Plaintiffs' Lawyers Beware: Lessons from the Subway Sandwich Footlong Litigation
Over the past few years, the Seventh Circuit has carefully scrutinized class action settlements, and some for good cause, given the circumstances of some very notorious cases well known to the class action bar. The most recent Subway sandwich Footlong case is yet another notorious example of a questionable class action settlement that did not pass muster.
In In Re Subway Footlong Sandwich Mktg. & Sales Practices Litig., 869 F.3d 551 (7th Cir. 2017), the Seventh Circuit rejected a settlement in a class action where plaintiffs and the class claimed that Footlong sandwiches were an inch too short. The case arose after a teen in Australia measured his sub, discovered it was not 12 inches long and said so on Facebook. His post “went viral” and litigation quickly ensued. Unfortunately for plaintiffs and their counsel, the Seventh Circuit found that facts gleaned in early discovery actually disproved plaintiffs’ claims. Plaintiffs and their counsel should have known this but failed to perform an adequate investigation prior to filing suit.
According to documents produced in discovery, Subway's sandwich process is standardized, ensuring that unbaked bread is uniform in length. Though variations may occur, they are minor and cannot be prevented because of “common sense” natural variability in baking. Further, the discovery showed that no customer is shorted any food even if a sandwich roll fails to bake to a full 12 inches because the sandwiches have standardized quantities of meat and cheese and the customer is able to add unlimited toppings. Because no customer is actually cheated, plaintiffs did not suffer any monetary injury.
Apparently recognizing this, plaintiffs’ counsel negotiated an injunctive relief settlement under Federal Rule 23(b)(2), whereby Subway would more closely monitor its process to ensure the represented bread length of 12 inches. The problem with that, however, is that no amount of monitoring could solve the bread length problem. Thus, the settlement acknowledged that natural variability could still occur and affect represented bread length. In exchange for the settlement, the plaintiffs’ lawyers would receive fees of $525,000 and each plaintiff would receive $500.
In a scathing opinion, the Seventh Circuit reversed approval of the settlement, calling its benefits to the class “worthless” and nothing but a “racket” for the plaintiffs’ lawyers.
“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,” Judge Sykes wrote. Because of this, the relief to the class was illusory and because there was no meaningful relief, there could be no settlement.
To convince the court that the settlement actually provided some tangible relief, the plaintiffs argued that if Subway were to violate the agreed-upon injunction, then the class could seek contempt sanctions. The Seventh Circuit rejected that argument, however, because the terms of the settlement acknowledge that bread length standardization is impossible. According to the Seventh Circuit therefore, any contempt remedy to enforce worthless terms of a settlement was worthless in and of itself. Thus, “[z]ero plus zero equals zero.” The Circuit concluded that the settlement should have been rejected outright and it remanded the case for further proceedings. Whether the plaintiffs in the Subway case will ever be able to craft an adequate settlement remains to be seen.
What can we class action lawyers learn from the Subway case? Obviously, we need to pursue meritorious claims. To that end, early investigation and analysis of the asserted claims and plaintiffs’ damages is critical. When negotiating a settlement- especially one that provides primarily injunctive relief- we need to do our best to make sure that there are genuine injuries that can be adequately addressed.
Virtually all plaintiffs’ lawyers already do all that, if only because they do not want to expend their time and resources on groundless cases that will not pay off for their clients and themselves. But the other lesson of the Subway case is that the rare outlandish case is used by defendants to attack plaintiffs and their counsel in other, meritorious cases. The few “bad apple” cases thus have negative effects far beyond the limits of those cases themselves.