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The Franchise Memorandum

The Franchise Memorandum

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Two federal courts in Illinois have rejected motions to certify classes of employees who worked in franchised McDonald’s and Jimmy John’s restaurants.

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A federal court in Illinois denied reconsideration of its decision to exclude plaintiff’s expert testimony in connection with a motion seeking class certification.

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A federal court in Illinois granted Jimmy John’s motion to exclude expert testimony of a putative class seeking certification, while denying the class’s motion to exclude Jimmy John’s expert testimony. Conrad v. Jimmy John's Franchise, LLC, 2021 WL 718320 (S.D. Ill. Feb. 24, 2021). The case against Jimmy John’s is the most procedurally advanced of the class actions filed against various franchisors alleging that employee anti-poaching provisions formerly contained in many franchise agreements constitute an unlawful conspiracy in restraint of trade in violation of ...

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A federal court in New Jersey recently denied antitrust claims brought by a prospective baker and distributor of Dunkin’ Donuts products against an existing distributor. Central Jersey, CML v. Patel, 2020 WL 2840125 (D.N.J. May 31, 2020). Central Jersey, CML sought to open a baking and distribution facility for nearby Dunkin’ Donuts stores. In pursuit of its efforts, it obtained conditional approval for $18.9 million in New Jersey State tax credits. Also in pursuit of its efforts, it sought the financial backing of the defendants — members of another New Jersey-based ...

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A federal court in New Jersey has become the latest to deny a franchisor’s motion to dismiss a putative class action complaint based upon a no-poach provision in a franchise agreement. Robinson v. Jackson Hewitt, Inc., 2019 WL 5617512 (D.N.J. Oct. 31, 2019). Jackson Hewitt operates a tax preparation business with franchised and company-owned locations throughout the United States. Its largest franchisee, which owns approximately 20% of all Jackson Hewitt locations, is a co-defendant in the suit. The plaintiffs worked as seasonal tax preparers for franchised and company-owned ...

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Since early 2018, the Washington Attorney General’s Office has been carrying out a campaign to remove antipoaching provisions from franchise agreements nationwide, reaching agreements with 93 franchisors to remove such provisions. When Jersey Mike’s was served with a Civil Investigative Demand from the Attorney General, Jersey Mike’s responded that it did not enforce the provisions and had removed the provision from its standard form franchise agreements. The primary obstacle to resolution between Jersey Mike’s and the Attorney General, however, was the ...

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A federal court in New Jersey has dismissed claims that an ambulance manufacturer violated the New Jersey Franchise Practices Act (“NJFPA”) and state and federal antitrust laws. First Priority Emergency Vehicles, Inc. v. REV Ambulance Grp. Orlando, Inc., 2019 WL 3423571 (July 30, 2019). First Priority became a party to two distributor agreements with the manufacturer, REV, that both required First Priority to use its “best efforts” to meet or exceed sales goals. On June 30, 2017, REV terminated the agreements based on First Priority’s failure to meet those sales goals ...

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In a precedent-setting departure from decisions in other courts, the Eastern District of Michigan has become the first court to dismiss a putative antitrust class action challenging an anti-poaching provision in a franchise agreement under Section 1 of the Sherman Act. Ogden v. Little Caesar Enters., Inc., 2019 WL 3425266 (E.D. Mich. July 29, 2019). According to the complaint, plaintiff Christopher Ogden was employed by a Little Caesar franchisee in Tennessee. The Little Caesar franchise agreement prohibited the hiring of managerial employees of other franchisees without the ...

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As reported in the last issue of The GPMemorandum, the Department of Justice Antitrust Division filed statements of interest in three franchise anti-poaching class actions pending in federal court in Washington. The statements urged application of the rule of reason to the Sherman Act claims asserted by the putative class members and explained why per se and quick-look analyses were improper. The cases in which the DOJ filed its statements of interest were settled and dismissed shortly thereafter, but similar class actions remain pending against many other franchisors.

In a ...

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A court in the Eastern District of Michigan recently denied a franchisor’s motion to dismiss a franchisee employee’s anti-poaching complaint, finding that the employee had pled sufficient facts to show that the anti-poaching provision of the franchise agreement could be an unlawful restraint of trade. Blanton v. Domino’s Pizza Franchising LLC, 2019 WL 2247731 (E.D. Mich. May 24, 2019). The plaintiff, Harley Blanton, was a former employee of a Florida Domino’s franchisee who alleged that he quit his job after his hours were cut. He filed suit against franchisor Domino’s ...

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Three parallel anti-poaching cases brought by private parties in the U.S. District Court for the Eastern District of Washington have settled following the filing of statements of interest by the U.S. Department of Justice and amicus briefs by the Washington State Attorney General’s Office. As reported in Issue 238 of The GPMemorandum, the DOJ had announced its intent to file a statement of interest in each of the three putative class action lawsuits. All three cases involved challenges to no-poaching provisions included in franchise agreements, provisions which restricted the ...

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A federal court in Nevada recently dismissed antitrust claims brought by a retailer that claimed it was harmed by a furniture manufacturer’s online sales through Wayfair, but allowed contract claims against the manufacturer to proceed to discovery. Furniture Royal, Inc. v. Schnadig Int’l  Corp., 2018 WL 6574779 (D. Nev. Dec. 13, 2018). Furniture Royal, the retailer, had sold furniture manufactured by Schnadig since 2010. In 2017, while maintaining the relationship with Furniture Royal, Schnadig also began selling its furniture directly to consumers through the Wayfair ...

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The U.S. Department of Justice recently announced its intent to file a statement of interest in three pending class action lawsuits, which each challenge no-poaching agreements, filed against franchisors in federal court in Washington. In its notice, the DOJ stated that “[a] no-poaching agreement between a franchisor and a franchisee, within the same franchise system, . . . merits rule of reason analysis at the proper procedural stage.” In so writing, the DOJ made clear its disagreement with the plaintiffs’ arguments in these cases that the less rigorous per se or quicklook ...

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A federal district court in the Western District of Washington denied a motion to dismiss a putative class action lawsuit alleging that anti‐poaching clauses in Cinnabon franchise agreements violated the Sherman Act and Washington’s Unfair Business Practices Act. Yi v. SK Bakeries, LLC, No. 3:18‐cv‐05627 (W.D. Wash. Nov. 13, 2018). The lead plaintiff, Kyla Yi, was a former employee at a Cinnabon franchised bakery in Washington. Franchise agreements for Cinnabon bakeries prohibited franchisees from hiring or soliciting Cinnabon’s and other franchisees’ ...

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A federal court denied a distributor’s motion for a preliminary injunction and dismissed its antitrust claims against a competitor, holding that the distributor failed to adequately plead its claims under either Section 1 or Section 2 of the Sherman Act. Nicolosi Distrib., Inc. v. FinishMaster, Inc., 2018 WL 4904918 (N.D. Cal. Oct. 9, 2018). Plaintiff Nicolosi Distributing is a small distributor of automotive paints and supplies that sells to auto body shops in the San Francisco Bay Area. It sued FinishMaster and its Canadian parent company, alleging that FinishMaster entered ...

