actions in a faithful codification”—instead, they “needed to reconcile their new rule with the tangled judicial history on class actions.”⁴¹ In their attempt to do so, the original Rule 23 drafters partitioned class actions into the “fairly murky categories” of true, hybrid, and spurious actions.⁴² In practice, however, courts experienced “considerable difficulty” implementing the 1938 version of Rule 23.⁴³

The modern-day formulation of the federal class action device was established during the 1966 amendment to Rule 23.⁴⁴ To “correct shortcomings” in the 1938 rule, the 1966 amendment jettisoned the true, hybrid, and spurious class action categorizations.⁴⁵ More importantly, however, the 1966 amendment “was designed in large measure to fulfill the ‘historic mission of taking care of the smaller guy’ ”⁴⁶ and “to provide means of vindicating the rights of groups of people who individually would be without effective strength to bring their opponents into court at all.”⁴⁷ Amended Rule 23(b)(2), for example, expanded the availability of injunctive or declaratory relief to similarly situated groups of plaintiffs.⁴⁸ Further, the revised Rule 23(b)(3) strengthened class litigation as a procedural alternative to adjudicating myriad individual disputes over small-value claims, which can be inefficient, inconsistent, and cost-prohibitive.⁴⁹ The 1966 amendment, in effect, transformed Rule 23 into a formidable mechanism for plaintiffs to collectively vindicate their substantive rights.⁵⁰ Though desegregation and civil rights were “the banner motivation for the revision” in 1966, the modernized Rule 23 induced—albeit unintentionally—a significant upsurge in the number of (b)(3) class actions demanding aggregated monetary damages.⁵¹

In the Rule 23(b)(3) context, the Supreme Court has long acknowledged that class actions can “overcome the [public policy] problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting [their] rights.”⁵² Especially where “many individuals have suffered the same injury, but each concomitant claim would yield negligible relief to a single plaintiff,” Rule 23(b)(3) empowers “private actors, who would otherwise be deterred from pursuing their insubstantial claims, to assist in the enforcement of the law and deter harmful behavior by defendants.”⁵³ In this regard, classwide adjudication of sufficiently comparable claims promotes (1) fair and economically viable access to the courts—even for plaintiffs with small- or negative-value monetary claims; (2) private enforcement of the law; and (3) deterrence of socially-detrimental conduct causing immense aggregate harm—even where individualized injury may be negligible.⁵⁴ Courts have also recognized that class actions foster judicial efficiency and legal finality for adverse parties “by aggregating common claims and resolving them via a single lawsuit rather than numerous piecemeal actions.”⁵⁵

2. Introduction to Incentive Awards

Compared to the ancient pedigree of representative litigation, incentive awards are a distinctly modern phenomenon. One leading class action treatise observes that “incentive award” (or any analogous term) has never been included in the plain text of Rule 23.⁵⁶ Instead, the concept first appeared in published case law in the late 1980s.⁵⁷ These payments are commonly understood to serve dual purposes: one utilitarian (to incentivize plaintiffs to step forward into the class representative role) and one equitable (to compensate representatives for their service to the plaintiff class).⁵⁸ Although the case law on incentive awards is “chaotic” and different circuits employ different legal standards,⁵⁹ most courts appraise the appropriateness and size of an incentive award by considering the representative’s efforts, risks, and costs, the overall class recovery, and public policy considerations.⁶⁰ Since the 1980s, the practice of granting modest incentive awards to deserving class representatives had steadily attained universal acceptance in every circuit nationwide—until 2020.⁶¹

In the most comprehensive published empirical study of incentive awards to date,⁶² Professors Theodore Eisenberg and Geoffrey Miller found that courts granted incentive awards in roughly 28% of their sample of 374 class settlements between 1993 and 2002.⁶³ Among other findings, the study revealed that the median per-representative award was $4,357 (or $6,680 in 2021 dollars) and the median total incentive award comprised only 0.02% of aggregate class recovery.⁶⁴ Eisenberg and Miller concluded that they observed “a degree of coherence and modesty in the pattern of incentive awards.”⁶⁵ A more recent analysis of incentive award data from 2006 to 2011 compiled by Professor William Rubenstein found that incentive awards were approved in 71.3% of class actions⁶⁶—a significant increase in frequency compared to the Eisenberg and Miller study—but the median per-representative award ($6,450 in 2021 dollars) was almost identical to Eisenberg and Miller’s findings.⁶⁷

B. Policy Rationales for Incentive Awards

Why award class representatives a payment above and beyond their portion of the class monetary recovery? In recent decades, courts and commentators have recognized four primary policy rationales justifying incentive awards: (1) “to compensate class representatives for work done on behalf of the class,” (2) “to make up for financial or reputational risk undertaken in bringing the action,” (3) “to recognize . . . willingness to act as a private attorney general,”⁶⁸ and (4) “to induce an individual to participate in the suit” as a class representative.⁶⁹ This Section explores these rationales.

1. Compensation for Actual Services Rendered

The first rationale is straightforward: class representatives deserve compensation for rendering actual services (including time and labor) on behalf of the plaintiff class. At minimum, Rule 23(a)(4) requires representatives to “fairly and adequately protect the interests of the class.”⁷⁰ This adequacy requirement thus obliges class representatives to attain basic familiarity with the legal and factual allegations of the class complaint.⁷¹ Representatives, moreover, are often required to sit for a deposition—which may “be time consuming and stressful to someone not familiar with the legal process”—as well as “comply with burdensome or intrusive discovery requests.”⁷² They may also need to attend court hearings or settlement negotiations, and even testify at trial.⁷³ For small business plaintiffs in particular, class representation often imposes substantial actual and opportunity costs associated with diverting limited labor and resources to litigation instead of “running their businesses.”⁷⁴

2. Compensation for Economic and Reputational Costs

The second rationale is likewise compelling: class representatives should be compensated for assuming financial and reputational costs on behalf of the absent class.⁷⁵ This rationale is particularly evident in the employment, antitrust, and privacy rights contexts.

