Size Matters: Seventh Circuit Rejects Subway Footlong Settlement Because It Provided No Meaningful Benefit To Class Members

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Subway (pd)I am a regular Subway customer, so I read the Seventh Circuit's opinion, In re. Subway Footlong Sandwich Marketing and Sales Practices Litigation, with great interest. You probably remember the events that spawned this litigation. As the Seventh Circuit described it: "In January 2013 Matt Corby, an Australian teenager, purchased a Subway Footlong sandwich and, for reasons unknown, 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. Thus a minor social-media sensation was born." And, "[w]ithin days of Corby's post, the American class-action bar rushed to court," therefore, a class action lawsuit was also born. It ended a few years later with a settlement, which the Seventh Circuit just overturned.

To say that the Seventh Circuit was critical of the settlement would be an understatement. Its opinion is filled with subtle, and not so subtle, criticisms of the settlement and plaintiffs' counsel. For example, early in its opinion, the court observed: "In their haste to file suit [ ] the lawyers neglected to consider whether the claims had any merit. They did not." It did not get much better for plaintiffs from that point on.

The court noted that the parties engaged in limited, informal discovery early on in the case, with the intent of going to mediation. This discovery revealed that plaintiffs' claims were deficient. It showed that "the length of the [baked] bread has no effect on the quantity of food each customer receives." First, all of Subway's raw dough is exactly the same size. So, even the few rolls that bake to approximately a quarter-inch less than 12 inches because of natural, and unpreventable, "vagaries in the baking process" provide the same bread as those that bake to the full 12 inches. Second, Subway standardizes the amount of meat and cheese that its "sandwich artists" put on each sandwich, so whether the bread is 12 inches long or a quarter-inch short, the customer still gets the same amount of food. (In the interest of full disclosure, because I am a regular, I do occasionally get an extra slice of ham, salami, and pepperoni on my six-inch BMT at my local Subway.) "This early discovery, limited though it was, extinguished any hope of certifying a damages class."

"Rather than drop the suits as meritless," however, plaintiffs shifted the focus of the lawsuit from one seeking damages to one seeking injunctive relief. THey filed an amendec complaint and, after mediation, reached a settlement with Subway, under which Subway would, for four years, implement practices designed to ensure, the the extent possible, that its sandwich rolls measured at least 12 inches long. But, the settlement noted that "because of the inherent variability in food production and the bread baking process, Subway could not guarantee that each sandwich roll [would] always be exactly 12 inches or greater in length after baking." In other words, Subway would try to fix, but could not guarantee that it would fix, the problem that spawned the lawsuit. 

Continue reading “Size Matters: Seventh Circuit Rejects Subway Footlong Settlement Because It Provided No Meaningful Benefit To Class Members”

Ignoring The 800 Pound Elephant Is OK! Wal-Mart Need Not Be Identified As Tenant In Public Notice For Planning Board Application

by:  Matthew J. Schiller

In Shakoor Supermarkets, Inc. v. Old Bridge Township Planning Board, the Appellate Division concluded that an applicant proposing to construct a 150,000 square foot Wal-Mart Superstore need not specify that the occupant of the retail space would be a Wal-Mart.  Rather, the Appellate Division deemed that the published public notice gave an accurate description of the property’s proposed use under the application and that technical details need not be provided. 

The objector challenged the Planning Board approval citing Perlmart of Lacey, Inc. v. Lacey Twp. Planning Bd., 295 N.J. Super. 234, 234 (App. Div. 1996), in which the Appellate Division deemed a public notice for a proposed K-Mart insufficient.  The Appellate Division in Perlmart stated that “while the notice informed that certain variances and minor and major site plan approvals were being sought ‘for the creation of commercial lots’ in a commercial zone, it does not tell the public of the nature of that use, i.e., a conditional use K-Mart shopping center.”  The Appellate Division disagreed with the objector in Shakoor, stating that Perlmart did not hold that it was necessary for the applicant to actually identify K-Mart as the retailer in its application, but rather, that a notice should provide a “common sense description of the nature of the application, such that the ordinary layperson could understand its potential impact upon him or her.”  The notice need not be “exhaustive” to support this standard.

The notice at issue in Shakoor identified the proposed use as “a main retail store of 150,000 s.f.”    The Appellate Division concluded that the description adequately informed laypersons that a major “big box” store was proposed for the site and alerted them to possible concerns, such as traffic, commonly associated with those stores, and that such concerns were expressed at the hearings by members of the public.  Further, the Appellate Division concluded that the multiple proposed retail uses did not constitute a legitimate cause for “heightened concern” to the public that would require a more in depth description beyond those associated with a 150,000 square foot retail store.

Therefore, so long as a proposed use is described in terms that permit ordinary laypersons to understand how the property will be used and sufficiently alerted as to its potential impact upon him or her, it will likely be deemed sufficient.

How Do You Say Scapegoat In French? “Fabulous Fab” Still The Only Target Of SEC Investigation Into Goldman Sach’s Mortgage Trading Operations

by:  Peter J. Gallagher

Several years after the start of the financial crisis, and the mortgage meltdown that caused it, only one individual, Fabrice Toure – a/k/a “Fabulous Fab,” his self-imposed moniker — has been sued by the SEC for selling the mortgage backed securities that created, or at the very least exacerbated, the crisis.  According to a recent piece in the New York Times,"SEC Case Stands Out Because It Stands Alone," Toure was an obscure trader for Goldman Sachs who was thrust into the national spotlight in 2010 when the SEC sued him for his role in creating and marketing Abacus, one of the many mortgage backed securities created by Goldman during the irrational exuberance of the early to mid 2000s.  (Abacus is interesting in its own right because it is one of the securities that was devised with the help of John Paulson, the hedge fund manager who famously made billions shorting mortgage backed securities like Abacus.)  As the article notes, the question many have raised is why Toure and why only Toure?

According to at least one former co-worker, Toure was a “junior” and “insignificant” member of a larger team at Goldman responsible for developing mortgage backed securities.  In their response to the SEC, Toure’s lawyers emphasized this point, identifying all of the other members of the team, and arguing that “singling Mr. Toure out for criticism regarding the content of this clearly collaborative effort is unreasonable.” For its part, the SEC has not explained why it focused on just one member of one team at one bank, and further on just one deal created by that bank.  However, as the article notes, recent increased interest from other regulators, including New York’s attorney general, indicates that this may not be the case for long, and the banks may soon be called upon to answer for their role in the crisis. 

 Finally, as interesting as Toure’s story is, equally interesting is the story behind how many of the documents that tell the story – including Toure’s non-public response to the SEC lawsuit – came to light.  The Times received them from an artist and filmmaker named Nancy Cohen who found the materials on a laptop given to her by a friend in 2006.  The friend told her that he found the laptop in a garbage can downtown.  Apparently, emails to Tourre continued “streaming into the device.”  While Cohen ignored them for years, she began paying attention when she learned about the SEC’s lawsuit, and subsequently gave the documents to the Times.