in Re: Papa John's Employee and Franchisee Employee Antitrust Litigation

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF KENTUCKY

LOUISVILLE DIVISION

IN RE PAPA JOHN’S EMPLOYEE AND

FRANCHISEE EMPLOYEE ANTITRUST CIVIL ACTION NO: 3:18-CV-00825-JHM

LITIGATION

MEMORANDUM OPINION AND ORDER

This matter is before the Court on Defendants’ Motion to Compel Arbitration [DN 58],

Motion to Dismiss, or in the Alternative, to Strike [DN 59], and Motion for the Court to Take

Judicial Notice [DN 60], as well as Plaintiffs’ Motion for the Court to Take Judicial Notice [DN

73]. Fully briefed, these matters are ripe for decision. For the following reasons, the Defendants’

Motion to Compel Arbitration is GRANTED, Motion to Dismiss or Strike is DENIED, and

Motion for Judicial Notice is GRANTED. Plaintiffs’ Motion for Judicial Notice is GRANTED.

I. BACKGROUND

On January 28, 2019, the Court consolidated three putative class actions filed against Papa

John’s International, Inc. and Papa John’s USA, Inc. (together, “Defendants” or “Papa John’s”).

[DN 39]. The Court ordered the Plaintiffs, current and former employees of Defendants, to file a

consolidated amended complaint. On February 19, 2019, Plaintiffs Jay Houston, Ashley Page,

and Jamiah Greer, on behalf of themselves and all others similarly situated, filed a Consolidated

Amended Complaint (“CAC”). [DN 54]. According to the CAC, Defendants violated the

Sherman Antitrust Act by “orchestrat[ing] an agreement between and among Papa John’s

restaurant franchisees, pursuant to which the franchisees agreed not to hire or solicit each other’s

employees or Papa John’s employees.” [Id. at 1]. Because of this unlawful agreement, Plaintiffs

allege that they suffered depressed wages and benefits and diminished employment opportunities.

[Id. at 2].

Papa John’s franchises are independently owned and operated as separate legal entities

from Defendants. [Id. at 17]. Papa John’s International, Inc.—the franchising arm of

Defendants—enters into a standard franchise agreement with each new franchise owner. Plaintiffs

claim that every franchisee executing a franchise agreement beginning no later than 2010 and

continuing through at least November 2017 agreed to a No-Hire provision. [Id. at 20]. The

provision stated as follows:

You covenant that you will not, during the Term and for a period of one year after

expiration or termination of the Franchise, employ or seek to employ any person

who is employed by us, our Affiliates or by any of our franchisees, or otherwise

directly or indirectly solicit, entice or induce any such person to leave their

employment.

[Id.; DN 59-4 at 3]. Additionally, all franchisees agreed to penalties for violations of said

agreement—for example, franchisees agreed that violation of the provision could result in

termination of the franchise, among other things. [Id.]. Plaintiffs claim that Defendants used the

franchise agreements to orchestrate a conspiracy among their franchisees to not compete for labor

among themselves or the corporate-owned stores. [Id. at 9].

Plaintiffs argue that this agreement is an unreasonable restraint of trade, violative of the

Sherman Antitrust Act. More specifically, Plaintiffs maintain that the No-Hire agreement acts as

a horizontal restraint of trade among competitors in the labor market and is a per se violation of

the Sherman Act. [Id. at 35]. Defendants disagree and move to dismiss for failure to state a claim.

[DN 59]. As grounds, Defendants argue that this is a vertical restraint and thus the rule of reason

standard of review ought to apply. [59-1 at 7–12]. Applying the rule of reason, Defendants aver,

the Court will easily conclude that Plaintiffs failed to adequately allege a violation of the Sherman

Antitrust Act and, accordingly, the case must be dismissed. [Id. at 16–17].

In this action, Plaintiffs seek to represent “[a]ll persons who were employed at a Papa

John’s restaurant located in the United States between January 1, 2010 through the present.” [DN

54 at 27]. In order to avoid the four-year statute of limitations on antitrust actions, Plaintiffs plead

fraudulent concealment by Defendants. [Id. at 30–33]. Defendants Move to Strike Plaintiffs’

fraudulent concealment allegations claiming that Plaintiffs failed to adequately plead each of the

three requirements for tolling the statute of limitations under such a theory. [DN 59 at 2; DN 59-1

at 17–21].

As an alternative to their Motion to Dismiss, Defendants Move to Strike Plaintiffs’ class

allegations. [DN 59 at 2–3; DN 59-1 at 21–25]. Defendants argue that the class allegations ought

to be stricken before discovery begins because the proposed class is overbroad and fails to satisfy

Federal Rule of Civil Procedure 23’s requirements. [DN 59-1 at 17–21]. Plaintiffs respond that

Defendants’ Motion is severely premature and that the Court cannot adequately assess Rule 23’s

requirements at this stage. [DN 71 at 22–24].

In addition to the Motion to Dismiss, or in the Alternative, to Strike, Defendants filed a

Motion to Compel Arbitration and Dismiss Claims of Jamiah Greer, one of the named plaintiffs

to this action. [DN 58]. Therein, Defendants assert that Greer affirmatively waived her right to

resolution of her Sherman Act claim in a judicial forum and has limited herself to resolution of

any such claim in arbitration. [DN 58-1 at 1–2]. Plaintiffs respond that the Motion to Compel

arbitration must be denied because Greer’s arbitration agreement only covered disputes arising

out of or related to her employment with Papa John’s, and her Sherman Act claim does not concern

her employment but instead arises out of a conspiracy between and amongst Defendants and their

franchisees. [DN 74].

Finally, both parties filed motions for judicial notice. [DN 60; DN 73]. Defendants ask

the Court to judicially notice three categories of exhibits offered in support of their Motion to

Dismiss: (1) a U.S. Department of Justice (“DOJ”) Statement of Interest; (2) the fact that

Defendants’ Franchise Agreements are publicly filed with state agencies; and (3) the fact that

Defendants’ branded restaurants and other restaurants not associated with Defendants advertise

job positions on various websites. [DN 60 at 2–4]. Plaintiffs in turn ask the Court to judicially

notice two documents offered in support of their Opposition to the Motion to Dismiss: (1) a public

letter from the American Antitrust Institute (“AAI”) to the DOJ and (2) two job postings for Papa

John’s delivery drivers. [DN 86 at 1].

II. STANDARD OF REVIEW

Upon a motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6),

a court “must construe the complaint in the light most favorable to plaintiffs,” League of United

Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), “accept all

well-pled factual allegations as true,” id., and determine whether the “complaint . . . states a

plausible claim for relief,” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under this standard, the

plaintiff must provide the grounds for its entitlement to relief, which “requires more than labels

and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when it “pleads

factual content that allows the court to draw the reasonable inference that the defendant is liable

for the misconduct alleged.” Iqbal, 556 U.S. at 678. A complaint falls short if it pleads facts

“merely consistent with a defendant’s liability” or if the alleged facts do not “permit the court to

infer more than the mere possibility of misconduct.” Id. at 679. Instead, “a complaint must contain

a ‘short and plain statement of the claim showing that the pleader is entitled to relief.’” Id. at 663

(quoting Fed. R. Civ. P. 8(a)(2)). “But where the well-pleaded facts do not permit the court to

infer more than the mere possibility of misconduct, the complaint has alleged—but it has not

‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

If “matters outside the pleadings are presented to and not excluded by the court” when

ruling upon a motion under Rule 12(b)(6), the Federal Rules require that “the motion must be

treated as one for summary judgment under Rule 56.” Fed. R. Civ. P. 12(d). This Rule does not

require the Court to convert a motion to dismiss into a motion for summary judgment every time

the Court reviews documents that are not attached to the complaint. Greenberg v. Life Ins. Co. of

Va., 177 F.3d 507, 514 (6th Cir. 1999). “[W]hen a document is referred to in the complaint and

is central to the plaintiff's claim . . . [,] the defendant may submit an authentic copy [of the

document] to the court to be considered on a motion to dismiss, and the court's consideration of

the document does not require conversion of the motion to one for summary judgment.” Id.

(quotation omitted). “Courts may also consider public records, matters of which a court may take

judicial notice, and letter decisions of governmental agencies.” Jackson v. City of Columbus, 194

F.3d 737, 745 (6th Cir. 1999), abrogated on other grounds, Swierkiewicz v. Sorema N.A., 534 U.S.

506 (2002).

III. DISCUSSION

A. Motion to Compel Arbitration

Defendants first move the Court to compel arbitration and dismiss the claim of Plaintiff

Jamiah Greer. [DN 58]. Defendants argue that Greer’s signing of an arbitration agreement during

her hiring process precludes her participation in this lawsuit and affirmatively limits resolution of

her claim to arbitration on an individual basis. [DN 58-1 at 3–4]. Plaintiffs oppose this Motion

stating that Defendants misconstrue the Sherman Act claim. [DN 74 at 1]. Plaintiffs explain that

the claim arises not out of Greer’s employment relationship with Defendants, but from a

conspiracy between and amongst Defendants and the franchisees. [Id.]. That being the case,

Plaintiffs maintain that the instant action does not fall under the purview of the arbitration

agreement and Greer may continue to be a part of this class. [Id. at 6].

Defendants ask the Court to enforce an arbitration agreement. The arbitration agreement

at issue provides that the FAA, 9 U.S.C. §§ 1–16, shall govern the agreement. “When asked by a

party to compel arbitration under a contract, a federal court must determine whether the parties

agreed to arbitrate the dispute at issue.” Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000)

(citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)). The

Sixth Circuit has explained a district court’s role as follows:

When considering a motion to stay proceedings and compel arbitration under the

Act, a court has four tasks: first, it must determine whether the parties agreed to

arbitrate; second, it must determine the scope of that agreement; third, if federal

statutory claims are asserted, it must consider whether Congress intended those

claims to be nonarbitrable; and fourth, if the court concludes that some, but not all,

of the claims in the action are subject to arbitration, it must determine whether to

stay the remainder of the proceedings pending arbitration.

Stout, 228 F.3d at 714 (citing Compuserve, Inc. v. Vigny Int'l Fin., Ltd., 760 F. Supp. 1273, 1278

(S.D. Ohio 1990)); see also N. Fork Collieries LLC v. Hall, 322 S.W.3d 98, 102 (Ky. 2010) (“The

task of the trial court confronted with” a motion to compel arbitration “is simply to decide under

ordinary contract law whether the asserted arbitration agreement actually exists between the

parties and, if so, whether it applies to the claim raised in the complaint. If an arbitration

agreement is applicable, the motion to compel arbitration should be granted”) (internal citations

omitted).

The parties do not dispute that a valid and enforceable arbitration agreement was signed

by Greer. The crux of the disagreement is on the second point—the scope of that agreement.

Although it is well-established that doubts about arbitrability in a labor agreement should be

resolved in favor of arbitration, the Court may compel arbitration only over those issues the parties

have agreed by contract to arbitrate. AT&T Tech., Inc. v. Commc’ns Workers of Am., 475 U.S.

643, 648 (1986) (“[A]rbitration is a matter of contract and a party cannot be required to submit to

arbitration any dispute which he has not agreed so to submit.”). Where the arbitration clause is as

broad as the one in the present case, the presumption of arbitrability is particularly strong. Id.

The arbitration agreement states that Greer waives all rights to a trial in court before a

judge or jury on any “claims, disputes or controversies arising out of or relating to her employment

with Papa John’s.” [DN 58-3 at 2]. Defendants maintain that Plaintiffs’ claim for monetary relief

arising out of Greer’s employment with Papa John’s is exactly the type of claim anticipated by the

arbitration agreement. [DN 58-1 at 6–7]. In contrast, Plaintiffs argue that Greer’s antitrust claim

“arises out of the concerted refusal of any Papa John’s franchisee to consider her for a position

pursuant to the No-Hire Agreement.” [DN 74 at 1]. Plaintiffs further argue that Defendants are

liable for the harm caused (wage suppression) “because it orchestrated the No-Hire Agreement,

not because it employed Ms. Greer.” [Id.].

Plaintiffs assert a claim for violations of the Sherman Act. [DN 54 ¶¶ 123–134 (citing 15

U.S.C. § 1, et seq.)]. Because of these violations, Greer alleges that she suffered injury, including

depressed wages and deprivation of job opportunities. [DN 54 ¶ 18]. Not only does the arbitration

agreement broadly cover “all claims, disputes or controversies arising out of or relating to your

employment with Papa’s Johns,” but the agreement proceeds to provide a non-exhaustive list of

potential claims covered by the agreement. [DN 58-3 at 2]. The agreement states that “[c]overed

claims include . . . any violation of any federal, state, or other governmental law, statute,

regulation, or ordinance.” [Id. at 3]. Reading this clause in conjunction with the limitation to

claims arising out of or relating to employment, as urged by Plaintiff, does not change the result.

Greer, a former employee of Defendants, alleges that Defendants violated federal antitrust laws

and requests damages including suppressed wages from her time as an employee—as such, this

action arises from Greer’s employment with Defendants. Plaintiffs, grasping at straws, make light

of the fact that the list of covered claims does not include the words “antitrust” or “Sherman Act.”

[DN 74 at 2]. However, explicit incorporation is not necessary for claims to be covered by this

clause. The Court is persuaded that Greer’s claims are covered by the parties’ arbitration

agreement.

Plaintiffs cite to Sixth Circuit case law which states that a court cannot “override the clear

intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because

the policy favoring arbitration is implicated.” Smith v. Altisource Sols., 726 F. App’x 384, 389–

90 (6th Cir. 2018). The Court does not run contrary to this precedent. At best, there is a small

degree of uncertainty as to whether the arbitration agreement covers the claims asserted in the

instant action. In such a case, the liberal policy favoring arbitration provides instructive guidance.

See Yaroma v. Cashcall, Inc., 130 F. Supp. 3d 1055, 1061 (E.D. Ky. 2015) (quoting Masco Corp.

v. Zurich American Ins. Co., 382 F.3d 624, 626 (6th Cir. 2004)). The text of the CAC and the

arbitration agreement signed by Greer, as well as the policy of rigorous enforcement of arbitration

agreements, convince the Court that the claims asserted are subject to arbitration. The final

relevant question is whether Congress evinced an intent for Sherman Act claims to be

nonarbitrable. Nothing in the Sherman Act suggests a congressional intention to preclude waiver

of judicial remedies. Accordingly, the claims asserted in the CAC are arbitrable.

Defendants ask the Court to dismiss the case, rather than stay proceedings, in the event

that the arbitration agreement is enforced. “The FAA requires a court to stay proceedings pending

arbitration ‘only on application of one of the parties.’” Hilton v. Midland Funding, LLC, 687 F.

App’x 515, 519 (6th Cir. 2017) (citing 9 U.S.C. § 3). Neither party has requested a stay, making

dismissal appropriate. Id. Therefore, Defendants’ Motion to Compel Arbitration [DN 58] is

GRANTED, and Greer’s claims will be DISMISSED without prejudice. Hilton, 687 F. App’x at

519 (dismissal without prejudice is appropriate to allow parties to refile or reopen case for entry

of arbitration award or any other relief to which parties may be entitled).

B. Motions to Take Judicial Notice

Both parties filed respective motions asking the Court to take judicial notice of several

documents. [DN 60; DN 73]. Defendants ask the Court to take judicial notice of three categories

of exhibits offered in support of their Motion to Dismiss: (1) a DOJ Statement of Interest; (2) the

fact that Defendants’ Franchise Agreements are publicly filed with state agencies; and (3) the fact

that Defendants’ branded restaurants and other restaurants not associated with Defendants

advertise job positions on various websites. [DN 60 at 2–4]. Plaintiffs, in turn, ask the Court to

judicially notice two documents in support of their Opposition to Defendants’ Motion to

Dismiss—a statement from the AAI to the DOJ and two Papa John’s delivery driver job postings.

[DN 73].

The Court begins with Defendants’ first request. Defendants ask the Court to take judicial

notice of a DOJ Statement of Interest filed in three previous cases. [DN 60 at 2]. Defendants state

that the document has been publicly filed in a case pending in federal court and is publicly

available through PACER. [Id.]. Plaintiffs ask that the Court only take notice of the fact that the

Statement was filed and its contents and not consider it for the truth or accuracy of the statements

therein. [DN 76 a 1]. Defendants reply that they are only asking for notice of the Statement “and,

as appropriate, to give deference to the [DOJ’s] analysis and guidance contained therein given the

DOJ’s status as the independent government agency tasked with enforcing the Sherman Act.”

[DN 84 at 2].

“[I]n order to preserve a party’s right to a fair hearing, a court, on a motion to dismiss,

must only take judicial notice of facts which are not subject to reasonable dispute.” Passa v. City

of Columbus, 123 F. App'x 694, 697 (6th Cir. 2005); see also Fed. R. Evid. 201 (“The court may

judicially notice a fact that is not subject to reasonable dispute because it . . . can be accurately

and readily determined from sources whose accuracy cannot reasonably be questioned.”). As to

the DOJ Statement of Interest, there is no dispute that the DOJ filed this document in three separate

cases on behalf of the United States. To that extent, judicial notice is proper for such a document.

“It is well-settled that ‘[f]ederal courts may take judicial notice of proceedings in other courts of

record’ . . . .” Lyons v. Stovall, 188 F.3d 327, 332 n.3 (6th Cir. 1999) (quoting Granader v. Pub.

Bank, 417 F.2d 75, 82–83 (6th Cir. 1969), cert. denied, 397 U.S. 1065 (1970)). The Court will

not, however, abdicate its duty to apply the law to the facts of this case by blindly deferring to the

DOJ’s analysis of distinct factual scenarios. Therefore, the Court will take judicial notice of the

existence of the DOJ Statement of Interest and any information contained therein that is not subject

to reasonable dispute.

Next, Defendants ask the Court to take notice of the fact that Papa John’s franchise

agreements are publicly filed with state agencies. [DN 60 at 2–3]. Defendants supply three links

at which the franchise agreement is publicly available. It is indeed proper to take judicial notice

of a document publicly available on the Internet. See Ryan v. Tenn. Valley Auth, 2015 WL

1962173, at *3 n.2 (E.D. Tenn. Apr. 30, 2015) (“The Court may take judicial notice of ‘public

records and government documents available from reliable sources on the Internet.’”) (quoting

U.S. ex rel. Dingle v. BioPort Corp., 270 F. Supp. 2d 968, 972 (W.D. Mich. 2003)). Plaintiffs list

several problems with this request, but each of Plaintiffs’ concerns is unfounded. The franchise

agreements on each website are easily located and Minnesota’s database notes that franchise

documents from 2010 became available on May 24, 2011. While Plaintiffs are correct that

Defendants have not shown that there was any means by which one could determine under which

version of the franchise agreement any particular franchisee operated, the Court will not

extrapolate to facts not contained within the four corners of the documents. The Court will do no

more than that asked by Defendants: “take judicial notice of the fact that Papa John’s franchise

agreements have been publicly filed with these state agencies and are available on those state

agencies’ websites, and the fact that Papa John’s franchise agreements have been available on the

Minnesota Commerce Department’s website since May 24, 2011.” [DN 84 at 4].

Finally, Defendants ask the Court to judicially notice that Papa John’s branded restaurants

and non-Papa John’s restaurants advertise job positions on various websites. [DN 60 at 3–4].

Plaintiffs respond that this fact is not appropriate for judicial notice because there is no indication

“that all 3,441 Papa John’s restaurants, including the 2,739 of them owned by independent

franchise entities, . . . advertise identical job postings, and have done so at all times since January

1, 2010.” [DN 76 at 3]. This is certainly true but does not change the fact that these documents

may be properly judicially noticed. As above, these exhibits only provide the Court with the

information contained therein—for example, that on March 28, 2019, seven of Defendants’

restaurants posted job listings for delivery drivers. Again, the Court will not improperly generalize

beyond the information included on the face of the documents.

The Court now turns to Plaintiffs’ Motion for the Court to Take Judicial Notice concerning

documents submitted in support of Plaintiffs’ Response to the Motion to Dismiss. [DN 73].

Plaintiffs ask the Court to take judicial notice of two sets of documents: (1) a public letter from

the AAI to the DOJ and (2) two job postings for Papa John’s delivery drivers. [Id. at 1].

Defendants object to the Court taking notice of the AAI letter but, as to the job postings, request

only that notice be circumscribed. [DN 86 at 1–3].

The Court first addresses the public letter from the AAI. As to this document, Plaintiffs

request that the Court take notice of the contents and that the document was published on the

Internet. [DN 73 at 1]. Defendants respond opposing judicial notice and argue that the letter “is

nothing more than a legal argument made by a private pro-plaintiff organization with an agenda

to push.” [DN86 at 3]. That may very well be true but that fact does not render the letter ill-suited

for judicial notice. The letter is published online by a reputable source and there is no reasonable

dispute as to the content of said letter, making it appropriate for judicial notice. Defendants’

objection appears to stem from the concern that the Court will, in its analysis, defer to the position

of the AAI. As previously stated, the Court will not blindly assent to third party arguments. To

be certain, the Court does not judicially notice the truth of the statements contained in the AAI

letter—nor the documents submitted by Defendants—because some of these facts may remain in

dispute.

As to the Papa John’s delivery driver job postings, this is no different than Defendants’

request for judicial notice of similar views of job postings. Again, Plaintiffs request that notice be

taken of the contents of the postings and that the postings were published online. [DN 73 at 1].

As there is no reasonable dispute as to the existence or the content of the job postings, judicial

notice is proper.

As with each document submitted by the parties for judicial notice, the Court’s notice is

limited: “a court may take notice of the documents and what they say, but it ‘[cannot] consider the

statements contained in the document for the truth of the matter asserted.’” Platt v. Bd. of Comm’rs

on Grievs. & Discipline of the Ohio Supreme Court, 894 F.3d 235, 245 (6th Cir. 2018) (quoting

In re Omnicare, Inc. Sec. Litig., 769 F.3d 455, 467 (6th Cir. 2014). Based on the foregoing,

Defendants’ and Plaintiffs’ Motions for the Court to Take Judicial Notice are GRANTED.

