Turner v. McDonald's USA, LLC

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. )

______________________________________________________________________________

STEPHANIE TURNER, )

)

Plaintiff, )

) No. 19 C 5524

)

v. )

) Judge Jorge L. Alonso

McDONALD’S USA, LLC, and )

McDONALD’S CORPORATION, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

After a hiring restriction prevented plaintiff Leinani Deslandes (“Deslandes”) from taking

a better-paying position with a rival McDonald’s outlet, she filed this suit seeking relief under

Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. Stephanie Turner (“Turner”) filed a

related suit, 19-cv-5524, which is consolidated with this one. Defendants have filed a motion for

judgment on the pleadings or, in the alternative, for summary judgment. Plaintiffs, too, have

filed a motion for summary judgment.1 For the reasons set forth below, plaintiffs’ motion is

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denied. Defendants’ motion is granted in part and denied in part.

I. BACKGROUND

In 2017, Deslandes filed a three-count amended complaint challenging a no-hire

provision in McDonald’s franchise agreements. In Count I, Deslandes asserted that the no-hire

provision was an unlawful restraint of trade under Section 1 of the Sherman Antitrust Act.2 In

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her amended complaint (familiarity with which is assumed), plaintiff alleged that the two

defendants (McDonald’s Corporation and its wholly-owned subsidiary McDonald’s USA, LLC)

served as the franchisor for the ubiquitous McDonald’s restaurants. (Plaintiffs usually refer to

the two defendants collectively as McDonald’s, and the Court does, as well.)

Deslandes also alleged that each franchisee signed a franchise agreement that contained a

no-hire restriction, which read:

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). Plaintiff further alleged that, although many McDonald’s restaurants were

owned and operated by franchisees, many other McDonald’s restaurants were owned and

operated by subsidiaries of defendant McDonald’s Corporation. The parties refer to the

restaurants owned by McDonald’s Corporation as McOpCos. Deslandes alleged that the

McOpCos competed directly with restaurants owned by franchisees.

1 Although the parties intend for the motions to apply to both cases, they are filed on the docket

of the Deslandes case.

2 The other two counts were previously dismissed with prejudice.

In her amended complaint, Deslandes styled her Sherman Act claim as a restraint that is

unlawful either per se or under quick-look analysis. Defendants disagreed and filed a motion to

dismiss. In their motion to dismiss, defendants argued that the restraint was most appropriately

analyzed under the rule of reason, such that plaintiff, in order to state a plausible claim, was

required to include in her complaint allegations of market power in the relevant market.

Deslandes had not included such allegations.

In ruling on the motion to dismiss, the Court concluded that Deslandes had stated a claim

for a restraint that might be unlawful under quick-look analysis. Deslandes v. McDonald’s USA,

LLC, Case No. 17-cv-4847, 2018 WL 3105955 at *8 (N.D. Ill. June 25, 2018) (“Deslandes I”).

(Familiarity with that decision is assumed.) The Court reasoned that plaintiff, by alleging that

the McOpCos compete directly with the franchisees, had adequately alleged a horizontal

restraint, because the restraint prevented defendants’ competitors (the franchisees) from hiring

defendants’ employees. Deslandes I, 2018 WL 3105955 at *6. The Court further concluded that

the alleged restraint could not be illegal per se, because it was ancillary to an output-enhancing

agreement, namely the franchise agreement itself, which increased output of burgers and fries.

Deslandes I, 2018 WL 3105955 at *7.

In denying the motion to dismiss and allowing plaintiff’s claim to proceed on the theory

that the alleged restraint might be unlawful under a quick look, the Court gave plaintiff an

explicit but time-limited opportunity to amend her complaint to add allegations that would

support the finding of an unlawful restraint under the rule of reason. Specifically, the Court said:

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.

Deslandes I, 2018 WL 3105955 at *8. (emphasis added). Deslandes chose not to amend.

The parties proceeded with discovery, and, eventually, plaintiffs Deslandes and Turner

(who had, by that time, filed a similar suit that was consolidated with this one) moved to certify a

nationwide class of persons who were employed by a McDonald’s restaurant during a five-year

period. This Court denied the motion for class certification. Deslandes v. McDonald’s USA,

LLC, Case No. 17 C 4857, 2021 WL 3187668 (N.D. Ill. July 28, 2021) (“Deslandes II”).

(Familiarity with that decision is assumed.)