Employment Class Actions. In employment-related class actions, the class representative is often “a former or current employee of the defendant.”⁷⁶ In employment discrimination cases, employee-employer legal adversity can place representatives at tangible risk of retaliation from current—or even prospective—employers.⁷⁷ In one case, a class representative averred that “multiple prospective employers . . . sent him correspondence indicating that his application for employment was rejected because of his pending litigation with his former employer.”⁷⁸ As Lance Slaughter attested in Slaughter v. Wells Fargo, these instances of “threatened or actual retaliation and professional isolation . . . can take a significant toll on [class representatives] and their families,” particularly for representatives, like him, who remain with their employers.⁷⁹

Antitrust Class Actions. In antitrust class actions, the class representative is often a plaintiff that directly purchased goods or services supplied by the defendant(s). Accordingly, representatives “often jeopardize[] the very relationships the plaintiff businesses need to remain viable” by championing a class lawsuit.⁸⁰ Backlash from defendant suppliers is a legitimate concern in the antitrust context.⁸¹ Especially in concentrated markets, supplier retaliation is an acute problem for plaintiffs because they will likely experience difficulty finding alternative suppliers. Risk of retaliation is also a severe cost to class representatives alleging antitrust violations in labor markets, such as those in wage-fixing or “no poach” cases in which plaintiffs sue their employer for artificially depressing their wages.⁸²

Privacy Rights Class Actions. In privacy rights class actions, the class representative is often an individual whose personal information was unlawfully disclosed to the public. In Taha v. Bucks County, for example, class plaintiffs alleged that defendants’ “Inmate Lookup Tool” database was not secure and caused unlawful public dissemination of certain photographs, fingerprints, and arrest data of individuals held or incarcerated at a correctional facility.⁸³ Some of the disclosed data related to individuals whose criminal records were previously expunged.⁸⁴ The district court granted an incentive award in Taha, in part because the class representative’s name was plastered all over the class action’s public docket and therefore his “criminal history [would] be forever public” despite its prior expungement.⁸⁵

3. Compensation for Private Enforcement of Laws Affecting the Public Interest

The third rationale is public spirited: class representatives should be compensated for privately enforcing laws that advance the public interest. This so-called “private attorney general” rationale mirrors one of the broader (and historic) purposes of class actions: “[T]o incentivize private parties to enforce certain laws such that the government is not required to undertake all law enforcement alone.”⁸⁶

Class actions, especially in the civil rights and consumer protection contexts, often have overarching benefits for the public writ large. These benefits extend beyond classwide monetary recovery and accrue from the deterrent effects of class actions.⁸⁷ For instance, in the federal antitrust context, indirect purchasers can still benefit from class actions brought by direct purchasers, despite the Illinois Brick “direct purchaser rule,”⁸⁸ if private antitrust enforcement deters anticompetitive conduct higher in the supply chain and the price overcharge is no longer “passed along” to the end consumer.⁸⁹ Beyond conferring benefits to individuals, the “private attorney general” rationale likewise aligns with the class action’s ability to “level the playing field and secure access to justice” for small businesses “to protect their rights against powerful corporate interests.”⁹⁰

4. Compensation to Incentivize Class Representation

The fourth rationale, pioneered by the Seventh Circuit, adopts a more functionalist, “law and economics”⁹¹ perspective: class representatives should be compensated where it is necessary to incentivize plaintiffs to step up and serve in the role. Acknowledging that class representatives are “an essential ingredient” for obtaining class certification under Rule 23(a)(4), the Seventh Circuit has granted incentive awards where compensation was “necessary to induce [a named plaintiff] to participate in the suit.”⁹² In this regard, the Seventh Circuit’s approach treats incentive awards as a solution to the collective action problem that rational economic actors will likely not incur significant personal costs to champion a class action if they only expect to recover “a few dollars in individual damages.”⁹³

C. Legal Authority for Incentive Awards

The doctrinal roots of class action incentive awards are somewhat enigmatic.⁹⁴ Rule 23, as noted in Section I.A, makes no express reference to incentive awards (nor has it ever).⁹⁵ This textual omission has complicated the endeavor of identifying a sound legal basis for allocating incentive awards to class representatives.⁹⁶

The most common—and likely the strongest—argument rationalizing the legality of incentive awards is that awarding equitable compensation to the class representative for their services prevents unjust enrichment of the class.⁹⁷ This is the theory advanced by Professors Jay Tidmarsh and Tladi Marumo,⁹⁸ and many courts have previously adopted this reasoning.⁹⁹ Under this restitutionary theory, incentive awards are a logical extension of the common fund doctrine, which “holds that a litigant who recovers a common fund for the benefit of [other] persons . . . is entitled to recover some of [their] litigation expenses from the fund as a whole.”¹⁰⁰ Though the common fund doctrine has a longstanding equitable tradition of justifying attorneys’ fee awards in class actions,¹⁰¹ courts have more recently employed the doctrine’s core reasoning to legally rationalize incentive awards as well.¹⁰²

The restitutionary theory of incentive awards, however, admittedly faces one major wrinkle: Restitution doctrine “generally confines the right to restitution to professionals, such as doctors and lawyers,” whereas class representatives are generally considered more akin to “public-spirited” class members than “professionals.”¹⁰³ The one curious exception to this general rule of restitution is the law of marine salvage,¹⁰⁴ which holds that persons voluntarily rendering assistance to a ship facing “impending peril on the sea” and successfully recovering “property from actual loss” are “entitled to share in the reward which the law allows for such meritorious service, and in proportion to the nature, duration, risk, and value of the service rendered.”¹⁰⁵ Though beyond the scope of this Note, it is worth noting that the public policy rationales and legal standards relating to salvage awards are remarkably similar to those relating to class representative incentive awards.¹⁰⁶ To the extent that class representative services—like the voluntary services of lawyers, doctors, or salvors—are considered socially beneficial, perhaps the equitable doctrine of restitution for benefits conferred voluntarily should be reconsidered and possibly expanded.¹⁰⁷