C. Motion to Dismiss or Strike

1. Sherman Antitrust Act

Section 1 of the Sherman Antitrust Act prohibits “every contract, combination in the form

of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or

with foreign nations.” 15 U.S.C. § 1. The Clayton Act provides the enforcement mechanism—

“any person who shall be injured in his business or property by reason of anything forbidden in

the antitrust laws may sue . . . and shall recover threefold the damages by him sustained.” 15

U.S.C. § 15. Such claims are subject to a four-year statute of limitations from the date “the cause

of action accrued.” Z Techs Corp. v. Lubrizol Corp., 753 F.3d 594, 598 (6th Cir. 2014) (quoting

15 U.S.C. § 15(b)).

To state a plausible violation of Section 1, a plaintiff must allege “(1) an agreement

between two or more economic entities, (2) an unreasonable restraint of trade, and (3) that the

conspiracy caused . . . injury.” Downing v. Ford Motor Co., No. 13-1335, 2018 WL 4621955, at

*2 (6th Cir. 2018). “[A]n antitrust plaintiff must also plead antitrust injury, ‘which is to say injury

of the type the antitrust laws were intended to prevent and that flows from that which makes the

defendants’ acts unlawful.’” Blanton v. Domino’s Pizza Franchising LLC, No. 18-13207, 2019

WL 2247731, at *4 (E.D. Mich. May 24, 2019) (quoting Valley Prods. Co., Inc. v. Landmark, a

Div. of Hospitality Franchise Sys., Inc., 128 F.3d 398, 402 (6th Cir. 1997)).

a. An Agreement

Plaintiffs allege that Defendants conspired to not compete for labor among their

franchisees. [DN 54 ¶ 76]. Plaintiffs point to several pieces of evidence in support of this

contention: (1) the explicit contractual terms in the franchise agreement [Id. ¶ 63]; (2) that the

agreement is otherwise against the franchisees’ self-interest [Id. ¶ 71–75]; (3) that no franchisee

would agree absent an assurance all others were held to the same terms [Id. ¶ 68]; and (4) that

franchisees have numerous opportunities to conspire at annual meetings [Id. ¶ 84]. Defendants

retort that the above allegations are “more consistent with the franchisees signing their franchise

agreements containing the no-poach clause because it was necessary to do so to acquire a franchise

than as a result of any franchise conspiracy.” [DN 83 at 5–6]. “To plead unlawful agreement, a

plaintiff may allege either an explicit agreement to restrain trade, or ‘sufficient circumstantial

evidence tending to exclude the possibility of independent conduct.’” Watson Carpet & Floor

Covering, Inc. v. Mohawk Indus., Inc., 648 F.3d 452, 457 (6th Cir. 2011) (quoting In re Travel

Agent Comm’n Antitrust Litig., 583 F.3d 896, 907 (6th Cir. 2009) (listing four circumstantial “plus

factors” that can demonstrate “concerted action”), cert. denied, 562 U.S. 1134 (2011)). Such

evidence must reasonably tend to prove that the defendants “had a conscious commitment to a

common scheme designed to achieve an unlawful objective.” Monsanto Co. v. Spray-Rite Serv.

Corp., 465 U.S. 752, 768 (1984). Construing the CAC in the light most favorable to Plaintiffs, as

is appropriate at this early stage, the Court is persuaded that they plausibly pled an agreement

between economic entities.

b. Unreasonable Restraint of Trade

Turning to the second element of a Sherman Act violation, Defendants maintain that under

any of the standards of review associated with restraints of trade, Plaintiffs’ CAC fails to state a

claim. [DN 59-1 at 6–17]. Plaintiffs respond that the Court need not decide which test applies at

this stage [DN 71 at 4–5], but that, analyzed under each, the No-Hire agreement is unreasonable.

[Id. at 5–18].

The Supreme Court “has long recognized that, ‘[i]n view of the common law and the law

in this country’ when the Sherman Act was passed, the phrase ‘restraint of trade’ is best read to

mean ‘undue restraint.’” Ohio v. Am. Express Co., 138 S. Ct. 2274, 2283 (2018) (quoting Standard

Oil Co. of N.J. v. United States, 221 U.S. 1, 59-60 (1911)). Whether a restraint is undue or

unreasonable is determined by one of three approaches—the per se rule, the “rule of reason,” or

the quick-look test. Nat’l Hockey League Players Ass’n v. Plymouth Whalers Hockey Club, 419

F.3d 462, 469 (6th Cir. 2005); Care Heating & Cooling, Inc. v. Am. Standard, Inc., 427 F.3d 1008,

1012 (6th Cir. 2005); Cal. Dental Ass’n v. FTC, 526 U.S. 756, 770 (1999).

“A small group of restraints are unreasonable per se because they always or almost always

tend to restrict competition and decrease output.” Ohio v. Am. Express Co., 138 S. Ct. 2274, 2283

(2018). “Typically only ‘horizontal’ restraints—restraints imposed by agreement between

competitors—qualify as unreasonable per se.” Id. at 2283–84. The rule of reason, on the other

hand, “requires courts to conduct a fact-specific assessment of market power and market structure

to assess the restraint’s actual effect on competition.” Id. at 2284. Under that analysis, “[t]he goal

is to ‘distinguish between restraints with anticompetitive effect that are harmful to the consumer

and restraints stimulating competition that are in the consumer’s best interest.’” Id. (quoting

Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886 (2007). “Vertical

restraints—i.e., restraints imposed by agreement between firms at different levels of distribution

[nearly always] should be assessed under the rule of reason.” Ogden v. Little Caesar Enters., Inc.,

No. 18-12792, 2019 WL 3425266, at *3 (E.D. Mich. July 29, 2019) (citing Ohio, 138 S. Ct. at

2284)). Finally, there is the quick look approach, which the Sixth Circuit recognizes as a “third

type of category arising from the blurring of the line between per se and rule of reason cases.” In

re Se. Milk Antitrust Litig., 739 F.3d 262, 274 (6th Cir. 2014). The rule is “used for situations in

which ‘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.’” Id.

(quoting Cal. Dental Ass’n, 526 U.S. at 770)).

