Antitrust Law Daily Wrap Up, ADVERTISING—Cal. App.: McCormick & Schmick’s “Kobe” beef settlement affirmed, (May 1, 2015)

By Greg Hammond, J.D.

A settlement between consumers and McCormick & Schmick’s Seafood Restaurants, Inc., arising from McCormick’s allegedly false advertising and misrepresentations concerning what it called “Kobe” beef, was affirmed by the California Court of Appeal in Los Angeles. The court, despite the objector’s arguments to the contrary, determined that the summary notices were sufficient and that the notice requirements did not need to comply with California’s Consumer Legal Remedies Act (CLRA) (Flannery v. McCormick & Schmick’s Seafood Restaurants, Inc., April 29, 2015, Rubin, L.).

Background. In 2012, a class action was filed against McCormick, alleging that the restaurant chain misrepresented items on its menu as “Kobe” beef. The class asserted claims for intentional and negligent misrepresentation, fraud, and false advertising in violation of California’s Unfair Competition Law (UCL) and False Advertising Law (FAL). A settlement, however, was reached in 2013, in which McCormick agreed to change the description of certain items to “American Kobe Style” beef and to provide a $15 “comp card” to any class member who timely submitted required documentation to the settlement administrator. Consumer John W. Davis opposed the settlement, arguing that the definition of the parties was overbroad. The trial court agreed that the class definition was overbroad to the extent it included customers of restaurants other than McCormick, but disagreed that the settlement itself was overbroad. Davis appealed final approval of the settlement agreement.

Notice. In support of his appeal, Davis argued: (1) summary notices that were posted at McCormick restaurants and on an Internet website were not adequately directed at a class comprising of restaurant patrons over a four-year period; and (2) the notice requirements did not comply with the CLRA.

The court first determined that the trial court did not abuse its discretion in finding that the manner of notice was reasonably calculated to apprise the class members of the pendency of the action. Specifically, it was noted that a summary notice was posted at McCormick host desks for a period of 90 days, informing consumers of the proposed settlement, explaining that they could be entitled to compensation if they purchased “Kobe Beef” during the qualifying period, and directing them to a website for further information. The settlement information was additionally on cards at customers’ tables. Further, the website contained a detailed settlement notice, claim and opt-out forms, and important deadlines.

Second, the court noted that the complaint never alleged a cause of action under the CLRA. Rather, the class brought a claim, in part, under the UCL, which was predicated on a violation of the CLRA. However, the court found no authority stating that CLRA procedures become applicable to a UCL cause of action that is predicated on a violation of the CLRA. The judgment was therefore affirmed.

The case number is B257450.

Attorneys: Edwin Aiwazian (Lawyers for Justice, PC) for Daniel Flannery. Andrew R. Hunter (Von Behren & Hunter LLP) for McCormick & Schmick's Seafood Restaurants, Inc. C. Benjamin Nutley (Kendrick & Nutley) for John W. Davis.

Companies: McCormick & Schmick’s Seafood Restaurants, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews