THE COMPLEXITIES OF LITIGATING A NO-POACH CLASS CLAIM IN THE FRANCHISE CONTEXT

By Jason Hartley and Fatima Brizuela¹

After a week of training at Returns R Us ("RRU"), Paloma Navarro was excited to start her new job as a tax preparer. Although her starting hourly wage was not very high, she saw a future with RRU, a nationwide tax services company with nearly 1,000 stores in 30 states. At least it was a big improvement over her prior work as an executive assistant who did little more than run menial errands for an arrogant senior law partner. RRU presented Paloma with the opportunity to start a career and grow. After all, Paloma knew that RRU had hundreds of locations around the country. She could build her experience at her local branch, work hard, and eventually move to a store near the coast, fulfilling her dream of living by the ocean.

Paloma applied to location after location in her favorite coastal cities. But she could not even get an interview despite responding to advertisements from RRU franchises that were specifically looking for workers with her precise skills, and each advertising a nearly identical compensation range for Paloma’s position. It was not until she followed up with a call to one of those places that she learned the real reason for her rejections. "We can’t hire you," said the manager of that RRU store. "There is a no-poaching provision in our franchise agreement. We aren’t allowed to solicit or hire anyone who works at another RRU location. Sorry." This was devastating news to Paloma. She could not believe that her years of hard work for RRU meant that she had to work for that same RRU franchise or change companies. She decided to see a lawyer.

Karen Danielle was an accomplished trial lawyer. She had scored some of the largest verdicts for her employment clients, both individually and in class actions. Paloma came to her distraught. After some consoling, Karen answered Paloma’s first question, "What, exactly, is a no-poach agreement?"

I. WHAT ARE NO-POACH AGREEMENTS?

A no-poach agreement is made between two or more entities (including franchisees of the same company or competitors within an industry) not to compete for each other’s employees, either during their active employment or for a period after termination of their employment. No-poach agreements may include agreements not to recruit, solicit, hire or do anything that could create opportunities for an employee to move from one company to another, or even from one location to another.

"Do I have a case and if so, can you take it?" asked Paloma. Karen paused. Paloma could have a case, and Karen could conceivably take it, but Karen had to evaluate this developing area of law. She had not litigated a no-poach case before, and was unsure how courts were treating them. In particular, whether no-poach provisions were legal in the franchise context seemed a potentially thorny question. Plus, she was not terribly experienced with antitrust law. Karen promised to do some research and get back to Paloma very soon. She started with the standard that a court would use when reviewing these antitrust claims.

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II. ANTITRUST STANDARD OF REVIEW

Section 1 of the Sherman Act prohibits every contract, combination, or conspiracy, in restraint of trade or commerce among the several States.² These restraints can be "horizontal" in nature, such as a conspiracy between competitors to jointly raise the prices of the commodity product they sell, or "vertical," such as agreements to restrain trade between companies at different levels of distribution.

There are three major standards of review in federal Section 1 antitrust cases. The first is the per se standard, which is a bright-line test that holds that certain conduct is automatically illegal if it is proven to have occurred such that no further inquiry into the effect on the market or intent of those engaged in the violative conduct is necessary. Most horizontal restraints, such as price-fixing, market allocation agreements, tying agreements, bid-rigging, and certain group boycotts are subject to per se antitrust liability.³ These horizontal agreements between separate and unrelated competitors have "such predictable and pernicious anticompetitive effect and such limited potential for procompetitive benefit that they are deemed unlawful per se."⁴

The second standard of review is the rule of reason—a multi-factored reasonableness test designed to evaluate the purpose and effect of the challenged conduct.⁵ Many vertical agreements are subject to the rule of reason standard, including loyalty discounts, bundling, exclusive dealing, and resale price maintenance agreements under federal law. Courts applying the rule of reason must examine the likely anticompetitive effects of the vertical agreement at issue, along with its beneficial and legitimate business justifications.⁶ The policy behind this higher standard of proof is that some agreements among vertically-involved companies may actually deliver efficiencies to the market, be pro-competitive, or are ancillary to a legitimate competitive agreement.

The third standard of review is the product of judicial rule-making, and is something of a hybrid between the other two standards. It involves a "quick look" version of the rule of reason and requires that the defendant advance an affirmative defense in the form of a legitimate justification for suspect conduct before the court can proceed to a fuller assessment of any competitive effects.

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Notably, Section 1 of the Sherman Act is not limited to arrangements to fix sales prices. Agreements among competing buyers to fix the prices at which they purchase can also violate Section 1, and it is this formulation that brings no-poach agreements within the purview of the Sherman Act.⁷ A no-poach agreement between competing employers is certainly not the traditional commodity sales price-fixing agreement. But it is an agreement among employers to lower the price paid for labor, and thus, it violates the antitrust laws. Antitrust laws can and have been applied to labor markets using the same analytical approach used in evaluating consumer product markets.⁸ Whether this approach is in fact suitable when analyzing challenges to no-poach franchise agreements remains to be seen.

When competing in the same labor markets, no-poach agreements between any two or more employers are considered horizontal restraints, regardless of whether the employers are competitors in the downstream product markets for the sale of goods or services. Thus, naked no-poach agreements between totally separate horizontal labor market competitors are subject to the less-stringent per se standard of review.⁹ Such agreements are condemned by the courts, the Department of Justice ("DOJ") and the Federal Trade Commission ("FTC"). In fact, both the DOJ and the FTC together announced their policy against no-poach agreements as per se violations of Section 1. In the Fall of 2016, the DOJ and the FTC jointly issued written guidance entitled, "Antitrust Guidance for Human Resource Professionals."¹⁰ According to the Antitrust Division, "[n]o-poach agreements are naked if they are not reasonably necessary to any separate, legitimate business collaboration between the employers . . . [and] are per se unlawful because they eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers."¹¹ From that point forward, the DOJ "intended to proceed criminally against naked no-poach and wage-fixing agreements."¹²

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III. FRANCHISE NO-POACH AGREEMENTS

In an unusual move, however, in March 2019 the DOJ modified its position with respect to no-poach agreements made within a single franchise, reasoning that because single-franchise no-poach agreements are part of a larger franchise agreement between the parties, they do not qualify as "naked" restraints.¹³ The DOJ’s 2019 position clashed with the position taken by several state attorneys general, led by the State of Washington, condemning no-poach agreements within franchises as per se antitrust violations. In fact, the Washington Attorney General ("AG") had been so successful in its enforcement actions that by August 2019 it had convinced dozens of companies to willingly withdraw their franchise no-poach agreements without filing a single complaint.¹⁴ The AG’s position that such no-poach agreements constitute per se violations no doubt influenced negotiations between the companies and the States. This placed the AGs and the DOJ at odds on the issue of franchise no-poach agreements.