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A federal court in North Carolina recently denied Hyundai’s request to dismiss federal antitrust counterclaims brought against it in a trademark infringement lawsuit. Hyundai Motor Am., Inc. v. Direct Techs. Int’l, Inc., 2018 WL 4110544 (W.D.N.C. Aug. 29, 2018). Hyundai sued Direct Technologies International (DTI) for trademark infringement, false advertising, dilution, unfair competition, intentional interference, and unfair and deceptive trade practices, alleging that DTI imported and sold Hyundai-branded parts through an unauthorized distributor. In ...

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The United States District Court for the District of Kansas has granted in part and denied in part motions by the distributor and supplier of EpiPen® products (“Mylan” and “Pfizer,” respectively) to dismiss a class action lawsuit initiated by the products’ consumers. In re EpiPen Mktg., Sales Practices, & Antitrust Litig., 2018 WL 3973153 (D. Kan. Aug. 20, 2018). The consumers’ 1,400-paragraph complaint alleges that Mylan and Pfizer have devised an unlawful scheme to establish a monopoly over the epinephrine auto-injector products market. It claims Mylan and ...

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A federal court in Illinois has allowed a former Jimmy John’s employee to proceed with antitrust claims targeted at an anti‐poaching requirement in Jimmy John’s franchise agreements. Butler v. Jimmy John’s Franchise, LLC, 2018 WL 3631577 (S.D. Ill. July 31, 2018). Jimmy John’s had included in its franchise agreements a prohibition on franchisees recruiting or hiring any employee that has worked at another Jimmy John’s in the prior year. According to the plaintiff, this requirement was enforced by franchisees through noncompete provisions in their employment ...

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The Ninth Circuit affirmed dismissal of Hip Hop Beverage Corporation’s claim that its competitor, Monster Energy, unlawfully restricted competition through exclusive dealing agreements. Hip Hop Beverage Corp. v. Monster Energy Co., 2018 WL 2093508 (9th Cir. May 7, 2018). The suit stemmed from Hip Hop Beverage’s attempt to sell to the U.S. Defense Commissary Agency. In compliance with DECA’s vending requirements, Hip Hop Beverage hired a broker, Mid Valley Products, but Mid Valley terminated the contract “due to conflicts at the broker level with regards to competing ...

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A federal district court in Illinois recently denied McDonald’s motion to dismiss a claim that the anti-raiding provision in its franchise agreement violated Section 1 of the Sherman Act. Deslandes v. McDonald’s USA, LLC, 2018 WL 3105955 (N.D. Ill. June 25, 2018). Until 2017, McDonald’s included a provision in its franchise agreement that prohibited franchisees from hiring workers who were at the time, or had been within the past six months, employed at another McDonald’s restaurant. McDonald’s also applied the policy to its own restaurants. The plaintiff was denied ...

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The United States District Court for the District of Delaware recently held that a manufacturer’s use of exclusivity agreements with its distributors may support anticompetitive conduct for purposes of the Sherman and Clayton Acts. Roxul USA, Inc. v. Armstrong World Indus., Inc., 2018 WL 810143 (D. Del. Feb. 9, 2018). Armstrong World Industries is a dominant manufacturer in the ceiling tile market, controlling 55 percent of the market share. Roxul USA, one of only three companies that compete against Armstrong, brought suit alleging that Armstrong unlawfully maintained ...

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A price discrimination suit against the maker of 5-hour Energy is heading to trial after a federal court in California denied cross-motions for summary judgment. In ABC Distributing, Inc. v. Living Essentials, LLC, 2017 WL 3838443 (N.D. Cal. Sept. 1, 2017), several Los Angeles area wholesalers brought suit against Living Essentials for allegedly offering 5-hour Energy drinks to Costco at lower prices than it did to the plaintiffs, in violation of the Robinson-Patman Act and California's unfair competition laws. Because a price discrimination claim requires competitive injury ...

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A franchisor of window replacement companies and its exclusive approved supplier of windows have successfully avoided claims that the windows sold to franchisees were sold at a discriminatory price under the Robinson-Patman Act and unlawfully tied to the franchisor’s services under the Sherman Act. Bendfeldt v. Window World, Inc., 2017 WL 4274191 (W.D.N.C. Sept. 26, 2017). The plaintiffs entered into a series of license agreements with Window World, Inc. (“WWI”) in the 2000s. Although the plaintiffs were at first required to purchase windows and related materials from a ...

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The Ninth Circuit Court of Appeals has reversed a district court's standing-based dismissal of a class-action complaint against Apple Inc. In re Apple iPhone Antitrust Litig., 846 F.3d 313 (9th Cir. Jan. 12, 2017). The plaintiffs alleged that Apple violated federal antitrust law by requiring iPhone "apps" to be sold only through Apple's "App Store," prohibiting third-party app developers from selling the software outside of Apple, and charging app developers 30 percent of their App Store sales. The district court had held that the plaintiffs lacked standing because of the ...

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In Suture Express, Inc. v. Owens Sr Minor Distribution, 2017 WL 971782 (10th Cir. Mar. 14, 2017), a distributor of sutures and endomechanical (together known as "suture-endo") supplies sued two competitors in the medical and surgical supply market, alleging that their bundling packages constituted illegal tying arrangements in violation of state and federal antitrust laws. Unlike the defendants, who distributed a large selection of medical supplies from a network of regional distribution centers, Suture Express's narrow focus on two types of easy-to-ship medical supplies ...

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A federal court in Iowa last week dismissed with prejudice a dealer’s price discrimination claim made under the Robinson Patman Act (“RPA”). Sioux City Truck & Trailer, Inc. v. Ziegler, Inc., No. 16-cv-4106 (N.D. Iowa Dec. 5, 2016). Gray Plant Mooty represented the supplier in this case. The dealer had been party to an engine parts and service agreement, which was terminated by the supplier, Ziegler, earlier this year. Ziegler tendered a new contract that would have allowed Sioux City Truck & Trailer (“SCTT”) to buy parts, but not to be a “full service” dealer. SCTT ...

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Another federal court in Ohio dismissed price discrimination claims brought against a motor vehicle manufacturer after ruling that the “functional availability” defense barred the claims. Brentlinger Enters. v. Volvo Cars of N. Am., 2016 WL 4480343 (S.D. Ohio, Aug. 25, 2016). Brentlinger, a Volvo dealer, sued Volvo over a tier-based incentive program that provided dealerships that only carried Volvo products and met Volvo’s
design standards with higher bonuses per vehicle sold and a larger allocation of high demand vehicles than it did to stores that did not meet both ...