The primary reason why the Court denied class certification was its conclusion that

individual issues would predominate. That conclusion stemmed from the conclusion that the

restraint in this case would have to be judged under the rule of reason, which meant each plaintiff

would need to establish that the restraint was anticompetitive in the relevant market in which she

sold her labor. This Court explained in great detail its reasons for concluding that rule-of-reason

analysis would apply. Deslandes II, 2021 WL 3187668 at *7-11. Those reasons included that

the Supreme Court had recently decided, in a unanimous decision, that claims regarding

restraints of trade “presumptively” call for rule-of-reason analysis. Deslandes II, 2021 WL

3187668 at *7 (citing NCAA v. Alston, __ U.S. __, 141 S.Ct. 2141 (2021)). Next, the Court

explained that in many parts of the country (some twenty states), the no-hire agreement was only

a vertical agreement between franchisor and franchisee, because, in those areas, no McOpCos

competed with franchisee restaurants. Deslandes II, 2021 WL 3187668 at *10. Vertical

agreements are judged under the rule of reason. Leegin Creative Leather Products, Inc. v. PSKS,

Inc., 551 U.S. 877, 907 (2007). Finally, defendants had put forth sufficient evidence of

procompetitive effects to warrant consideration of the restraint under the rule of reason.

Deslandes II, 2021 WL 3187668 at *8-10.

Because this Court denied class certification, this case is not a class action. What

remains of this case are the individual claims of two plaintiffs, Deslandes and Turner. Each

seeks relief under the Sherman Act for alleged reduced wages resulting from the no-hire

restriction.

Before the Court is defendants’ motion for judgment on the pleadings, or, in the

alternative, summary judgment. As defendants point out, neither Deslandes nor Turner ever

included in her respective complaint a plausible claim under the rule of reason, which is to say

neither ever alleged a relevant market within which defendants have market power to suppress

wages. Plaintiffs, too, have filed a motion for summary judgment.

The following facts are undisputed unless otherwise noted.3

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3 Local Rule 56.1 outlines the requirements for the introduction of facts parties would like

considered in connection with a motion for summary judgment. The Court enforces Local Rule

56.1 strictly. See FTC v. Bay Area Business Council, Inc., 423 F.3d 627, 633 (7th Cir. 2005)

(“Because of the important function local rules like Rule 56.1 serve in organizing the evidence

and identifying disputed facts, we have consistently upheld the district court’s discretion to

require strict compliance with those rules.”). At the summary judgment stage, a party cannot

rely on allegations; she or it must put forth evidence. Fed.R.Civ.P. 56(c)(1)(A); see also Grant v.

Trustees of Indiana Univ., 870 F.3d 562, 568 (7th Cir. 2017) (“As the ‘put up or shut up’

moment in a lawsuit,’ summary judgment requires a non-moving party to respond to the moving

party’s properly-supported motion by identifying specific, admissible evidence showing that

there is a genuine dispute of material fact for trial.”). Where one party supports a fact with

admissible evidence (i.e., not complaint allegations) and the other party fails to controvert the

fact with citation to admissible evidence (i.e., not complaint allegations), the Court deems the

Deslandes, at some point (the parties do not say when) was employed by a franchisee in a

McDonald’s restaurant in Apopka, Florida, near Orlando. Within three miles of Deslandes’s

home were two McDonald’s restaurants and between 42 and 50 other quick-service restaurants.

Within ten miles of Deslandes’s home were 517 quick-service restaurants.

Turner was employed, at some point (the parties do not say when), by a McOpCo in

Covington, Kentucky. She was also employed, at some point (the parties do not say when), by a

franchisee to work in McDonald’s restaurants located in Florence, Hebron and Erlander,

Kentucky. Within ten miles of Turner’s home were 253 quick-serve restaurants.

II. STANDARD

A motion for judgment on the pleadings “is subject to the same standard as a motion to

dismiss under Rule 12(b)(6).” Gill v. City of Milwaukee, 850 F.3d 335, 339 (7th Cir. 2017).

Thus, the question is whether a plaintiff’s complaint states a claim that is plausible on its face,

meaning it “allows the court to draw the reasonable inference that defendant is liable for the

misconduct alleged.” Gill, 850 F.3d at 339 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009)).

Summary judgment shall be granted “if the movant shows that there is no genuine dispute

as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P.