The DOJ’s Statement of Interest sparked significant opposition from the AG and the American Antitrust Institute ("AAI").¹⁵ The AAI drafted a position letter to the DOJ characterizing the DOJ’s position on the standard of proof in franchise no-poach agreements as "misguided" and expressed that it was "concerned that the Statement of Interest threatens to lead district courts astray and discourage antitrust challenges to patently anticompetitive labor-market restraints that exploit the most vulnerable workers in the franchise sector."¹⁶ Indeed, more than half of the major franchise companies in the U.S. include no-poach clauses in their franchise agreements, and these agreements are more often adopted in low-wage, low-skilled industries.¹⁷ In support of its position, the DOJ responded to the AAI, citing an AAI legal policy paper published in 2018 for the proposition that the rule of reason is the applicable standard, "unless the arrangement amounts to a hub-and-spoke conspiracy."¹⁸ In its position letter, however, the AAI made perfectly clear that it was prepared to "clarify that [it] disagrees with the interpretations of the law offered in the Statement of Interest . . . and to explain the basis for [AAI’s] belief that the Division’s approach to franchise no-poaching cases is unsound."¹⁹

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IV. WHAT STANDARD OF REVIEW SHOULD APPLY TO FRANCHISE NO-POACH AGREEMENTS?

The conflicting positions of the DOJ and the AGs on the standard that should apply when an anti-poaching provision within a franchise agreement is challenged have not been resolved uniformly by the courts. Indeed, it remains a relatively novel issue. In the few instances in which no-poach franchise agreements have come up the response from the bench has been mixed.

Even before the DOJ’s March 2019 Statement of Interest, many defendants in private franchise no-poach actions brought motions to dismiss arguing that the rule of reason standard of review should apply, and that plaintiffs did not adequately plead the elements necessary for such a claim. But few have been successful. For example, in Butler v. Jimmy John’s, defendants argued that plaintiff did not plead a plausible enough claim under the Sherman Act to survive a 12(b) motion.²⁰ The Jimmy John’s Court found that plaintiffs plausibly alleged a "hub-and-spoke" conspiracy where the "hub" was comprised of a collection of vertical agreements with other firms—the "spokes"—who in turn entered into horizontal agreements to make up the "wheel."²¹ Although the court declined to decide the applicable standard of review this early in the litigation, Judge Reagan explained that if the evidence shows that franchisees are independent, the agreements will likely be subject to the hybrid quick-look analysis.

Separately, in Deslandes v. McDonald’s the court had no trouble concluding that the no-poach provision included in McDonald’s franchise agreement was akin to an agreement to divide the market.²² Walking through its reasoning, the court explained that McDonald’s "[franchisees are not granted exclusive rights or territories and are specifically warned that they may face competition from other franchisees, new franchisees, and restaurants owned by McOpCos [McDonald’s Operating Companies]." Because McOpCos restaurants were in direct competition with its franchisees, the court held that the restrictive provision in its franchise agreements was a horizontal restraint.²³ Despite the horizontal nature of the restraints at issue, the court found the quick-look approach appropriate. In another case involving a no-poach franchise agreement, Judge Bryan of the Western District of Washington relied in part on Deslandes v. McDonald’s and found that Cinnabon employee plaintiffs had plausibly alleged facts to show that the no-poach provisions in defendants’ franchise agreements should be analyzed under the quick-look test.²⁴

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Of the recent litigation targeting no-poach provisions in franchise agreements, so far just one defendant has managed to escape suit. In Ogden v. Little Caesars Enterprises,²⁵ Judge David M. Lawson of the Eastern District of Michigan found that plaintiffs did not plead facts sufficient to show that their case fit "within the narrow set of cases to which the Supreme Court has applied the per se analysis, and even under the hybrid ‘quick-look’ approach the complaint fail[ed] to state a claim."²⁶ Strangely, the court cited to Butler v. Jimmy John’s to support this reasoning. There, as Judge Lawson noted, the plaintiff "explicitly stated in his complaint" that the Jimmy John’s store where he worked required him to sign an employee non-competition agreement, "which the franchisees force on their employees in order to enforce the no-hire provisions between stores." The no-poaching provision at issue in Little Caesars was instead included in the franchise agreements between the corporate parent and its franchisees. The court’s flawed analysis appears to suggest that a restrictive employment covenant that affects an employee’s mobility within the franchise brand—and to which the employee is a party apprised of the terms and limitations the agreement—qualifies as "far more onerous" so as to warrant a quick-look, whereas a restrictive covenant to which the employee is not a party, and therefore not apprised of the terms, limitations, let alone existence of the agreement, but which carries with it the same restrictions affecting the employee’s mobility within the franchise brand deserves the stricter rule of reason. Practicality and reason contradict this logic. Although the Little Caesars court did not definitively dismiss the potential application of a quick-look analysis to no-poach agreements, it reasoned that the no-poach provisions in other cases where courts have found that a quick-look analysis might apply were "far more onerous and directly enforced employment restraints."²⁷

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The challenge facing the courts is the sometimes-vertical nature of the markets in which franchise agreements operate. As noted above, many vertical agreements are analyzed under the rule of reason, such as resale price maintenance cases.²⁸ But it is important to understand that this standard applies to those agreements not simply because they are vertical in nature, but because certain types of vertical conduct can be "replete with procompetitive justifications."²⁹ As the Washington AG points out, because franchisors commonly own and operate their own corporate owned stores in addition to their network of franchise locations throughout the country, "it would be a mistake to view a franchise agreement as vertical in all instances."³⁰ When a franchise agreement includes a no-poaching provision that restricts solicitation and hiring among franchisees and a corporate-owned store—"indisputably a horizontal competitor of a franchisee for labor"—the agreement must be analyzed as a per se restraint.³¹

A common misperception is that all vertical agreements are analyzed under the rule of reason. They are not.³² The question of when the higher rule of reason burden applies turns not on whether the agreement is simply vertical in nature, but rather on whether it is ancillary to a legitimate pro-competitive agreement. "A formalistically vertical restraint" with no known, cognizable efficiencies can have a close family resemblance to a per se illegal horizontal restraint in its effects, regardless of the different levels of distribution at which the parties operate.³³ Absent an ancillary legitimate pro-competitive agreement, vertical agreements bearing a close family resemblance to a horizontal restraint should be analyzed as per se illegal restraints, or, at the very least, should otherwise be analyzed under the quick-look test.³⁴

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Vertical agreements between a franchisor and franchisees are no exception. The DOJ, in its Statement of Interest in the Stigar case, acknowledged that "if a company plausibly pleads direct competition between a franchisor and its franchisees to hire employees with similar skills, a no-poach agreement between them is correctly characterized as horizontal and, if not ancillary to any legitimate and procompetitive joint venture, would be per se unlawful."³⁵ Thus, unless the no-poach agreements come under the ancillary restraints doctrine, it is still generally accepted that they would be per se unlawful anticompetitive agreements.

