Southern District Of Illinois Refuses To Certify A Class Alleging That Jimmy John’s No-Poach Clauses Suppressed Wages
08/10/2021On July 23, 2021, the United States District Court for the Southern District of Illinois denied a named plaintiff’s motion for class certification against Defendants Jimmy John’s Franchise, LLC and Jimmy John’s Enterprises, LLC on the basis that he did not meet the factors required to certify a class—among which included his failure to show that his claims where typical of the claims of the potential class members he purported to represent. Conrad v. Jimmy John’s Franchise, LLC, No. 18-CV-00133-NJR (S.D. Ill. July 23, 2021).
Plaintiff, who was fired from a Jimmy John’s franchise for calling a colleague an expletive, filed a complaint against Jimmy John’s and its franchisees alleging that various no-poach clauses in Jimmy John’s franchise agreements constituted naked restraints on trade in violation of Section 1 of the Sherman Act. Plaintiff further alleged that the no-poach provisions reduced employee mobility which in turn suppressed his and potential class members’ wages. Plaintiff filed a motion to certify a class of all Jimmy John’s employees. The Court denied the motion.
To certify a class, a plaintiff must show that the proposed class can satisfy Federal Rule of Civil Procedure 23(a) requirements along with one of the requirements of 23(b)—and in this case, the Court analyzed 23(b)(3)’s predominance requirement. In denying plaintiff’s motion to certify a class, the Court held that plaintiff failed to meet Rule 23’s typicality, adequacy, and predominance requirements.
As to typicality, the Court found that plaintiff did not satisfy the requirement that his claims “arise from the same event or practice or course of conduct that gives rise to the claims of other class members” and that his…claims are based on the same legal theory.” It was insufficient that plaintiff worked at a Jimmy John’s branded restaurant when he never attempted to leave his job for higher wages and was never denied the opportunity to switch jobs because of any no-poach provision. Indeed, plaintiff admitted that the no-poach provision was “irrelevant” and “just didn’t really have anything to” do with him.
The Court also found the adequacy requirement lacking because of a conflict of interest among groups of class members—here, between managerial and non-managerial employees. The Court found that managers are often tasked with enforcing the no-poach provisions that plaintiff challenged and that managers’ incentives differ from those of employees. Among them, the Court cited the managers’ incentive to reduce mobility and consequently wages in order to increase their share of Jimmy John’s profit-sharing bonuses model.
Turning to predominance, the Court noted the predominance requirement is satisfied when “‘common questions represent a significant aspect of [a] case and . . . can be resolved for all members of [a] class in a single adjudication.’” The Court found that predominance was not met here because plaintiff could not prove through common evidence “that the Jimmy John’s franchisees had a conscious commitment to suppress labor mobility.” The Court found it particularly difficult to prove this through common evidence since there was evidence that the no-poach clauses were often not enforced and that most individuals who requested permission to switch restaurant locations were granted permission (including 94 percent of non-managers and 88 percent overall). Of note, in assessing predominance, the Court held that the rule of reason standard, rather than a per se standard, would apply “in this monopsony case challenging a nationwide franchise’s use of intrabrand restraints that were arguably ‘designed to help [the company] more effectively compete with other brands by ensuring cooperation and collegiality among the franchisees, and by encouraging investment in training.” In holding that the rule of reason would apply in this case, the Court cited the recent Supreme Court case NCAA v. Alston, 141 S. Ct. 2141 (2021).
Ultimately, this case illustrates that antitrust plaintiffs, in addition to government regulators, are continuing to focus on conditions related to employees and, in particular, no-poach clauses. However, this decision also makes clear that the mere existence of a no-poach clause does not mean either that they are per se illegal or that class treatment is proper.