IN THE UNITED STATES DISTRICT COURT
OPPOSITION OF OBJECTORS
The 14 named plaintiffs in this action have moved, through class counsel, for a unitary incentive awards in the staggering amount of $1.5 million. To be blunt, this request is absurd and should be rejected. Such a gargantuan award would improperly drain money from the common fund and would therefore directly reduce benefits for class members such as Mr. Beifuss and Ms. O'Connor. For the reasons explained below, to the extent that each class representatives can show specifically that he or she is entitled to any incentive award at all, an award of no more than $3,000 per class representative, the amount previously awarded by Magistrate-Judge Botley, would be sufficient.
Part I below provides some background on this issue that is conspicuously absent from the named plaintiffs' $1.5 million application. Part II shows why the $1.5 million request is grossly excessive and raises some other issues that the Court should consider before it makes any incentive awards.
When the first settlement was proposed in 1995, class counsel moved for an award of 1% of the overall settlement fund, or an astounding $550,750, for the 14 named plaintiffs. Apparently recognizing that such a request was totally out of line, Magistrate-Judge Botley awarded $3000 each to the original six class representatives. See Memorandum and Order (Doc. 689) (Sept. 14, 1995). Class counsel moved for reconsideration of those awards. The motion for reconsideration was denied, except that $3,000 awards were also made to the eight named plaintiffs that were added to the case later. See Order (Doc. 718) (Oct. 5, 1995). Thus, the total award was $42,000, or about 7.6% of the more than a half million dollars that class counsel had requested. Now, without any explanation of what, if anything, the class representatives have done to advance the interests of the class since the first settlement was proposed, the requested incentive award has nearly tripled to a staggering $1.5 million. It is disturbing that class counsel has chosen not even to mention this history in the current incentive award application.(1)
II. The Amount Requested Is Grossly Excessive.
A. The amount requested by class counsel -- on average, more than $107,000 for each class representative -- is grossly excessive. Although there is a split in authority as to whether incentive awards are ever appropriate, see Newberg on Class Actions § 11.38, pp. 11-80 - 11-82 (Dec. 1992), we believe that courts may properly reward the additional time and effort expended by class representatives with reasonable payments in appropriate cases. However, anything other than a small award tailored to the particular efforts of each class representative threatens a basic principle of class action jurisprudence: Class representatives may not take a disproportionate amount of the benefits for themselves. In this case, the named representatives are trying to use the class device to obtain large individual "damages" awards, rather than to do what they are supposed to do: assure that similarly-situated class members are treated alike. In short, they have abandoned their role as fiduciaries for the class. Not surprisingly, absent from class counsel's application is any reported decision approving an incentive award remotely near the amount sought here. See id. (including the July 2000 Supp.).
The cases cited by class counsel are wholly inapposite and/or do not support an award even close to the one requested in this case. For instance, in Genden v. Merrill Lynch, Pierce, Fenner & Smith, 700 F. Supp. 208, 210 (S.D.N.Y. 1988), the court made an award to the class representative, a lawyer who rendered "consultative services" to the class. The court made the award not so much as an "incentive"--which is the type of award that the class representatives seek here--but more because the class representative had provided legal-type services to the class. Indeed, the court reduced the award because of the class representative's failure to keep contemporaneous time records, just as would occur with any lawyer seeking a fee award.
In Harris v. Pernsley, 654 F. Supp. 1042 (E.D. Pa. 1987), the court did not approve an "incentive award" at all, but rather approved an award of $20,000 in damages to the named plaintiffs, even though the absent class members did not receive damages. Although Harris surely raises a question of conflict between the named plaintiffs and the class, it has nothing to do with whether, and in what amounts, class representatives should be paid as an "incentive" or because of specific services rendered to the class. So, too, in Women's Committee for Equal Employment Opportunity v. National Broadcasting Co., 76 F.R.D. 173, 181-83 (S.D.N.Y. 1977), the court approved an award of damages to the class representatives because they (as opposed to absent class members) had come forward with specific evidence of damages. Although that ruling raises the question of possible collusion--which the court carefully weighed (id.)--like Harris, it has nothing to do with the question of "incentive awards."
B. Class counsel should not be permitted to obtain an overall incentive award and then divide it as they, or the class representatives, deem appropriate. But that is precisely what class counsel contemplates. They have not even attempted to explain the efforts of each of the named plaintiffs, but rather have asked for a flat $1.5 million. Because awards to class representatives raise the specter of unequal treatment, see Women's Committee, 76 F.R.D. at 181-83 (noting potential for collusion when named plaintiffs get something that other class members do not), the precise amounts to be awarded each class representative must be disclosed and justified. Cf. In re Agent Orange Prod. Liab. Litig., 818 F.2d 216 (2d Cir. 1987) (in all class actions, fee sharing agreements among plaintiffs' attorneys must be fully disclosed); see also Bowling v. Pfizer, Inc., 102 F.3d 777, 781 n.3 (6th Cir. 1996).
In this regard, two further points bear mention. First, although the Magistrate-Judge ultimately awarded $3,000 to each of the 14 class representatives, it is important to note a potential difference among those representatives. Class counsel's application does not claim specifically that the eight additional representatives incurred the same type of expense and burdens as did the original six, but it stands to reason that the original plaintiffs may have expended more time and effort on the litigation since they were involved in the case from its inception. Thus, although we believe that all plaintiffs who incurred the burdens of litigation are entitled to a modest award, in order to sustain an equal award for each class representative (whether the $3,000 originally awarded by the Magistrate-Judge or somewhat more or less), class counsel should be required to demonstrate specifically that the additional eight class representatives were burdened in the same manner.
Second, some of the incentive award applicants appear to be five pairs of husbands and wives (in one case, the husband has died and his wife represents his estate). Therefore, it appears that these couples are seeking, on average, about $215,000 per household, which further underscores the absurdity of the request. That is particularly true if, as we suspect, some of the spouses advanced derivative claims and did not themselves incur considerable time or effort on the litigation. This factor emphasizes the need for class counsel to show specifically what each class representative did and to justify each award on a plaintiff-by-plaintiff basis.
C. The application for incentive awards also does not indicate whether any or all of the awards will go in part to lawyers under contingency agreements, rather than to the plaintiffs themselves. That is a matter that must be disclosed to the Court for two related reasons. First, all fee requests must be approved by the Court only after the attorneys show that the amounts requested are deserved, and incentive awards should not be a basis for evading that requirement, even in part. Second, if some of plaintiffs seeking incentive awards are obligated to give some of those awards to their lawyers that may explain (in small part) why the incentive award request is so outrageous.
In light of the foregoing, the gargantuan $1.5 million incentive award request should be rejected. A reasonable amount similar to the amount previously awarded by the Magistrate-Judge would be more than sufficient. In addition, class counsel should be required to justify the awards on a plaintiff-by-plaintiff basis. Finally, class counsel should disclose whether any of the incentive awards are subject to contingent fee agreements.
1. The settling parties had purported to consent to allow the Magistrate-Judge to enter dispositive orders in this action, including the order concerning incentive awards. However, various objectors argued that the Magistrate-Judge could not issue final orders pursuant to 28 U.S.C. § 636 without the consent of all parties, including the absentees (who could not, of course, consent). Although the settling parties ultimately agreed with the objectors on this point, class counsel did not agree until after the Magistrate-Judge awarded them far less in attorney's fees and incentive awards than they had requested.