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A manufacturer can sell its largest packs of products only to discount club chains without engaging in illegal price discrimination, according to the United States Court of Appeals for the Seventh Circuit in Woodman’s Food Market, Inc. v. Clorox Co., 833 F.3d 743 (7th Cir. 2016). The case concerned Clorox’s practice of selling its largest-sized containers of products only to discount warehouses such as Sam’s Club or Costco. Woodman’s, a small grocery chain based in Wisconsin and Illinois, sued Clorox seeking injunctive relief for unlawful price discrimination under ...

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The United States Court of Appeals for the Ninth Circuit has affirmed a district court holding that Aerotec International failed to establish federal antitrust claims against Honeywell International, one of the largest manufacturers of auxiliary power units for aircraft. Aerotec Int’l v. Honeywell Int’l, 836 F.3d 1171 (9th Cir. 2016). Aerotec, a small company that provides repair services for Honeywell’s products, alleged that during a worldwide parts shortage, it was unable to purchase from Honeywell the parts necessary to service its clients because Honeywell’s ...

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Meanwhile, the United States District Court for the Northern District of Ohio denied a car distributor’s motion to dismiss a claim under the RPA. Bedford Nissan, Inc. v. Nissan N. Am., Inc., 2016 WL 6395799 (N.D. Ohio Oct. 28, 2016). After discovering that Nissan North America had given Bernie Moreno, a dealer, cash and sales incentives not offered to all dealers in the area, four other Nissan dealers in the same market sued Nissan, claiming, among other things, that the incentive payments allowed Moreno to purchase and sell Nissan vehicles at substantially lower prices than the ...

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The United States Court of Appeals for the Third Circuit recently reversed a large antitrust jury verdict that had been entered against telecom equipment manufacturer Avaya. Avaya Inc. v. Telecom Labs, Inc., 838 F.3d 354 (3d Cir. Sept. 30, 2016). After a lengthy and contentious trial, a jury had awarded a $20 million general verdict in favor of Telecom Labs, a former Avaya dealer and maintenance provider, finding that Avaya had attempted to monopolize the aftermarket for maintenance of its specialized telephone switchboard for business organizations and had unlawfully tied ...

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A North Carolina trial court dismissed a state-law antitrust claim that Window World franchisees brought against their franchisor in Window World of Baton Rouge, LLC v. Window World, Inc., 2016 WL 6242945 (N.C. Super. Ct. Oct. 25, 2016). The franchisees claimed that Window World conspired with a supplier of vinyl replacement windows by requiring franchisees to purchase products at inflated prices, rather than allowing them to pay the lowest price available among suppliers of their own choosing. Although federal Sherman Act precedent was instructive to the court’s analysis ...

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The White House last month announced a broad series of new administrative steps “calling for actions that enhance competition” in employment practices. One aspect of the new antitrust focus on employment matters may intentionally or unintentionally also affect franchise agreements. That possibility involves terms in many franchise agreements that prohibit franchisees from soliciting employees away from other franchisees or from the franchisor itself. Under the new emphasis, such “anti-poaching” agreements could be deemed illegal—or at least subject to ...

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In Issues 196 and 200 of The GPMemorandum, we discussed some of the common antitrust risks facing manufacturers. Prevention is the best cure for those problems, as attempts to address the risks at the time of termination or after a claim has been lodged are too late. We recommend that manufacturing companies review their compliance with antitrust laws by formally gathering and scrutinizing all of their pricing programs, sales policies, competitor communications, and customer agreements, among other documents, to uncover and defuse landmines. Sales leadership and other ...

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The United States Court of Appeals for the Third Circuit recently ruled that Swatch Group was not subject to New Jersey’s Franchise Practices Act (“NJFPA”) but partially reversed the lower court’s summary judgment order because a material dispute of fact remained regarding a retailer’s claim that Swatch violated the Robinson-Patman Act (“RPA”). Orologio of Short Hills, Inc. v. Swatch Group (U.S.), Inc., 2016 WL 3454211 (3d Cir. June 24, 2016). Orologio, a high-end watch store in suburban New Jersey, sued Swatch after it was dropped as an authorized dealer. Orologio ...

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The Michigan Court of Appeals recently affirmed a judgment in favor of a dealer on its claims that the manufacturer of the products at issue had violated both the Michigan Antitrust Reform Act ("MARA") and the Michigan Farm and Utility Equipment Act ("MFUEA") by increasing competition in the dealer's exclusive territory. Manitou N. Am., Inc. v. McCormick Intg, LLC, 2016 WL 439354 (Mich. Ct. App. Feb. 2, 2016). Manitou, a manufacturer and supplier of telescoping boom lifts, or "telehandlers," entered into a dealership agreement with McCormick, under which McCormick was to become an ...

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A federal district court in New Jersey has denied ExxonMobil's motion to dismiss various antitrust, franchise, and common law claims brought by a group of more than 50 gas station franchisees. S. Gas, Inc. v. ExxonMobil Oil Corp., 2016 WL 816748 (D.N.J. Feb. 29, 2016). The plaintiffs, who leased retail gas stations from Exxon and were required to purchase gas from Exxon for resale to their customers, alleged that Exxon had sold to them at discriminatory prices compared to competing wholesale customers in violation of the Robinson-Patman Act, violated the New Jersey Franchise ...

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Collusion with competitors is the most serious form of antitrust risk. Bid rigging and price fixing, for example, are criminal offenses, and individuals receive prison sentences when they engage in such conduct on behalf of their companies. The problem is that it is difficult to tell where legal collaboration ends and collusion starts. Trade association activity provides one case in point. While generally legal, trade associations can lead to competitors working together too closely and ending up in trouble. Worries also arise when competitors discuss a merger or acquisition ...

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The United States District Court for the Eastern District of Pennsylvania granted some, but not all, of a manufacturer's motion to dismiss antitrust claims brought by a cigar distributor that sells mass-market cigars to convenience stores. Satnam Distr. LLC v. Commonwealth-Altadis, Inc., 2015 WL 5971583 (E.D. Pa. Oct. 14, 2015). Satnam sued a competing distribution company and one of the manufacturers of a particular cigar brand, alleging that the manufacturer provided discounts to the distributor, which allowed the distributor to sell the manufacturer's cigars for less than ...

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The United States Court of Appeals for the Ninth Circuit recently affirmed a ruling in favor of the largest U.S. retail dealer of musical instruments and guitars, dismissing a class action brought by purchasers of guitars on the grounds that the plaintiffs did not plead sufficient facts to prove an antitrust conspiracy. In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186 (9th Cir. Aug. 25, 2015). The class action plaintiffs alleged that the defendant, Guitar Center, Inc., along with manufacturers Fender, Yamaha, Gibson, Hoshino, and Kaman, engaged in a "hub and spoke ...

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In a rare post-Leegin case involving resale price maintenance, a federal district court in Florida has refused to dismiss claims brought by retailer Costco against its supplier of contact lenses. Costco Wholesale Corp. v. Johnson & Johnson Vision Care, Inc., No. 3:15- cv-00734 (M.D. Fla. Nov. 4, 2015). Costco alleged that Johnson & Johnson forced it to agree to increase its retail contact lens prices to minimum levels. The resale price maintenance policy was alleged to have followed agreements between Johnson & Johnson and eye doctors who sell contact lenses, and between Johnson & ...

