Schneider v. Chipotle Mexican Grill, Inc.

Background

Plaintiffs brought a consumer class action alleging that Chipotle Mexican Grill, Inc. falsely or misleadingly advertised its food products as “non-GMO” and “GMO free.” The complaint alleged that Chipotle’s meat and dairy products came from animals fed genetically engineered or genetically modified feed and that its soft drinks contained corn syrup, which Plaintiffs alleged was genetically modified. Plaintiffs asserted claims under California, Florida, Maryland, and New York consumer-protection and false-advertising laws, as well as claims for unjust enrichment, misrepresentation, and declaratory relief.

The Court had previously dismissed the claims for injunctive relief, later reconsidered that ruling, and denied the motion to dismiss those claims. The Court later denied Chipotle’s motion for summary judgment, certified classes of qualifying purchasers in California, Maryland, and New York, and denied the parties’ evidentiary motions. The Court also later modified the class definitions in part and denied the modification request in part. Chipotle subsequently moved to decertify the classes, but the parties stayed further proceedings after reaching an agreement in principle to settle.

Proposed Settlement

The parties’ settlement agreement defined the Settlement Class as all people in the United States who purchased Chipotle food products in its restaurants during the class period, April 27, 2015, through June 30, 2016. The agreement excluded people who timely and validly opted out, governmental entities, the parties and their counsel, Chipotle-related persons and entities listed in the agreement, the presiding judge and related court personnel, and people or entities that had previously released claims concerning the food products.

Chipotle agreed to make a non-reversionary payment of $6.5 million. The payment would cover class-member payments, estimated settlement-administration expenses of approximately $400,000 to $600,000, incentive awards, and any attorneys’ fees and costs awarded by the Court. The agreement capped individual claims and limited the number of claims that could be submitted without proof of purchase, with proof of purchase, and per household. Settlement checks not cashed within 120 days would be void, and the remaining funds would be divided equally between Public Justice and Public Counsel.

The settlement would release claims relating to the purchase of food products marketed as non-GMO during the class period and the claims alleged in the operative complaint. Chipotle would also release claims against the class representatives, settlement class members, and class counsel relating to the lawsuit. Named Plaintiffs could seek incentive awards of up to $5,000 each, and class counsel could seek attorneys’ fees of up to one-third of the settlement fund, or $1.95 million, plus costs.

Amended Complaint and Provisional Class Certification

As part of the settlement, Plaintiffs agreed to file an amended complaint that would use the nationwide settlement-class definition and remove the Florida-law claim because the only named Plaintiff who had asserted that claim dismissed it. The Court granted leave to file the amended complaint, but provided that the amended complaint would be dismissed if the settlement was not finally approved or became void under its terms.

For settlement purposes, the Court provisionally certified the nationwide Settlement Class under Federal Rule of Civil Procedure 23. The Court found that common questions predominated because class members were exposed to uniform non-GMO representations and allegedly suffered the same injuries. The Court also found that a class action was the superior method for resolving the dispute. It appointed the Named Plaintiffs as class representatives and appointed Kaplan Fox and Kilsheimer LLP and Kobre & Kim LLP as class counsel.

Preliminary Approval Analysis

Under Rule 23(e), a class settlement requires court approval. At the preliminary stage, the Court considered whether the settlement appeared to result from serious, informed, non-collusive negotiations; whether it improperly favored class representatives or other groups; whether it fell within the range of possible approval; and whether it had obvious deficiencies.

The Court found no basis to deny preliminary approval because of the settlement’s provision preventing Chipotle from objecting to a fee request of up to $1.95 million plus costs. Although the Court described that provision as a warning sign requiring close review, it found that the agreement was non-reversionary and did not provide counsel with a disproportionate share of the settlement. The Court stated that it would scrutinize any fee request more carefully at final approval.

The Court also found a sufficient connection between the proposed recipients of uncashed settlement funds and the class. Public Justice would direct its funds to a food-related project, and Public Counsel has a consumer-rights and economic-justice division that handles consumer-fraud and unfair-business-practice matters. The Court found that both organizations shared the class members’ interest in preventing consumer fraud involving food-product labeling.

The Court found that the possible incentive awards did not prevent preliminary approval because such awards can compensate class representatives for work and risks undertaken for the class. It deferred deciding whether any award, and what amount, would be reasonable until the final fairness hearing. The Court also found that the settlement amount was within the possible approval range, considering Plaintiffs’ estimated recovery, the risks of continued litigation, and the risks of maintaining class treatment and prevailing at trial. It found no obvious deficiencies.

Notice Plan

The Court approved a notice process using a third-party settlement administrator, a digital media campaign, and publication notices in People magazine and the East Bay Times. The Court accepted the parties’ representation that no list of identifiable class members existed and concluded that direct notice was not feasible. The proposed digital campaign was designed to reach people through online advertisements related to Chipotle, fast-casual dining, Mexican food, and related searches or websites. The Court found that the process was reasonably calculated to notify class members and that the notice content adequately described the action, class definition, claims, exclusion process, deadlines, and binding effect of a judgment.

Disposition

The Court GRANTED Plaintiffs’ motion for preliminary approval of the class-action settlement and GRANTED Plaintiffs’ request to file an amended complaint. It directed Plaintiffs to file the amended complaint within five days, directed the parties to propose a schedule for notice, fee and incentive-award motions, objections and opt-outs, and final approval, and directed the parties to implement the proposed notice plan. The order provided preliminary approval; it did not finally approve the settlement or determine the merits of Plaintiffs’ allegations.