Notably, the restitutionary theory of incentive awards is consistent with the current formulation of Rule 23(e), as amended in 2018. Under Rule 23(e)(2)(D), courts must consider whether class action settlements “treat[] class members equitably relative to each other” before finding that the settlement is “fair, reasonable, and adequate.”¹⁰⁸ Interpreting Rule 23(e)(2)(D), the Newberg and Rubenstein treatise observes:

The equitable treatment requirement most obviously protects absent class members from being subjected to excessive incentive awards, but it also protects class representatives from having absent class members free ride on their efforts. In other words, if the class representatives face particular risks in serving the class and/or undertake valuable work on behalf of the class but cannot recover any of the costs of those efforts through an incentive award, they have a fair argument that the settlement is not treating them equitably relative to the absent class members.¹⁰⁹

The treatise goes further, positing that “incentive awards may [even] be necessary to ensure that class representatives are treated [equitably] to other class members, rewarded both for the value of their claims (like all other class members) but also for their unique service to the class.”¹¹⁰

Other courts and scholars have advanced alternative legal theories to justify incentive awards. Judge Richard Posner, for example, has suggested in dicta that class representative compensation “could be thought the equivalent of [class counsel’s] nonlegal but essential case-specific expenses, such as long-distance phone calls, which are reimbursable.”¹¹¹ Meanwhile, Professor William Rubenstein has postulated that representatives may derive a “simple and straightforward” legal entitlement to an incentive award because the award “is paid out of the class’s common fund and the class representative, as a member of the class, is, by definition, entitled to a portion of the common fund.”¹¹² And Benjamin Gould, a class action practitioner,¹¹³ has also presented two alternative theories: (1) the law of settlement agreements provides courts with “independent remedial power” sufficient to authorize incentive awards in most cases,¹¹⁴ and (2) analogizing class representatives to trustees justifies compensating representatives for their “personal services” under “traditional equitable principles.”¹¹⁵

Though the public policy rationales for incentive awards are strong,¹¹⁶ the legal authority buttressing such awards remains a matter of significant controversy in the federal courts and legal academy today.

D. Opposition to Incentive Awards Before 2020

Incentive awards may have been ubiquitous before Johnson, but such payments have never been immune from policy and legal opposition from critics, including legislators, courts, and class action settlement objectors.¹¹⁷

Some of the fiercest public opposition to incentive awards has come from Capitol Hill, notably during consideration of the Class Action Fairness Act (CAFA). Section 1714(a) of the 2003 CAFA bill would have compelled courts to reject proposed class action settlements that “provide[d] for the payment of a greater share of the award to a class representative serving on behalf of a class . . . than that awarded to the other class members.”¹¹⁸ During legislative debate, Representative Bob Goodlatte characterized incentive awards as “bounties” and “rife for abuse,” and then catalogued a cherry-picked sampling of incentive award “abuses.”¹¹⁹ The House Judiciary Committee Report also articulated a concern that incentive awards create a divergence of interests between the class representative and absent class by providing disproportionately large payments to representatives vis-à-vis other class members.¹²⁰ The 2003 CAFA bill passed the House of Representatives and was a mere one vote away from defeating a Senate filibuster.¹²¹ Congress eventually approved CAFA in 2005—importantly, without the draft language in Section 1714(a) of the 2003 CAFA proposal—but the 2005 CAFA did announce a congressional finding that “[c]lass members often receive little or no benefit from class actions, and are sometimes harmed, such as where . . . unjustified awards are made to certain plaintiffs at the expense of other class members.”¹²² This recent crusade against incentive awards in Congress is emblematic of a larger legislative “retrenchment” of the class action device since the 1970s.¹²³

Federal courts, like lawmakers, have also raised concerns about incentive awards long before Johnson. As early as 1989, one district court observed that granting incentive awards could create “a potentially undesirable precedent where every named plaintiff would expect a ‘fee’ or ‘bounty,’ ” which could lead to “bidding war[s]” for class representative services.¹²⁴ Further, in 2013, the Sixth Circuit commented in dicta that it had neither officially approved nor disapproved the practice of granting incentive awards.¹²⁵ Though the Sixth Circuit did not reach the question of incentive award permissibility in Dry Max Pampers, the panel majority did note: “[T]o the extent that incentive awards are common, they are like dandelions on an unmowed lawn—present more by inattention than by design.”¹²⁶ Nevertheless, the Sixth Circuit has affirmed district court grants of incentive awards before and after Johnson.¹²⁷

Finally, in the years preceding Johnson, some class action litigators and settlement objectors raised the very same argument against the lawfulness of incentive awards that the Eleventh Circuit found persuasive in Johnson—but to no avail at the time. For instance, in a public hearing before the Advisory Committee on Civil Rules in 2017, practitioner Eric Isaacson testified to his belief that “the Supreme Court’s seminal common-fund precedents appear to flatly proscribe such payments to class representatives for personal services.”¹²⁸ Several class action settlement objectors have launched this same legal objection in courts nationwide.¹²⁹

II. Banning Incentive Awards: The Latest Attempt to Erode the Class Action Device

As discussed in the Introduction, the Eleventh Circuit in Johnson disrupted the status quo ubiquity of incentive awards.¹³⁰ This Part analyzes that decision in considerable depth. Section II.A introduces Johnson and the late nineteenth-century Supreme Court cases on which it relies. Section II.B situates Johnson in the context of other recent precedents eroding the potency of the class action device and assesses the decision’s potential far-reaching implications. Finally, Section II.C revisits Johnson and explains why the incentive award issue was wrongly decided by the Eleventh Circuit.

