Court Denies Motion to Dismiss Appeal of Class Decertification, Finding that Plaintiffs Who Already Settled Still Had Standing – Espenscheid v. DirectSat USA

In an appeal of the decertification of a class action lawsuit, a federal appeals court denied a motion to dismiss the appeal for lack of jurisdiction, finding that the plaintiffs/appellants, who settled with the defendants after decertification, still had a stake in the litigation. Espenscheid v. DirectSat USA, LLC, 688 F.3d 872 (7th Cir. 2012). The plaintiffs claimed that they were entitled to an “incentive award” or “enhancement fee” for serving as class representatives, but only if the case was certified as a class action. Id. at 874-75. This gave them an ongoing stake in the litigation, they argued, and therefore gave them standing to appeal decertification. The court agreed, finding that dismissing their appeal on standing grounds would not serve judicial economy, as another class member could simply step in and appeal.

Judge Richard Posner, writing for the court, does not say much about the underlying lawsuit, except that it consists of both class action and collective action claims. The three named plaintiffs brought collective action claims against the defendant for alleged violations of the federal Fair Labor Standards Act, and class action claims for supplemental state law claims. The difference between a class action and a collective action under federal law, the court notes, is not particularly relevant to the question at hand.

The district judge certified several classes, but then decertified them and split them into three separate lawsuits by each plaintiff. The plaintiffs settled their claims with the defendant, but then appealed the decertification to the Seventh Circuit Court of Appeals. The defendant moved to dismiss the appeal, and the plaintiffs asserted that the incentive award gave them standing. The court cited on the one case it could find that seemed related to the issue, Narouz v. Charter Communications, LLC, 591 F.3d 1261, 1265 (9th Cir. 2010). That case involved a plaintiff with both individual and class claims against a defendant, who settled the individual claims but retained both the class action claim and a possible enhancement fee for serving as class representative.

The court found the plaintiffs’ situation to be comparable to Narouz, because even though the plaintiffs no longer had a legal claim against the defendant, they still had a stake in the litigation. The plaintiffs, the court noted, might no longer be able to serve as effective class representatives, as their settlement with the defendant meant their interests did not align with the other class members’ interests. They might still be entitled to compensation for their prior service as class representatives, however. The court noted the risks that class representatives take should the lawsuit not succeed, as well as the time involved in depositions and other litigation activities. “The incentive reward,” the court said, “is designed to compensate [the class representative] for bearing these risks.” Espenscheid, 688 F.3d at 877.

Finally, the court held that nothing specifically prevented the plaintiffs from collecting an incentive fee for representing the class of plaintiffs in the collective action as well as the class action. This gave the plaintiffs an even greater stake in the litigation, the court held. It therefore denied the defendant’s motion to dismiss.

Lubin Austermuehle’s team of class action attorneys represent the interests of consumers who wish to assert their rights under state and federal consumer protection laws. Class action lawsuits give consumers, who may lack the resources for a prolonged legal battle against a much larger opponent, a means to stand up for themselves in cases of consumer fraud. We practice throughout the Chicagoland area including Cook, DuPage, Kane, Lake, McHenry and Will Counties, and in the Mid-West region including Indiana, Wisconsin and Iowa. To schedule a confidential consultation with one of our attorneys, please contact us online, at (630) 333-0333.