# Deslandes v. McDonald's USA, LLC

> District Court, N.D. Illinois · June 25, 2018

URL: https://www.frixlaw.com/law-library/cases/10138743

## Case

- **Court:** District Court, N.D. Illinois
- **Decided:** June 25, 2018
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

LEINANI DESLANDES, )
)
Plaintiff, )
) No. 17 C 4857
)
v. )
) Judge Jorge L. Alonso
McDONALD’S USA, LLC, )
McDONALD’S CORPORATION, and )
DOES 1 through 10, )
)
Defendants. )

MEMORANDUM OPINION AND ORDER
After a no-hire agreement prevented plaintiff from obtaining a position with a rival
employer, plaintiff Leinani Deslandes (“Deslandes”) filed suit asserting, among other things, that
defendants’ no-hire agreement violates the Sherman Antitrust Act, 15 U.S.C. § 1. Defendants
McDonald’s USA, LLC and McDonald’s Corporation move to dismiss. For the reasons set forth
below, the Court grants in part and denies in part defendants’ motion to dismiss [34].
I. BACKGROUND
Plaintiff’s story is one of employment success: she started as an entry-level crew
member paid $7.00 per hour at a McDonald’s franchise and worked her way up into
management. When she applied for a better-paying position with a competing McDonald’s
restaurant, she was foiled by a no-hire agreement which forbid the competing McDonald’s
restaurant to hire both current employees of other McDonald’s restaurants and anyone who had
worked for a competing McDonald’s restaurant in the last six months. Given that most
individuals in the low-skill employment market do not have the luxury of being unemployed by
choice for six months, the no-hire provision effectively prevented competing McDonald’s
franchises (as well as the company-owned stores) from competing for experienced, low-skill
employees. The following facts are from plaintiff’s complaint and are taken as true.
Defendant McDonald’s USA, LLC is a wholly-owned subsidiary of defendant
McDonald’s Corporation. Plaintiff generally refers to them collectively as “McDonald’s.” The

ubiquitous purveyor of hamburgers serves 68,000,000 customers per day from some 36,000
outlets around the world. According to plaintiff’s complaint, nearly two million people work for
McDonald’s or its franchisees.
Many McDonald’s-brand restaurants are owned and operated by McDonald’s Operating
Companies (“McOpCos”), which are direct or indirect subsidiaries of McDonald’s Corporation.
McDonald’s also franchises McDonald’s-brand restaurants. Thus, many McDonald’s-brand
restaurants are independently owned and operated by franchisees. McDonald’s receives revenue
from the franchisees in the form of rent, royalties and fees.
McDonald’s restaurants compete with one another. Franchisees are not granted exclusive
rights or territories and are specifically warned that they may face competition from other

franchisees, new franchisees and restaurants owned by McOpCos. Thus, restaurants owned by
McOpCos compete directly with McDonald’s franchisees (who, in turn, compete with each
other) to sell hamburgers and fries to customers.
When franchising restaurants, McDonald’s enters a standard franchise agreement with its
franchisees.1 Because the agreement is standard, franchisees know the basic contents of each
other’s agreements. Generally, each franchise agreement lasts for twenty years. In addition to a
franchise fee, franchisees agree to pay McDonald’s a percentage of gross revenue. McDonald’s

1 Plaintiff alleges that McDonald’s Corporation is the franchisor for franchise agreements signed
before 2005 and that McDonald’s USA, LLC is the franchisor for franchise agreements signed
from 2005 to the present.
has an incentive to promote revenue growth in its franchisees’ restaurants and encourages
competition between franchisees for food sales.
Under the standard franchise agreement, each franchisee is an independent business
responsible for the operation of its particular McDonald’s-brand restaurant. Under the