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The United States Court of Appeals for the Second Circuit has affirmed summary judgment in a price discrimination case in which the plaintiffs were unable to show a significant loss of customers. Cash Sr Henderson Drugs v. Johnson & Johnson, 2015 U.S. App. LEXIS 15162 (2d Cir. Aug. 27, 2015). The case arose because Johnson & Johnson, a pharmaceutical manufacturer, offered rebates and discounts to certain "favored purchasers," resulting in higher prices for retail pharmacies for the same drugs. Because Johnson & Johnson did not contest that it sold name-brand drugs to different ...

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The United States District Court for the Western District of Pennsylvania recently denied in part a motion to dismiss a distributor's claims against a competing manufacturerdistributor for breach of contract and unlawful price discrimination. AlarMax Distributors, Inc. v. Honeywell International, Inc., 2015 WL 3645259 (W.D. Pa. June 9, 2015), involved a wholesale distributor of electronic fire and security products, AlarMax, that purchased its inventory from several companies, including defendant Honeywell. In addition to its manufacturing activities, Honeywell also ...

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The United States Court of Appeals for the Eleventh Circuit has affirmed the Federal Trade Commission's finding that McWane, Inc. violated Section 5 of the FTC Act when it developed an exclusive dealing program to maintain monopoly power in the domestic fittings market. McWane, Inc. v. FTC, 783 F.3d 814 (11th Cir. Apr. 15, 2015). The FTC initiated the enforcement action against McWane, a manufacturer of iron pipe fittings primarily used by municipal water authorities, for requiring exclusivity from its distributors. After a new manufacturer, Star Pipe Products, entered the ...

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In a case closely followed in the franchising and distribution industries, the proposed merger of national distributors Sysco Corporation and US Foods, Inc. has been blocked. FTC v. Sysco Corp., 2015 U.S. Dist. LEXIS 83482 (D.D.C. June 23, 2015). Upholding the administrative injunction, the United States District Court in Washington, D.C. agreed with antitrust concerns raised by the Federal Trade Commission. Many restaurant chain franchisors and others had been asked to support or refute these concerns as witnesses in the case, due to the close vendor relationships between food ...

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Finding Apple, Inc. per se liable under the Sherman Antitrust Act, the United States Court of Appeals for the Second Circuit has affirmed a district court's important ruling from 2013 in United States v. Apple, 2015 WL 3953243 (2d Cir. June 30, 2015). The appellate court agreed that Apple orchestrated what became a "horizontal" agreement among nearly all major book publishing companies to fix (and raise) prices of electronic books. Based on this analysis of the situation as horizontal—including the unique role of Apple, a nonpublisher—the court held Apple's conduct to be a per se

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A federal court recently allowed a price discrimination claim against Nike to proceed to discovery. Games People Play, Inc. v. Nike, Inc., 2015 U.S. Dist. LEXIS 33217 (E.D. Tex. Feb. 12, 2015). Games People Play (GPP) is a golf retailer in Texas that had been selling Nike apparel and equipment since 1986. In 2010, GPP discovered what it considered to be a significant price disparity between what it was paying for specialty Nike golf clubs and what its competitors were paying for the same clubs. GPP alleged that in the two years after it complained to Nike about this price disparity, Nike ...

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Following a nine-day jury trial in the United States District Court for the District of Minnesota, a manufacturer of fireplaces and related products won a jury verdict defeating all counts in a product distribution and antitrust case tried earlier this year. J&M Distrib., Inc. v. Hearth & Home Techs., Inc., No. 13- cv-00072-SRN-TNL (D. Minn. Jan. 23, 2015). The lawsuit, in which Gray Plant Mooty represented the manufacturer, Hearth & Home Technologies, followed the decision of Hearth & Home to terminate its wholesale, two-step distributor in Pennsylvania, Ohio, Maryland, and West ...

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The United States District Court for the Western District of Wisconsin denied a motion to dismiss a lawsuit alleging violations of the Robinson-Patman Act based on the discriminatory offering of different product sizes to sellers for resale. Woodman's Food Mkt., Inc. v. Clorox Sales Co., 2015 U.S Dist. LEXIS 11656 (W.D. Wis. Feb. 2, 2015). After Clorox informed Woodman's that it would no longer offer Woodman's the large pack products that it offered to bulk retailers like Sam's Club and Costco, Woodman's brought suit against Clorox under the Robinson-Patman Act's price ...

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A federal court in New Jersey recently dismissed a claim for inducing price discrimination between competing distributors, but granted the plaintiff leave to file an amended complaint with additional factual allegations. Marjam Supply Co. v. Firestone Bldg. Prods. Co., 2014 U.S. Dist. LEXIS 158217 (D.N.J. Nov. 7, 2014). Marjam, a distributor of Firestone products, filed suit against the manufacturer of roofing systems and products, as well as against various competing Firestone distributors, for price discrimination violations under the Robinson-Patman Act. Firestone ...

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A federal court in California denied in part a motion to dismiss a car dealer's price discrimination claim against its distributor under the Robinson-Patman Act. Mathew Enterprise, Inc. v. Chrysler Group LLC, 2014 U.S. Dist. LEXIS 95522 (N.D. Cal. July 11, 2014), involved a franchised dealer, Mathew Enterprise, that purchased its vehicle inventory directly from Chrysler at a standard invoice price. Chrysler, however, also offered earned subsidies to its dealers through "volume growth" incentive programs based on the dealer's prior sales. Although incentive programs are not ...

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Despite being one of two manufacturers that control 99% of the market, E.I. DuPont de Nemours and Co. has persuaded the United States Court of Appeals for the Fourth Circuit to affirm dismissal of exclusive dealing claims against it. Kolon Indus. Inc. v. E.I. DuPont de Nemours Sr Co., 748 F.3d 160 (4th Cir. Apr. 3, 2014). Kolon, a would-be competitor, claimed DuPont's multi-year supply agreements with large customers comprised an unlawful attempt or successful creation of a monopoly in the market for para-aramid fiber, a synthetic product used in body armor, tires, and other goods ...

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The United States Court of Appeals for the Eighth Circuit has concluded neither side could prevail on summary judgment motions in an antitrust action brought by a "small town, family-owned grocery store" against SuperValu Inc. and C&S Wholesale Grocers, Inc., two of the largest grocery wholesalers in the United States. In re: Wholesale Grocery Prods. Antitrust Litig., 652 F.3d 728 (8th Cir. May 21, 2014). This case arose out of negotiations by SuperValu and C&S to buy assets of a third grocery wholesaler, Fleming Companies, and to acquire certain territories from each other. D&G ...