But, even under the ancillary restraints doctrine, merely attaching an anticompetitive agreement or provision to a legitimate one does not transform the analysis from per se or quick look to rule of reason. "Ancillary" is defined as "providing necessary support to the primary activities or operation of an organization, institution, industry, or system."³⁶ Unsurprisingly, the legal definition of an ancillary agreement is similar. "To be ancillary, and hence exempt from the per se rule, an agreement eliminating competition must be subordinate and collateral to a separate legitimate transaction and reasonably necessary to make the main transaction more effective in accomplishing its purpose."³⁷ Thus, mere attachment to a legitimate agreement is not sufficient. "[A] restraint is not saved from the ‘naked’ classification simply because it is included in some larger joint venture arrangement that is clearly efficient."³⁸ There must be a "plausible connection between the specific restriction and the essential character of the legitimate agreement."³⁹ A legitimate basis for the restraint must be identified and it must be necessary to the legitimate underlying agreement. In other words, it is not ancillary if it is not necessary to make the broader agreement effective. It is also not ancillary until a legitimate basis for the restraint is identified.

The rationale for adjudicating vertical restraints under the rule of reason is that they may produce efficiencies that promote competition with outside companies, notwithstanding the potential that they may reduce competition in the internal labor market.⁴⁰ For example, in Leegin Creative Leather Products v. PSKS, Inc., the Supreme Court recognized that for that resale price maintenance ("RPM") policy at issue, cognizable procompetitive justifications were identified in the expansive economics literature submitted, but it did not make any blanket pronouncement that intrabrand vertical restraints always produce efficiencies.⁴¹ In fact, the Court cautioned that while vertical agreements setting minimum prices may have procompetitive justifications, "the potential anticompetitive consequences of vertical price restraints must not be ignored or underestimated."⁴² Eliminating "free riding" is the primary economic theory on which a pro-competitive claim for a RPM policy is based, whereby discount retailers free ride on retailers who furnish services then capture some of the increased demand those services render.⁴³ In the context of franchise no-poach agreements, the ostensibly legitimately pro-competitive agreement is the franchise agreement itself.

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In that context, a franchisor might argue that a vertical restraint is reasonable because it prevents intrabrand free-riding, whereby one franchisee is prevented from raiding another franchisee’s employees after the employing franchisee invested time and money to train the employees, thereby promoting interbrand competition.⁴⁴ Notably, no-poach agreements are significantly less frequent in industries with higher average wages and education levels. This seemingly challenges models that view these employment covenants as a mechanism to encourage training investment, or protect intellectual or quasi-intellectual property.⁴⁵ In fact, the AAI acknowledged that the free-rider justification for a franchise no-poach provision is a "non-starter," because among other things, training for the entry level employees most often subject to these agreements, is "minimal and unavoidable."⁴⁶ Moreover, even if the free-rider theory had teeth, the only arguable efficiency is the cost savings to franchisees, which it may reinvest in its brand to sell more product, arguably promoting interbrand competition in the downstream product market. Even if cognizable product market benefits result, procompetitive effects in a product market cannot be used to justify a restraint restricting the solicitation and hiring of employees.⁴⁷

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By agreeing—against a franchisee’s own self-interest—to refrain from hiring other franchisee’s employees, all franchisees in a chain reduce competition in their labor market and decrease the likelihood of an employee leaving for another franchisee’s potential job offer. "This is equivalent to a reduction in the elasticity of labor supply faced by individual franchisees and, in the usual models of monopsony."⁴⁸

Perhaps the biggest problem with the DOJ and defendant franchisees’ analyses under the ancillary restraints doctrine is the lack of any actual connection between the franchise agreement and the no-poach agreement. On this issue, the AAI stated that it could not imagine a legitimate basis for the no-poach agreement, notwithstanding the ways in which it is vertical in nature.⁴⁹ Notably absent from the DOJ’s Statement of Interest was any justification for the restraint on the labor market. Instead, the DOJ seemed to classify all such vertical agreements as pro-competitive ancillary agreements, characterizing the franchisee-franchisor relationship as "in many respects vertical" because they "normally conduct business at different levels of the market structure."⁵⁰ The DOJ goes on in this somewhat circular fashion to say that, because agreements between the franchisor and franchisee are vertical, the franchise no-poach agreements should also be assessed under the rule of reason.

But recounting the vertical nature of the franchise agreements containing the no-poach agreements falls far short of identifying any legitimate basis for the no-poach agreements themselves. It also ignores the market reality that while a franchisor-franchisee agreement may be vertical in nature, the relationship between them in the labor market and the entire relationship between franchisees is not, and the "full-blown rule of reason is inappropriate for vertical restraints that have horizontal anticompetitive effects and no known, cognizable efficiencies."⁵¹ Should a restriction between competing franchisees, facilitated through an agreement with the franchisor, be subject to a higher standard of proof than other horizontal agreements? It becomes an even tougher task when one considers the fundamental fairness of no-poach agreements. Unlike the typical agreements within a franchise where the parties themselves explicitly agree to limit the geographic scope of a franchisee’s territory, or restrict what products are sold, no-poach agreements between franchisors and franchisees or between franchisees of a single brand concern employees who generally do not know about the no-poach agreements and certainly do not negotiate them or agree to them. Employees are not parties to the no-poach agreements. Employees are simply the ones who suffer the consequences of the agreements without realizing any upside.

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As the AAI pointed out, in response to the Washington AG’s efforts, 66 companies willingly abandoned their no-poach provisions, agreeing not to use them anymore throughout the United States, without the AG even filing a complaint.⁵² If the no-poach provisions were truly ancillary (that is, necessary) to the franchise agreements, then they would not have so easily and quickly been abandoned. It seems that, in fact, these no-poach agreements have no legitimate justification, and "the ancillary restraints doctrine is exceedingly unlikely to apply when a vertical restraint has no plausible justifications or cognizable efficiency benefits."⁵³

For someone like Paloma, whether the no-poach agreement is evaluated under the per se rule, the rule of reason or a quick look, the effect is the same. Her wages were depressed, and her job mobility was dramatically restricted.

V. CLASS CERTIFICATION ISSUES MAY ARISE EARLY

Karen concluded Paloma likely had a case in terms of liability. Paloma’s next question was whether it was a case that Karen would take. Because Paloma could not afford to pay Karen’s hourly rate and Karen could not afford to work on a contingency basis for the relatively low damages Paloma may be entitled to individually, it would have to be a class action, Karen continued her research into class certification issues surrounding no-poach agreements.

In addition to uncertainties surrounding the appropriate standard of review in franchise no-poach class actions, such cases also face a unique set of hurdles at the class certification stage. Against a backdrop of heightened federal scrutiny of restrictive hiring and solicitation provisions in franchise agreements, private lawsuits challenging no-poaching agreements are on the rise.⁵⁴ Though these cases remain in the very early stages of litigation, they are well-positioned to influence the development of no-poach class action jurisprudence. To understand the particular challenges franchise-employee plaintiffs may face at the class-certification stage, an examination of the early no-poach cases that reached class certification is instructive.

