In Radcliffe v. Experian Information Solutions Inc., No. 11-56376 (9th Cir. Apr. 22, 2013), amended by No. 11-56376 (9th Cir. May 2, 2013), the Ninth Circuit reversed the district court’s approval of a class action settlement. The settlement permitted incentive awards “to each of the Named Plaintiffs serving as class representatives in support of the Settlement” not to exceed $5,000. The Ninth Circuit found this language limited the incentive award to representatives who supported the settlement, a factual conclusion it supported with evidence that plaintiff’s counsel advised class representatives that if they opposed the settlement, they would not receive an incentive award. Incentive awards that are structured to create a conflict between class members and the class representatives corrupt the settlement, undermine the adequacy of the class representatives and class counsel, and require the court to reject the settlement. Also, incentive awards that are disproportionate to the relief the class members could obtain under the settlement exacerbate the conflict. This conflict also made class counsel inadequate to represent the class because class counsel has a fiduciary duty to represent all class members. On remand, the district court was directed to reject any fees claimed by class counsel for periods in which they were operating under a conflict.
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