56(a). When considering a motion for summary judgment, the Court must construe the evidence

and make all reasonable inferences in favor of the non-moving party. Hutchison v. Fitzgerald

Equip. Co., Inc., 910 F.3d 1016, 1021 (7th Cir. 2018). Summary judgment is appropriate when

fact admitted. See Curtis v. Costco Wholesale Corp., 807 F.3d 215, 218-19 (7th Cir. 2015);

Ammons v. Aramark Uniform Servs., Inc., 368 F.3d 809, 817-18 (7th Cir. 2004). This does not,

however, absolve the party putting forth the fact of the duty to support the fact with admissible

evidence. See Keeton v. Morningstar, Inc., 667 F.3d 877, 880 (7th Cir. 2012).

the non-moving party “fails to make a showing sufficient to establish the existence of an element

essential to the party’s case and on which that party will bear the burden of proof at trial.”

Celotex v. Catrett, 477 U.S. 317, 322 (1986). “A genuine issue of material fact arises only if

sufficient evidence favoring the nonmoving party exists to permit a jury to return a verdict for

that party.” Brummett v. Sinclair Broadcast Group, Inc., 414 F.3d 686, 692 (7th Cir. 2005).

III. DISCUSSION

A. Motion for judgment on the pleadings

Defendants’ theory as to why they are entitled to judgment on the pleadings is that the

Court has already determined that this case must be analyzed under the rule of reason, and

neither plaintiff included in her respective complaint allegations that plausibly suggest the

restraint would be unlawful under rule-of-reason analysis. Specifically, neither Deslandes nor

Turner alleged in her respective complaint the relevant market in which she sold her labor or that

McDonald’s had market power in that relevant market. Such allegations are necessary to state a

plausible claim that a restraint is unlawful under the rule of reason. Agnew v. National

Collegiate Athletic Ass’n, 683 F.3d 328, 347 (7th Cir. 2012) (affirming dismissal of rule-of-

reason claim where plaintiff failed to allege that defendant had market power within a relevant

market); see also Deslandes II, 2021 WL 3187668 at *11 (describing the importance of defining

a relevant market in vertical and horizontal restraint cases). In Agnew, the Seventh Circuit

explained:

Under a Rule of Reason analysis, the plaintiff carries the burden of showing that

an agreement or contract has an anticompetitive effect on a given market within a

given geographic area. As a threshold matter, a plaintiff must show that 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, 683 F.3d at 335 (internal citation omitted).

When this Court concluded that the restraint at issue must be judged under the rule of

reason, it considered information outside the pleadings. The conclusion, however, is the same

based solely on the pleadings. “[A]ntitrust courts must give wide berth to business judgments

before finding liability.” Alston, 141 S.Ct. at 2163. Deslandes’s and Turner’s claims

“presumptively” call for rule-of-reason analysis. Alston, 141 S.Ct. at 2151 (“Determining

whether a restraint is undue for purposes of the Sherman Act ‘presumptively’ calls for what we

have described as ‘rule of reason analysis.’”).

In Alston, the Supreme Court explained that a quick look suffices:

only for restraints at opposite ends of the competitive spectrum. For those sorts of

restraints—rather than restraints in the great in-between—a quick look is

sufficient for approval or condemnation.

Alston, 141 S.Ct. at 2155 (emphasis added). On one end of that spectrum, the Supreme Court

explained, are restraints that are “so obviously incapable of harming competition that they

require little scrutiny,” such as joint ventures commanding such a small share of the market (say,

5-6%) that any reduction in output would be made up by the rest of the market. Alston, 141 S.Ct.

at 2155-56. On the opposite end of the spectrum are those “agreements among competitors” that

“so obviously threaten to reduce output and raise prices that they might be condemned” after a

quick look. Alston, 141 S.Ct. at 2156. The Supreme Court said such quick-look condemnations

should be rare, explaining, “we take special care not to deploy these condemnatory tools until we

have amassed ‘considerable experience with the type of restraint at issue’ and ‘can predict with

confidence that it would be invalidated in all or almost all instances.’” Alston, 141 S.Ct. at 2156

(citing Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 886-887 (2007)).

The restraint at issue in this case falls in “the great in-between” of restraints that require rule-of-

reason analysis. This Court cannot say that it has enough experience with no-hire provisions of

franchise agreements to predict with confidence that they must always be condemned, which

means, under Alston, that the Court must apply rule-of-reason analysis to this case.