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A. The Importance of Economic Analysis on Predominance

Class certification in past no-poach cases, as with most antitrust cases, often turned on plaintiffs’ ability to demonstrate through economic analysis that common issues with respect to antitrust injury and damages predominated over individualized issues under Rule 23(b)(3). The Third Circuit’s opinion in Weisfeld v. Sun Chemical Corp., is instructive on this point.⁵⁵ There, plaintiffs sought to certify a class consisting of all personnel who provided technical services and possessed specialized skills in the manufacture, distribution, and sale of printing inks, and who were employed by any of the defendants or their predecessors during the relevant time period. In Weisfeld, the court found that predominance was not satisfied at the class certification stage when, instead of the "multiple regression and yardstick analyses [that] have been widely accepted," plaintiffs’ expert instead submitted a scant three-page declaration stating that he intended to use a multiple regression model.⁵⁶ In short, as with most antitrust cases, no-poach cases will typically require a detailed expert opinion grounded in established methods of economic analysis at the class certification stage to show that class-wide impact can be assessed through reliable methods.

B. Defining a No-Poach Class Presents Particular Issues as to Commonality

Almost a decade after the Weisfeld decision, the Ninth Circuit affirmed certification of a nationwide class of employees who were the subjects of employer no-poach agreements.⁵⁷ In In re High-Tech Employees, plaintiffs alleged that several leading high tech companies engaged in an "overarching conspiracy" to eliminate competition for skilled labor, with the intent and effect of suppressing the compensation and mobility of defendants’ employees.⁵⁸ Again, defendants were quick to contest plaintiffs’ satisfaction of Rule 23(b) (3)’s predominance requirement, arguing that neither antitrust impact nor damages were susceptible to class-wide proof.⁵⁹

Plaintiffs originally sought certification of an "All Employees" class which included more than 100,000 employees of the high-tech companies, and only in the alternative, certification of a more limited class of salaried, technical, creative, and research development employees ("Technical Class").⁶⁰ The court found that the "adjudication of Defendants’ alleged antitrust violation will turn on overwhelmingly common legal and factual issues," and that plaintiffs satisfied their Rule 23(b)(3) burden on the issue of the predominance of common issues with respect to damages.⁶¹ Based on the evidence available to plaintiffs at the time, however, the court was unable to conclude that plaintiffs adequately demonstrated that common issues regarding the impact of the alleged violation on members of the All Employee Class or Technical Class would predominate under Rule 23(b)(2).⁶² Addressing the court’s concerns, plaintiffs amended the proposed class definition and successfully sought to certify only a nationwide Technical Class of employees.⁶³ So why was the class certified in High Tech but not in Weisfeld?

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First, rather than a simple three-page declaration lacking the substance of any proposed regression analysis submitted by plaintiffs in Weisfeld, plaintiffs in High Tech offered substantial evidence, including documentary evidence and expert reports using statistical modeling, economic theory, and data, to show that common questions predominated over individual questions in determining the impact of antitrust violations.⁶⁴ The High Tech court found that plaintiffs’ evidence and expert reports "paint[ed] a picture of Defendants’ business practices and the market in which Defendants operate that suggests that common proof could be used to demonstrate the impact of Defendants’ actions on Technical Class members."⁶⁵ Importantly, the High Tech Plaintiffs’ showed that Defendants maintained formal compensation structures and made significant efforts to maintain internal equity within those structures, supporting plaintiffs’ theory that the anti-solicitation agreements’ downward pressure on individual employees’ salaries would have applied similar downward pressure across defendants’ salary structures and on all Technical Class employees’ salaries.⁶⁶ Next the court found that plaintiffs’ documentary evidence supported its theory that wage suppression within an individual defendant firm would have affected Technical Class members employed by another defendant firm because the defendants viewed each other as competitors for the same labor.⁶⁷

In a related follow-up action—Nitsch v. Dreamworks Animation SKG Inc—the Ninth Circuit affirmed certification of a similar class of employees who alleged that their employers entered into a series of bilateral agreements limiting employee mobility and compensation.⁶⁸ Once more, the Ninth Circuit rejected defendants’ arguments that individual issues with respect to antitrust injury and damages predominated.⁶⁹ Importantly, in Nitsch the certified class consisted of animation and visual-effect employees, and specifically, those who held job titles delineated in plaintiffs’ expert report.⁷⁰ "[I]n passing," the defendants argued that plaintiffs’ claims were not typical of the class because some class members had arbitration or release agreements with some defendants, and the named plaintiffs were not parties to those same agreements.⁷¹ The court explained that "defenses that may bar recovery for some class members of the putative class, but those that are not applicable to the class representative do not render a class representative atypical under Rule 23."⁷²

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Next, on the issue of predominance, the court emphasized that the "inquiry is not a mechanical inquiry of ‘bean counting’ to determine whether there are more individual questions than common questions," but rather, a "hard look at the soundness of statistical models."⁷³ Defendants challenged predominance arguing that as a result of the arbitration agreements and releases signed by some class members, "overwhelming individual inquiries" predominated.⁷⁴ Again, based on extensive documentary evidence and economic theory, the court disagreed and found that common questions predominated over individual questions with respect to antitrust impact.⁷⁵ Specifically, the court found that the "evidence suggest[ed] that Defendants maintained a formal wage structure and used internal equity as a factor in determining compensation."⁷⁶

VI. SEAMAN V. DUKE UNIVERSITY, ET AL. ILLUSTRATES THE IMPORTANCE OF RIGOROUS ECONOMIC ANALYSIS IN SUPPORT OF CLASS CERTIFICATION

After reviewing Weisfeld and the High Tech line of cases, Karen was satisfied that if discovery unearthed evidence showing that RRU had formal compensation systems in place and/or maintained some sort of internal equity structure, this documentary evidence along with reliable economic analysis would suffice to show that common questions relating to antitrust impact would predominate for a class of RRU employees. In fact, Karen was confident of this because in Paloma’s case, the no-poach agreements were between RRU and its franchisees, eliminating the need to engage in a cumbersome company-by-company analysis of proprietary compensation structures. Moreover, in light of RRUs long-standing history in the tax services industry and hundreds of locations throughout the country, Karen was optimistic that discovery would likely produce evidence to support a theory of antitrust impact based on an internal equity structure, similar to that in High Tech Employees.

As Karen continued her research to determine whether Paloma’s case would be suitable for class action treatment, she could not help but notice similarities to the story of Dr. Seaman, a college professor who was foreclosed from seeking employment at a competing university as a result of a no-hire agreement to which she was not a party. Dr. Seaman’s story unfolded in Seaman v. Duke University, et al.⁷⁷ There, Dr. Danielle Seaman, a radiologist and Assistant Professor of Radiology at Duke University, brought suit against defendants Duke University ("Duke"), the University of North Carolina at Chapel Hill ("UNC"), and their affiliates alleging defendants agreed they would not hire or attempt to hire faculty employed by each other, thereby resulting in "suppressed compensation [for plaintiff and members of the class] throughout defendants’ medical schools and healthcare facilities."⁷⁸ "Faculty" was defined to include employees who had an academic appointment at either the Duke or UNC Schools of Medicine.⁷⁹

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Dr. Seaman sought to certify a class of all persons employed by defendants "as a faculty member, physician, nurse, or other skilled medical staff."⁸⁰ Defendants did not "seriously contend" that the requirements of Rule 23(a) were not satisfied. Instead the dispute centered on whether common issues with respect to antitrust impact and damages predominated over individual issues.⁸¹

In line with High Tech and Nitsch, Dr. Seaman asserted an "internal equity structure" impact theory under which defendants’ conduct would have suppressed compensation on a faculty-wide basis.⁸² Specifically, Dr. Seaman’s theory contended that "individual harm of decreased lateral offers and corresponding lack of retention offers," suppressed compensation across all faculty as a result of defendants’ internal equity structures, which she defined as policies and practices designed to ensure "relatively constant compensation relationships between employees."⁸³ To support her impact theory, Dr. Seaman presented documentary and testimonial evidence, as well as expert reports providing economic theory and statistical modeling, including "sharing" regression analyses that examined how an individual faculty member’s compensation moved in relation to other faculty members’ compensation. Finding the sharing regression analyses provided further support for Dr. Seaman’s antitrust impact theory, the court was satisfied that this was a "class-wide theory supported with class-wide proof."⁸⁴ With respect to damages, using common data, including payroll and other employment records for all faculty across defendants, plaintiff’s expert conducted regression analyses to develop an aggregate class-wide damages estimate for all faculty, which the court also found was consistent with plaintiff’s antitrust impact theory.⁸⁵

As for non-faculty included in the proposed class definition, Dr. Seaman’s expert averred that by virtue of defendants’ internal equity structures, the no-hire agreement as to faculty and the resulting suppression of faculty compensation had a trickle-down effect as to all non-faculty employees. Although the court agreed that the Seaman plaintiffs met the threshold requirements to pursue the same theory of antitrust impact with respect to non-faculty employees as faculty employees, and also found that the damages analysis was consistent with the impact theory, the Seaman court declined to include non-faculty in the certified class. The court cited concerns regarding manageability, particularly in light of the different documentary and testimonial evidence of internal equity required for non-faculty, which the court notes, is specific to non-faculty.⁸⁶ Moreover, though similar to the faculty sharing regression model, the non-faculty sharing regression model analyzed different compensation metrics, requiring an "additional evidentiary step" to connect the non-faculty evidence to the no-hire agreement’s alleged impact on faculty compensation.⁸⁷ Importantly, the court expressly noted that non-faculty class members could pursue a separate action, thereby leaving open the possibility that non-faculty employees could seek class certification based on the same antitrust impact theory offered for faculty members, with respect to defendants’ internal equity structures.⁸⁸

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For Karen, Seaman confirmed that while she and her team may someday be tasked with showing whether RRU employed an internal equity structure to support an antitrust impact theory, at this early stage it might be acceptable to table such complex inquiries until she obtained discovery that experts could rely upon in supporting the class certification stage of the litigation.

Now satisfied that Paloma could and should pursue her claim as a class action and equipped with an understanding of what a satisfactory antitrust impact theory at class certification might look like, Karen refocused her efforts on developing Paloma’s case and began to draft her complaint. For Karen, an understanding of these earlier cases indeed shed light at the end of what she once perceived to be a dark no-poach class certification tunnel. However, as another saying goes, sometimes the light at the end of the tunnel is a train. Karen soon learned that the predominance related inquiries she had tabled for a later time may in fact be ripe for determination at the pleading stage of the litigation. In deciding whether these considerations could wait, she had to consider a recent decision out of the Western District of Pennsylvania Court: In re Railway Employee No-Poach Antitrust Litigation.⁸⁹"

VII. IN RE RAILWAY EMPLOYEE NO-POACH ANTITRUST LITIGATION SUGGESTS ADVANCING A PRIMA FACIE SHOWING THAT REQUIREMENTS OF RULE 23 ARE SATISFIED AT THE PLEADING STAGE

In Railway, the plaintiffs alleged that their employers, who were "among the world’s dominant rail equipment suppliers," entered into unlawful no-poach agreements pursuant to which each agreed not to hire or solicit the other’s employees.⁹⁰ Defendants quickly moved to dismiss the consolidated class action complaint and to strike the class action allegations.⁹¹ As for the applicable standard of review, the court agreed with plaintiffs that the no-poach agreements, pled as market allocation agreements that were not ancillary to any other agreements with proper business purposes, may be considered per se violations.⁹² With respect to defendants’ motion to strike class action allegations, however, the court focused its analysis on whether the Railway plaintiffs satisfied the predominance requirement under Rule 23(b)(3), at the pleading stage.

[Page 16]

The court explained that plaintiffs bear the burden of "advancing a prima facie showing that the class action requirements of Fed. R. Civ. P. 23 are satisfied or that discovery is likely to produce substantiation of the class allegations."⁹³ The proposed class was defined to include all persons employed by, or hired through staffing agencies or vendors to work for, defendants or their affiliates, at any time from the start of the conspiracy to the present.⁹⁴ In their motion to strike, defendants challenged plaintiffs’ class definition as overbroad and argued that the consolidated class action complaint shows plaintiffs would not be able to satisfy typicality under Rule 23(a) and predominance under Rule 23(b).

The Railway Plaintiffs alleged that defendants’ antitrust violation was the same for all members of the proposed class and likewise resulted in suppressed compensation for all class members.⁹⁵ As for typicality, while the defendants conceded that the "underlying legal theory of Plaintiffs’ claims may apply class-wide," they argued that the factual underpinnings of the claims, including for example, terms of employment, would differ in that an employee who has special skills in the industry would individually negotiate terms, as opposed to one without skills specific to the industry.⁹⁶ The court explained that despite possible factual differences among the various kinds of employees in the putative class, the court could not at that early stage of the litigation conclude that those differences created a conflict of interest between the named plaintiffs and members of the putative class, so as to render the named plaintiffs’ claims atypical of the class.⁹⁷

On the issue of predominance, defendants argued that plaintiffs would not be able to satisfy the requirements under Rule 23(b)(3) because plaintiffs’ "expansive class definition will require the Court to consider each employee’s contract, salary history, professional qualifications, geographic location and willingness to relocate, and fungibility within the labor markets, when determining proof of both antitrust injury and damages."⁹⁸

The Railway Plaintiffs alleged that defendants’ agreements applied to all employees regardless of their title, position, or status, and that each agreement harmed each plaintiff regardless of his or her employer because every agreement "disrupted the normal bargaining and price-setting mechanisms that apply in the labor market, causing suppressed compensation levels generally."⁹⁹ In a rare turn, Judge Conti concluded that the plaintiffs had not "set forth factual allegations sufficient to make a prima facie showing that defendants’ agreements caused all employees of defendants harm (antitrust impact)" that can be proven on a class-wide basis or that discovery will likely substantiate plaintiffs’ allegations that the common issues will predominate over the individual questions raised by plaintiffs’ proposed class of all employees."¹⁰⁰