agreement, franchisees are required to purchase supplies from approved suppliers. They can,
however, seek approval of new suppliers, and they negotiate directly with the suppliers as to
purchasing terms, such as price.
Franchisees, as independent business owners, are also responsible for the day-to-day
operations of their respective restaurants and for, among other things, employment matters.
Franchisees make their own decisions with respect to hiring, firing, wages and promotions. The
standard franchise agreement specifically states that franchisees are not agents of McDonald’s
and that McDonald’s is not a joint employer with respect to the franchisees’ employees.
Although franchisees make most of their employment decisions independently, their
hiring decisions are restricted in one respect by the standard franchise agreement. The standard

agreement that was used until some point in 2017 contained a no-hire provision. Specifically,
the relevant provision stated:
Interference With Employment Relations of Others. During the term of this
Franchise, Franchisee shall not employ or seek to employ any person who is at the
time employed by McDonald’s, any of its subsidiaries, or by any person who is at
the time operating a McDonald’s restaurant or otherwise induce, directly or
indirectly, such person to leave such employment. This paragraph [] shall not be
violated if such person has left the employ of any of the foregoing parties for a
period in excess of six (6) months.

(Am. Complt. ¶ 87). Although McDonald’s stopped including the no-hire provision in new
franchise agreements at some point in 2017, the provision remains in the franchise agreements
applicable to some 13,000 currently-operating McDonald’s-brand restaurants. McDonald’s has
applied the same restraint to hiring by the McOpCos.
Franchisees ignore the no-hire provision at their peril. A breach of the no-hire provision
gives McDonald’s the right not to consent to a transfer of the franchise. With repeated breaches,

McDonald’s has the right to terminate the franchise. Plaintiff alleges that the provision
promoted collusion among franchisees, because each knew the other had signed an agreement
with the same provision. Plaintiff alleges that the no-hire provision is against each franchisee’s
individual interest, because it denies each franchisee opportunities to hire the best employees.
Plaintiff also alleges that, so long as the other franchisees also refrain from poaching employees,
the no-hire provision helps franchisees keep costs low by allowing them to pay below-market
wages to their own employees.
Although franchisees are generally responsible for their own employment decisions (so
far as they do not violate the no-hire agreement, anyway), many McDonald’s-brand restaurants
are staffed in similar ways. Many stores have managers with varying titles, such as swing

manager, assistant manager and store manager. Assistant and store managers are responsible for
such tasks as payroll processing, time-sheet updating, tracking supplies and orders and training
entry-level employees. McDonald’s requires franchisees to enroll present and future managers
in training programs at McDonald’s training centers. The cost of the training is borne by the
franchisees.
A McDonald’s franchise in Florida (“Bam-B”) first hired plaintiff in 2009. Plaintiff
started as an entry-level employee earning $7.00 per hour, and, within three months, plaintiff had
earned a promotion to shift manager, with a wage bump to $10.00 per hour. By 2011, plaintiff
was a Department Manager for Guest Services, earning $12.00 per hour. At that point, plaintiff
began coursework to become eligible for a position as General Manager. Plaintiff’s employer
enrolled her in a week-long training course at McDonald’s Hamburger University. The training
was scheduled to take place in April 2015, but plaintiff’s supervisors canceled her training when
they learned plaintiff was pregnant.2

Fed up, plaintiff decided to put her skills to work elsewhere. Plaintiff found an opening
for a position similar to hers at a nearby McDonald’s restaurant. The restaurant was owned and
operated by a McOpCo, which was a subsidiary of defendant McDonald’s USA, LLC and which
was subject to the no-hire provision. The positon at the McOpCo restaurant offered a wage of
$13.75 per hour to start, with an expected bump to $14.75 after a 90-day probationary period.
Plaintiff applied online and received a call from the store manager, who told plaintiff she would
like to hire her. Plaintiff told the store manager that she worked for Bam-B. The next day,
plaintiff received a call from a McDonald’s corporate employee who told plaintiff the restaurant
could neither interview nor hire her unless she was “released” by Bam-B to work for the
McOpCo restaurant.