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A federal district court in New York dismissed a value-added reseller's antitrust claims against its competitor based on its failure to properly define a relevant market. Techreserves Inc. v. Delta Controls, Inc., 2014 U.S. Dist. LEXIS 47080 (S.D.N.Y. Mar. 31, 2014). Techreserves operates as a reseller in the building management systems sales, installation, and maintenance markets, in which Delta is a manufacturer. Techreserves claimed that its competitors, including defendant IBC, and Delta excluded other value-added resellers from selling, installing, and servicing ...

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The United States District Court for the Northern District of Illinois has paved the way for what will be a closely-watched antitrust trial in American Needle, Inc. v. New Orleans Saints, 2014 U.S. Dist. LEXIS 47527 (N.D. III. Apr. 4, 2014). As reported in Issue 131 of The GPMemorandum, the United States Supreme Court in 2010 allowed plaintiff American Needle, an apparel manufacturer, to allege that the National Football League and thirty of its teams conspired, in violation of Sherman Act Section 1, to award Reebok an exclusive apparel license to make hats for all NFL teams. In a ...

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The United States District Court for the District of Colorado granted summary judgment dismissing seven claims of federal and state antitrust violations brought by a distributor of DuPont's automobile paint coatings. ITS Choice Enters., Inc. v. E.I. DuPont De Nemours Sr Co., 2014 U.S. Dist. LEXIS 24332 (D. Colo. Feb. 26, 2014). DuPont provided various forms of assistance to its distributors and, in exchange, each distributor agreed not to solicit existing business from other distributors. Between 2008 and 2009, DuPont gave significant financial assistance and other support to ...

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A federal court in Arizona has rejected various antitrust claims brought by a servicer of aircraft power units against a manufacturer of those units. Aerotec Int'l, Inc. v. Honeywell Int'l, Inc., 2014 U.S. Dist. LEXIS 38651 (D. Ariz. Mar. 17, 2014). The court granted summary judgment in favor of Honeywell International, a company that manufactures aircraft power units that provide on-board electrical power in commercial aircraft. Honeywell is the largest servicer of its power units. Aerotec International is an independent service provider that performs maintenance, repair ...

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The Ninth Circuit recently affirmed summary judgment in an antitrust suit involving the sale of aftermarket automotive parts. In Gorlick Distribution Centers v. Car Sound Exhaust, 2013 U.S. App. LEXIS 14635 (9th Cir. July 19, 2013), the appeals court agreed that Gorlick had failed to raise a genuine issue of fact regarding its claim that its competitor, Allied Exhaust Systems, knowingly received discriminatory pricing in violation of the RobinsonPatman Act. Although it was clear that Allied did in fact know it was receiving favorable pricing from its supplier, Car Sound Exhaust ...

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Late last month, the Supreme Court of Nebraska affirmed a jury verdict in favor of credit reporting agency Experian Information Solutions, in a lawsuit brought against it by mortgage credit report reseller, Credit Bureau Services, alleging violations of Nebraska’s unusual antitrust act. Credit Bureau Servs., Inc. v. Experian Info. Solutions, Inc., 2013 Neb. LEXIS 47 (Neb. Mar. 22, 2013). Evidence was adduced at trial that as part of its “Project Green,” Experian increased, over the course of several years, the minimum monthly purchase requirement for mortgage-related ...

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A federal district court in California this month dismissed claims by a smaller hardware store chain against Home Depot and two manufacturers of power tools. Orchard Supply Hardware LLC v. Home Depot USA, Inc., et al., Case No. 12-cv-06361-JST (N.D. Cal. April 12, 2013). The claim, which was dismissed without prejudice, was that Home Depot had demanded exclusive supply contracts with the two manufacturers, both of which then stopped supplying the plaintiff. Those allegations alone were not enough to state a viable antitrust action, the court held.

The decision rejected each of the ...

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A case that has stood as one of the only recent precedents for an antitrust tying claim in franchising was dismissed last week by the court in Burda v. Wendy’s Int’l, Inc., 2012 U.S. Dist. LEXIS 145447 (S.D. Ohio Oct. 9, 2012). Last week’s decision favors the franchisor, after the same court twice had refused to dismiss the plaintiff franchisee’s tying claims, as reported in Issues 124 and 136 of The GPMemorandum. This time, on motion for summary judgment, Wendy’s prevailed on all claims, including the challenge to the franchisor’s involvement in the supply of products to ...

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Mary Kay sued a former national sales director (the next level up from a Mary Kay consultant) for enforcement of a contractual covenant against competition. The director, Amy Dunlap, in turn brought a counterclaim against Mary Kay. Dunlap alleged that Mary Kay had violated Texas’s Deceptive Trade Practices Act (DTPA) and further claimed that the noncompete agreement was an illegal restraint of trade under the Sherman Act. In Mary Kay, Inc. v. Amy Dunlap, 2012 U.S. Dist. LEXIS 86499 (N.D. Tex. June 21, 2012), the court addressed Mary Kay’s motion to dismiss Dunlap’s ...

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The United States District Court for the Eastern District of Virginia recently granted a manufacturer’s motion for summary judgment on a claim of monopolization brought against it by a competitor. In Kolon Industries, Inc. v. E.I. DuPont de Nemours & Co., Bus. Franchise Guide ¶ 77,857 (E.D. Va. Apr. 5, 2012), Kolon claimed that DuPont monopolized the United States para-aramid market, in which DuPont sold its Kevlar product, through the use of long-term, multi-year supply agreements with high volume para-aramid purchasers.

To prove its claim, Kolon had to show that DuPont ...

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Last month saw two state appellate courts issue similar but not identical opinions regarding the treatment of vertical resale price (RPM) agreements. The decisions reflect the continued lack of consistency regarding the treatment of RPM under federal antitrust law and under various state antitrust laws, as well as the compliance difficulties faced by businesses with national resale networks.

On May 4, 2012, the Kansas Supreme Court in O’Brien v. Leegin Creative Leather Products, Inc., 2012 Kan. LEXIS 246 (Kan. May 4, 2012), reversed a decision granting summary judgment to ...

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Last month, the United States District Court for the Western District of Arkansas dismissed state and federal antitrust claims brought by Coffee.org against Green Mountain Coffee relating to the distribution of the “K-cup” single-serve coffee capsule, which is used with a patented coffee machine owned by Green Mountain. Coffee.org, Inc. v. Green Mountain Coffee Roasters, Inc. et al., 2012-1 Trade Cases ¶ 77,790 (W.D. Ark. Feb. 15, 2012). Coffee.org, an online retailer of coffee and coffee-related products, alleged that Green Mountain acquired essentially all ...

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A federal district court in New York has denied a plaintiff’s motion to dismiss antitrust counterclaims for discriminatory pricing by a seller to competing buyers. In Dayton Superior Corp. v. Spa Steel Products, Inc., 2012 U.S. Dist. LEXIS 4283 (N.D. N.Y. Jan. 13, 2012), the plaintiff originally sued the defendant for breach of contract to recover $1.2 million that the defendant allegedly owed the plaintiff for goods sold and delivered. The defendant brought counterclaims with its amended answer, including a counterclaim under the Robinson-Patman Act based on the allegation ...

