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  • Chipotle Tries to End 70,000 Restaurant Workers’ Lawsuits by Offering Them a Free Burrito

Chipotle Tries to End 70,000 Restaurant Workers’ Lawsuits by Offering Them a Free Burrito

After being hit with multiple lawsuitsfor alleged failures to provide meal periods, rest periods, wage statements, and other legally required employee protections, Chipotle is now trying to settle-out of court by proposing to pay its more than 70,000 California restaurant workers a choice between essentially acoupon for a free burrito or $6.00. According to papers filed with the San Francisco Superior Court, each coupon has a cash value of only $6. (The papers admit: “Class Members who do not affirmatively opt-out of the settlement will receive payment in the form of a $12.00 meal voucher (“Voucher Option”) or $6.00 in cash (“Cash Option”).”)

Although there are a number of different law firms representing various cross-sections of these restaurant workers, only a single law firm has actually supported this dubious deal. Experts opine that the sole reason that law firm is a proponent ofthis dubious deal is because that law firm would stand to receive over $1,000,000 if the Court approves the settlement. In other words, even if every class member redeemed his or her $6 coupon, the total value to the class members would be only $420,000.00; thus, the attorneys would stand to be paid 120% of what the class receives – and that is if every single class member redeemed the coupons. If only a quarter of the class members redeem the coupons – amore realistic scenario – the ratio of attorneys’ fees to class member payments is $500,000.00 to $105,000.00 (or a 5 to 1 ratio).

A number of appellate court opinions have, in recent years, strongly disfavored these types of “coupon settlements” because they tend to favor giving significant funds to the attorneys, while offering only nominal or little monetary value to the class members. When coupons are of little value – for example $6 – only a small percentage of class members ever actually redeem them. For this reason, the Ninth Circuit Court of Appeals recently held that the Class Action Fairness Act requires that coupon settlements must be based on the value of the coupons actually redeemed by class members; not on the value of the total coupons offered. (In re HP Inkjet Printer Litig., 716 F.3d 1173, 1183-85 (9th Cir. 2013) – holding that 28 U.S.C. § 1712(a) prohibits payment of attorneys’ fees based on a percentage of the alleged value of all coupons offered).

A recent article published by the Notre Dame Law Review says this about the types of coupon settlements Chipotle and a single law firm are promoting here:

“In class action settlements, defendants naturally prefer providing coupons or credits to paying cash. Not only do coupons cost less to the defendant, they may help the defendant to generate business. [C]oupon settlements sometimes provide little benefit to class members.

(Aggregation as Disempowerment, (2016) at 878-879.)
Tellingly, the Senate Report concerning the enactment of the Class Action Fairness Act of 2005 stated the following about “coupon” settlements:

“Where such settlements are used, the fairness of the settlement should be seriously questioned by the reviewing court where the attorneys’ fees demand is disproportionate to the level of tangible, non-speculative benefit to the class members.”
(S. REP. NO. 109-14, at 31–32.)

To make matters worse, the proposed Chipotle settlement would attempt to moot – i.e., wipe-out – the claims of nearly 3,000 managerial employees who have always been represented by a different law firm, Hogue & Belong, APC, in a case that has been prosecuted since 2016. Hogue & Belong’s attorneys have been openly critical of the proposed “Burrito Coupon Settlement” because, they say, the settlement offers no real value to the class and attempts to settle-out the claims of 3,000 employees without the consent of the attorneys that have been advancing their claims for the last 4 years.

Experts say that this Burrito Coupon Settlement is “of near-worthless value” and will “almost certainly prompt Chipotle employees throughout the State of California to object to this settlement or attempt to file their own individual claims – if they are savvy enough to know how to object.”The problem for many employees however, is that they do not know how to advance their own claims, and think they cannot afford an attorney.

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