Radcliffe_v._Experian Info. Solutions

An incentive award for class representatives conditioned on support of settlement makes the class representatives inadequate and creates a conflict of interest for class counsel between the class representatives and the class.

Consumers brought class actions against credit reporting agencies for violations of the Fair Credit Reporting Act and state laws. As part of the settlement agreement, the class representatives would receive $5,000 as an incentive award on the condition that they supported the settlement. Several named plaintiffs and objectors claimed the incentive award created a conflict of interest between the representatives and the class and that class counsel engaged in conflicted representation by their representation of the settling class representative and the class at large. Among other things, the district court ruled that the proposed class action settlement was fair, settlement was not tainted by class, and class representatives’ representation of the class was adequate. The Ninth Circuit reversed and remanded the district court's approval of the settlement for two reasons. First, the incentive award diverged the interests of the class representatives from the class because it was conditioned on the representatives’ support of settlement. Additionally, the incentive award significantly exceeded the amount that absent class members could expect to get from the settlement. For these reasons, the incentive award made the settling class representatives inadequate representatives of the class because it undermined their ability to “fairly and adequately protect the interests of the class.” Second, the panel held that the since the settling class representatives did not adequately represent the interests of the class members, class counsel was simultaneously representing clients with conflicting interests. REVERSED and REMANDED.