[Page 17]

Notably, all of the various decisions the court discussed at length in its order and which provide the framework for its own antitrust impact analysis—including Weisfeld, High Tech, Nitsch, and Seaman—were decided following extensive discovery, briefings on class certification, and the submission of multiple, detailed expert reports that included economic theory, statistical modeling, and data. Citing Weisfeld, the court acknowledged that the Third Circuit Court of Appeals recognized that evidence showing class members’ compensation was correlated over time may be evidence to show that antitrust injury in a wage suppression case can be proven on a class-wide basis.¹⁰¹ Then citing High Tech, Nitsch, and Seaman, the court further acknowledged "other courts in wage suppression or no-hire cases have certified classes and found antitrust impact could be proven on a class-wide basis when there is evidence that the class members’ wages were correlated and the defendant-employers emphasized internal or external equity, which ensured individuals performing similar jobs are compensated on a similar level."¹⁰²

The Railway court concluded that in the no-poach context, in order to satisfy the requirement of predominance with respect to antitrust impact, there must be evidence to show that defendants’ compensation structures in the relevant industry "were so rigid that the compensation of all class members were tethered together."¹⁰³ In other words, the Railway decision proposes that at the earliest stage of litigation and well in advance of any meaningful discovery, class action plaintiffs like Paloma are required to set forth sufficient factual allegations concerning the internal compensation structures employed by each of the named defendants to demonstrate the unyielding nature of these compensation systems such that the compensation for all employees strictly adheres to and/or is bound by these fixed systems.

While the Railway decision may provide important guidance for class plaintiffs and employees like Paloma who are in the initial stages of considering whether and how to pursue class claims challenging no-poach provisions in franchise agreements, it remains to be seen whether other courts will follow this heightened standard at the pleading stage. That said, the predominance and related compensation structure inquiries Karen recently tabled are now at the forefront of her analysis and consideration in drafting Paloma’s class action complaint.

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VIII. CONCLUSION

Karen concluded there are many complexities for a plaintiff to navigate when considering whether to bring a no-poach antitrust action. Thoughtful analysis at the outset, coupled with a clear understanding of the antitrust analysis courts have applied in this context, is critical to securing a meaningful recovery for Paloma and other clients subject to no-poach employment restraints.

[Page 19]

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Notes:

^1. Jason Hartley is the managing partner of Hartley LLP in San Diego. Jason represents plaintiffs in commercial contingency representation, class action litigation, antitrust and unfair competition. He has represented a number of Fortune 500 companies as plaintiffs and served as lead counsel and in senior litigation roles in numerous class actions. Fatima Brizuela is an associate at Hartley LLP in San Diego. Fatima’s practice is focused on antitrust and consumer protection class action litigation.

^2. 15 U.S.C. § 1.

^3. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984); Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5—6 (1958); Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc. ("BMI" ), 441 U.S. 1, 19—20, (1979). Because these actions are conclusively presumed to be unreasonable, no inquiry into the harm actually caused is required. Copperweld, 467 U.S. at 768; Northern Pacific, 356 U.S. at 5.

^4. State Oil Co. v. Khan, 522 U.S. 3, 10.

^5. See Robert H. Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division, 74 Yale L.J. 776 (1965) and 75 Yale L.J. 373 (1966); Thomas J. Piraino, Reconciling the Per Se and Rule of Reason Approaches to Antitrust Analysis, 64 S. Cal. L. Rev. 685 (1991).

^6. See, e.g., National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., 468 U. S. 85, 109—110, and n. 39 (1984); National Soc. of Professional Engineers v. United States, 435 U. S. 679, 688—691 (1978); Board of Trade of Chicago v. United States, 246 U. S. 231, 238 (1918).

^7. See National Macaroni Mfrs. Ass’n v. FTC, 345 F.2d 421, 426-27 (7th Cir. 1965) (finding that an agreement among buyers of a product, rather than sellers, to limit the amount of premium priced durum wheat products purchased per se illegal because the effect of the restriction was intended to, and did reduce the price of durum wheat that had risen as a result of a shortage); Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co, 549 U.S. 312, 317—18 (2007) (holding that the same test applied to both predatory-pricing and predatory-bidding claims under the Sherman Act).

^8. See FTC Hearings on Competition and Consumer Protection in the 21st Century, Public Comments of 18 State Attorneys General on Labor Issues in Antitrust (July 15, 2019) [hereinafter, "AGs Public Comments"].

^9. Federal Trade Commission, Department of Justice Antitrust Division, Antitrust Guidance for Human Resource Professionals, at 3 (Oct. 2016)).

^10. Press Release, U.S. Dep’t of Justice, Justice Department and the Federal Trade Commission Release Guidance for Human Resources Professional on How Antitrust Law Applies to Employee Hiring and Compensations (Oct. 20, 2016), available at www.justice.gov/atr/file/903511/download.

^11. Id.

^12. Id. See also Mark L. Krotoski, DOJ Antitrust Division Announces Imminent Criminal Prosecution for "No Poaching" Agreements, NAT’L L. REV. (Feb. 6, 2018), https://www.natlawreview.com/article/dojantitrust-division-announces-imminent-criminal-prosecution-no-poaching [https://perma.cc/CFQ2-VE79].

^13. Corrected Statement of Interest of the United States of America, Stigar v. Dough Dough, Inc., No. 2:18-CV-00244-SAB (E.D. Wash. Mar. 8, 2019), ECF No. 34 [hereinafter "Statement of Interest"]. The Department of Justice filed their Statement of Interest in the consolidated cases against Carl’s Jr., Auntie Anne’s and Arby’s in the Eastern District of Washington federal court Stigar v. Dough Dough, Inc., No. 2:18-cv-00244-SAB (E.D. Wash. 2018), See infra, Note 55. In response, the Attorney General of Washington submitted an amicus brief to aid the court’s assessment of the state antitrust law claims in Stigar, taking an opposite stance to that proposed by the DOJ and arguing for per se treatment, at least for those claims for which the State AG acts as the primary enforcer for the State. Stigar v. Dough Dough, Inc., et al., No. 2:18-CV-00244-SAB (E.D. Wash. March 11, 2019), Amicus Curiae Brief by the Attorney General of Washington, ECF No. 36 [hereinafter, WA AG Amicus Curiae Brief]. The three cases in the Eastern District of Washington settled in just a matter of days after the Washington AG filed its amicus brief, on March 18, 2019 before the court weighed in on the applicable standard in these consolidated cases.

