• Plaintiffs Maintain Standing to Appeal Decertification of Classes Because of Their Interest in an Incentive Award
  • September 10, 2012 | Author: Clifford E. Yuknis
  • Law Firm: Hinshaw & Culbertson LLP - Chicago Office
  • In a case addressing standing, incentive awards and adequate class representatives, the U.S. Court of Appeals for the Seventh Circuit held that individual plaintiffs had standing to appeal the decertification of the classes because of their interest in an incentive award.

    Plaintiff employees brought a class and collective action suit against defendant employers to enforce the Fair Labor Standards Act and parallel state laws. The district judge certified but later decertified several classes. The lawsuits were settled but reserved the employees a right to appeal the decertification order. The employees appealed, and the employers asked the Seventh Circuit to dismiss the appeal because the employees had suffered no injury as a result of the denial of certification. The settlement agreement provided for the employees to receive an incentive award for their services as class representatives, the reward being contingent upon certification of the class. The employees argued that such an award gave them a tangible financial stake in getting the denial of class certification revoked and so entitled them to appeal that denial.

    The Seventh Circuit agreed and held that the employees had standing to appeal the decertification. The court explained that a settling plaintiff would be an adequate class representative if there were no significant conflicts of interest and the prospect of an incentive award was sufficient to motivate him or her to assume the “modest risks” of a class representative and discharge the “modest duties” of the position fully. An important motivating factor is that if the class action suit fails, no incentive award will be made, while if the suit succeeds, in part at least as a result of the representative’s “strenuous efforts,” the incentive award may be larger the larger the settlement or judgment is.

    Thus, serious thought must be given before entering into a settlement agreement with a reservation to appeal. Such a reservation may result in prolonging the resolution of the suit, at last as to the settling plaintiffs, if not as to the entire class action.