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Once again, the Senate Judiciary Committee has taken a step toward the passage of legislation to overturn the effect of Leegin Creative Leather Products, Inc. v. PSKS, Inc. On November 3, 2011, the U. S. Senate Committee reported the passage of the proposed “Discount Pricing Consumer Protection Act,” a bill sponsored by Senator Kohl of Wisconsin. This is the same bill that has been introduced in prior years, as reported in The GPMemorandum. We will continue to monitor the progress (if any) of this legislation. 

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A recent decision by a federal trial court in San Francisco construed California law in a manner that may have implications for franchisors and suppliers who find themselves in litigation in that state. In Nicolosi Distributing, Inc. v. BMW of North America, 2011 U.S. Dist. LEXIS 44544 (N.D. Cal. Apr. 19, 2011), a distributor of automotive paint entered into an exclusive multi-year supply agreement with German Motors, a San Francisco BMW dealership and repair shop. German Motors is certified by BMW as a “Certified Collision Repair Center” (“CCRC”), which is, in effect, an ...

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In a June opinion, the Eighth Circuit Court of Appeals affirmed summary judgment for C.R. Bard, Inc. dismissing an antirust action brought against it and several other defendants by a class of direct purchasers of urological catheters. Saint Francis Medical Center v. C.R. Bard, Inc., 2011 U.S. App. LEXIS 11552 (8th Cir. June 15, 2011). The plaintiff Saint Francis, a Missouri hospital and member of a Group Purchase Organization (GPO), alleged on behalf of the class that Bard, a supplier of catheters, abused its dominant position in the United States catheter market in violation of ...

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The United States District Court for the Western District of Kentucky recently granted in part but denied in part a motion brought by tire retreading franchisor, Bridgestone Bandag, LLC, to dismiss a four-count complaint brought by Shamrock Marketing, Inc., alleging that Bandag implemented an unlawful tying arrangement in violation of Sections 1 and 2 of the Sherman Act. Shamrock Marketing, Inc. v. Bridgestone Bandag, LLC, 2011 U.S. Dist. LEXIS 25109 (W.D. Ky. Mar. 11, 2011). Shamrock is a family-owned Kentucky corporation that supplies “curing envelopes” and other ...

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The United States Court of Appeals for the Fourth Circuit recently reversed the dismissal of a claim brought by a competing manufacturer that alleged DuPont attempted to wield, and did wield, monopoly power over the U.S. para-aramid fiber market in violation of Section 2 of the Sherman Act.  E.I. du Pont de Nemours and Co. v. Kolon Industries, Inc., 2011 U.S. App. LEXIS 4752 (4th Cir. March 11, 2011). DuPont had brought a trade secrets suit against Kolon, a relative newcomer to para-aramid production. Kolon counterclaimed that DuPont had monopolized and had attempted to monopolize the ...

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The United States Supreme Court in its 2007 Leegin decision ruled that resale price controls by manufacturers and others would be judged under the more lenient standard of the rule of reason, at least under federal antitrust law. Since then, other than in the post-remand developments in Leegin itself, most of the legal activity has been at the state level. Two states recently reached different results in their enforcement efforts, however, and the Supreme Court refused to grant further review of the final judgment in Leegin.

First, on January 11, California entered into a consent ...

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Two states reached different results last month concerning separate resale price controls. First, on January 11, California entered into a consent decree with a cosmetics manufacturer that had been prohibiting discounting by internet dealers. California v. Bioelements, Inc., No. 10011659 (Cal. Sup. Ct. Jan. 11, 2011). Although the manufacturer was required to stop controlling internet discounts, this result was achieved by settlement rather than a court decision, so its weight can be (and is being) questioned. Then, three days later, New York lost its court case against a ...

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Last week the United States District Court for the Western District of Washington dismissed two of the four counts—including an antitrust claim—brought by a disgruntled franchisee in Danforth & Associates, Inc. v. Coldwell Banker Real Estate, LLC, 2011 U.S. Dist. LEXIS 10882 (W.D. Wash. Feb. 3, 2011). In addition to dismissing a claim for breach of contract, the court made a brief and specific ruling that a claim under Section 1 of the Sherman Antitrust Act cannot be based on an alleged conspiracy between a franchisor and a franchisee. For this reason, the court ruled that the ...

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In one of the first post-Leegin appellate decisions in the vertical pricing context, the Eleventh Circuit this month rejected on the pleadings the antitrust claims brought by consumers against a manufacturer in Jacobs v. Tempur-Pedic North Am., Inc., 2010 U.S. App. LEXIS 24638 (11th Cir. Dec. 2, 2010). The complaint alleged, and was taken as true, that the manufacturer and its distributors agreed as to minimum resale prices for the manufacturer’s mattresses. The appeals court agreed with the trial court that the pleading of “visco-elastic foam mattresses” as a relevant ...

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In affirming the dismissal of the plaintiff’s second amended complaint, the Fifth Circuit appears to have put an end to the parties’ long-running legal battle in a case that resulted in the United States Supreme Court’s 2007 reversal of the century-old per se ban on minimum resale price agreements. PSKS, Inc. v. Leegin Creative Leather Prod., Inc., No. 09-40506 (5th Cir. Aug. 17, 2010). Plaintiff PSKS had been a retailer of the high-end Brighton® brand of women’s accessories manufactured by Leegin. Leegin had instituted a minimum resale price maintenance policy through ...

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In September 2009, The GPMemorandum reported that an Ohio federal court had denied the motion of Wendy’s International Inc. to dismiss a claim by several of its franchisees that Wendy’s had violated Section 1 of the Sherman Act by requiring the franchisees to purchase food supplies only from sellers in which Wendy’s had a financial interest. Burda v. Wendy’s Int’l, Inc., 659 F. Supp. 2d 928 (S.D. Ohio 2009). The court held that the franchisee-plaintiffs had sufficiently alleged that Wendy’s had market power in the tying product market under the “lock-in” theory ...

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A New York federal court recently granted Honeywell International, Inc.’s motion to dismiss a former distributor’s antitrust claims, despite the plaintiff’s allegation that it was terminated pursuant to an agreement among Honeywell and its other distributors, who allegedly objected to the plaintiff’s discounting. In Integrated Systems and Power, Inc. v. Honeywell Int’l, Inc., 2010 U.S. Dist. LEXIS 47283 (S.D.N.Y. May 13, 2010), the court found ISPI’s allegations insufficient to state a claim for either per se or Rule of Reason violations of Section 1 of the ...

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In Shell’s suit against a former franchisee under the Petroleum Marketing Practices Act, the First Circuit held that the franchisee’s price discrimination antitrust counterclaim was properly dismissed on summary judgment because the franchisee failed to show that it was competing with favored retailers of Shell Oil. The Shell Oil Company (Puerto Rico) Ltd. v. Los Frailes Serv. Station, Inc., 605 F.3d 10 (1st Cir. 2010). The franchisee claimed that Shell was violating Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, as well as Puerto Rican antitrust law ...