A. The Eleventh Circuit Resurrects Late Nineteenth-Century Federal Common Law

In Johnson, plaintiff Charles Johnson, on behalf of himself and a putative class, sued NPAS Solutions, LLC, a medical debt collector.¹³¹ Johnson alleged that NPAS had violated the Telephone Consumer Protection Act by operating an automatic dialing system to call cell phones of nonconsenting persons.¹³² The parties eventually reached an agreement that NPAS would establish a $1,432,000 settlement fund to compensate 9,543 claims-submitting class members.¹³³ The district court approved the settlement and—consistent with common practice at the time—allocated a $6,000 incentive award to Johnson for serving as a class representative.¹³⁴ No class members opted out of the settlement, and only one—the appellant herself—filed an objection to the incentive award (and other aspects of the settlement).¹³⁵

On appeal, the Eleventh Circuit evaluated, inter alia, the objector’s contention that the class representative’s incentive award contravened late nineteenth-century Supreme Court precedent established in Trustees v. Greenough (1882) and Central Railroad & Banking Co. of Georgia v. Pettus (1885).¹³⁶ In a surprising and potentially trailblazing holding, a divided Eleventh Circuit panel “did what no court of appeals ha[d] done before: it categorically barred incentive awards.”¹³⁷

One must travel back in time to the 1880s to fully understand the Eleventh Circuit’s decision. As the Johnson majority correctly recognized, Greenough and Pettus are the seminal Supreme Court cases establishing the “common fund” doctrine,¹³⁸ which authorizes courts to exercise their inherent equitable powers to award attorneys’ fees in cases recovering a common fund.¹³⁹ The Johnson majority, however, agreed with the objector and interpreted Greenough as crafting a hitherto-undiscovered federal common law rule: “A plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but [they] cannot be paid a salary or be reimbursed for [their] personal expenses.”¹⁴⁰

The facts of Greenough are instructive. In 1870, Francis Vose—a Florida Railroad Company bondholder—filed a lawsuit in equity, on behalf of himself and other bondholders, against the trustees of the Internal Improvement Fund of Florida and other defendants.¹⁴¹ Vose charged in his bill “ ‘that the trustees were wasting and destroying the [trust] fund by selling at nominal prices’ land that had been earmarked to service the bonds that he and the other bondholders held.”¹⁴² He ultimately prevailed in securing and recovering a substantial portion of the trust fund, and “dividends [were] made amongst the bondholders, most of whom came in and took the benefit of the litigation.”¹⁴³

Because Vose shouldered almost the entire litigation burden and risk, he petitioned the court for “an allowance out of the [recovered] fund” to compensate him for his personal services and expenses.¹⁴⁴ In response, the lower court awarded Vose both an annual $2,500 allowance for personal services over ten years and reimbursement for “personal expenditures,” such as hotel bills and railroad fares.¹⁴⁵

Greenough eventually reached the Supreme Court. The Court held that the lower court properly reimbursed 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.”¹⁴⁶ This reimbursement, in the Court’s eyes, was necessary to avert unjustly enriching bondholders who benefited from Vose’s years-long legal campaign to save and recover the trust fund.¹⁴⁷ The Court, however, found that this reasoning did not justify compensating Vose for his personal services and expenditures, in part because Vose was a creditor, not a trustee.¹⁴⁸ The Greenough Court rationalized this holding by opining—without citation—that such allowances “would present too great a temptation to parties to intermeddle in the management of valuable property or funds in which they have only the interests of creditors.”¹⁴⁹ Ultimately, the Court held that compensating Vose for his “personal services and private expenses . . . ha[d] neither reason nor authority for its support” and partially reversed the lower court’s order.¹⁵⁰

Pettus arrived at the Supreme Court’s marble steps three years after Greenough. Pettus primarily dealt with application of the common fund doctrine to attorneys’ fee awards.¹⁵¹ But, relevant to this Note, the Pettus Court reiterated and affirmed the general principles articulated in Greenough about “what costs, expenses and allowances could be properly charged upon a trust fund brought under the control of court” in a lawsuit filed by a creditor on behalf of themselves and other creditors having “a like interest.”¹⁵²

Back to 2020. Under its novel interpretation of Greenough¹⁵³ and Pettus, the Johnson majority found that Johnson’s $6,000 incentive award was “part salary and part bounty.”¹⁵⁴ The Eleventh Circuit therefore reversed the district court’s incentive award order and held that Greenough and Pettus categorically prohibit awards compensating class representatives for personal services or rewarding them for initiating class actions.¹⁵⁵ Johnson became binding law in the Eleventh Circuit (encompassing Alabama, Florida, and Georgia) after the court declined to rehear the case en banc,¹⁵⁶ and the Supreme Court denied a petition for certiorari.¹⁵⁷

B. Implications of Johnson for the Future of Class Actions

Soon after Johnson was decided, court watchers prognosticated that the decision “fundamentally change[d] the rules of obtaining approval for class action settlements”¹⁵⁸ and “could be examined if not adopted by other jurisdictions.”¹⁵⁹ Alas, the specter of Johnson’s holding spreading nationwide is real. One federal district court in California maintained that “Johnson raises a valid issue,”¹⁶⁰ another in New York stated that the “issue is deserving of congressional attention,”¹⁶¹ and a Second Circuit panel asserted in dicta in 2023 that incentive awards “are likely impermissible under Supreme Court precedent” but held that it was bound by Second Circuit law to the contrary.¹⁶² Unless and until the Supreme Court or Congress weighs in, “courts and litigants across the country will have to grapple with the issues raised by the majority and dissenting opinions” in Johnson.¹⁶³

Since Johnson was decided in 2020, the First,¹⁶⁴ Second,¹⁶⁵ and Ninth¹⁶⁶ Circuits have expressly or implicitly “disagreed with the Eleventh Circuit’s holding, forming an acknowledged circuit split.”¹⁶⁷ Interestingly, there is also apparent intra-circuit disagreement among judges sitting on the Second¹⁶⁸ and Eleventh¹⁶⁹ Circuits—with different judges expressing different views on the lawfulness of incentive awards within the span of a few years. If the circuit split continues to grow wider—which seems almost inevitable—the Supreme Court will likely face intensified pressure in coming years to grant certiorari and decide the issue.

