A Day Late and an Inch Short

Amid the controversy over the debt ceiling, gun control and health care, some people are taking a stand for what truly matters – their right to a sandwich.  Twelve inches of sandwich to be exact.  Last week, New Jersey plaintiffs John Farley and Charles Pendrak, and Chicago resident Nguyen Buren, filed respective putative class actions against Subway Sandwich Shops Inc.  Plaintiffs allege that Subway defrauded its customers by selling $5 "footlongs" that don't measure up.  At long last, the judiciary may get to decide if size really does matter.

According to Subway's website, it has over 38,000 stores in 100 countries worldwide.  Further, Subway's "$5 Footlong" specials have been a mainstay of the company's advertising campaign for years.  The likelihood of additional copycat cases is great.  This means that, despite the weaknesses of these plaintiffs' claims, and the hurdles plaintiffs will face certifying a class, Subway will be expending significant resources defending these cases.

Assuming that these plaintiffs avoid dismissal, one potential resolution of these lawsuits is an early settlement that provides class members with a coupon or voucher for Subway product(s), as well as a small cash payment to each lead plaintiff, and a large payout for plaintiffs' attorneys.  Not necessarily a bad result for Subway, or the class members.  Notwithstanding, this scenario may reinvigorate the debate "coupon settlements."

Coupon settlements have been an area of controversy and criticism among the class action bench and bar.  One criticism of coupon settlements is that they are per se unfair because they require class members to do business with the company that allegedly defrauded them.  Others argue that coupon settlements benefit only plaintiffs' attorneys because the class members receive no meaningful compensation from the defendant.  In some situations, however, vouchers and coupons are the best alternative remedy to damages that may amount to pennies per class member.

In 2005, the Class Action Fairness Act ("CAFA") changed the rules for evaluating coupon settlements in federal court, often reducing attorneys' fees that are found to be excessive compared to the benefits actually afforded class members.  See 28 U.S.C. § 1712.  CAFA, however, does not apply to state court class actions.  As a result, if Subway is unable to achieve a dismissal of these claims, then Jared may be handing out free subs to a lot of disgruntled customers.

About The Author

Erin Rhinehart | Faruki Partner