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The Franchise Memorandum

Eleventh Circuit Reverses Burger King Anti-Poaching Decision, Holding that a Franchisor and its Franchisees Are Separate Entities Capable of Conspiring
Posted in Antitrust

The Eleventh Circuit Court of Appeals reversed a decision dismissing an anti-poaching class action against Burger King, holding that the franchisor and its franchisees are independent actors capable of concerted action in violation of Section 1 of the Sherman Act. Arrington v. Burger King Worldwide, Inc., --- F.4th ----, 2022 WL 3931471 (11th Cir. Aug. 31, 2022). Relying primarily on the Supreme Court’s decision in Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 193 (2010), which held that the NFL’s member clubs could engage in unlawful concerted action with respect to licensing of merchandise, the Eleventh Circuit concluded that the complaint plausibly alleged that Burger King and its franchisees were independent competitors for employees. As such, they could potentially be liable for a violation of Section 1 of the Sherman Act. In reaching this conclusion, the Eleventh Circuit principally cited provisions of Burger King’s franchise agreements, which stated that the franchises were independently owned and operated, and also stated that the franchisees were entirely responsible for all aspects of the employment relationship with their employees.

The Eleventh Circuit’s decision is not surprising, insofar as none of the many other courts that had considered franchise anti-poaching class actions had determined that the franchisor and franchisee were incapable of conspiring for purposes of Section 1. In addition, the Department of Justice Antitrust Division, which had filed statements of interest in favor of franchisors on other issues related to anti-poaching class actions, submitted an amicus brief contending that the district court’s analysis was inconsistent with American Needle. Notably, the Eleventh Circuit refused Burger King’s request that the court consider alternative grounds that might have supported the judgment, including the failure to plead a plausible antitrust claim under the rule of reason. Similar deficiencies have caused courts to dismiss anti-poaching claims against other franchisors, both at the motion to dismiss stage and on summary judgment.

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