Since 2010, there has been a 375% rise in the number of class actions being raised against food and drink companies in the US. The number of actions has risen from 45 in 2010 to a staggering 214 in 2022. For example, currently, Wendy's are facing a class action alleging that the burgers displayed in promotional images on its menu and marketing materials are shown to be at least 15% larger than they are in reality. Taco Bell also faced a class action in New York earlier this year, which alleged that various items photographed on its menu, including pizzas and wraps, were overstated in its advertisements - having at least double the amount of filling compared to that served. So what can this exponential rise in fast food related class actions tell us about the future of group proceedings both in Scotland and beyond?

What is an opt-out class action?

The important aspect to note regarding class actions against food and drinks companies in the US is that most, if not all, of these actions will be raised on an opt-out basis. In reality, in the US, class actions are almost always raised on an opt-out basis. This means that anyone falling within the scope of the class of the action is considered to be part of the class, unless they specifically choose to leave. For example, class members may opt out if they determine their own individual claim is large enough to sue independently (which, if successful, may result in them receiving a much higher individual award of damages than if they had shared in any award distributed amongst the larger class). However, in reality, the opt-out rate in most consumer class actions is usually low and in the US is under 2%.

For instance, A&W and Keurig Dr Pepper were ordered to pay $15 million in settlement of a dispute regarding their drinks cans which were labelled as being "made with aged vanilla" following a finding in a class action that they used synthetic flavouring. In that particular case, anyone who purchased at least one A&W root beer or cream soda product with the label “Made With Aged Vanilla” on it between February 2016 and June 2023, will be eligible to receive a portion of the settlement sum. This is because anyone who falls within the class criteria is considered to have automatically opted in and, therefore, is able to benefit from the success of the litigation.

Given the success of fast-food companies in America and the scale of their custom, it is unsurprising that litigation funders in the US are inclined to invest in these types of cases. In particular, due to the use of the opt-out procedure, the size of the potential class is far-reaching and the opportunity for the class to be awarded extensive damages is high.

What does the future look like for opt-out procedure in Scottish group proceedings?

With the number of class actions against food and drinks companies growing exponentially in the US, with a particular focus on advertising components, this raises the question of whether a similar pattern may start to arise in Scotland now that group proceedings are a permitted form of procedure in the Court of Session.

Group proceedings were introduced in Scotland on 31 July 2020 following the implementation of Part 4 of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 ("2018 Act"). The 2018 Act set out a legislative framework which has the capacity for the Scottish courts to operate an opt-in and an opt-out procedure. However, at present, Scotland is only operating on an opt-in basis. Therefore, potential members of the class must explicitly agree to form part of the action. English class actions can proceed on either an opt-in or an opt-out basis depending on the type of claim and procedure used. See our previous blog for more information.

In 2022, US companies spent a record of $3.5 billion on class action defence, with the two main drivers being (1) an increase in the number of companies facing class actions, and (2) the claims themselves becoming larger. In contrast, group proceedings/class actions can also be very costly actions to raise for pursers/plaintiffs. Therefore, given the financial implications, it is unlikely that actions similar to those being pursued against large food outlets in the US would become prominent in Scotland without opt-out procedure first becoming available here. If, however, this procedure was to become operative, it is likely that litigation funders would be much more attracted to the prospect of investing in these types of group proceedings in Scotland, leading to a potential increase in cases.

Contributors

Hannah Clark

Solicitor

Craig Watt

Partner & Solicitor Advocate