Western District Of Kentucky Upholds Complaint Challenging Franchise No-Poach Agreements As Horizontal Restraints Of Trade
On October 21, 2019, Judge Joseph H. McKinley Jr. of the United State District Court for the Western District of Kentucky issued a mixed order and opinion that denied Defendants Papa John’s International, Inc. and Papa John’s USA’s (“Papa John’s” or “Defendants”) motion to dismiss Plaintiffs’ class claims, but granted Defendants’ motion to compel one of the named plaintiffs to arbitrate. In Re Papa John’s Employee and Franchisee Employee Antitrust Litigation, NO: 3:18-CV-00825-JHM (W.D. Ky. 2019). The case involves three consolidated putative class actions filed by current and former employees against defendants, alleging no-poach, or no-hire, clauses in the company’s franchise agreements are a horizontal restraint on trade and a per se violation of Section 1 of the Sherman Act. The Court ruled that plaintiffs adequately alleged a per se violation, but that discovery would be necessary to determine what standard of review would apply moving forward.
Seventh Circuit Allows Beer Conspiracy Allegations One More Shot
On September 5, 2019, Judge Kenneth Ripple, writing for a unanimous panel of the U.S. Court of Appeals for the Seventh Circuit, partially reversed a lower court’s dismissal of antitrust claims alleging that two brewers conspired to restrict a competitor’s exports of beer to Ontario, Canada. Mountain Crest SRL, LLC v. Anheuser-Busch InBev SA/NV, No. 18-2327, 2019 WL 4198809 (7th Cir. Sept. 5, 2019). The Seventh Circuit held that agreements with a Canadian government-controlled entity (the Liquor Control Board of Ontario, or “LCBO”) were immune from antitrust scrutiny under the act of state doctrine. However, the Court held that claims of an alleged conspiracy between competitors to strong-arm the LCBO into entering into the agreements did not implicate the act of state doctrine and were improperly dismissed.
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).
Department Of Justice Seeks To Intervene In No-Poach Class Action To Counter Arguments That Such Agreements Are Per Se Illegal
On January 25, 2019, the Justice Department’s Antitrust Division filed a Notice of Intent to File a Statement of Interest in Myrriah Richmond et al. v. Bergey Pullman Inc., et al., No. 2:18-cv-00246, in the United States District Court for the Eastern District of Washington. The Notice follows a barrage of settlements between fast-food chains and state antitrust enforcers involving the chains’ “no-poach” agreements—that is, agreements between a franchisor and franchisees that restrict the hiring of one franchisee’s employees by another franchisee. The Justice Department’s decision to involve itself in Myrriah Richmond is significant. By emphasizing—as its Notice did—that such franchisor-franchisee no-poach agreements are “vertical restraints” subject to the rule-of-reason (rather than illegal per se, or subject to only a “quick look” analysis of legality), the Justice Department provides analytic clarity and useful guidance as courts address the growing number of actions challenging different variations of no-poach agreements in different factual scenarios.
United States District Court For The Eastern District of New York Rejects One-Sided Market And Single-Brand Market Definitions In Credit Card Antitrust Litigation
On January 14, 2019, Judge Nicholas G. Garaufis of the U.S. District Court for the Eastern District of New York granted defendant American Express’ motion for summary judgment as to three of the four relevant markets proposed by the plaintiffs in their antitrust challenge to the “anti-steering” provisions in American Express’s merchant contracts. In re American Express Anti-Steering Rules Antitrust Litigation, No. 11-MD-2221 (NGG) (RER) (E.D.N.Y. Jan. 15, 2019). Following the U.S. Supreme Court’s 2018 decision in a parallel challenge to the same contractual provisions by the U.S. Department of Justice (“DOJ”) and several states, Ohio v. American Express Company, 138 S. Ct. 2274 (2018), Judge Garaufis rejected the retail merchant plaintiffs’ proposed product market definitions that were limited to the merchant side of card transactions, i.e., the “one-sided” markets, finding that the Supreme Court’s decision required an examination of competition on both sides of the credit card platform – the cardholder side and the merchant side – i.e., the “two-sided” market. The court also rejected the plaintiffs’ attempt to limit the relevant product market to American Express card transactions (the “Amex-only market”) because other general purpose credit and charge cards are reasonably interchangeable with American Express cards and therefore in the same relevant product market. American Express did not move for summary judgment on the plaintiffs’ two-sided, all general purpose credit card market definition, and the case will proceed to trial on that theory.
