CHICAGO — The controversial new “soda pop tax” that went into effect last month has already sparked class-action lawsuits against retailers and restaurants for allegedly miscalculating the tax, but David Almeida, an attorney at Benesch, Friedlander, Coplan & Aronoff LLP, believes these suits likely are aimed only at generating quick paydays for plaintiffs' lawyers.

“The threat posed by these lawsuits is twofold," Almeida told the Cook County Record. "First, they are brought only as class actions, which opens companies up to discovery regarding a large number of transactions. And second, plaintiffs’ attorneys are bringing these cases without regard for the fact that class-wide damages are very low. Usually these transactions involve the alleged improper collection of between $0.02 and $0.21. Despite that, class-wide damages are very low (likely less than $50,000)."

The new tax requires sellers of sweetened beverages to add $0.01 per ounce to any beverage that contains sugar, sucrose, glucose or an artificial sweetener like aspartame. Beverages like coffee and tea, which are typically sweetened by the buyer, aren’t affected.

Almeida doesn’t think the lawsuits are going to be a big headache for businesses. 

“The underlying theory of these lawsuits - that companies are going out and intentionally overcharging taxes - simply makes no sense," he said. "Companies do not keep these taxes. These cases are generally grounded in theories of fraud, which requires that the business intend for consumers to rely on a deceptive practice. Plaintiffs’ lawyers are not going after bad actors; they are going after businesses acting in good faith to make every effort possible to comply with the change in law.” 

Almeida said these cases are not likely certifiable as class actions.  

“Plaintiffs (more appropriately, their counsel) are manufacturing these cases by doing things like purchasing fountain drink cups and using self-service machines to select an unsweetened beverage after paying the tax," he said. "There is simply no way to identify a similar class of people, which would be plagued by a number of individualized questions.”  

Almeida said he believes the only goal of these lawsuits is to coerce businesses into settling and paying plaintiffs' lawyers.

“Plaintiffs’ counsel rushed to file these lawsuits almost immediately after the tax became effective," he said. "Plaintiffs’ counsel know that there is no pot of gold at the end of the rainbow—there is only so much in $.05 charges that can be at issue. No plaintiffs’ lawyer would want to certify this class. It would cost more to get class members their relief than they would be entitled to. The cost of postage would cost more than class members would get. Knowing this, plaintiffs’ counsels’ only goal here is to force a quick settlement.” 

Cook County may see a rush of lawsuits in the near future, but Almeida thinks that will subside. 

“Tax class actions go through momentary bursts of popularity, but quickly die down," he said. "A few years ago, there were a handful of lawsuits regarding taxing delivery fees and another handful of lawsuits of the proper tax treatment where coupons are used. Once businesses see these suits, everyone checks for compliance and moves on. And, plaintiffs’ lawyers learn that these cases cost more than their worth, which naturally tamps down such cases.”

Right now, the lawsuits have focused on fairly large companies like Walgreens, Subway and PepsiCo. Almeida feels that plaintiffs lawyers won’t go after mom-and-pop businesses. 

“The focus has been on companies with dozens of locations in Cook County in an effort to have as large a class as possible," he said. "There is no incentive to go after mom-and-pop shops as maximum class-wide damages are likely in the four figures.”  

Almeida, however said there are things that businesses can do to protect themselves from these kinds of lawsuits. 

"First, make sure that your point of sale system is programmed properly," he said. "Second, make sure that your employees are aware of the tax and are trained in what beverages are and are not subject to the tax. And third, offer refunds of the tax whenever a customer comes forward regarding an improper tax assessment.”

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Organizations in this Story

Benesch, Friedlander, Coplan & Aronoff LLP
333 W Wacker Dr
Chicago, IL - 60606

Cook County
118 N Clark St
Chicago, IL - 60602

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