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Judge rejects nationwide class in McDonald's no-poach case

3 minute read

REUTERS/Gleb Garanich

  • Nationwide class not proper for local labor markets
  • Plaintiff claims no-poach agreements violated antitrust laws
  • Judge blasts lawyers' "self interest"

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(Reuters) - A federal judge in Chicago has declined to certify a nationwide class in a lawsuit claiming McDonald's Corp violated antitrust laws by prohibiting franchisees from poaching employees of corporate-owned restaurants.

U.S. District Judge Jorge Alonso on Wednesday said that because geographic markets for low-skilled, low-wage labor tend to be small, it would not be appropriate to allow a nationwide class in the 2017 lawsuit to proceed.

Alonso also criticized the plaintiffs' lawyers at McCune Wright Arevalo for pursuing a nationwide class and a broad theory of liability, suggesting they were pursuing their own interests over those of the workers they claimed to represent.

"Perhaps these attorneys took a gamble ... in the hopes of the huge reward of certifying a nationwide class," he wrote. "Such a self-interested decision would not instill confidence that the attorneys would adequately represent the class."

McDonald's has said the nationwide class could include millions of workers, and the plaintiffs have estimated damages in the case at $2.74 billion - meaning a potential $900 million payout for class counsel if they prevailed.

Illinois-based McDonald's and its lead lawyer, Rachel Brass of Gibson Dunn, did not immediately respond to requests for comment. Nor did lawyers at McCune Wright Arevalo.

The named plaintiff in Wednesday's case, Leinani Deslandes, was first hired for an entry-level job at a McDonald's franchise in Florida in 2009, according to her lawsuit. In 2015, she sought a higher-paying position at a corporate-owned McDonald's, she said.

The manager of that restaurant told Deslandes she wanted to hire her but could not because of the no-poaching policy between franchises and corporate-owned locations, known as "McOpCos," she said. Deslandes said she then quit her job.

Deslandes in her 2017 complaint accused McDonald's of engaging in concerted activity with franchisees to restrict competition for employees, which suppressed their wages. She alleged violations of the federal Sherman Act, a similar Illinois law, and a state law banning deceptive trade practices.

McDonald's in court filings has said it stopped requiring franchisees to sign no-poach agreements in 2017.

Deslandes had sought to represent a nationwide class of people who worked at McDonald's franchises and McOpCos over a five-year period beginning in 2013.

But Alonso on Wednesday agreed with the company that any analysis of whether the agreements amounted to anticompetitive behavior would have to look at individual local labor markets. And Deslandes failed to show that McDonald's workers sell their labor in a national market, "and it defies logic to suppose that they do," the judge wrote.

He noted that about 92% of McDonald's employees work within 10 miles of home, and that only about 900 of McDonald's 3,000 U.S. franchisees operate a restaurant near a McOpCo. As a result, Alonso said, the no-poach agreements could have anticompetitive effects in some labor markets and not others.

"Even looking at the rough contours of the relevant markets in which plaintiffs sell their labor suggests there are hundreds or thousands of local relevant markets in this case," Alonso wrote.

The case is Deslandes v. McDonald's USA LLC, U.S. District Court for the Northern District of Illinois, No. 1:17-cv-04857.

For Deslandes: Richard McCune of McCune Wright Arevalo

For McDonald's: Rachel Brass of Gibson Dunn & Crutcher

Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.

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