In a case that had implications for a nationwide class of sandwich purchasers, Subway was sued for their failure to properly ensure that their signature “Foot-Long” submarine sandwiches were actually a full 12 inches. Only one serial objector appeared, Ted Frank, who was represented by Adam Schulman, both of the Center for Class Action Fairness. At issue was the way an uncontested settlement amount of $525,000 was distributed amongst class counsel, class representatives, and the class. Given the weakness of the plaintiff’s claims, Defendants, Objector Frank, and the Court all agreed that a larger monetary settlement was unlikely. As laid out in the settlement and affirmed by the Court in the Final Approval, $520,000 was awarded to class counsel and $5,000 was distributed to the named plaintiffs. As this was an injunctive relief-only class, no funds were directed to class members.
Objector Frank contended that the $525,000 should be administered as a common fund, with class counsel then entitled to reasonable fees and the remainder being directed to class members. However, as the Court pointed out, “one major problem [with this proposal] is the impracticality of distributing a settlement as small as $525,000 to a class composed of many millions of consumers” (Decision and Order, page 23). Frank contended at the Fairness Hearing that administration could be accomplished for $100,000, a figure that the Court found “extremely unrealistic” (id, page 14). Even using Frank’s estimations and other generous assumptions, the Court found that the average value of a claim would be 28 cents. Assuming a class member took 5 minutes to file a claim and assuming they value their time at the current federal minimum wage ($7.25/hour), it would still cost class members 32 cents to receive their compensation.
Objector Frank argued that the fund could be structured as a coupon settlement, with “30 cents off” coupons available at the point of sale. However, the settling parties had previously considered coupons but had rejected it due to likely settlement administration costs and because the cost of the coupons would be borne by independent franchisees, rather than the Defendants themselves.
Ultimately, the Court rejected all of Objector Frank’s arguments, finding that the fees and incentive awards were eminently reasonable given the strength of the claims, and approved the settlement.
UPDATE (8/26/2017): On August 25, 2017 the court found in appellant's favor. The case has been reversed and remanded.