PepsiCo Inc. will only pay $426,000 to class members in a $1.2 million settlement over employee credit reports that won final approval Jan. 11.

Class counsel’s request of nearly $400,000 in fees is excessive in relation to that actual payout to members, Judge J. Paul Oetken wrote for the U.S. District Court for the Southern District of New York.

The court reduced the fee award to $262,000, which represents 22 percent of the full common fund.

Courts tend to disfavor common fund settlements that include reversion terms—where unclaimed funds go back to the defendant—especially if attorneys’ fees are pegged to the size of the fund before the reversion.

Such terms might “decouple class counsel’s financial incentives from those of the class, increasing the risk that the actual distribution will be misallocated between attorney’s fees and the plaintiffs’ recovery,” the court here said.

Altareek Grice filed a class action alleging Pepsi Beverages Co. violated the Fair Credit Reporting Act by obtaining consumer reports of himself and class members for employment purposes without making the required disclosure in a stand-alone document.

There are 23,000 members of the class but only 1,879 submitted valid claims, the court said.

The low participation rate triggered the settlement’s reversionary term that allows Pepsi to claw back 40 percent of the net settlement fund—$284,340—with the remaining 60 percent—$426,510—to be distributed equally among participating class members.

The court granted class counsel’s request for $74,500 in costs and a service award for Grice of $5,000.

The Blanchard Law Group APC; The Dion-Kindem Law Firm; and Morgan & Morgan P.A. represented the class.

Ogletree Deakins Nash Smoak & Stewart P.C. represented Pepsi.

The case is Grice v. Pepsi Beverages Co., 2019 BL 10378, S.D.N.Y., No. 17-CV-8853, 1/11/19.