The prospect of the Supreme Court or other circuit courts adopting Johnson’s holding is profoundly troubling for two reasons. First, as Judge Jill Pryor warned in her Johnson dissental, prohibiting incentive awards “threatens the very viability of class actions,” especially in “small-dollar-value class actions, where incentive awards help to encourage potential plaintiffs to serve as class representatives despite having to take on significant additional responsibilities [and costs] while receiving the same modest recovery as other class members.”¹⁷⁰ Hence, incentive awards may diminish “the collective action problem that prevails when a widely dispersed group of individuals possesses legal claims too costly to pursue individually, yet highly valuable in the aggregate.”¹⁷¹

Second, the “pendulum has been swinging toward the curtailment of the class action” in recent decades,¹⁷² and Johnson is merely the latest fracture in the slow but steady erosion of the device by the federal judiciary. Recent examples of this judicial “retrenchment” of class actions¹⁷³ include (but are certainly not limited to): the Supreme Court’s narrow reading of Rule 23(a)(2)’s “commonality” requirement in Wal-Mart v. Dukes;¹⁷⁴ the Supreme Court’s approval of class action waivers in mandatory arbitration agreements (notwithstanding state legislative attempts to prohibit them) in AT&T v. Concepcion;¹⁷⁵ the Supreme Court’s adoption of a harsher evidentiary standard for satisfying Rule 23(b)(3)’s “predominance” requirement in antitrust class actions in Comcast v. Behrend;¹⁷⁶ and the Third Circuit’s heightening of the implicit “ascertainability” requirement for class certification in Marcus v. BMW.¹⁷⁷ Given that “the domain of the class action [is] substantially shr[inking]—much like a grape in the sun, drying slowly into a raisin,”¹⁷⁸ Johnson, considered within this broader trend, is particularly concerning precedent. And the stakes could not be higher: Professor Francis McGovern testified to the Advisory Committee on Civil Rules that “perhaps [only] 10% to 20% of legitimate claims [would] be filed” by potential plaintiffs without the class action device.¹⁷⁹

C. Revisiting the Eleventh Circuit’s Johnson Holding

Given the possibility that other circuit courts and the Supreme Court may weigh in on the lawfulness of incentive awards, it makes sense to scrutinize whether applying Greenough to modern-day incentive awards is appropriate and whether Johnson was correctly decided. This Section does so, and concludes that the Eleventh Circuit erred.

1. Reading Greenough in Historical Context

Because Greenough (1882) predates the advent of the modern class action (1966) by almost a century, divorcing the case from its historical context is ill-advised. Unfortunately, Johnson’s application of Greenough appears to be “a classic case of ‘law-office history,’ ”¹⁸⁰ as the Eleventh Circuit overlooked crucial historical and legal context.¹⁸¹

First, Johnson failed to acknowledge the unique aspects of the litigation in Greenough—a type of equity suit that was common over a century ago but has since been rendered functionally obsolete. Greenough was an “equity receivership” case, which Benjamin Gould has described as “the nineteenth-century analogue to, and the ancestor of, Chapter 11 reorganizations.”¹⁸² Equity receiverships were a judicially crafted product of a distinct moment in American history when railroad companies were collapsing financially but neither federal nor state statutory law could provide a remedy for their insolvency.¹⁸³ In response, federal courts intervened to “restructure the railroad’s debts” through the equity receivership process.¹⁸⁴

Creditor lawsuits “to force an entity into receivership”—like Francis Vose’s equity suit in Greenough—were later classified as “hybrid” class actions under the 1938 version of Rule 23.¹⁸⁵ However, Congress’s enactment of “federal bankruptcy laws trivialized this category, leaving its remaining role to be that of perplexing law students in first-year civil procedure classes for the next generation.”¹⁸⁶ Importantly, hybrid class action practice was also fundamentally transformed by the 1966 amendment to Rule 23.¹⁸⁷ Hybrid class actions involved class members with “several rights [to] specific property”¹⁸⁸—in other words, class members each claimed a right to one piece of property but “the several nature of the right at stake made litigant preferences relevant and their conflict theoretically possible.”¹⁸⁹ Hybrid class actions, therefore, could be led by a self-appointed plaintiff-representative who did not necessarily share “joint or common interests” with other class members,¹⁹⁰ or could involve myriad individualized questions of law or fact as long as a single piece of property was in controversy. Modern Rule 23(b)(3) class actions, however, cannot be certified unless the court finds that the class representative “fairly and adequately protect[s] the interests of the class”¹⁹¹ and that common questions of law or fact “predominate over any questions affecting only individual members.”¹⁹² Accordingly, post-1966 class actions seeking aggregated monetary damages do not remotely resemble the pre-1966 hybrid class action, the apparent successor to Vose’s bondholder suit to establish an equity receivership in Greenough.