When plaintiff arrived at work the next day, she asked Bam-B to release her to work for
the McOpCo restaurant. Bam-B said no, because plaintiff was “too valuable.” Plaintiff
continued to work for Bam-B for several months, but, ultimately, she took an entry-level job
with Hobby Lobby for less money, $10.25 per hour. Plaintiff alleges that some of the skills she
developed as a manager of a McDonald’s outlet were not transferable to management positions
at employers outside of the McDonald’s brand, so she had to start over at the bottom elsewhere.
Based on these allegations, plaintiff asserts that defendants violated § 1 of the Sherman
Antitrust Act. Plaintiff alleges that defendants and their franchisees engaged in concerted

2 Bam-B, plaintiff’s former employer, is not a defendant in this action, and plaintiff has not
asserted a claim for discrimination.
activity to restrict competition among them for employees, thereby lowering their employment
costs and limiting the employees’ ability to earn higher wages. Plaintiff also asserts that the
alleged conduct violates the Illinois Antitrust Act and the Illinois Consumer Fraud and Deceptive
Trade Practices Act. Defendants move to dismiss.

II. STANDARD ON A MOTION TO DISMISS
The Court may dismiss a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure if the plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P.
12(b)(6). Under the notice-pleading requirements of the Federal Rules of Civil Procedure, a
complaint must “give the defendant fair notice of what the . . . claim is and the grounds upon
which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)). A complaint need not provide detailed factual allegations, but
mere conclusions and a “formulaic recitation of the elements of a cause of action” will not
suffice. Twombly, 550 U.S. at 555. To survive a motion to dismiss, a claim must be plausible.
Ashcroft v. Iqbal, 556 U.S. 662 (2009). Allegations that are as consistent with lawful conduct as

they are with unlawful conduct are not sufficient; rather, plaintiffs must include allegations that
“nudg[e] their claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570.
In considering a motion to dismiss, the Court accepts as true the factual allegations in the
complaint and draws permissible inferences in favor of the plaintiff. Boucher v. Finance Syst. of
Green Bay, Inc., 880 F.3d 362, 365 (7th Cir. 2018). Conclusory allegations “are not entitled to
be assumed true,” nor are legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662, 680 & 681 (2009)
(noting that a “legal conclusion” was “not entitled to the assumption of truth[;]” and rejecting, as
conclusory, allegations that “‘petitioners ‘knew of, condoned, and willfully and maliciously
agreed to subject [him]’ to harsh conditions of confinement”). The notice-pleading rule “does
not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.”
Iqbal, 556 U.S. at 678-679.
III. DISCUSSION
A. Plaintiff’s Sherman Act claim

Plaintiff seeks relief under § 4 of the Clayton Act, 15 U.S.C. § 15, which provides a
private right of action for treble damages to any person “injured in his business or property by
reason of anything forbidden in the antitrust laws[.]” 15 U.S.C. § 15.
The antitrust laws protect market competition, which usually, though not always, means
the goal is enhancing output and reducing price. See Arizona v. Maricopa Cty. Med. Soc., 457
U.S. 332, 348 (1982) (“The per se rule ‘is grounded on faith in price competition as a market
force’”) (citations omitted); Leegin Creative Leather Products v. PSKS, Inc., 551 U.S. 877, 895
(2007) (“the antitrust laws are designed primarily to protect interbrand competition, from which
lower prices can later result”). Accordingly, a plaintiff must allege antitrust injury, an injury
attributable to “an anti-competitive aspect of the practice under scrutiny[.]” Atlantic Richfield

Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990). This case involves a restraint affecting
competition in the supply of an input (labor) for a final product. Usually a cheaper input means a
cheaper final price—something the antitrust laws traditionally prefer. Nonetheless, defendants
do not dispute (nor could they) that plaintiff has alleged antitrust injury in this case, just like
other suppliers do when they allege a restraint in a supply market. Eichorn v. AT&T Corp., 248
F.3d 131, 142 (3d Cir. 2001) (employees challenging no-hire agreement had antitrust standing to
sue); Roman v. Cessna Aircraft Co., 55 F.3d 542, 545 (10th Cir. 1995) (employee had antitrust
standing to challenge agreement between employers not to hire each other’s employees); Phillip
E. Areeda & Herbert Hovencamp, Antitrust Law: An Analysis of Antitrust Principles and Their
Application, ¶352a (3rd and 4th Editions, 2018 Cum. Supp. 2010-2017) (“Employees may
challenge antitrust violations that are premised on restraining the employment market . . .
Standing for employees thus parallels that for ‘suppliers’ generally[.]”); Doe v. Arizona Hosp.
and Healthcare Ass’n, Case No. CV 07-1292, 2009 WL 1423378 at *3 (D. Ariz. March 19,

2009) (“Price-fixing agreements among buyers, like those among sellers, are prohibited by the
Sherman Act, even where the damages caused by the agreement is to sellers and not
consumers.”); cf. Mandeville Island Farms v. American Chrystal Sugar Co., 334 U.S. 219 (1948)
(sugar beet suppliers had antitrust claim for price-fixing against sugar beet refiners).
Section 1 of the Sherman Antitrust Act prohibits “[e]very contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or commerce . . . ” 15 U.S.C. § 1.
This language has long been interpreted to “outlaw only unreasonable restraints” of trade. State
Oil Co. v. Khan, 522 U.S. 3, 10 (1997). Some restraints are deemed so anti-competitive (and,
thus, unreasonable) that they are illegal per se, while other restraints, which may have
procompetitive effects, are judged under the rule of reason (or its subset: the quick look).

As the Supreme Court has explained, restraints that are “unlawful per se” are those that
“have such predictable and pernicious anticompetitive effect, and such limited potential for
procompetitive benefit” that it is obvious they are unreasonable restraints of trade. Khan, 522
U.S. at 10. The per se rule applies to restraints “‘that would always or almost always tend to
restrict competition and decrease output.’” Leegin, 551 U.S. at 886. Accordingly, the per se rule
is reserved for restraints with respect to which “courts have had considerable experience” such
that they “can predict with confidence that [the restraint] would be invalidated in all or almost all
instances under the rule of reason[.]” Leegin, 551 U.S. at 886-87.
Most restraints are not per se unlawful but are instead analyzed under the rule of reason.
Khan, 522 U.S. at 10. Under the rule of reason, “the finder of fact must decide whether the
questioned practice imposes an unreasonable restraint on competition, taking into account a
variety of factors, including specific information about the relevant business, its condition before

and after the restraint was imposed, and the restraint’s history, nature, and effect.” Khan, 522
U.S. at 10. Generally, this requires a plaintiff to show the defendant has “market power—that is
the ability to raise prices significantly without going out of business—without which the
defendant could not cause anticompetitive effects on market pricing.” Agnew v. National
Collegiate Athletic Ass’n, 683 F.3d 328, 335 (7th Cir. 2012). In this case, market power would
be the power to suppress wages.
Courts sometimes apply a third test of reasonableness, the quick look, which is a short
form of rule of reason analysis. Illinois Corp. Travel, Inc. v. American Airlines, Inc., 806 F.2d
722, 727 (7th Cir. 1986) (“This is the sort of short form or quick look Rule of Reason analysis
endorsed in NCAA v. Board of Regents, 468 U.S. 85, 109-10 & n. 42 (1984)). As the Seventh

Circuit has explained:
the quick-look approach can be used when ‘an observer with even a rudimentary
understanding of economics could conclude that the arrangements in question
would have an anticompetitive effect on customers and markets,’ but there are
nonetheless reasons to examine the potential procompetitive justifications.