^14. In fact, 66 companies willingly agreed to abandon the no-poach provisions in their franchise agreements as a result of the AG’s effort. Washington State Off. of the Att’y Gen., Press Release, AG Ferguson’s Initiative Ends No-Poach Clauses At Four More Corporate Chains Nationwide (Aug. 8, 2019), https://www.atg.wa.gov/news/news-releases/ag-ferguson-s-initiative-ends-no-poach-clauses-four-more-corporate-chains

^15. See generally AAI Letter, WA AG Amicus Curiae Brief.

^16. American Antitrust Institute Position Letter at 1 (May 2, 2019), available at https://www.antitrustinstitute.org/wp-content/uploads/2019/05/AAI-No-Poach-Letter-w-Abstract.pdf [hereinafter "AAI Position Letter"].

^17. Krueger A. B. and O. Ashenfelter (2018), Theory and Evidence on Employer Collusion in the Franchise Sector, NBER Working Paper Series No. 24831, at 4, http://www.nber.org/papers/w24831 [hereinafter Krueger & Ashenfelter, 2018] ("No-poaching agreements are comparatively less frequent in industries with higher average wages and education levels, contrary to models that view no-poach agreements as a mechanism to encourage training investment or to protect intellectual property.").

^18. AAI Position Letter at 1 (quoting Randy M. Stutz, The Evolving Antitrust Treatment of Labor-Market Restraints: From Theory to Practice, Am. Antitrust Inst. ( July 31, 2018) [hereinafter "AAI Paper"].

^19. Id.

^20. Butler v. Jimmy John’s Franchise, LLC, 331 F. Supp. 3d 786, 795 (S.D. Ill. 2018).

^21. Id. at 797. The lawsuit was first led by Sylas Butler in January 2018, and now is now captioned Conrad v. Jimmy John’s Franchise, LLC, Case No. 3:18-cv-00133-NJR-RJD (S.D. Ill. May 21, 2019), ECF No. 189-1. Judge Reagan subsequently retired and defendants filed another "extremely similar" motion, including many of the same arguments that Judge Reagan’s prior order already adjudicated. Id. at 2. Applying the law of the case doctrine, the newly presiding judge denied defendants’ renewed motion to dismiss. Id. at 6.

^22. See Deslandes v. McDonalds USA LLC, Case No. 1:17-cv-04857, ECF No. 53, at 12 (N.D. Ill. June 25, 2016) ("[t]hus, because a no-hire agreement is, in essence, an agreement to divide a market, the Court had no trouble concluding that a naked horizontal no-hire agreement would be a per se violation of the antitrust laws.").

^23. Id. at 11.

^24. Yi v. SK Bakeries, LLC et al., Case No. 18-cv-05627-RJB (W.D. Wash. filed Aug. 3, 2018).

^25. Ogden v. Little Caesar Enterprises, Inc., et al., No. 2:18-CV-12792 (E.D. Mich. filed Sept. 7, 2018).

^26. Ogden v. Little Caesar Enterprises, Inc., et al., No. 2:18-CV-12792, Op. & Order (July 29, 2019) ECF No. 56 at 1.

^27. Id. at 16.

^28. See Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877, 127 S. Ct. 2705, 168 L. Ed. 2d 623 (2007).

^29. Id. at 889.

^30. WA AG Amicus Curiae Brief at 6.

^31. Id. (citing Am. Motor Inns, Inc. v. Holiday Inns, Inc., 521 F.2d 1230, 1235, 1253-54 (3d Cir. 1975) ( holding that "otherwise unreasonable restraints of trade are not insulated from the antitrust laws" simply by the fact that the company functions as a franchisor in addition to operating motels on the same horizontal market level as its franchisees).

^32. See also MM Steel, L.P. v. JSW Steel (USA) Inc., 806 F.3d 835, 850 (2015) (declining to hold that the Leegin "silently overruled" the line of cases applying per se liability to each member of a group boycott despite vertical components of the conspiracy).

Vertical agreements can be used to facilitate coordination of a horizontal conspiracy without the other parties to those agreements even knowing about, or agreeing to the horizontal conspiracy’s goals. United States v. Apple, Inc., 791 F.3d 290, 325 (2d Cir. 2015). "Because it may be difficult to distinguish such facilitating practices from procompetitive vertical resale price agreements, Leegin notes that those ‘vertical agreement[s] . . . would need to be held unlawful under the rule of reason.’ But there is no such possibility for confusion in the hub-and-spoke context, where the vertical organizer has not only committed to vertical agreements but has also agreed to participate in the horizontal conspiracy. In that situation, the court need not consider whether the vertical agreements restrained trade because all participants agreed to the horizontal restraint, which is ‘and ought to be, per se unlawful.’" Id. at 324-25 (internal quotations omitted).

^33. Polygram Holdings, Inc. v. FTC, 416 F.3d 29, 36 (2005 (Ginsburg, J) (a "rebuttable presumption of illegality arises" when there exists a "close family resemblance between suspect practice and another practice that already stands convicted in the court of consumer welfare."); Gen. Leaseways, Inc. v. Nat’l Truck Leasing Assoc., 744 F.2d 588, 595 (7th Cir. 1984) (taking a quick-look to conclude that the market division agreement amounted to a per se illegal, horizontal conspiracy because no reason was suggested why an otherwise procompetitive agreement to provide reciprocal truck-leasing services required participants not to compete with one another in the leasing of trucks).

^34. See Butler v. Jimmy John’s Franchise, LLC, 331 F. Supp. 3d 786, 793 (S.D. Ill. 2018) (acknowledging that the quick-look approach is appropriate when the restraint is a vertical agreement in which the anticompetitive effects of the agreement are so obvious that "an observer with even a rudimentary u nderstanding of economics could conclude that the a rrangement in question would h ave an anticompetitive effect on customers and markets")(quoting California Dental Ass’n v. F.T.C., 526 U.S. 756, 770 (1999))).

^35. Corrected Statement of Interest of the United States of America, Stigar v. Dough, Inc., No. 2:18-CV-00244-SAB (E.D. Wash. Mar. 8, 2019), ECF No. 34, at 13.

^36. Id.

^37. Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 224 (D.C. Cir. 1986)

^38. XI Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law, ¶ 1908b, 230 (2d. ed. 2000).

^39. Gen. Leaseways, Inc. v. Nat’l Truck Leasing Assoc., 744 F.2d 588, 595 (7th Cir. 1984).

^40. AAI Position Letter at 7.

^41. 551 U.S. 877, 890 (2007).

^42. Id. at 894.

^43. For example, a consumer might learn about a manufacturer’s product from a retailer who offers product demonstrations, invests in inviting showrooms, or otherwise hires and trains knowledgeable employees to educate its customers on the products it carries. 551 U.S. at 890-91. If that consumer can turn around and purchase that same manufacturer’s product at a discount from another retailer who does not offer any of these services, the retailer providing the service will eventually cease to do so. Leegin provides that the minimum resale price may alleviate this problem by preventing discounters from undercutting the service provider, and with price competition decreased, the manufacturer’s retailers compete among themselves over services, thereby promoting interbrand competition. Id.