In light of this relevant history, the Johnson majority’s strained analogy of Vose to the modern class representative¹⁹³ seems inapposite.¹⁹⁴ Gould, on the other hand, has offered a more compelling analogy: “[T]he modern descendant of the creditor in Greenough is not the class representative, but the creditor in a Chapter 11 bankruptcy case.”¹⁹⁵ This theory is persuasive, especially because equity receivership practice ultimately “became the basis for modern corporate reorganization” law.¹⁹⁶ If Gould’s analogy is more appropriate than the Eleventh Circuit’s analogy, it casts serious doubt on the factual underpinnings of Johnson’s conclusion.

Second, the fundamental concern animating the Greenough Court’s refusal to reimburse Francis Vose for his personal services and private expenses is substantially less consequential in modern class actions. In Greenough, the Supreme Court reasoned that compensating creditors (like Vose) for their personal services and expenditures “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.”¹⁹⁷ The Court’s concern was legitimate in the context of Greenough and similar nineteenth-century bondholder suits. After all, to the extent that Greenough was even litigated as a representative action pursuant to Equity Rule 48 (which is unclear from the record), Equity Rule 48 did not contain the due process protections engrained in modern Rule 23’s class certification requirements, such as adequacy of representation.¹⁹⁸

Importantly, the Greenough Court’s rule was designed to prevent opportunistic creditors from “officious[ly] intermeddling” in a trust fund.¹⁹⁹ The public policy underlying this rule, however, is substantially less relevant in the modern class action context. In Greenough, the court did not have a reliable procedural mechanism to screen creditors like Vose for conflicts of interest. In stark contrast, Rule 23 now contains robust procedural safeguards to protect absent class members from improper “intermeddling” by class representatives.²⁰⁰ In particular, Rule 23(a)(4) compels courts to determine at certification whether a representative “will fairly and adequately protect the interests of the class,”²⁰¹ and Rule 23(e)(2)(A) bars courts from approving class settlements unless they make an affirmative finding that the representative “adequately represent[s] the class.”²⁰² Moreover, as Tidmarsh and Marumo observe, class representatives are generally understood to serve as “a fiduciary of the class” or owe, at minimum, “fiduciary obligations toward the class.”²⁰³ In essence, one of the primary purposes (if not the predominant purpose) of the Greenough rule—to preclude intermeddling in a trust fund by opportunistic creditors—is not particularly relevant to modern class action practice.

Third, even if Greenough’s rule against taxing a trust fund to reimburse a creditor’s personal services and expenditures were to apply to modern class actions, the amount and type of the compensation prohibited in Greenough are not analogous to modern-day incentive awards. For example, Francis Vose requested reimbursement totaling approximately $1.3 million in 2020 dollars, including an annual “salary” of roughly $66,000 over ten years and almost $400,000 for hotel and travel costs.²⁰⁴ Such compensation is a far cry from the comparatively modest median incentive awards (approximately $6,500 in 2021 dollars) found in Eisenberg and Miller’s and Rubenstein’s empirical studies.²⁰⁵ Notably, typical incentive awards are also awarded as a lump sum, which courts review using multifactor tests,²⁰⁶ but “are never a fixed regular payment and they hardly amount to a salary.”²⁰⁷

Fourth, though it is beyond the scope of this Note, law professors, practitioners, and judges have raised serious doubts about whether the federal general common law rule announced in Greenough remains good law after Erie Railroad Co. v. Tompkins (1938).²⁰⁸ The Eleventh Circuit did not confront this issue in Johnson,²⁰⁹ but the issue deserves judicial attention.

Considering the aforementioned historical and legal context, the Eleventh Circuit’s application of Greenough to modern class action incentive awards is misguided.

2. Supreme Court Dicta on Incentive Awards

In more recent cases involving modern class action practice, the Supreme Court has also implicitly recognized the availability of incentive awards in dicta, calling Johnson’s holding into further question. For example, in China Agritech v. Resh (2018), the Supreme Court acknowledged that class representatives “might receive a share of class recovery above and beyond [their] individual claim.”²¹⁰ And a year later, the Court noted in a per curiam opinion in Frank v. Gaos that portions of a class action settlement fund would be allocated to “the named plaintiffs in the form of incentive payments.”²¹¹ The Supreme Court did not squarely address the lawfulness of incentive awards in these cases—or the application of Greenough to class actions—but several judges on the Eleventh Circuit found the Supreme Court’s silence on the matter to be persuasive.²¹²

3. Congressional Action and Inaction on Banning Incentive Awards

Legislative history relating to class action incentive awards also suggests that Johnson was wrongly decided. Notably, the Private Securities Litigation Reform Act of 1995 (PSLRA) “prohibited incentive awards . . . for class representatives in securities class action settlements.”²¹³ And, as discussed earlier, the 2003 CAFA bill would have proscribed federal courts from approving class action settlements involving incentive awards.²¹⁴ The fact that Congress banned only a narrow category of incentive awards in the PSLRA and attempted (but failed) to enact a more comprehensive ban in the 2003 CAFA bill suggests that Congress “does not view these awards as illegal” under current Supreme Court precedent.²¹⁵

III. Facing the Future: Incentive Awards After Johnson

As discussed in Section II.B, there is a real possibility that the Eleventh Circuit’s ban on incentive awards will extend to other circuits or eventually become binding Supreme Court precedent, which could have devastating consequences for the continued viability of class actions. This Part confronts this unsettling prospect and presents three proposals—one for policymakers and two for plaintiff-side class action practitioners—that could save the equitable tradition of compensating deserving class representatives if this Note’s fears come to fruition.