Agnew, 683 F.3d at 336 (internal citation omitted) (quoting Cal. Dental Ass’n v. FTC, 526 U.S.
756, 770 (1999)). Under quick-look analysis, if the defendant lacks legitimate justifications for
facially anticompetitive behavior then the court “condemns the practice without ado” without
resort to analysis of market power. Agnew, 683 F.3d at 336; Chicago Prof. Sports Ltd.
Partnership v. NBA, 961 F.2d 667, 674 (7th Cir. 1992); see also National Collegiate Athletic
Ass’n v. Board of Regents, 468 U.S. 85, 109-10 n. 42 (1984) (“While the ‘reasonableness’ of a
particular alleged restraint often depends on the market power of the parties involved, because a
judgment about market power is the means by which the effects of the conduct on the market
place can be assessed, market power is only one test of ‘reasonableness.’ And where the
anticompetitive effects of conduct can be ascertained through means short of extensive market

analysis, and where no countervailing competitive virtues are evident, a lengthy analysis of
market power is not necessary.”).
In this case, plaintiff has styled her Sherman Act claim as a restraint that is either
unlawful per se or is unlawful under quick-look analysis. Defendant disagrees. Defendant
argues that the restraint at issue in this case is most appropriately analyzed under the rule of
reason such that plaintiff must include allegations of market power in the relevant market in
order to state a claim. As defendants point out, plaintiff has not included allegations of market
power in a relevant market. To decide which standard to apply, the Court must first consider the
alleged restraint.
Here, plaintiff argues that she has alleged the existence of a horizontal agreement in

restraint of trade. Plaintiff alleges that McDonald’s franchisees signed written franchise
agreements pursuant to which each agreed not to hire employees (including former employees
who left within the prior six months) from other McDonald’s restaurants. Specifically, the
franchisees were not allowed to hire anyone who was employed (or had been employed in the
prior six months) by “McDonald’s, any of its subsidiaries, or by any person who is at the time
operating a McDonald’s restaurant[.]” (Am. Complt. ¶ 87). Plaintiff alleges that the McOpCos
were similarly restricted.
Defendants argue that this is merely a vertical restraint, because it was spearheaded by
the entity at the top of the chain. The Court agrees that the restraint has vertical elements, but the
agreement is also a horizontal restraint. It restrains competition for employees among horizontal
competitors: the franchisees and the McOpCos. Plaintiff has alleged that McOpCos run
McDonald’s-brand restaurants and, thus, compete directly with franchisees for employees.
Plaintiff has also alleged that the McOpCos are subsidiaries of defendant McDonald’s and that

the restraint explicitly restricts franchisees from hiring employees of McDonald’s subsidiaries,
i.e., the franchisees’ competitors. Thus, McDonald’s, by including the no-hire provision in its
agreement with franchisees, was protecting its own restaurants (i.e., itself) from horizontal
competition for employees. Cf. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752,
771 (1984) (“the coordinated activity of a parent and its wholly owned subsidiary must be
viewed as that of a single enterprise for purposes of § 1 of the Sherman Act”). The Court finds
that plaintiff has alleged a horizontal restraint of trade.
Naked horizontal agreements (i.e., those among competitors) to fix prices or to divide
markets are per se unlawful. Leegin, 551 U.S. at 886; Federal Trade Comm’n v. Superior Court
Trial Lawyers Assoc., 493 U.S. 411 (1990) (horizontal agreement among lawyers not to accept

appointments to represent indigent criminal defendants until fees increased was a naked price
restraint and per se unlawful); Blackburn v. Sweeney, 53 F.3d 825, 827 & 828 (7th Cir. 1995)
(“reciprocal agreement [among attorneys] to limit advertising to different geographical regions
was . . . an agreement to allocate markets so that the per se rule of illegality applies”). This
includes naked agreements to set wages. Arizona Hosp., 2009 WL 1423378 at * 3 (plaintiff’s
allegations that hospital association set prices for temporary nurses stated claim for per se
violation of the Sherman Act).
A horizontal agreement not to hire competitors’ employees is, in essence, a market
division. See United States v. eBay, Inc., 968 F.Supp. 2d 1030, 1039 (N.D. Cal. 2013) (“The
court thus finds that the United States’ allegations concerning agreement between eBay and
Intuit [not to hire each other’s employees] suffice to state a horizontal market allocation
agreement.”). The Department of Justice, which enforces rather than interprets the law, has
warned employers that it considers naked no-hire agreements to be per se unlawful. (Press