Accordingly, the Court also rejects Turner’s and Deslandes’s argument that the alleged

restraint is unlawful per se. Per se treatment is outside quick-look treatment on either end of the

spectrum and is, thus, even more rare than quick-look analysis. This Court previously rejected,

at the motion-to-dismiss stage, the idea that Deslandes had alleged a restraint that was unlawful

per se. Deslandes I, 2018 WL 3105955 at *7. The alleged restraint was specifically alleged to

be part of a franchise agreement, which is to say it was ancillary to an agreement that was output

enhancing in the market for fast food. Thus, though the restraint as alleged in the plaintiffs’

respective complaints had horizontal elements (in that the franchisees competed with the

franchisor for labor), the restraint is not per se unlawful because it “may contribute to the success

of a cooperative venture that promises greater productivity and output.” Polk Bros., Inc. v.

Forest City Enterprises, Inc., 776 F.2d 185, 189 (7th Cir. 1985). Such restraints are judged

under the rule of reason. Polk Bros., 776 F.2d at 188-89 (“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.”).4 The restraint plaintiffs allege must be judged under the rule of reason.

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4 The restraint alleged by Deslandes and Turner is similar to dual distribution, where a

“manufacturer simultaneously sells to independent dealers and to those who might otherwise be

customers of those dealers.” Phillip E. Areeda & Herbert Hovencamp, Antitrust Law: An

Analysis of Antitrust Principles and Their Application ¶ 1605a (4th and 5th Editions, 2015-

2021). Such arrangements are generally judged under the rule of reason, because the restraints

generally “serve legitimate purposes without harming market competition.” Id. ¶ 1605c (“The

manufacturer’s own presence at the dealer level in no way alters its strategy for profit

maximization. That presence would not induce it to impose restraints that reward dealers with

excess profits, because such profits necessarily reduce its own manufacturer-level profits.”); see

also Krehl v. Baskin-Robbins Ice Cream Co., 664 F.2d 1348, 1357 (9th Cir. 1982) (“dual

distribution systems must be evaluated under the traditional rule of reason standard”).

Next, plaintiffs argue that they were not required to amend their complaints to add rule-

of-reason allegations, because they need not plead legal theories. Plaintiffs are correct that

“[f]ederal pleading rules . . . do not countenance dismissal of a complaint for imperfect statement

of the legal theory supporting the claim asserted.” Johnson v. Shelby, 574 U.S. 10, 11 (2014).

That does not, however, absolve either of these plaintiffs of the obligation to “plead facts

sufficient to show that her claim has substantive plausibility.” Johnson, 574 U.S. at 12 (citing

Bell Atlantic Corp. v. Twombly, 550 U.S. 554 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009)). In

other words, this Court would not dismiss either plaintiff’s antitrust claim for failing to include

the words “rule of reason” in her respective complaint. The Court can, however, dismiss such a

claim for failure to include allegations of market power in a relevant market, because those are

the facts necessary to render plausible a claim that a restraint is unlawful under rule-of-reason

analysis. Deslandes and Turner failed to include such facts.

Nor are plaintiffs saved by their suggestion that employment by McDonald’s restaurants

constitutes a market all its own, separate from the market for employment by other quick-serve

restaurants. Plaintiffs could have sold their labor to other customers. As the Seventh Circuit has

explained:

Suppose that a well-conducted survey shows that vanilla is people’s favorite

flavor of ice cream, and by a large margin. It would not follow that vanilla ice

cream is a separate market, because if its price rises any other ice cream producer

could make more vanilla and less chocolate or pistachio. For a closely related

reason, [the expert’s] conclusion that at-shelf coupons uniquely appeal to

‘impulse shoppers’ (that is, shoppers who do not prepare in advance by clipping

coupons from the Sunday supplements) does not identify an economic market.

Attributes of shoppers do not identify markets. An example from United States v.

Rockford Memorial Corp., 989 F.2d 1278, 1284 (7th Cir. 1990), shows why.

Suppose that diabetics must drink low-calorie soft drinks, if any at all. Could

producers of artificially sweetened soft drinks raise prices as a result of those

‘locked in’ customers? No, they could not. A price increase not only would drive

nondiabetic customers to other products but also would induce rivals to switch

some of their production from standard drinks to artificially sweetened ones. The

healthy customers, and the products, combine to protect the diabetic customers.

Just so with coupons. Careful shoppers and other producers protect the impulse

buyers (or, to be accurate, protect the manufacturers that want to sell to impulse

buyers).