A. Legitimizing Incentive Awards Through Rulemaking or Legislation

Assuming the Johnson holding spreads beyond the Eleventh Circuit, the most seemingly obvious and straightforward solution would be to legitimize incentive awards via rulemaking or legislation. More specifically, the Advisory Committee on Civil Rules could recommend that the Supreme Court amend Rule 23, or Congress could expressly authorize federal courts to grant incentive awards to class representatives at their discretion. In fact, the Johnson majority contemplated these two possibilities.²¹⁶ And, in a student note, Sofia Hubscher also advanced a similar proposal—albeit in the specific context of Rule 23(b)(2) and employment discrimination class actions.²¹⁷ Moreover, in other contexts, Congress has authorized courts to award incentive payments to private plaintiffs initiating public interest litigation, such as certain whistleblower suits under the False Claims Act.²¹⁸

Admittedly, the rulemaking and legislative approaches face two significant obstacles. First, the rulemaking approach may violate the Rules Enabling Act, which states that the Federal Rules “shall not abridge, enlarge or modify any substantive right.”²¹⁹ Though there is sufficient legal authority for granting incentive awards (e.g., under the substantive law of restitution and unjust enrichment),²²⁰ there is also some risk that federal courts may disagree and find that the rulemaking approach “run[s] afoul of the Rules Enabling Act” by “creat[ing] a new right to payment” for some class representatives.²²¹ Second, the legislative and rulemaking approaches rely on either affirmative authorization or acquiescence²²² by Congress. Given past congressional hostility toward class actions and incentive awards,²²³ partisan gridlock, and the Senate filibuster, codifying incentive awards may ultimately prove wishful thinking.

B. Reimagining Incentive Awards

Even if the Supreme Court or other circuit courts adopt Johnson’s holding and policymakers decline (or fail) to implement the proposal discussed in Section III.A, plaintiff-side class action practitioners should innovate by reimagining the traditional practice of equitably compensating deserving class representatives. This Section presents two novel proposals for practitioners to test drive in the Eleventh Circuit or any other circuit embracing Johnson—one for when a common fund is created after a judgment on the merits in favor of the plaintiff class (Section III.B.1) and one for when the parties negotiate a classwide settlement (Section III.B.2).

1. Reframing Incentive Awards as Reimbursement for “Costs”

Greenough and Johnson do not have to be a death knell for equitably compensating class representatives after a favorable judgment on the merits. Historical context, once again, is crucial. Though there is a meaningful difference between “costs” in equity and at common law, and between “costs” in England and the United States, this difference “has escaped attention”—perhaps because the “identity of term conceals fundamental variations in function.”²²⁴ An 1890 treatise on equity practice in the United States, published a few years after Greenough, describes the key distinction: “The costs of an action at law are governed by fixed and arbitrary rules,” whereas “[i]n equity, the award or denial of costs is always in the discretion of the court.”²²⁵ Since the Federal Rules consolidated actions in equity and at law into one form of civil action,²²⁶ Rule 54(d) now governs the authority of federal courts to allow costs.²²⁷ Notably, the influential Federal Practice and Procedure treatise observes that inclusion of the phrase “unless a court order directs otherwise” in the plain text of Rule 54(d)(1) suggests that Rule 54(d) “adopts the practice [of allowing costs] formerly followed in equity rather than at law.”²²⁸ Accordingly, awarding costs is within the court’s discretion.

Because federal courts—even today—exercise equity-based discretion in awarding costs to the prevailing party, class counsel could petition the district court under Rule 54(d) to allow “costs” to the class representative by ordering the common fund (or even the defendant) “to reimburse [the class representative] for [their] expense and trouble” in leading the litigation on behalf of the plaintiff class.²²⁹ Such an award would be at the court’s discretion, “tak[ing] into consideration the circumstances of the case[]” and “the situation or conduct of the parties.”²³⁰ A class representative’s “costs” could reasonably encompass, for instance, direct economic costs, opportunity costs, reputational costs, and costs associated with defendant retaliation.²³¹ Although few courts have conceptualized incentive awards as recoverable costs in the past,²³² the theory is legally and historically sound.

Crucially, this proposal is also wholly consistent with Greenough. In Greenough, the Supreme Court recognized two “long-established” principles that guide federal courts in exercising equitable authority.²³³ First, “in cases of administration of funds under its control, [a federal court may] make such allowance to the parties out of the fund as justice and equity may require.”²³⁴ Second, a federal court may exercise “control over the costs and charges of the litigation, to be exercised as equity and justice may require, including proper allowances to those who have instituted proceedings for the benefit of a general fund.”²³⁵ Therefore, even if Greenough’s reasoning is extended to modern class actions, class representatives could still be compensated for their “reasonable costs, counsel fees, charges, and expenses incurred in the fair prosecution of the suit,” so long as the reimbursement is modest and does not rise to providing “a salary for their time and of having all their private expenses paid.”²³⁶

2. Negotiating Settlements to Include Incentive Awards Paid by Defendants

Because Rule 54(d) regulates only the allowance of “costs” to a prevailing party after a judgment on the merits, equitably compensating class representatives in class action settlements likely requires a different approach than the one proposed in Section III.B.1. Where a class action is settled instead of litigated to final judgment, class counsel could negotiate a term in the class settlement agreement requiring the defendant to pay a modest incentive award to the class representative, in an amount determined by the district court at the Rule 23(e)(2) fairness hearing. The incentive award payment would be separate from the defendant’s payment into the common fund.

