On August 25, 2017, the Seventh Circuit Court of Appeals held that a settlement agreement entered into between a putative class of consumers and Subway was “utterly worthless” and reversed and remanded the District Court’s Order approving that settlement. The class had alleged that Subway’s famous Footlong sandwiches often came up short.
In 2013, an Australian teenager measured his Subway Footlong sandwich and discovered it was only 11 inches long. He photographed the sandwich next to a tape measure and posted the photo on Facebook. Needless to say, his post went viral, and plaintiffs’ lawyers across the United States flocked to federal court suing Subway for damages and injunctive relief under state consumer-protection laws, seeking class certification. The suits were combined into a multidistrict litigation in the Eastern District of Wisconsin.
However, in their haste to file suit, the lawyers failed to consider whether the claim had any merit. Limited discovery uncovered that Subway’s unbaked bread sticks are uniform, and baked rolls rarely fall short of 12 inches. The minor variations that do occur are wholly attributable to the natural variability in the baking process and cannot be prevented. Importantly, no customer was ever shorted any food even if a sandwich roll failed to bake to the full 12 inches. All the meat and cheese ingredients are standardized and the Subway employee adds toppings in whatever amount the customer desires.
Realizing that there was no compensable injury, the Plaintiffs’ lawyers sought a class claim for injunctive relief. Subsequently, the parties reached a settlement in which Subway would implement measures to ensure, to the extent practicable, that all Footlong sandwiches are at least 12 inches long.
Subway agreed that:
(1) franchisees would “use a tool” for measuring sandwich rolls;
(2) corporate quality-control inspectors would measure a sampling of baked bread during each regularly scheduled compliance inspection;
(3) the inspectors would check bread ovens during each compliance inspection “to ensure that they are in proper working order and within operating specifications”; and
(4) Subway’s website and each franchised restaurant would post a notice explaining that the natural variability in the bread-baking process will sometimes result in sandwich rolls that are shorter than the advertised length.
The settlement also explicitly acknowledged that “because of the inherent variability in food production and the bread baking process,” Subway could not guarantee that each sandwich roll will “always be exactly 12 inches or greater in length after baking.”
The District judge approved the settlement and adopted class-counsel’s request for $520,000 in attorney fees as reasonable. A putative class member who had opposed the settlement appealed.
The Seventh Circuit did not agree. They opined that: “A class settlement that results in fees for class counsel but yields no meaningful relief for the class is no better than a racket.” The Seventh Circuit clearly believed that the settlement was of no value to the actual class members. They stated that: “No class action settlement that yields zero benefits for the class should be approved, and a class action that seeks only worthless benefits for the class should be dismissed out of hand.”
The Seventh Circuit reasoned that before the settlement, class members could be fairly certain that a Subway Footlong sandwich would be at least 12 inches long and if the loaf happened to bake up slightly shorter than the 12 inches, customers could be assured of receiving the same quantity of meat and chesses as any other customer. Likewise, after the settlement, despite the new measuring tools, protocols, and inspections, there would be the same slight chance that Subway would sell a class member a sandwich that is slightly shorter than advertised. There was no discernable benefit to the class members from entering into the settlement.
Despite this set back, one of the class action attorneys told the Milwaukee Journal Sentinel that they intend to pursue the cases and will seek the release of internal Subway documents that were kept confidential for purposes of mediation in the case.
Subway released the following statement regarding the Seventh Circuit’s decision: “We are pleased that the Seventh Circuit Court of Appeals recognized, as had the lower court before it, that the Subway brand did not misrepresent its product. We stand behind our commitment to quality.”
While the nature of this case may seem a bit absurd, it raises important issues regarding the role of class action lawsuits. While the class action can be a necessary vehicle for consumers to combat fraud or deceptive sales practices, the Subway lawsuit appears to dilute the class action process by seeking relief that has no real benefit to the public. Class action settlements that do nothing other than line the pockets of the attorneys will be rejected out of hand under the Seventh Circuit’s recent decision.
The Seventh Circuit’s decision can be accessed here.
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