Plaintiffs claim that the Court need not resolve the applicable test at this time as it is a fact-

laden determination. [DN 71 at 4–5]. Defendants, taking aim at the caselaw cited in support of

this argument, disagree with that position and submit the case of Ogden v. Little Caesar Enters.,

Inc., as supplemental authority. [DN 88; DN 88-1]. Ogden, decided on July 29, 2019, is indeed

instructive. Therein, the Eastern District of Michigan decided that the plaintiff’s request for the

court to postpone selection of a standard of review was unavailing. Ogden, 2019 WL 3425266, at

*4. However, the case is distinguishable. In Ogden, the plaintiff “pointedly resist[ed]” the

application of the rule of reason test. Id. That being the case, the court explained that it need not

defer selecting the appropriate rule. Id. (“The plaintiff himself has tethered the viability of his

pleading to the application of either the per se or ‘quick look’ rules of decision, which are more

amenable to analysis at the pleading stage.”). Here, the Plaintiffs do no such thing. In fact,

Plaintiffs adamantly maintain that the CAC sufficiently states a claim under the rule of reason

standard in addition to the per se and quick look tests. [DN 71 at 17–18]. Accordingly, the Court

examines each standard to determine whether Plaintiffs plausibly allege an unreasonable restraint

of trade.

Plaintiffs say that the No-Hire provision is a per se violation of the Sherman Act—it

operates as a “market allocation agreement, a category of restraint long held to be per se unlawful

under the antitrust laws.” [DN 54 ¶ 1]. As discussed above, “[t]he less common method of

determining whether [a] restraint is unreasonable is the per se rule.” In re Se. Milk Antitrust Litig.,

739 F.3d 262, 271 (6th Cir. 2014). Plaintiffs plausibly pled and proceed to argue in their Response

to the Motion to Dismiss that the provision restrains horizontal competitors for labor. [DN 54 ¶

29; DN 71 at 6–8]. Such agreements “are so clearly unreasonable that their anticompetitive effects

within geographic and product markets are inferred.” Se. Milk, 739 F.3d at 270 (citing Expert

Masonry, Inc. v. Boone Cnty., Ky., 440 F.3d 336, 342 (6th Cir. 2006)).

In the alternative, Plaintiffs suggest that the No-Hire provision is illegal under the

quick-look approach. They maintain that even a person with a rudimentary understanding of

economics would recognize the agreement not to hire each other’s employees to be detrimental to

competitive markets for labor. [DN 54 at 15–17]; see also Deslandes v. McDonald’s USA, LLC,

No. 17 C 4857, 2018 WL 3105955, at *7 (N.D. Ill. June 25, 2018). Defendants oppose application

of the quick look test and instead urge the Court to apply the rule of reason and dismiss Plaintiffs’

case.

In contrast to Ogden, the Plaintiffs here maintain that even under the rule of reason test

they have stated a claim that the No-Hire provision operates as an unreasonable restraint of trade.

[DN 54 at 17–18]. Defendants retort that because the CAC contains no allegation of a relevant

product and geographic market or market power—necessary allegations for application of the rule

of reason—Plaintiffs fail to state a rule of reason claim. [DN 83 at 10]. Central to this argument

is their claim that such allegations are necessary to state a claim of unreasonable restraint under

the rule of reason test. To determine whether a restraint violates the rule of reason, there is a three-

step, burden shifting framework. Ohio v. Am. Express Co., 138 S. Ct. 2274, 2284 (2018).

According to this framework,

the plaintiff has the initial burden to prove that the challenged restraint has a

substantial anticompetitive effect that harms consumers in the relevant market. If

the plaintiff carries its burden, then the burden shifts to the defendant to show a

procompetitive rationale for the restraint. If the defendant makes this showing,

then the burden shifts back to the plaintiff to demonstrate that the procompetitive

efficiencies could be reasonably achieved through less anticompetitive means.

Id. (internal citations omitted). Defendants here claim that Plaintiffs’ failure to allege a relevant

market is fatal to the initial showing of an unreasonable restraint of trade under the rule of reason

standard.

To satisfy the initial burden, a plaintiff can show direct or indirect evidence. Id. “Direct

evidence of anticompetitive effects would be ‘proof of actual detrimental effects [on

competition],’ such as reduced output, increased prices, or decreased quality in the relevant

market.” Id. (quoting FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 460 (1986)). Indirect evidence,

on the other hand, “would be proof of market power plus some evidence that the challenged

restraint harms competition.” Id.

Here, Plaintiffs rely exclusively on direct evidence to prove that Defendants’ No-Hire

provision has caused anticompetitive effects in the labor market—suppression of wages and

decreased job mobility. [DN 54 ¶¶ 16–18]. Plaintiffs rely on Ohio v. Am. Express Co. for the

proposition that they need not define the relevant market because they offer actual evidence of

adverse effects on competition. [DN 71 at 17]. In that case, the Supreme Court indirectly stated

that, when dealing with a horizontal restraint that has an adverse effect on competition, a plaintiff

need not define the relevant market. Ohio, 138 S. Ct. 2274, 2285, n.7; see also Ind. Fed’n of

Dentists, 476 U.S. at 460–61 (“Since the purpose of the inquiries into market definition and market

power is to determine whether an arrangement has the potential for genuine adverse effects on

competition, proof of actual detrimental effects . . . can obviate the need for an inquiry into market

power, which is but a surrogate for detrimental effects.”) (internal quotation marks omitted).

Defendants respond that because this case involves vertical agreements, Plaintiffs’ reliance on

Ohio is misplaced. The Court disagrees. Plaintiffs have set forth factual allegations sufficient

from which the Court could plausibly conclude that the agreements at issue are horizontal.