Menasha Corp. v. News Am. Mkg. In-Store, Inc., 354 F.3d 661, 665 (7th Cir. 2004) (emphasis

added). The idea that Deslandes and Turner sold their labor in market that was limited to

McDonald’s outlets is implausible. They could have sold their labor to other buyers. As in

Agnew:

Plaintiffs appear to have made the strategic decision to forgo identifying a specific

relevant market. Whatever the reasons for the strategic decision, they cannot now

offer post hoc arguments attempting to illuminate a buried market allegation.

Agnew, 683 F.3d at 347. Neither plaintiff alleged, in her respective complaint, a relevant market

or that defendants had market power in that relevant market.

In a footnote, plaintiffs request leave to amend. It is far too late for that. On June 25,

2018, this Court explicitly gave plaintiff Deslandes an opportunity to file an amended complaint

in order to add allegations that defendants had market power in the relevant market. [Docket 53

at 16]. The Court set a deadline of July 23, 2018 for the amendment. [Docket 53 at 16].

Deslandes did not file an amended complaint, and, thus, as this Court has mentioned in multiple

orders, plaintiff waived the chance to add those allegations. Plaintiffs argue that plaintiff Turner

was not given a deadline for amending her complaint. The reason the Court did not set an

explicit deadline for Turner was that such a deadline was unnecessary. When Turner asked this

Court to consolidate her case with Deslandes’s, she specifically stated that she was asserting the

same claim as Deslandes. (Docket 146 at 5) (“Ms. Turner’s addition to the case will not

significantly impact the scope of discovery as she will assert the same legal theories as Ms.

Deslandes.”) (emphasis added). It is far too late in this case, after discovery has closed, for

either plaintiff to add allegations of market power in the relevant market. Cf. Chapman v. First

Index, Inc., 796 F.3d 783, 785 (7th Cir. 2015) (“a district court has discretion to reject an attempt

to remake a suit more than four years after it began”). Plaintiffs have not shown good cause for

this Court to relieve them of a strategy they chose years ago. Their neglect to amend in 2018 is

not excusable.

Finally, the Court notes that amendment would be futile. As this Court has previously

explained, the relevant geographic market for the type of labor Deslandes and Turner were

selling is a small, local area. This Court explained why, at length, previously. Deslandes, 2021

WL 3187668 at *12-13. It would be futile for either plaintiff to amend. It is undisputed that,

within three miles of Deslandes’s home were two McDonald’s restaurants and between 42 and

50 other quick-serve restaurants. Within ten miles of Deslandes’s home were 517 quick-serve

restaurants. Accordingly, Deslandes cannot plausibly allege that defendants had market power in

the relevant market within which she sold her labor. Within ten miles of Turner’s home were

253 quick-serve restaurants. Accordingly, Turner cannot plausibly allege that defendants had

market power in the relevant market in which Turner sold her labor. Without market power,

defendants could not suppress plaintiffs’ wages; another buyer would step in to pay plaintiffs

more. See Alston, 141 S.Ct. at 2156 (citing Polk Bros, 776 F.2d at 191 (“Unless the firms have

the power to raise price by curtailing output, their agreement is unlikely to harm consumers, and

it makes sense to understand their cooperation as benign.”)). Amendment would be futile.

Deslandes failed to allege plausibly that the restraint is unlawful under rule-of-reason

analysis. She declined to amend when she had the chance, and now it is too late. Defendants are

entitled to judgment on the pleadings with respect to Count I of Deslandes’s amended complaint.

The same is true with respect to Turner. Defendants are entitled to judgment on the pleadings on

Count I of her complaint.

B. Motions for summary judgment

Accordingly, the cross motions for summary judgment are denied as moot.

IV. CONCLUSION

For these reasons, defendants’ motion [378] for judgment on the pleadings or for

summary judgment is granted in part and denied in part. Plaintiffs’ motion [390, 393] for

summary judgment is denied as moot. Defendants’ motions [409, 411] to exclude experts are

denied as moot. Defendants are granted judgment on the pleadings with respect to Count I of

Deslandes’s amended complaint. Deslandes’s claims against Does 1-10 are dismissed for want

of prosecution.

Defendants are granted judgment on the pleadings with respect to Count I of Turner’s

complaint. Civil case terminated.

SO ORDERED. ENTERED: June 28, 2022

United States District Judge

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