Release, U.S. Dep’t of Justice, Justice Department and Federal Trade Commission Release
Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring
and Compensation (Oct. 20, 2016), available at https://www.justice.gov/opa/pr/justice-
department-and-federal-trade-commission-release-guidance-human-resource-professionals.).
Thus, because a no-hire agreement is, in essence, an agreement to divide a market, the Court has
no trouble concluding that a naked horizontal no-hire agreement would be a per se violation of
the antitrust laws. Even a person with a rudimentary understanding of economics would
understand that if, say, large law firms in Chicago got together and decided not to hire each
other’s associates, the market price for mid-level associates would stagnate. With no
competition for their talent (aside from lower-paying in-house or government jobs), associates

would have no choice but to accept the salary set by their firms or to move to another city. Thus,
such a claim would be suitable for per se treatment.
Not all horizontal restraints are per se unlawful, however. Some horizontal restraints are
ancillary to agreements that are procompetitive, usually in the sense of enhancing output (i.e.,
producing either a greater quantity of goods or a new good that would not otherwise exist). Polk
Bros., Inc. v. Forest City Enterprises, Inc., 776 F.2d 185, 188-89 (7th Cir. 1985) (“A court must
distinguish between ‘naked’ restraints, those in which the restriction on competition is
unaccompanied by new production or products, and ‘ancillary’ restraints, those that are part of a
larger endeavor whose success they promote.”). A restraint is ancillary if it “promoted enterprise
and productivity when it was adopted.” Polk Bros., 776 F.2d at 189. When a restraint is
ancillary, it is judged either under the rule of reason or given a “quick look.” For example, no-
hire agreements that are ancillary to the sale of a business can have procompetitive effects, so
they are judged under the rule of reason. Eichorn v. AT&T Corp., 248 F.3d 131, 144 (3d Cir.

2001).
Similarly, where the horizontal restraint is necessary in order for the product to exist at
all, a restraint will not be judged per se unlawful but rather will be judged under the rule of
reason, including by “quick look.” Law v. National Collegiate Athletic Assoc., 134 F.3d 1010
(10th Cir. 1998); see also Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc., 441 U.S. 1
(1979); National Collegiate Athletic Ass’n. v. Board of Regents of the Univ. of Okla., 468 U.S.
85 (1984). In Law, a group of college basketball coaches brought suit challenging the NCAA’s
rule limiting annual salaries for certain assistant basketball coaches to $16,000 per year. Because
some restraints were necessary in order to make college sports available, the court concluded that
the horizontal price restraint should be analyzed under the rule of reason, and, in particular, the

“quick look.” Law, 134 F.3d at 1018 & 1020 (“We find it appropriate to adopt such a quick look
rule of reason in this case.”)
In this case, plaintiff has alleged a horizontal restraint that is ancillary to franchise
agreements for McDonald’s restaurants. Each time McDonald’s entered a franchise agreement,
it increased output of burgers and fries, which is to say the agreement was output enhancing and
thus procompetitive. (That is not to say that the provision itself was output enhancing. The very
fact that McDonald’s has managed to continue signing franchise agreements even after it stopped
including the provision in 2017 suggests that the no-hire provision was not necessary to
encourage franchisees to sign.) Because the restraint alleged in plaintiff’s complaint is ancillary
to an agreement with a procompetitive effect, the restraint alleged in plaintiff’s complaint cannot
be deemed unlawful per se. Plaintiff’s claim does not rise and fall on per se treatment, though.
She claims in the alternative that the restraint is unlawful under quick-look analysis.
The next question, then, is whether plaintiff has plausibly alleged a restraint that might be