^44. See e.g. Eichorn, 248 F.3d at 146 (limited no-hiring agreement ancillary to business sale insofar as primary purpose was to "retain the skilled services of [the buyer’s] employees"); Cesnik v. Chrysler Corp., 490 F.Supp. 859, 868 (M.D. Tenn. 1980)(primary purpose of limited agreement was to "retain the skilled services of management-level employees").

^45. Alan B. Krueger & Orley Ashenfelter, Theory and Evidence on Employer Collusion in the Franchise Sector 18 (Princeton Univ., IZA Institute of Labor Economics, Working Paper No. 11672, at 4 Sept. 2017).

^46. AAI Position Letter at 8, n. 40.

The complaints in the consolidated cased in the Eastern District of Washington allege no-poach agreements covering crewmembers who twist and bake soft pretzels at Auntie Annie’s, Stigar v. Dough, Inc., No. 2:18-cv-00244-SAB (E.D. Wash. filed Aug. 3, 2018), crewmembers working at Arby’s fast food sandwich shops, Richmond v. Bergey Pullman, Inc., No. 2:18-cv-00246-SAB (E.D. Wash. Filed Aug. 22, 2018), and shift leaders at Carl’s Jr. fast food sandwich stores, Harris v. CJ Star, LLC, No. 2:18-cv-00247-TOR (E.D. Wash filed Aug. 3, 2018).

^47. AAI Position Letter at 3; See also Deslandes v. McDonald’s USA, LLC, No. 1:17-CV-04857, Mem. Op. & Order (N.D. Ill. June 25, 2018) at 14-15.

"[D]efendants nonetheless argue that their restraints have procompetitive benefits. Specifically, defendants argue that the no-hire restriction promotes interbrand competition, by which they mean between McDonald’s and Burger King, rather than the intrabrand competition between McDonald’s restaurant at, say, 111 W. Jackson and the McDonald’s at, say 223 W. Jackson. It makes sense for McDonald’s franchisees and the McOpCos to cooperate to promote intrabrand competition for hamburgers, because a customer who is satisfied with a hamburger she buys today at 111 W. Jackson might tomorrow prefer a hamburger from the McDonald’s at 223 W. Jackson to a hamburger from Burger King. This case, though, is not about competition for the sale of hamburgers to customers. It is about competition for employees, and in the market for employees, the McDonald’s franchisees and McOpCos within a locale are direct, horizontal competitors."

^48. Alan B. Frueger & Orley Ashenfelter, Theory and Evidence on Employer Collusion in the Franchise Sector 18 (Princeton Univ., IZA Institute of Labor Economics, Working Paper No. 11672, at 4 Sept. 2017).

^49. AAI Position Letter at 8.

^50. Statement of Interest at 11.

^51. AAI Position Letter at 1.

^52. Id. at 12 (citing Washington State Off. of the Att’y Gen., AG Ferguson Announces Fast-Food Chains Will End Restrictions on Low-Wage Workers Nationwide (July 12, 2018), https://www.atg.wa.gov/news/news-releases/ag-ferguson-announces-fast-foodchains-will-end-restrictions-low-wage-workers).

^53. Id. at 12.

^54. Employee-plaintiffs have filed various cases seeking damages and barring enforcement of no-poach agreements in many courts, including three consolidated cases in the United States District Court for the Eastern District of Washington, Stigar v. Dough Inc., No. 2:18-cv-00244; Harris v. CJ Star LLC, No.2:18-cv-00247; and Richmond v. Bergey Pullman Inc., No. 2:18-cv-00246. Plaintiffs claimed that the no-poach agreements are unlawful per se anti-trust violations because of clear anticompetitive effects of the agreements.

^55. 84 Fed. App’x. 257 (3d Cir. 2004).

^56. Id. at 259-64

^57. In re High-Tech Employees Antitrust Litigation, 5:11-cv-02509 (N.D. Cal. filed May 23, 2011).

^58. In re High-Tech Employees Antitrust Litigation, 5:11-cv-02509, Order Granting Plaintiffs’ Supplemental Motion for Class Certification, ECF No. 531, at pp. 4, 24.

^59. Id. at 18.

^60. Id. at 6-7.

^61. Id. at 8.

^62. Order Granting Plaintiffs’ Supplemental Motion for Class Certification, ECF No. 531, at p. 8.

^63. Id. at 10.

^64. Id. at 31.

^65. Id.

^66. Id. at 40.

^67. Id. at 47.

^68. 315 F.R.D. 270 (N.D. Cal. 2016).

^69. Id. at 281.

^70. Id.

^71. Id. at 284.

^72. Id. (quoting Barnes v. AT&T Pension Benefit Plan—Nonbargained Program, 270 F.R.D. 488, 494 (N.D. Cal. 2010)).

^73. Id. at 288 (citing Butler v. Sears, Roebuck & Co., 727 F.3d 796, 801 (7th Cir. 2013)).

^74. Id.

^75. Id. at 315.

^76. Id.

^77. Seaman v. Duke University, et al., Case No. 1:15-cv-00462 (M.D.N.C. filed June 5, 2015).

^78. Seaman v. Duke University, et al., Case No. 1:15-cv-00462 (M.D.N.C. filed June 5, 2015), Mem. Opn. & Order, (M.D.N.C. Feb. 1, 2018), Dkt. No. 189 at 2-3 (Feb. 1, 2018) [hereinafter Duke Order on Class Cert.].

^79. Id. at 2, note 1.

^80. Id. at 3-4.

^81. Id. at 6.

^82. Id. at 9-11.

^83. Id. at 9.

^84. Id. at 13.

^85. Id. at 14.

^86. Id. at 15.

^87. Id.

^88. Id. at 20.

^89. In re Railway Industry Employee No-Poach Antitrust Litigation, No. 18-0798 (M.D. Pa. June 20, 2019) Opinion.

^90. Id. at 4-5.

^91. Id.

^92. Id. at 19-20.

^93. Id. at 48 (citing Trunzo v. Citi Mortgage, Civ. Action No. 11-1124, 2018 WL 741422, at * 4 (W.D. Pa. Feb. 7, 2018)).

^94. Id. at 12.

^95. Id.

^96. Id. at 53.

^97. Id. at 59-60.

^98. Id. (citing Defendants’ Motion to Dismiss, Dkt No. 124-1, at 26).

^99. Id.

^100. Id. at 3, 63.

^101. Id. at 63 (citing Weisfeld v. Sun Chem. Corp., 84 F. App’x 257 (3d Cir. 2004).

^102. Id. at 63-64 (citing Nitsch v. Dreamworks Animation SKG, Inc., 315 F.R.D. 270, 293 (N.D. Cal. 2016); Seaman v. Duke Univ., No. 1:15-CV-462, 2018 WL 671239, at *8 (M.D.N.C. Feb. 1, 2018); In re: High-Tech Employee Antitrust Litigation, 985 F.Supp.2d 1167 (N.D. Cal. 2013)).

^103. Id. at 76.