Eastern District Of Michigan Slices No-Poach Antitrust Claims Against Pizza Franchise
On July 29, 2019, Judge David M. Lawson of the U.S. District Court for the Eastern District of Michigan dismissed, with prejudice, antitrust claims stemming from a fast-food pizza franchise’s use of “no-poach” hiring agreements in its standard franchise contracts. Judge Lawson determined that plaintiff, who did not attempt to advance a rule of reason antitrust claim, had not pled a viable per se or quick look antitrust violation. Moreover, plaintiff did not plausibly allege that the no-poach agreements caused him a cognizable antitrust injury. Ogden v. Little Caesar Enterprises, Inc., No. 18-12792, 2019 WL 3425266 (E.D. Mich. July 29, 2019).
Plaintiff alleged that defendant Little Caesars—a nationwide fast food pizza franchise—included no-poach provisions in its standard franchise agreements. Under the terms of that provision, defendant’s franchise stores agreed not to hire certain employees of another franchise store without permission. Violators would be subject to liquidated damage claims and potential franchise license termination.
Plaintiff, a former manager at one of defendant’s franchise locations, brought antitrust claims alleging that these no-poach provisions depressed wages and limited employment mobility for low-wage fast food franchise employees. Plaintiff alleged that, because of the no-poach provision, he could not transfer to another franchise location and was forced to take a lower-paying job in another fast food chain.
Plaintiff alleged that the no-poach provision was unlawful under the per se and quick look antitrust standards but failed to allege any claim under the rule of reason. The court rejected both arguments. The court explained that the per se standard is reserved only for antitrust cases in which the challenged practice is clearly anticompetitive and requires no deeper analysis. Similarly, the quick look standard applies where “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect” (quoting California Dental Association v. FTC, 526 U.S. 756, 770 (1999)).
Applying these standards, the court found that plaintiff failed to link the no-poach provisions to any sufficiently obvious anticompetitive risk to sustain a per se or quick look claim. Among other things, the court noted that the restrictions could be explained by procompetitive justifications—namely incentivizing investment and training of the franchisee’s employees. The court thus dismissed plaintiff’s per se and quick look claims and noted that plaintiff failed to allege claims under the default rule of reason. The court dismissed with prejudice because an amended complaint would fail under the rule of reason, as plaintiff could not allege a relevant market where defendant held any market power.
Finally, the Court held that plaintiff failed to sufficiently allege a cognizable antitrust injury because plaintiff only alleged that he was unsatisfied with his working conditions and pay, and thus, left his employment with defendant’s franchise location. Plaintiff did not seek employment with another of defendant’s franchise locations, nor was he denied any such employment because of the no-poach provisions. Furthermore, plaintiff did not allege any facts of a particular lost opportunity or lost wages. Thus, the court concluded that plaintiff did not suffer any injury of the type the antitrust laws were intended to prevent, and dismissed the case with prejudice on this basis, too.