found unlawful under quick-look analyis. The Court thinks she has. Even a person with a
rudimentary understanding of economics would understand that if competitors agree not to hire
each other’s employees, wages for employees will stagnate. Plaintiff herself experienced the
stagnation of her wages. A supervisor for a competing McDonald’s restaurant told plaintiff she
would like to hire plaintiff for a position that would be similar to plaintiff’s position but that
would pay $1.75-2.75 more per hour than she was earning. Unfortunately for plaintiff, the no-
hire agreement prevented the McOpCo from offering plaintiff the job. When plaintiff asked her
current employer to release her, plaintiff was told she was too valuable. The Court agrees that an
employee working for a below-market wage would be extremely valuable to her employer.
Defendants, nonetheless, argue that their restraint has pro-competitive benefits.

Specifically, defendants argue that the no-hire restriction promotes interbrand competition, by
which they mean the competition between McDonald’s and Burger King, rather than the
intrabrand competition between the McDonald’s restaurant at, say, 111 W. Jackson and the
McDonald’s at, say, 233 W. Jackson. It makes sense for McDonald’s franchisees and the
McOpCos to cooperate to promote intrabrand competition for hamburgers, because a customer
who is satisfied with a hamburger she buys today at the McDonald’s at 111 W. Jackson might
tomorrow prefer a hamburger from the McDonald’s at 233 W. Jackson to a hamburger from
Burger King. This case, though, is not about competition for the sale of hamburgers to
consumers. It is about competition for employees, and, in the market for employees, the
McDonald’s franchisees and McOpCos within a locale are direct, horizontal, competitors.3 A
way to promote intrabrand competition for employees would be an advertising campaign
extolling the virtues of working for McDonald’s. That is not what defendants are alleged to have
done here. Here, they are alleged to have divided the market for employees by prohibiting

restaurants from hiring each other’s current or former (for the prior six months, anyway)
employees. In the employment market, the various McDonald’s stores are competing brands.
Dividing the market does not promote intrabrand competition for employees, it stifles interbrand
competition.
Defendants argue that the no-hire restriction promotes intrabrand competition for
hamburgers by encouraging franchisees to train employees for management positions.
Presumably, the theory is that better service equals happier customers. The Court has no doubt,
as defendants argue, that McOpCos and franchisees were concerned about training and then
losing employees. The restraint, though, is not limited to management employees who had
received expensive training at Hamburger University. The restraint applies even to entry-level

employees with no management training. Nor was the restraint limited to a reasonable period of
time (say six months) after the employee had received the expensive training at Hamburger
University. In any case, every employer fears losing the employees it has trained. That fear does
not, however, justify, say, law firms agreeing not to hire each other’s associates. Employers
have plenty of other means to encourage their employees to stay without resorting to unlawful
market division. Those options include paying higher wages/salaries and contracting directly
with each employee to set an employment term.

3 Realistically, only restaurants within the same locale compete for employees. A McDonald’s
restaurant in Chicago does not compete for employees with a McDonald’s restaurant in Florida.
Though the Court has concluded that plaintiff has stated a claim for a restraint that might
be unlawful under quick-look analysis, the evidence at a later stage may not support it. As
defendants have pointed out, plaintiff has not attempted to plead a claim under the rule of reason.
This is perhaps unsurprising. To state a claim under the rule of reason, a plaintiff must allege

market power in a relevant market. The relevant market for employees to do the type of work
alleged in this case is likely to cover a relatively-small geographic area. Most employees who
hold low-skill retail or restaurant jobs are looking for a position in the geographic area in which
they already live and work, not a position requiring a long commute or a move. That is not to
say that people do not move for other reasons and then attempt to find a low-skill job; the point
is merely that most people do not search long distances for a low-skill job with the idea of then
moving closer to the job. Plaintiff, though, seeks to represent a nationwide class, and allegations
of a large number of geographically-small relevant markets might cut against class certification.
Nonetheless, if plaintiff decides she would like to include a claim under the rule of reason, she
has leave to amend, but she must do so soon, within 28 days.

