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More than three years after an Australian teen’s photo of a shorter-than-a-foot Subway sandwich kicked off a series of lawsuits against the fast food chain — and nearly a year after those suits were settled — the matter is still pending before a federal appeals court. Not because the plaintiffs are asking for more or Subway is trying to wriggle out of the deal, but because a third party is saying the case was so frivolous there should have been no settlement at all.
A quick history lesson. In early 2013, the above photo of an 11″ “foot-long” went nuts on the internet, leading all sorts of other people to start measuring sandwiches and wondering whether or not they were being short-changed by the nation’s largest fast food chain.
Within weeks, lawsuits began accusing Subway — whose real corporate name is Doctor’s Associates Inc. — alleging fraud. In response to the media feeding frenzy over the litigation, Subway made policy changes regarding the measuring of its bread, but the lawsuits continued.
However, it eventually became clear that Subway was not systemically or deliberately baking some loaves slightly shorter than 12″, and there was no evidence that the slightly shorter bread resulted in any fewer ingredients for the customer.
And so when the settlement was announced in Oct. 2015 (and then finalized earlier this year), the total payout was only around $520,000 with all but $5,000 of that going to cover attorney fees.
In February, noted class action critic — and Subway customer — Ted Frank appealed [PDF], arguing that the only benefits of the settlement to Subway customers are the company’s policy changes, which he claims are “worthless” because “Subway had already committed to fixing any problem with the lengths of its sandwiches in January 2013, and there was no evidence that the litigation and settlement added anything to that.”
In Frank’s view, the only people to benefit from the case are the ten law firms that will split the $520,000.
Yesterday, Frank — along with lawyers representing Subway and the plaintiffs’ attorneys in the class action — appeared before a Seventh Circuit Court of Appeals panel to make their oral arguments.
The three-judge panel made no attempt to hide its disregard of the foot-long lawsuit, repeatedly referring to it as “frivolous,” “without merit,” and a “nuisance.”
In his argument, Frank pointed out that the actual litigation work on a case like this only lasts a few months, but sorting out attorneys fees can take more than a year.
“The class is getting nothing out of this,” he told the panel, “and that sort of rent-seeking shouldn’t be countenanced.”
Pointing to Subway’s policy changes and the settlement’s requirement that the company stick with these measures for at least four years, Judge Ilana Rovner asked, “Wouldn’t that allow consumers to make up their supposed losses by eating sandwiches that are at least 12-inches long for the next four years?”
Frank shrugged off this notion that this is any sort of relief for consumers, but admitted, “Perhaps there are consumers that really care that much about the shape of their bread.”
Rather that certify the class and allow the settlement, Frank believes the District Court judge should have asked the lawyers, “Why are you still here, why are you taking up my time? There’s nothing you can accomplish for the class because Subway has already confessed their sins”
In questioning all three parties, Judge Diane Sykes kept coming back to what she viewed as the underlying problem with the lawsuits, that there was no injury to consumers.
Frank said the complaints amounted to nothing more than “We got short sandwiches and Subway wasn’t doing enough to prevent us from getting wrongly shaped bread.”
Matthew De Re, representing the plaintiffs’ attorneys, countered that, “There are certain people that do put a value on getting what they bargain for.”
Sykes was having none of it, responding, “There was no injury in that regard; they didn’t not get what they bargained for.”
“They got the same amount of food —” De Re started, before Sykes interrupted.
“Right, and that’s what you bargain for when you buy a sandwich,” said the judge. “There’s no argument for a consumer fraud action here now that we know that the very few sandwiches that fell half an inch shorter than the 12 inches had the same amount of food or more… Any claim that the shape of the bread is material would be rejected as a matter of law as frivolous.”
It could have won this case on the merits but “made a decision in the midst of a media frenzy… made a business decision to settle. It’s really not for Mr. Frank to decide whether Doctors’ Associates should or should not make that business decision.”
Jeffrey Babbin, the attorney representing Subway before the panel, explained the company has no doubt it would have won the case on its merits, but nevertheless “made a decision in the midst of a media frenzy… It’s really not for Mr. Frank to decide whether Doctors Associates should or should not make that business decision.”
However, Judge Sykes responded by explaining that Subway’s decision to settle was not really the legal issue before the panel.
“What we’re talking about is what the court’s obligation in a situation like this is; to avoid abuses of the legal system such as this case represents,” she explained to Babbin. “A class action that seeks only worthless benefits for the class should be dismissed out of hand. That’s what should have happened here… This is a racket.”
De Re had argued that the benefits of the settlement were not actually worthless, and that the policy changes would not have occurred had the lawsuits not been filed.
There is value, he explained, “of saying we’re going to implement these procedures, we’re gonna do right by our people.”
“But they had already done that,” replied the panel.
“Before this case was filed, they had not,” countered De Re. “I don’t think that there is any support on the record for the fact that Subway was going to do this or anything was going to be different on this matter. The original case in this matter was filed before there was any public statement made.”
He also contends — though none of this evidence is on the record — that mediation with Subway did indeed turn up proof that “Some people were getting less food.”
Sykes slammed the plaintiffs’ attorneys for piling on to a case with no apparent merit.
“No investigation was done pre-suit, so far as I can tell,” she told De Re. “The suits were filed within days of the Australian kid’s post that went viral. It was opportunistic entirely.”
“There was no ’selling out’ here,” responded De Re. “It was plaintiffs’ council doing the best they would with what turned out to be some bad facts.”
Judge Rovner asked Babbin if Subway looked at the payment of the $520,000 in attorney fees as an opportunity for an “effective exit.”
The attorney agreed that Subway was indeed looking for a good way out in light of the story going viral and turning up on “national media, morning television shows.”
“What a wonderful opportunity,” said Rovner, “to go on national television and get all of that free publicity and say ‘Every one of these sandwich eaters got exactly the amount of sandwich that they paid for.’”
Sykes questioned the merits of the actual policy changes when Subway has admitted that, because of the imperfect science of baking bread, not all rolls will be 12″ long.
“Yes, but we’ve changed the tolerance of them serving that bread,” answered Babbin.
Asked Rovner, “Are you saying that the young teenager selling Subway sandwiches is standing there with a ruler?”
Closing out the oral arguments, Frank pointed to a statement by Subway that it would be following the same the policy changes even if the district court rejected the settlement.
“That’s the very definition of immaterial,” concluded Frank. “There’s no marginal difference [here] between having a settlement and not having a settlement.”
The judges will likely rule on this case by early 2017.
by Chris Morran via Consumerist
