Last month, a district court in the Sixth Circuit issued opinions in two related cases that refused to approve two class action settlements, taking class counsel to task for proposing $5,000 incentive awards to the class representatives, because the class members only received $248 each. Moeller v. The Week Publications, 1:22-cv-10666 (E.D. Mich. Dec. 15, 2022); Strano v. Kiplinger Wash. Editors, Inc., 1:21-cv-12987 (E.D. Mich. Dec. 15, 2022). The district court noted that the Sixth Circuit agreed that incentive awards could be appropriate but cautioned against a disproportionate award to the class representative.
I’ve seen more excessive awards, but this one falls on the bad side. It should serve as a warning sign for class counsel.
The most recent edition of the National Association of Consumer Advocates’ Standards and Guidelines for Litigating and Settling Consumer Class Actions, 299 F.R.D. 160 (3d. ed., 2014), covers the issue of excessive awards and serves as a good guide to avoiding excessive awards.
Spoiler alert: When class counsel returned a few weeks later, with a reduction of incentive awards to $1000, the district court approved the settlements. Moeller v. The Week Publications, 1:22-cv-10666 (E.D. Mich. Jan. 6, 2023); Strano v. Kiplinger Wash. Editors, Inc., 1:21-cv-12987 (E.D. Mich. Jan. 6, 2023).
Why would someone want to agree to be deposed, have to answer discovery, attend mediation, testify at trial, take on other obligations and risks, only to stand to gain $1,000 (maybe less?)? I mean …. even just the lawyer and judge time arguing about the proper incentive award would seem to create an absurdity. I bet the briefing on moving the incentive down from 5k to 1k cost at least 10k.