Jun 15, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Domino’s Franchise Agreement Supports Employee’s Antitrust Conspiracy Claim

Crux of Court’s Decision (Not including any subsequent appeals): Domino’s Franchise Agreement Supports Employee’s Antitrust Conspiracy Claim. The Court rejected Domino’s motion to dismiss concluding that a ‘no-hire’ provision in Domino’s franchise agreements supported the allegation that the franchisor had formed and participated in an antitrust conspiracy. In so concluding, the Court ruled that Blanton, the plaintiff employee of a Domino’s franchisee, had adequately pled that Domino’s used the franchise agreements to orchestrate a conspiracy among their franchisees to not compete for labor; Blanton says that the no-hire provision is evidence of that conspiracy and violates the Sherman Antitrust Act because it unreasonably restrains competition for Domino’s franchise employees and depresses employee wages, lessens employee benefits, and stifles employee mobility

Name of Court: United States District Court for the Eastern District of Michigan, Southern Division

Short Case Name: Blanton v. Domino’s

Crux of Dispute: Blanton says Defendants violated the Sherman Antitrust Act by orchestrating an employee no-hire agreement among their nationwide network of franchisees. Under the no-hire provision at issue—included in every Domino’s franchise agreement from at least January 2013 to April 2018—Domino’s franchisees agreed not to solicit or hire current employees of other Domino’s franchisees and affiliated entities.
Blanton worked for a Domino’s franchise in Port Orange, Florida, from January 2017 until April or May of that year; he says he quit because his hours were repeatedly cut back. The Domino’s franchise that Blanton worked for is one of many in the nation that signed the Domino’s franchise agreement and agreed to the no-hire provision. Defendant Domino’s Pizza Franchising, LLC—the current franchising arm of Defendant Domino’s Pizza, Inc.—enters into a standard franchise agreement with each new Domino’s franchise owner; Domino’s franchises are independently owned and operated as separate entities from Defendants. Until at least April of 2018, each franchise agreement included the no-hire provision. The no-hire provision required franchisees to agree not to:

Directly or indirectly, solicit or employ any person who is employed by Domino’s, by any entity controlled by or affiliated with Domino’s, or by any other of our franchisees, nor will you induce any of these people to       leave their employment without the prior written consent of their employers.

This provision prohibits a Domino’s franchisee from recruiting or hiring a current employee of another Domino’s franchisee without prior written consent. Franchisees also agree that a violation of the no-hire provision will cause “irreparable harm” to Defendants; moreover, a violation triggers termination of the violating franchisee’s franchise agreement.  Blanton says that Defendants used the franchise agreements to orchestrate a conspiracy among their franchisees to not compete for labor; Blanton says that the no-hire provision is evidence of that conspiracy and violates the Sherman Antitrust Act because it unreasonably restrains competition for Domino’s franchise employees and depresses employee wages, lessens employee benefits, and stifles employee mobility.

Primary Legal Claims by Franchisor: Defendants [franchisors – Domino’s] say Blanton’s complaint should be dismissed for lack of Article III standing under Federal Rule of Civil Procedure 12(b)(1). They also say Blanton fails to allege antitrust injury. The Court disagreed.

Primary Legal Claims by Franchisee: Blanton pleads that Defendants’ no-hire provision “harmed [Domino’s franchise] employees by lowering the salaries and benefits employees otherwise would have commanded in a competitive marketplace.” Blanton says that his own wages were depressed. Blanton says that the no-hire provision is a per se violation of the Sherman Act; he argues that the no-hire provision is evidence of the type of horizontal agreement that courts always deem per se illegal. Courts hold that this type of restraint has such a clear lack of redeeming value that it is conclusively presumed to be unreasonable. See Expert Masonry, Inc. v. Boone Cty., Ky., 440 F.3d 336, 342 (6th Cir. 2006).  Some Detail of Court’s Decision (Not including any subsequent appeals): Blanton also sufficiently alleges antitrust injury. Blanton contends that Defendants’ no-hire agreement is “a conspiracy not to compete for labor.” As discussed above, Blanton says the conspiracy had the purpose and effect of depressing wages and limiting the employment mobility of Domino’s franchise employees, including himself. Blanton also alleges that Domino’s franchises compete against one another for labor. “The relevant cases hold that plaintiffs whose opportunities in the employment market have been impaired by an anticompetitive agreement directed at them as a particular segment of employees have suffered an antitrust injury under the governing standard.” Roman v. Cessna Aircraft Co., 55 F.3d 542, 544 (10th Cir. 1995) (citing Radovich v. National Football League, 352 U.S. 445, 77 S. Ct. 390, 1 L. Ed. 2d 456 (1957)); see also Phillip Areeda & Herbert Hovenkamp, Antitrust Law ¶ 377c (rev. ed. 1995) (“[a]ntitrust law addresses employer conspiracies controlling employment terms precisely because they tamper with the employment market and thereby impair the opportunities of those who sell their services there . . . An employee overcomes the primary hurdle to standing when he shows that the alleged violation restrains competition in the labor market.”).

Interesting Factual Point: The Plaintiff sued only the franchisor entities, not the franchisees.

Interesting Theoretical Point: The decision appears to confuse the antitrust distinction between horizontal and vertical Sherman Act violations, as well as the distinction between horizontal per se and rule of reason claims.

Jeff Goldstein’s Comment: The language of the franchise agreement, as drafted and imposed upon franchisees by the franchisor, opened up the franchisees to antitrust liability:

Blanton says Defendants orchestrated an agreement not to compete for labor among their franchisees; he says that franchisees, by signing the franchise agreement, tacitly agree not to hire one another’s employees—an agreement he says is evidenced by the provision that allows franchisees the power to waive the no-hire restraint. Further, Blanton says this agreement lowered the wages and depressed the mobility of a nationwide class of Domino’s employees.

Official Case Name and Legal Cite: Blanton v. Domino’s Pizza Franchising LLC, No. 18-13207, 2019 U.S. Dist. LEXIS 87737 (E.D. Mich. May 24, 2019)

Click on the Link Below for a Full Copy of this Decision:

Blanton v. Domino_s Pizza Franchising LLC_ 2019 U.S. Di

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