By Karen Morris
The federal Court of Appeals for the Seventh Circuit (Illinois, Indiana, and Wisconsin) just rejected a class action settlement intended to resolve a lawsuit claiming Subway sandwich fast-food chain, which specializes in submarine sandwiches, misrepresented the size of its “footlong” subs.
Subway famously touts its “Footlong” sandwich. A social media uproar resulted when a customer measured his order and found it to be 11 inches, not 12. He posted a picture of his sandwich next to a 12” ruler highlighting the discrepancy, and it went viral. Numerous lawsuits were filed asserting violations of state consumer-protection laws which prohibit “unfair trade practices.” The cases were ultimately consolidated in a single class action (a lawsuit with many plaintiffs who are all injured from the same cause).
To bring a class action lawsuit requires that a court certify (approve) the description of class members. The certified class in this case was “all persons in the US who purchased a 6 inch or footlong sandwich at a Subway restaurant between January 1, 2003 and October 2, 2015.”
Discovery (the process of parties to a lawsuit exchanging relevant information) revealed the following. The weight of Subway’s unbaked bread rolls are uniform, containing the same ingredients and proportions. They are made from raw dough sticks which all weigh exactly the same, so if a roll fails to bake to a full 12 inches, it nonetheless contains the same amout of bread as its 12 inch counterpart. Differences in length are due to the “natural variability in the baking process” and are unavoidable. The named plaintiffs conceded that the exact length of the sandwiches did not impact their purchase decisions or alter their future plans to eat at the fast food outlets.
The parties settled with Subway agreeing to pay attorneys for the plaintiffs $525,000 in legal costs, and each named plaintiff (one or more representatives of the class who select and work closely with the attorney for the class) would receive $500. The fast food company also agreed to various modifications of its policies and procedures to help ensure their sandwiches are either six or twelve inches. These included additional training of employees, periodic corporate inspections of bread and ovens, use of a designated device for workers to measure bread in the restaurants, and posting of a notice stating, “Due to natural variations in the bread baking process, the size and shape of bread may vary.” This settlement was initially approved by a Wisconsin federal judge in February, 2016.
When parties to a class action reach a settlement, the terms must be reviewed by a court to ensure they are “fair, reasonable, and adequate” to all class members. Typically there are two such hearings, called fairness hearings. The first is for preliminary approval by a judge. Next, a Notice of Proposed Settlement is sent to all class members. A Final Fairness Hearing is thereafter scheduled at which class members can object to the settlement.
A member of the Center for Class Action Fairness (formed in 2009, the Center represents class members against unfair class action procedures and settlements), Theodore Frank, a well-known critic of class actions, joined the lawsuit as a class member and appealed the settlement. In the court’s decision, he is described as “a professional objector to hollow class-action settlements.” He and the Center take issue generally with class lawyers receiving substantial fees while class members’ interests are not adequately addressed. Asserts the Center, “When the Center prevails, lawyers get less, class members get more, and the rule of law is strengthened.”
Frank argued that the Subway case settlement “enriched only the lawyers and provided no meaningful benefits” to the customers who made-up the class. ”[W]hen attorneys bring class actions to benefit only themselves, it’s an abuse of the sytem, and courts should not tolerate it.”
The court was convinced. ““The settlement enriches only class counsel and, to a lesser degree, the class representatives. The procedures required by the settlement do not benefit the class in any meaningful way. The settlement acknowledges as much when it says that uniformity in bread length is impossible due to the natural variability of the bread-baking process. A class action that seeks only worthless benefits for the class and yields only fees for class counsel is no better than a racket and should be dismissed out of hand. That is an apt description of this case.”
Subway responded by saying, “We are pleased the court recognized that Subway did not misrepresent its product. We stand behind our commitment to quality.”
For more information, see earlier post about this lawsuit on the KNowNow blog from June 19, 2013, and click here.
What effect is this decision likely to have on lawyers who concentrate on class action lawsuits?
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