Contracts-Class Certification

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7^th Circuit Court of Appeals

Case Name: Stephanie Turner v. McDonald’s USA LLC

Case No.: 22-2334

Officials: Easterbrook , Ripple, and Wood, Circuit Judges.

Focus: Contracts-Class Certification

Until recently, in all McDonald’s franchise contracts, franchise operators made a commitment to refrain from hiring individuals who were employed by different franchises or by McDonald’s itself within six months after those individuals had concluded their employment with McDonald’s or another franchise. Additionally, a related clause prevented one franchisee from actively recruiting employees from another franchise (these are referred to as anti-poach clauses). In a legal case presented under the Sherman Act, 15 U.S.C. 1, the plaintiffs had been employed by McDonald’s franchises during the existence of these clauses. Consequently, they were unable to consider more lucrative employment offers from other franchises. The core argument they put forth was that the anti-poach clause was in violation of antitrust laws.

Initially, the district court dismissed the case by rejecting the plaintiffs’ “per se” interpretation. The court’s stance was that the anti-poach clause wasn’t a straightforward and blatant restriction on trade, but rather a supplementary aspect of each franchise agreement. Moreover, the court justified the restraint by explaining that it was reasonable given that as new restaurants are established, the overall output increases. The court considered the complaint insufficient under the Rule of Reason doctrine due to its failure to assert that both McDonald’s and its franchises collectively possessed significant influence in the labor market for restaurant workers.

The case reached the Seventh Circuit. The complaint alleged a form of horizontal restraint, where the presence of market power was not a crucial element in antitrust claims involving explicit agreements among competitors. The court observed that the case posed numerous intricate questions that couldn’t be resolved merely by scrutinizing the complaint’s language; rather, they necessitated meticulous economic analysis.

Vacated and Remanded.

Decided 08/25/23

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