Why should class counsel request that the defendant, rather than the class, pay the class representative’s incentive award? The primary reason is that Greenough’s holding governs only the “costs, expenses, and allowances” that may be awarded to the named plaintiff by taxing “a trust fund under the control of the court.”²³⁷ Vose’s lawsuit in Greenough was litigated to a final judgment and did not involve a settlement,²³⁸ so Greenough therefore places no limitations on direct payments between a defendant and class representative as part of a class settlement agreement.²³⁹ The only court-imposed constraints on class settlement agreements are those articulated in Rule 23(e), including the court finding that the settlement is “fair, reasonable, and adequate,”²⁴⁰ that the class representative “adequately represented the class,”²⁴¹ and that the settlement “treats class members equitably relative to each other.”²⁴² As discussed in Section I.C, the Newberg and Rubenstein treatise posits that under certain circumstances, an extra payment to class representatives in addition to their individual settlement payout as a member of the class may actually be necessary to satisfy Rule 23(e)(2)(D)’s equitable treatment requirement.²⁴³

Admittedly, asking the defendant to pay the incentive award seems inconsistent with the restitutionary theory of incentive awards because the absent class—not the defendant—is unjustly enriched by the representative’s service to the class.²⁴⁴ Although the restitutionary theory is a persuasive justification for incentive awards, plaintiff-side practitioners should be prepared to rationalize such awards on other grounds if Johnson’s holding continues to gain traction. Even though the proposal in this Section may be in tension with restitutionary theory, it is consistent with the “private attorney general” rationale,²⁴⁵ the plain text of Rule 23(e)(2)(D),²⁴⁶ and the law of contracts.²⁴⁷

There are three potential critiques of this proposal that merit some discussion. First, defendants may hesitate to agree to pay an unspecified incentive award amount that will later be determined by the court. But defendants can rest assured: courts have historically awarded modest incentive awards,²⁴⁸ and there is no reason to believe that they would suddenly start to allocate larger awards. Assuming that the class settlement agreement stipulates a “modest” incentive award, defendants could theoretically appeal the district court’s implementation of an immodest award on the basis of ordinary principles of contract interpretation. However, because incentive awards “usually pale[] in comparison to the aggregate amount awarded to the class,” and defendants are generally “most interested in the total settlement amount and achieving finality,”²⁴⁹ many defendants would likely consent to paying an incentive award (even with uncertainty as to the precise amount) to secure the benefits of global peace that a class action settlement affords. Finally, although the purpose of the court’s fiduciary duties to the absent class²⁵⁰ and Rule 23(e)(2)(D)’s equitable treatment requirement²⁵¹ is to protect class members, these protections also have an indirect effect of advancing the defendant’s interest in paying the lowest possible incentive award under this proposal.

Second, some commentators may argue that it is inappropriate for class counsel to simultaneously negotiate the monetary relief for the settlement class and an incentive award. The concern regarding simultaneous negotiation primarily arises, however, in the context of class counsel negotiating a “lump sum that covers both class claims and attorney fees.”²⁵² Even though incentive awards do present some inherent conflict between the interests of the class representative and absent class, that concern is lessened because of Rule 23’s robust due process protections, the court’s and class counsel’s fiduciary obligations to the absent class,²⁵³ and the fact that class counsel possesses ultimate authority to negotiate and enter into classwide settlements—even without the “assent of class representatives.”²⁵⁴ Additionally, class counsel would not negotiate the precise amount of the incentive award with the defendant—that determination would be left to the sound discretion of the district court.

Third, others may contend that this proposal is merely a disguised means to tax the common fund to pay the class representative an incentive award. The settlement procedure recommended in this proposal, however, minimizes this concern. Because the incentive award amount would necessarily be determined (by the court) after the parties finish negotiating the defendant’s payment into the common fund, the defendant cannot reliably treat the common fund and incentive award as a single pot of money and make tradeoffs between the two payments. Further, even if defendants could estimate the amount of the incentive award, these awards (unlike attorneys’ fees) are typically such a tiny fraction of the total value of the common fund²⁵⁵ that defendants are unlikely to expend finite negotiation power on shifting the cost back onto the class by decreasing the common fund payment by an equivalent amount.

Conclusion

In a concurring opinion in Fikes Wholesale, Judge Dennis Jacobs postulated: “Perhaps class actions that plaintiffs lack incentive to bring are class actions that need not be brought.”²⁵⁶ This Note fundamentally disagrees. Most rational economic actors—absent altruism or a public spirit—would see no reason to unilaterally shoulder the substantial costs and risks of serving as a class representative only to receive the same monetary payout as an absent class member. This is especially true where the class representative’s individual damages claim is small or dwarfed by the cost of litigation. But this manifestation of the collective action problem does not mean that certain class actions ought not be brought. After all, class actions enable plaintiffs to aggregate meritorious claims into a viable litigation unit to vindicate rights that might otherwise go unenforced but for the class action vehicle. Class litigation also serves the important public policy purpose of holding defendants accountable and deterring future lawbreaking.

Judge Jacobs’s commentary also suggests that the controversy over incentive awards is intertwined with the larger debate among federal judges, legal practitioners and academics, policymakers, and the public writ large about the utility of the class action device. Nevertheless, as long as the class action continues to live on in Rule 23, class representatives like Lance Slaughter—who, at great personal cost, assist in establishing a common fund to benefit the plaintiff class—deserve equitable compensation. Justice so requires.

* J.D., May 2023, University of Michigan Law School. I owe a deep debt of gratitude to Professor Maureen Carroll for sharing her invaluable insights and providing encouragement throughout my journey of researching and writing this Note. Thank you to my fellow Volume 121 Notes Editors—Annie Schuver, Will Hanna, Noah Harrison, Hank Minor, and Lara Ryan—for teaching me to be a better writer and making our year working together such a fulfilling experience; to the Volume 122 Notes Office—Hannah Cohen Smith, Kassie Fotiadis, Ashley Munger, Katie M. Osborn, Eddie Plaut, and Jordan Schuler—for their thoughtful and thorough edits; to Bailey Tulloch for her mentorship and helpful feedback on my earliest drafts; and to Carter Brace, Robert Brewer, Rita Elfarissi, Sunita Ganesh, Margaret Larin, Tallulah Wick, and every Michigan Law Review editor. Finally, I could not have undertaken this endeavor without my family and Tori—thank you for your love and support during my three years in Ann Arbor.