CHICAGO (Legal Newsline) - The U.S. Court of Appeals for the Seventh Circuit has reversed a Wisconsin federal court’s decision certifying a proposed class and approving a settlement in a case about the length of Subway’s “footlong” sandwiches, calling it “utterly worthless.”
“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’s an apt description of this case,” Judge Diane S. Sykes wrote for a three-judge panel of the Seventh Circuit Aug. 25.
The plaintiffs in the case alleged footlong sandwiches sold at Subway restaurants were marketed as being 12 inches in length, when, in fact, they were not.
According to their complaint, Subway’s alleged business practices violated state consumer protection statutes.
The class action stemmed from a social media post in 2013, which pointed out how the chain’s footlong sandwich came up short.
Matt Corby, an Australian teenager, purchased a Subway footlong sandwich and decided to measure it. The sandwich was only 11 inches long. He took a photo of the sandwich next to a tape measure and posted the photo on his Facebook page.
Subway, in response, issued a press release announcing it had “redoubled” its efforts “to ensure consistency and correct length in every sandwich.” The franchisor assured its customers that its “commitment remains steadfast” to ensure that every footlong sandwich sold at each of its restaurants worldwide is at least 12 inches long.
“Within days of Corby’s post, the American class-action bar rushed to court,” Sykes wrote in the Seventh Circuit’s 11-page ruling.
Plaintiffs’ lawyers sued Doctor’s Associates Inc., or DAI, the franchisor of Subway Sandwich Shops, seeking damages and injunctive relief under the consumer protection laws of various states.
Subway moved to transfer the cases to a single district court for a multidistrict litigation. The cases -- nine in total -- were eventually consolidated in the U.S. District Court for the Eastern District of Wisconsin.
In the meantime, Sykes explained, the parties agreed to conduct limited informal discovery, anticipating mediation.
That early discovery revealed the claims were “factually deficient,” the judge wrote.
“For starters, the vast majority of Subway Footlong sandwiches are, as the name implies, at least 12 inches long. The few that do not measure up generally fall short by only about a quarter-inch, and the shortfalls are the inevitable consequence of natural -- and unpreventable -- vagaries in the baking process,” she wrote. “Additionally, all of Subway’s raw dough sticks weigh exactly the same, so the rare sandwich roll that fails to bake to a full 12 inches actually contains no less bread than any other.
“What’s more, Subway standardizes the amount of meat and cheese in each sandwich, and sandwich makers prepare each one to order right in front of the customer, adding toppings on request. So the length of the bread has no effect on the quantity of food each customer receives.”
Individual hearings would be needed, Sykes explained, to identify which purchasers actually received undersized sandwiches and which customers, if any, deemed a minor variation in bread length “material” to their decision to buy.
At this point, instead of dropping the lawsuits altogether, class counsel filed a consolidated class complaint seeking only injunctive relief.
Following mediation, the parties agreed to a settlement in which Subway would institute practices designed to ensure that its rolls measure at least 12 inches long and keep such practices in place for four years.
The parties then spent the next year or so arguing over class counsel fees and incentive awards.
Eventually, they agreed to cap attorneys’ fees at $525,000 and incentive awards at $1,000 for each named plaintiff.
The district judge preliminarily approved the settlement and scheduled a fairness hearing. Class counsel then filed a motion seeking $520,000 in attorneys’ fees and a $500 incentive award for each of 10 named plaintiffs.
Ted Frank, with the Competitive Enterprise Institute’s Center for Class Action Fairness and a frequent objector to such class action settlements, objected to the settlement and class certification.
Frank, a class member himself, argued the settlement -- a proposed injunction -- enriched only the lawyers and provided no meaningful benefits to the class; therefore, the settlement was worthless.
In February 2016, Judge Lynn Adelman for the Eastern District of Wisconsin was not persuaded. He certified the proposed class and approved the settlement. Frank appealed to the Seventh Circuit.
CCAF argued the lower court’s approval was contrary to case law, which states class actions should not be allowed to proceed when their only effect is to enrich the lawyers for the class while producing no relief for class members themselves.
During oral arguments in September 2016, Sykes suggested the lawsuit was “opportunistic entirely.”
The judge was not swayed in authoring the court’s opinion.
“The plaintiffs and Subway defend this settlement by insisting that it actually provides meaningful benefits to the class because Subway has bound itself, for a period of four years, to a set of procedures designed to achieve better bread-length uniformity,” Sykes wrote. “A simple comparison of the state of affairs before and after the settlement exposes the cynicism in this argument.
“Before the settlement, class members could be fairly certain that a Subway Footlong sandwich would be at least 12 inches long. They could rest assured that because all loaves are baked from the same quantity of dough, each sandwich contained the same amount of bread even if an occasional loaf failed to bake to the full 12 inches in length. And if a loaf happened to bake up slightly shorter than 12 inches, customers could be assured of receiving the same quantity of meat and cheese as any other customer; no class member, regardless of bread length, was cheated on the amount of ham or turkey, provolone or pepper jack. As for other sandwich ingredients, class members could be as profligate or as temperate as they pleased: Subway’s ‘sandwich artists’ add toppings at the customer’s request.”
The judge continued, “In sum, before the settlement there was a small chance that Subway would sell a class member a sandwich that was slightly shorter than advertised, but that sandwich would provide no less food than any other. After the settlement -- despite the new measuring tools, protocols, and inspections -- there’s still the same small chance that Subway will sell a class member a sandwich that is slightly shorter than advertised.”
Sykes said the injunctive relief approved by Adelman is “utterly worthless.”
“The settlement enriches only class counsel and, to a lesser degree, the class representatives,” she wrote for the panel, which also included judges Joel Martin Flaum and Ilana Rovner.
Frank said he is pleased the Seventh Circuit agreed and recognized the settlement as “part of the ‘racket’ plaintiffs’ attorneys use to extract fees for themselves.”
“The Seventh Circuit has been at the forefront of protecting consumers from litigation in which plaintiffs’ attorneys abuse the class action system solely for their personal profit,” he said in a statement.
Thomas A. Zimmerman Jr., of the Zimmerman Law Offices of Chicago, and Stephen P. DeNittis, of the firm of DeNittis Osefchen Prince P.C., of Marlton, N.J., are among those representing the class.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.