The Franchise Memorandum

Subject to court approval, franchisors Jiffy Lube and Papa John’s have agreed to settle separate putative civil class actions alleging that anti-poaching provisions previously included in their franchise agreements violated antitrust law. In re: Papa John’s Employee and Franchisee Employee Antitrust Litig., No 3:18-cv-00825-BB-RSE (W.D. Ken. July 27, 2022); Fuentes v. Jiffy Lube Int’l, Inc., No. 2:18-cv-05174-AB (E.D. Pa. July 22, 2022). According to the uncontested motions that were filed seeking the judicial approval required for class action settlements, Jiffy Lube will pay a total of $2 million to resolve the claims against it, while Papa John’s will pay a total of $5 million. These sums include fee payments to the plaintiffs’ counsel and a modest award to the named plaintiffs. The hotly contested claims, which were nearing the point at which the court would decide on potential class certification, were founded on the contention that anti-poaching provisions previously included in these systems’ franchise agreements had the effect of unlawfully restraining competition among employers for workers and, thus, lowering wages.

The $2 million and $5 million settlements appear to represent a high-water mark for the plaintiffs (and class action counsel) in the cases that have been brought against numerous franchisors based upon the anti-poaching provisions that once were almost ubiquitous in franchise agreements. At the same time, these figures represent a massive discount from the theoretically available damages (subject to automatic trebling) if plaintiffs could have proven that wages had been suppressed for all employees system-wide over a period of years. In their unopposed motions seeking approval of the settlements, the plaintiffs noted these difficulties of proof, as well as the fact that class action certification had been denied in cases against other franchisors brought under the same theory. Cases against some franchisors have been thrown out entirely for failure to state a valid claim under the antitrust laws. As one accommodation to these constraints, the Jiffy Lube settlement class was limited to employees in one metropolitan statistical area, as opposed to the nationwide class that had originally been pled.