Do Representative Payments Matter? An Empirical Study

ABSTRACT For many decades, courts have awarded the representative plaintiffs who bring class actions an extra payment when the actions recover something for the class. It has long been thought that the payments are necessary to induce a class member to step forward and serve as a representative, and, without them, many class actions would go away. Indeed, we show that the payments had become all but ubiquitous in non‐securities class actions. In 2020, however, the United States Court of Appeals for the Eleventh Circuit became the only circuit to hold the payments unlawful. We test whether the Eleventh Circuit's decision caused a decline in class action filings there relative to other circuits. Much to our surprise, we did not find good evidence of a decline. We surmise that class members may be willing to serve as representatives without the extra compensation for selfless or principled reasons. Although, if true, this might not entirely defeat the case for representative payments, it certainly complicates that case because some believe the payments are not costless. As a result, our analysis may give courts and commentators additional reason to rethink their support for prevailing practices.