Consumer Class Action Blog

News, analysis and commentary on state and federal consumer class action litigation

Incentive award for pro-se objector? 10th Cir. says “no,” but leaves door open

Posted by Philip Kay on September 19, 2009

The 10th Circuit addressed a novel issue in UFCW Local 880-Retail Food Employers Joint Pension Fund v. Newmont Mining Corp., 2009 WL 2902565 (10th Cir., Sep 11, 2009):  whether pro-se class action objectors are entitled to incentive awards.

The underlying case was a securities fraud class action commenced in June 2005 in my home District of Colorado.  The case was settled in early 2008.  The settlement called for defendants to create a fund of $15 million, from which various litigation expenses would be paid before the remainder was paid out to the class members.  Class counsel initially requested a fee of $5 million.  Class member Lawrence W. Schonbrun, acting pro se, and another class member, Natasha Engan, represented by counsel, filed objections to the amount of fees requested by class counsel.  Based on the objections, proceedings were held and ultimately the attorney fee award was reduced to $450K.

Mr. Schonbrun then filed an application for an incentive award based on his time and effort spent in the attorney fee proceedings.  The district judge (Judge Marcia Krieger, one of the smartest judges on the bench in my opinion) denied Mr. Schonbrun’s request but granted fellow-objector Ms. Engan her attorney fees because “the services she provided conferred a benefit on class members sufficient to entitle her to a reasonable fee award.”

Mr. Schonberg appealed, claiming that the district court erred in finding that his objection to class counsel’s attorney fees did not benefit the class sufficiently to entitle him to an incentive award. Mr. Schonbrun argued that he was entitled to a pro se incentive award on the same or similar basis as a named class representative.

The 10th Circuit disagreed.  But, it expressly declined to directly decide the issue of whether pro se objectors can ever be entitled to incentive awards.  Instead, the Court focused solely on whether Mr. Schonbrun conferred a benefit on the class and whether Judge Krieger abused her discretion in ruling that he did not.  The Court acknowledged that “[a]n objector whose arguments result in a reduction of attorney-fee and expense awards provides a benefit to the class,” but in this case Mr. Schonbrun’s objections merely mimicked Ms. Engan’s objections and were lacking in any meaningful independent value.  Thus, Mr. Schonbrun did not confer a benefit to the class that was not already provided by Ms. Engan.  “[G]eneral, garden-variety objections usually are not helpful to the court, nor do they benefit the class.”

The Court also declined Mr. Schonbrun’s invitation to apply to his pro se request for an incentive award the same standards applicable to an objector’s request for an attorney fee.  The Court correctly noted the distinction between an objector seeking his own incentive award and an objector seeking payment for his attorney fees.  “A pro se objector’s time and effort is not the same as an attorney fee incurred by an objector… Mr. Schonbrun did not incur attorney fees; therefore, we do not apply the same standards as if he had.”

So, can a pro se objector ever be entitled to an incentive award?  While the Court declined to directly answer the question, it implied that in appropriate circumstances the answer could be “yes.”  But, the threshold requirement is that the objector confer a benefit on the class.  Further, the Court implied that to receive an incentive award, an objector must also put himself “at risk” in the litigation.  Regarding this requirement, see Parker v. Time Warner Entertainment Co., L.P., 2009 WL 1940791 (E.D.N.Y., Jul. 06, 2009): “The amount of the incentive award is related to the personal risk incurred by the individual or any additional effort expended by the individual for the benefit of the lawsuit”.

I’m not aware of any federal circuits that have directly addressed the issue of whether, and in what circumstances, a pro se objector is entitled to an incentive award.  I think the 10th Circuit’s reasoning would likely be followed by other circuits facing this issue and they would require an objector to (1) confer a benefit on the class and (2) incur personal risk in order to be entitled to an incentive award.

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