As in Blanton v. Domino’s Pizza Franchising LLC, “[t]he Court declines to announce a

rule of analysis at this juncture.” No. 18-13207, 2019 WL 2247731, at *4 (E.D. Mich. May 24,

2019). Plaintiffs do no tether the viability of their claim to any one rule. Accordingly, more

factual development is necessary before a standard of review is selected.

c. Antitrust Injury

Plaintiffs also sufficiently plead antitrust injury. Plaintiffs contend that the No-Hire

provision is an agreement not to compete for labor and that the agreement had the purpose and

effect of depressing wages and diminishing employment opportunities. Courts within the Sixth

Circuit have found such allegations sufficient to satisfy the antitrust injury requirement. See Id.

(quoting Roman v. Cessna Aircraft Co., 55 F.3d 542, 544 (10th Cir. 1995) (“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.”)). Consequently, Plaintiffs allege facts sufficient

to satisfy the antitrust injury requirement of an antitrust claim.

For the foregoing reasons, the Court finds that Plaintiffs plausibly allege that Defendants

violated the Sherman Antitrust Act. See In re Text Messaging Antitrust Litig., 630 F.3d 622, 629

(7th Cir. 2010) (“The case is just at the complaint stage and the test for whether to dismiss a case

at that stage turns on the complaint’s ‘plausibility.’”). Accordingly, Defendants’ Motion to

Dismiss is DENIED.

2. Fraudulent Concealment

Plaintiffs seek to represent a class of plaintiffs that goes beyond the normal statutory period

for antitrust claims—they claim that the statute should be tolled because Defendants fraudulently

concealed the existence of the No-Hire agreement. [DN 54 ¶¶ 107–122]. Defendants argue that

the Court should strike Plaintiffs’ fraudulent concealment allegations as Plaintiffs failed to plead

with particularity each of the necessary elements of such a claim. [DN 59-1 at 17–21].

Specifically, Defendants assert that they could not have wrongfully concealed the No-Hire

agreement because it was publicly available, that Plaintiffs failed to plead that acts of concealment

prevented them from discovering a claim, and that Plaintiffs failed to plead facts to show that they

exercised due diligence to discover their claims. [Id.].

Defendants are correct, Federal Rule of Civil Procedure 9(b) requires that “[i]n alleging

fraud or mistake, a party must state with particularity the circumstances constituting fraud or

mistake.” Fed. R. Civ. P. 9(b). To state a claim of fraudulent concealment, a plaintiff must plead:

“(1) wrongful concealment of their actions by the defendants; (2) failure of the plaintiff to discover

the operative facts that are the basis of his cause of action within the limitations period; and (3)

plaintiff’s due diligence until discovery of the facts.” Dayco Corp. v. Goodyear Tire & Rubber

Co., 523 F.2d 389, 394 (6th Cir. 1975). Critical to the resolution of this issue, the Eastern District

of Michigan noted in Blanton that “[t]he requirement of diligence is only meaningful . . . when

facts exist that would excite the inquiry of a reasonable person.” Blanton v. Domino’s Pizza

Franchising LLC, No. 18-13207, 2019 WL 2247731, at *6 (E.D. Mich. May 24, 2019) (quoting

Conmar Corp. v. Mitsui & Co. (U.S.A.), Inc., 858 F.2d 499, 504 (9th Cir. 1988)).

As to the first requirement, Plaintiffs argue that Defendants made public statements that

concealed “the fact that [they] orchestrated and engaged in a No-Hire agreement . . . .” [DN 54

¶¶ 109–14]. More particularly, Plaintiffs claim that Defendants publicly maintained the position

that each franchisee had full control over employment decisions including “hiring, termination,

pay practices and any other employment practices.” [Id. ¶ 113]. Further, Plaintiffs allege that

Defendants publicly stated that employees could transition from a team member into a

management position during their employment with Defendants. [Id. ¶ 111]. Defendants are

correct—generally, fraudulent concealment requires affirmative acts of concealment. Pinney

Dock & Transport Co. v. Penn Cent. Corp., 838 F.2d 1445, 1471 (6th Cir.), cert. denied, 488 U.S.

880 (1988). “Concealment by mere silence is not enough. There must be some trick or

contrivance intended to exclude suspicion and prevent inquiry.” Id. at 1467 (internal quotation

marks omitted). The Plaintiffs have shown just that. Defendants publicly represented that each

franchisee had complete control over all hiring practices and those false statements fostered a

misimpression on Plaintiffs’ behalf that Defendants had no inter-franchise constraints on their

hiring and employment practices.

Defendants further argue that Plaintiffs failed to exercise due diligence to discover their

alleged claims. [DN 59-1 at 20–21]. The agreement, while publicly available, was only available

through third-party websites—California’s Department of Business Oversight, Minnesota’s

Commerce Department, and Wisconsin’s Department of Financial Institutions. [Id. at 19]. As

previously mentioned, the diligence requirement is only meaningful when individuals would have

reason to know of the records’ existence. See Dayco Corp. v. Goodyear Tire & Rubber Co., 523

F.2d 389, 394 (6th Cir. 1975) (“Any fact that should excite his suspicion is the same as actual

knowledge of his entire claim.”); see also Ruth v. Unifund CCR Partners, 604 F.3d 908, 911 (6th

Cir. 2010) (concluding that the “mere availability of open and readily accessible public records

may not suffice by itself to defeat a fraudulent concealment claim” where a plaintiff does not have

“ample reason” to look at those records). Based on the obscurity of the publication of the franchise

agreements, the further obscurity of the No-Hire agreement within the franchise agreements, and

the fact that Plaintiffs had no reason to look for or read their employer’s franchise agreement, the

Court does not believe facts exist at this stage to conclude that a reasonable person’s interest would

be piqued. [DN 54 ¶¶ 115–119]; see Campbell v. Upjohn Co., 676 F.2d 1122, 1128 (6th Cir. 1982)

(“Actions such as would deceive a reasonably diligent plaintiff will toll the statute; but those

plaintiffs who delay unreasonably in investigating circumstances that should put them on notice

will be foreclosed from filing, once the statute has run.”).