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In an instructive opinion arising from the appeal of two related antitrust suits, the Third Circuit in Howard Hess Dental Laboratories Inc. v. Dentsply International, Inc., 602 F.3d 237 (3d Cir. 2010), affirmed the dismissal of two dental laboratories’ claims for monopolization against a manufacturer of artificial teeth and for conspiracy to monopolize and restrain trade against the manufacturer and its dealers. The laboratories, which purchased artificial teeth to make dentures, alleged that the manufacturer set anticompetitive prices for artificial teeth and ...

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Late last month, the United States Supreme Court issued its decision in American Needle, Inc. v. National Football League, et al., 2010 LEXIS 4166 (U.S. May 24, 2010), which was previewed in Issue 127 of The GPMemorandum. In a unanimous opinion authored by the retiring Justice Stevens, the court rejected the argument of the National Football League and its 32 teams that they are categorically immune from Sherman Act Section 1 liability because they operate as a single economic unit. The Supreme Court held that the teams function separately, with “independent centers of ...

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Feeser’s, Inc. v. Michael Foods, Inc., 2010 U.S. App. LEXIS (3d Cir. Jan 7, 2010) involved alleged price discrimination under the Robinson-Patman Act (the “RPA”).  Ruling against the plaintiff, the Third Circuit construed strictly the RPA’s requirement that, to be actionable, a seller must discriminate in price between “competing purchasers.”  As reported in Issue No. 121 of The GPMemorandum (July 2009), the price discrimination claim arose in the supply of food products to institutional food service providers, such as schools and hospitals.  The defendant, Michael ...

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On January 13, 2010, the U.S. Supreme Court heard oral argument in a case testing the antitrust status of the National Football League, the result of which could affect not only sports franchises but franchising in general. The issue before the Court in American Needle v. National Football League (08-661) is whether the NFL and its member teams function as a “single entity” and therefore cannot possibly violate Section 1 of the Sherman Act, which requires proof of collective action involving separate entities. The case involves a challenge by an excluded hat maker to the joint ...

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A Maine federal court recently denied Amazon’s motion to dismiss an antitrust tying claim brought by a putative class of print on demand (“POD”) publishers.  Booklocker.com, Inc. v. Amazon.com, Inc., 2009 WL 2709396 (D. Me. Aug. 26, 2009). The court held that Booklocker.com sufficiently pled that Amazon’s policy of refusing to allow POD books to be sold through its Direct Amazon Sales Channel unless those books were printed by a wholly owned subsidiary of Amazon constituted a per se tying violation under Section 1 of the Sherman Act.   

After Amazon acquired BookSurge, a company ...

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A Pennsylvania federal court certified a class—and five subclasses—in an antitrust lawsuit against Babies “R” Us (“BRU”) in McDonough v. Toys “R” Us, et al., 2009 U.S. Dist. LEXIS 60684 (E.D. Penn. July 15, 2009). The case was decided on the heels of the Supreme Court’s antitrust decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., as well as the Third Circuit’s ruling in In re Hydrogen Peroxide Antitrust Litigation that district courts must engage in a rigorous analysis under Federal Rule of Civil Procedure 23 before certifying any class action.

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An Ohio federal court recently denied Wendy’s International Inc.’s motion to dismiss a franchisee’s claim that Wendy’s violated Sherman Act § 1 by requiring it to purchase food supplies from approved sellers in which Wendy’s had a financial interest. Burda v. Wendy’s Int’l, Inc., 2009 U.S. Dist. LEXIS 86044 (E.D. Ohio Sept. 21, 2009). The court held that the franchisee sufficiently pled a tying claim under a “Kodak lock-in” theory.   

When Plaintiff Robert Burda acquired a Wendy’s franchise in 1996, there were multiple Wendy’s-approved food suppliers. In ...

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A Pennsylvania federal court recently ordered summary dismissal of a discounting garbage truck distributor’s antitrust claims against Mack Trucks, Inc. for violation of Section 1 of the Sherman Act. The court, however, did allow some of the claims of both parties to proceed. RDK Truck Sales and Service, Inc. v. Mack Trucks, Inc., 2009 WL 1441578 (E.D. Pa. May 19, 2009).

Plaintiff RDK is an independent distributor of garbage trucks, including Mack trucks. It markets itself by “aggressively advertising low prices nationwide,” though its only service facility is in Tampa. Mack ...

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In Feeser’s, Inc. v. Michael Foods, Inc., No. 1:CV-04-0576 (M.D. Pa. April 27, 2009), the United States District Court for the Middle District of Pennsylvania ruled that a food manufacturer’s pricing structure violated the Robinson-Patman Act’s prohibition on price discrimination. The price discrimination claim arose in the arena of the supply of food products to institutional food service providers, such as schools and hospitals. Institutional food service providers generally obtain food products in one of two ways. An institution is either a “self-operator” ...

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An Ohio federal court recently dismissed a franchisee’s claim against its franchisor for illegal tying in violation of Section 1 of the Sherman Act. Arnold v. Petland, Inc., No. 2:07-cv-01307 (S.D. Ohio Mar. 26, 2009). The Arnolds, owners of a failed Petland franchise, claimed, after being supplied with sick puppies and stale pet food, that Petland illegally tied the purchase of puppies and pet food from Petland’s preferred supplier to the ownership of the Petland franchise. Noting that dismissal of a tying claim is appropriate where a plaintiff has improperly limited its ...

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In an opinion issued four days after the Petland decision, an Illinois federal court denied Harley Davidson, Inc.’s motion to dismiss the tying claim of an independent manufacturer of plastic merchandise bags. Packaging Supplies, Inc. v. Harley-Davidson, Inc., No. 08-cv-400 (N.D. Ill. Mar. 30, 2009). Whereas the court in Petland focused upon the existence of market power in the market for the tying product, the Packaging Supplies court evaluated whether the plaintiff had properly alleged that the defendant possessed market power in the market for the tied product.

Packaging ...

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The Supreme Court’s landmark 2007 antitrust decision applying rule of reason analysis to resale price maintenance claims brought under federal law was most recently addressed by the Fourth Circuit Court of Appeals in Valuepest v. Bayer, 2009 WL 756901 (4th Cir. March 24, 2009). The defendant suppliers in this case sold through what they called “agency” relationships, as distributors merely facilitated sales to the ultimate purchasers. The resale price maintenance claim arose out of the contractual rights of the manufacturer defendants to set the price at which the product ...

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The United States District Court for the District of Connecticut recently dismissed the third amended complaint of a convenience store franchisee who challenged the franchise system’s primary merchandise vendor for alleged violations of federal and state antitrust laws and the Connecticut Unfair Trade Practices Act. Bansavich v. McLane Co., Inc., No. 3:07cv702 (D. Conn. Oct. 31, 2008). Plaintiff Bansavich, a Mobil on the Run franchisee, challenged the requirement that franchisees participating in the system’s “Exclusive Product Program” purchase certain ...