B. Plaintiff’s state-law claims
Plaintiff also asserts two state-law claims. First, in Count II, plaintiff asserts a claim
under the Illinois Antitrust Act, 740 ILCS 10/1 et seq. The Illinois Antitrust Act states, in
relevant part, that it is unlawful to “[m]ake any contract . . . (a) for the purpose or with the effect
of fixing, controlling, or maintaining the price . . . or the fee . . . paid for any service . . .
received by the parties thereto[.]” 740 ILCS 10/3(a)(1). The Illinois Antitrust Act goes on to
state that “‘[s]ervice’ shall not be deemed to include labor which is performed by natural persons
as employees of others.” 740 ILCS 10/4.
Defendants argue that the plaintiff’s claim is, thus, excluded from coverage under the
Illinois Antitrust Act. The Court agrees that the plain language of the statute excludes plaintiff’s
claim, which alleges that the no-hire agreement artificially suppressed her wage, i.e., the price
paid for her service. See O’Regan v. Arbitration Forums, Inc., 121 F.3d 1060, 1066 (7th Cir.

1997) (“[T]o the extent [plaintiff’s] claims relate to an alleged market for labor services, they are
specifically excluded by § 10/4 of the [Illinois Antitrust] Act.”). Although plaintiff suggests this
is merely an exception for collective bargaining, the statute includes a separate labor exemption.
740 ILCS 10/5(1) (“No provisions of this Act shall be construed to make illegal: (1) the
activities of any labor organization or of individual members thereof which are directed solely to
labor objectives which are legitimate under the laws of either the State of Illinois or the United
States.”).
Accordingly, defendants’ motion to dismiss is granted as to Count II, and Count II is
dismissed with prejudice.
Next, in Count III, plaintiff asserts a claim for violation of the Illinois Consumer Fraud

and Deceptive Trade Practices Act. Defendants move to dismiss, and the Court agrees that
plaintiff cannot move forward on this claim.
To begin with, as defendants point out, the Illinois Supreme Court has concluded that the
Illinois Consumer Fraud Act aims to protect consumers from fraud, not to provide extra
enforcement of the antitrust laws. Laughlin v. Evanston Hosp., 133 Ill.2d 374, 390 (Ill. 1990).
There, the Illinois Supreme Court said:
There is no indication that the legislature intended that the Consumer Fraud Act
be an additional antitrust enforcement mechanism. The language of the Act
shows that its reach was to be limited to conduct that defrauds or deceives
consumers or others. The title of the Act is consistent with its content.
Laughlin, 133 I1.2d at 390. Thus, plaintiff cannot use the ICFA to bring her antitrust claim.
According to plaintiff's allegations, she was injured because a no-hire agreement prohibited a
potential employer from hiring her. Plaintiff was harmed in her capacity as an employee, which
is to say in her capacity as a supplier of services. She was not defrauded as a consumer of
hamburgers, and she cannot state a claim under the ICFA. Hess v. Kanoski & Assoc., 668 F.3d
446, 454 (7th Cir. 2012) (‘[Plaintiff] has no claim under the Illinois Consumer Fraud Act...
because [she] was an employee, not a ‘consumer.”’’).
Count III is dismissed with prejudice.
IV. CONCLUSION
For the reasons set forth above, the Court grants in part and denies in part defendants’
motion to dismiss (34.7 The motion is denied as to Count I. The motion is granted as to Counts
II and HI, which are dismissed with prejudice. This case is set for status on 8/15/18 at 9:30 a.m.

SO ORDERED. ENTERED: June 25, 2018

JORGEL.ALONSOU
United States District Judge

“Tn their motion, defendants also request that the Court dismiss plaintiff's demand for injunctive
relief. Defendants have not sufficiently developed this argument, so the request is denied
without prejudice.
18

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10138743. Public record. Not legal advice.