Western District Of Washington Rejects Per Se Rule, But Allows Cinnabon Worker’s No-Poach Class Action To Proceed After “Quick Look” Analysis
On November 13, 2018, Judge Robert J. Bryan of the United States District Court for the Western District of Washington denied a motion to dismiss a class action complaint by a former fast-food worker alleging that the company’s agreement to prohibit the re-hiring of one franchisee’s employees by another franchisee violates the Sherman Antitrust Act. Yi v. SK Bakeries LLC, et al., No. 3:18-cv-05627, Dkt. No. 33 (W.D. Wa. Nov. 13, 2018). Judge Bryan did, however, caution plaintiff against relying solely on a “quick look” theory, and suggested that whether franchisees are, in fact, a “single entity” incapable of conspiring with one another is a fact-specific question that did not merit a pleading-stage dismissal.
United States Supreme Court Upholds Rejection Of The Government’s Antitrust Challenge To American Express’s Merchant Contracts
On June 25, 2018, the U.S. Supreme Court, in a 5-4 decision by Justice Thomas, held that provisions in American Express Company’s (“American Express” or “Amex”) and its operating subsidiary’s contracts with merchants that restricted the ability of these merchants to steer customers to other credit or charge cards did not violate the Sherman Act. Ohio v. Am. Express Co., 585 U.S. __, slip op. at 1 (2018). The Court held that plaintiffs—the United States Department of Justice and the Attorneys General of several states—failed to satisfy their burden of proving anticompetitive effects in the relevant market under the rule of reason. Id. at 10. The ruling has important implications for antitrust analysis, not only for the credit card industry, but for other industries that operate in two-sided markets where firms must compete simultaneously for different groups of customers whose demands are distinct but deeply interrelated.
U.S. District Court For The District Of New Jersey Dismisses Class Action For Failure To Identify Concerted Action And Relevant Market
01/23/2018On January 9, 2018, Judge William J. Martini of the United States District Court for the District of New Jersey dismissed with prejudice a putative class action brought by a purchaser of Jaguar vehicles against Jaguar Land Rover North America LLC, Jaguar Land Rover Limited (collectively, the “manufacturer defendants”), their dealers, and a third-party consulting company. Baar v. Jaguar Land Rover North Am., LLC, et al., No. 2:17-04142 (D.N.J. Jan. 9, 2018). Plaintiff alleged that defendants unreasonably restrained trade by implementing and enforcing a no-export agreement that prohibited purchasers from reselling Jaguar’s vehicles abroad for at least one year. The Court held that the plaintiff’s complaint failed to state a violation of federal or state antitrust laws because it did not adequately allege (1) concerted action among the defendants, or (2) that Jaguar’s no-export policy produced anticompetitive effects within a cognizable antitrust product and geographic market.
Sixth Circuit Holds That Homeowners Stated A Plausible Tying Claim Against Neighborhood Developers For Tying Purchase Of Telecommunications Services To The Sale Of Homes
On October 30, 2017, a divided panel of the United States Court of Appeals for the Sixth Circuit reversed a district court’s denial of plaintiffs’ motion to file an amended complaint alleging that the defendants—a group of affiliated real estate development companies—illegally used their alleged market power in the sale of homes in three centrally planned neighborhoods to force the plaintiffs to purchase telecommunication services from another defendant, Crystal Clear Technologies, LLC, a telecommunications company that the developers owned and controlled. Cates v. Crystal Clear Technologies, LLC, No. 16-6714 (6th Cir. Oct. 30, 2017). The majority affirmed, however, the district court’s dismissal of the plaintiffs’ claim that the arrangement between Crystal Clear and the defendant developers violated the Federal Communications Commission’s “Exclusivity Order” (In the Matter of Exclusive Service Contracts For Provision Of Video Services In Multiple Dwelling Units and Other Real Estate Developments, 22 FCC Rcd. 20235, 20251 (2007), 47 C.F.R. § 76.2000(a)), which prohibits cable television distributors from entering into exclusive contracts to provide video programming, on the grounds that the complaint and contracts themselves contradicted the allegation that the contracts were in fact exclusive.
Eastern District Of North Carolina Finds Plaintiff Plausibly Pleads Tying Claims In Foam Insulation Antitrust Case
On October 24, 2017, Judge Terrence W. Boyle of the Eastern District of North Carolina declined to dismiss monopolization and other antitrust claims based on alleged tying and exclusive dealing of foam insulation products against Armacell, Inc. K-Flex, Inc. v. Armacell, Inc., No. 5:17-CV-279-BO (E.D.N.C. Oct. 24, 2017). The Court held that plaintiff K-Flex, Inc.’s complaint plausibly alleged that Armacell violated Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 & 2), Section 3 of the Clayton Act (15 U.S.C. § 14), and North Carolina’s Unfair and Deceptive Trade Practices Act (N.C.G.S.A. § 75-1.1), by conditioning sales of one product – polyethylene or “PE” foam insulation, as to which Armacell had substantial market power – on the distributor’s agreement to purchase a second type of insulation product – elastomeric foam insulation - exclusively from Armacell and coercing a distributor to terminate the plaintiff. The opinion is notable in sustaining a monopolization claim against a manufacturer based largely on an alleged exclusive dealing/tying arrangement with a single regional distributor.