Class-Action Plaintiffs’ Service Awards Questioned by Second Circuit Ahead of Likely Supreme Court Determination

The United States Court of Appeals for the Second Circuit has upheld the grant of service awards totaling nearly one-million dollars to eight lead plaintiffs in a class action against Visa, Inc. and Mastercard, Inc., while at the same time stating its view that such awards are likely “impermissible under Supreme Court precedent.”  In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation.

As part of a long-running case involving fees imposed on retail merchants, the United States District Court for the Eastern District of New York approved a $5.6 billion settlement, including $900,000.00 in service awards to the eight merchants serving as lead plaintiffs.  On appeal, the Second Circuit affirmed the settlement in most respects, including the service awards (although it remanded for a reexamination of the amount of the service award).

While the Court affirmed the grant of service awards on the basis of controlling Second Circuit precedent from 2019 and 2022, the panel unanimously stated its view that service awards are impermissible under Supreme Court precedent from 1881, well before the codification of class actions under Federal Rule of Civil Procedure 23.  Most federal appellate courts allow service payments to lead plaintiffs, but the Eleventh Circuit has adopted the argument mentioned by the panel here, and prohibits service awards to lead plaintiffs.

Two petitions have been filed with the Supreme Court to take up cases on this issue and resolve the circuit split.  Those pushing to abolish service awards now have one additional ruling to cite embracing their interpretation.  Ultimately the Supreme Court will have the last word on the legality of service awards.  We here at Fitch Law Partners will continue monitoring these developments.

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