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The United States District Court for the Eastern District of Tennessee has determined that a class of purchasers of retail products manufactured and distributed by Leegin Creative Leather Products, Inc. failed to state claims against Leegin for violations of Sherman Act § 1 and the Tennessee Trade Practices Act, or for common law unjust enrichment.  Spahr v. Leegin Creative Leather Products, Inc., No. 2:07-cv-00187 (E.D. Tenn. August 20, 2008). As  was the subject of a June 2007 decision of the United States Supreme Court, Leegin, the manufacturer of Brighton® women’s ...

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The United States District Court in Minnesota late last month dismissed state statutory and federal antitrust claims brought by a Kia automobile dealership against manufacturer Kia Motors. Barnett Chrysler Plymouth Co. v. Kia Motors America, Inc., 2008 U.S. Dist. LEXIS 87216 (D. Minn. Oct. 27, 2008).

Barnett Kia has sold vehicles made by Kia since 1998. In 2006, Barnett discovered that the manufacturer offered discretionary advertising allowances to other Minnesota Kia dealers through the Regional Marketing Fund (“RMF”) program, through which Kia subsidizes fifty ...

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Franchisor American Dairy Queen Corporation and its corporate parent, International Dairy Queen, Inc., prevailed this month against the most recent challenges by a franchisee association and cooperative that represents some of its franchisees. An arbitration panel held that the franchisor and its parent’s supply entity have not violated antitrust law or a prior settlement agreement with respect to the approval and distribution of products for use in franchisees’ locations. Dairy Queen Operators Association and Dairy Queen Operators Cooperative v. International Dairy ...

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The United States District Court for the Northern District of Ohio has dismissed federal antitrust counterclaims brought by an HVAC systems franchisee against its franchisor. Trane U.S. Inc. v. Meehan, 2008 WL 2219781 (N.D. Ohio May 29, 2008). The events giving rise to the suit began when Trane audited its franchisee, Toledo Trane, and discovered significant noncompliance with the Manual of Policies and Procedures (“MOPP”) Trane issued to its franchisees. The MOPP largely affected “bundled sales,” which are sales of products that combine Trane and non-Trane ...

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In Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., 2008 WL 2420729 (3rd Cir. June 17, 2008), the United States Court of Appeals for the Third Circuit affirmed a district court’s grant of summary judgment in favor of a truck manufacturer on a dealer’s Robinson-Patman claim but reversed an award in favor of the manufacturer on the dealer’s Sherman Act claim. Mack manufactures a variety of heavy-duty trucks that it distributes and services primarily through a nationwide network of authorized dealers. Until its termination, Toledo was an authorized Mack dealer in the ...

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The United States District Court for the District of New Jersey recently dismissed federal antitrust claims brought by a pizza franchisee and its individual owners against its franchisor and the franchisor’s managing member. Beuff Enterprises Florida, Inc. v. Villa Pizza, LLC, 2008 WL 2565008 (D.N.J. June 25, 2008).

The plaintiffs alleged that: (1) the defendants violated Sherman Act § 2 by maintaining a monopoly in a “conglomeration of unique products, trade dress, services, methods, ingredients, recipes, menus and packaging, quality and quantity control strategies ...

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In Sheridan v. Marathon Petroleum Co., LLC, 2008 WL 2486581 (7th Cir. June 23, 2008), a Marathon gasoline dealer filed suit against Marathon to challenge a provision of the dealer’s franchise agreement. The franchise agreement required the dealer to process credit card purchases made on credit cards issued by Marathon through specified credit card processing equipment. The franchisee remained free to process payments made by other credit cards through a different processing system if he so chose. The franchisee claimed that Marathon had effectively tied the processing of all ...

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The United States District Court for the Northern District of Illinois recently dismissed federal and state antitrust claims brought by a class of Quizno’s franchisees against Quizno’s Franchise Company and related entities. Siemer v. Quizno’s Co. LLC, 2008 WL 904874 (N.D. Ill. March 31, 2008). The plaintiffs alleged that the defendants violated federal and Illinois antitrust laws by exercising substantial economic power within the “Quick Service Toasted Sandwich Restaurant Franchises market” to coerce franchisees to purchase essential goods from Quizno’s ...

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In Partner & Partner, Inc. v. ExxonMobil Oil Corp, 2008 WL 896052 (E.D. Mich. March 31, 2008), the court dismissed the plaintiff’s breach of contract and antitrust claims. The plaintiff was a direct ExxonMobil gasoline dealer until the defendant decided to stop selling gasoline directly to dealers and opted to work with distributors who would purchase gasoline from ExxonMobil and then sell it to individual dealers. ExxonMobil then allowed plaintiff and other dealers to purchase the stations they were leasing previously. The plaintiff purchased its station and entered into a ...

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The United States Court of Appeals for the Fifth Circuit recently affirmed the dismissal of a distributor’s antitrust counterclaim against a franchisor in a lawsuit brought by the franchisor against the distributor. Schlotzsky’s, Ltd. v. Sterling Purchasing & National Distrib. Co., 2008 WL 588640 (5th Cir. March 5, 2008). The most important aspect of the case for franchisors is the analysis of relevant market issues in the franchise context.

Plaintiff Schlotzky’s is the franchisor for a quick-serve restaurant system and owner of the related trademarks and associated ...

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Distinguishing the situation in Queen City Pizza as a “contractually-created market power” (which cannot lead to antitrust liability), the United States Court of Appeals for the Ninth Circuit restored claims under the Sherman Antitrust Act in Newcal Industries, Inc. v. Ikon Office Solution, 2008 WL 185520 (9th Cir. Jan. 23, 2008). While this case is not brought against a franchisor, the court’s renewed affinity for the Kodak-based theory of a single-brand market could be cited against franchisors in some scenarios. Ikon, the defendant in this case, saw its district court ...

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For as long as anyone alive today can remember, federal antitrust law has prohibited suppliers from setting minimum resale prices based on a century-old precedent. Last summer, the United States Supreme Court, in Leegin v. Creative Leather Products, Inc., 2007 WL 1835892 (U.S. June 28, 2007), reversed that long-standing precedent, ruling that all such agreements are now subject to the “rule of reason,” a method of analysis under which the claimant must make the difficult showing that the arrangement harms competition substantially in the market as a whole. This decision is ...

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For the first time in over a decade, the Supreme Court in early 2006 addressed Robinson-Patman Act standards for price discrimination in Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., 2006 WL 43971 (U.S. Jan. 10, 2006). The decision came in the context of a dealership dispute. A key fact in this case was that Volvo Trucks North America, the defendant at trial, had, like many companies, decided to reduce its dealership ranks so that each dealer would serve a larger market. With that common backdrop, the plaintiff convinced a jury that Volvo Trucks had discriminated against ...

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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