The Court is satisfied that the CAC alleges all of the required elements of fraudulent

concealment sufficient to survive Defendants’ Motion. Defendants’ Motion to Strike Plaintiffs’

fraudulent concealment allegations is DENIED.

3. Motion to Strike Class Allegations

Finally, Defendants Move to Strike Plaintiffs’ class allegations. [DN 59 at 2–3; DN 59-1

at 21–25]. Specifically, Defendants argue that Plaintiffs’ proposed class is overbroad and, as a

result, cannot satisfy the predominance requirement of Federal Rule of Civil Procedure 23(b)(3).

[DN 59-1 at 22–25]. Defendants ask the Court to strike Plaintiffs’ class allegations before

discovery begins because discovery will not alter the central defect in their class claim. [Id. at 21–

22].

Federal Rule of Civil Procedure 23 governs class actions in federal court. To certify a

class, a plaintiff must satisfy two sets of requirements: “(1) each of the four prerequisites under

Rule 23(a), and (2) the prerequisites of one of the three types of class actions provided for by Rule

23(b).” Pilgrim v. Universal Health Card, LLC, 660 F.3d 943, 945–46 (6th Cir. 2011).

“Certification is only proper if, after a ‘rigorous analysis,’ a court finds that all the prerequisites

of Rule 23 have been satisfied.” Modern Holdings, LLC v. Corning Inc., No. 13-405, 2015 WL

1481459, at *2 (E.D. Ky. Mar. 31, 2015) (quoting In re Am. Med. Sys., Inc., 75 F.3d 1069, 1078–

79 (6th Cir. 1996).

Defendants ask the Court to strike the class allegations at this stage, before discovery has

been conducted. [DN 59-1 at 21–22]. “Though procedurally permissible, striking a plaintiff’s

class allegations prior to discovery and a motion for class certification is a rare remedy.” Id.

(collecting cases). At this early stage, Defendants bear the burden of demonstrating from the face

of the CAC that it will be impossible to certify the class as alleged, “regardless of the facts

plaintiffs may be able to prove [through discovery.]” Id. (internal quotation marks omitted). See

also Healey v. Jefferson Cnty. Ky. Louisville Metro Gov’t, No. 3:17-CV-71, 2018 WL 1542142,

at *2 (W.D. Ky. Mar. 29, 2018); John v. Nat’l Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir.

2007) (designating the standard as whether “it is facially apparent from the pleadings that there is

no ascertainable class”).

Plaintiffs seek to represent a class consisting of “[a]ll persons who were employed at a

Papa John’s restaurant location in the United States between January 1, 2010 through the present.”

[DN 54 ¶ 99]. It is unclear from Defendants’ filings which requirements of class certification they

are attacking. Defendants seem to be arguing that Plaintiffs cannot satisfy the commonality

requirement of Rule 23(a)(2) nor the predominance requirement of Rule 23(b)(3). The difference

between these two requirements is that Rule 23(a)(2) mandates that even a single common

question exist whereas Rule 23(b)(3) more stringently requires that common questions

predominate.

As to commonality, the Supreme Court held in Wal-Mart Stores, Inc. v. Dukes, 564 U.S.

338, 350 (2011), that Rule 23(a)(2) demands proof that the proposed class members have suffered

the same injury. Plaintiffs satisfy this showing. They correctly note that the proposed class is

“congruent with Papa John’s No-Hire Agreement, which applies to all Papa John’s employees.”

[DN 71 at 24 (citing DN 54 ¶ 6); DN 54 at 28–29]. Further, it appears from the face of the CAC

that a class-wide proceeding would provide common answers to the issues raised by Plaintiffs.

Dukes, 564 U.S. at 350. Based on the allegations contained in the CAC, the Court is persuaded

that the commonality requirement of Rule 23(a)(2) is satisfied at this early stage.

Turning to predominance, parties seeking class recognition must show that “questions of

law or fact common to class members predominate over any questions affecting only individual

members.” Fed. R. Civ. P. 23(b)(3). Here, there is a common cause of injury—the No-Hire

provision of the franchise agreement. That common cause resulted in similar types of harm—

depressed wages and benefits and lack of employment opportunities. It preliminarily appears that

this is not the type of action which, in practice, will result in multiple lawsuits separately tried.

Consequently, Plaintiffs also satisfy the predominance requirement of Rule 23(b)(3).

The Court is persuaded that Plaintiffs’ CAC alleges the requisite elements of a class

certification sufficient to defeat Defendants’ Motion to Strike at this stage. See Burton v. D.C.,

277 F.R.D. 224, 230 (D.D.C. 2011) (“Wal-Mart confirms that pre-certification discovery should

ordinarily be available where a plaintiff has alleged a potentially viable class claim . . . .”) (citing

Dukes, 564 U.S. at 351). After discovery, Plaintiffs may or may not be able to establish the

necessary connection between Defendants’ conduct and the proposed class boundaries. However,

with only the CAC currently before the Court, “resolution of the certification issue would be

inappropriate at this stage.” Modern Holdings, LLC v. Corning Inc., No. 13-405, 2015 WL

1481459, at *7 (E.D. Ky. Mar. 31, 2015). Defendants’ Motion to Strike the Plaintiffs’ class

allegations is DENIED.

IV. CONCLUSION

For the reasons set forth above, IT IS HEREBY ORDERED that Defendants’ Motion to

Compel Arbitration [DN 58] is GRANTED, Motion to Dismiss, or in the Alternative, to Strike

[DN 59] is DENIED, and Motion for the Court to Take Judicial Notice [DN 60] is GRANTED.

Further, Plaintiffs’ Motion for the Court to Take Judicial Notice [DN 73] is GRANTED.

PH Mialegf,

Joseph H. McKinley Jr., Senior Judge

United States District Court

October 21, 2019

ce: counsel of record

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