Duane Morris Antitrust Class Action Review – 2024

operator from hiring any person employed by a different franchise or by McDonald ’ s itself until six months after the last date that person had worked for McDonald ’ s or another franchise. The plaintiffs alleged that they were unable to earn higher wages at other franchises while these provisions were in effect. The district court in Deslandes, et al. v. McDonald’s USA, LLC, 2022 U.S. Dist. LEXIS 113524 (N.D. Ill. June 28, 2022), reasoned, in part, that the no-poach provisions in McDonalds’ franchise agreements could not be illegal per se because they were “ancillary” to the underlying franchise agreements, which served a procompetitive purpose in that the underlying agreements “increased output of burgers and fries.” Id. at *6. On appeal, the Seventh Circuit disagreed because the district court ’ s reasoning “treats benefits to consumers (increased output) as justifying detriments to workers (monopsony pricing)” as an ancillary restraint. Deslandes , 2023 U.S. App. LEXIS 22509 at *8. While the Seventh Circuit recognized the possibility that the no-poach clause could have been protecting franchises’ investment in training, it found that selling more burgers and fries to consumers is immaterial to justifying any detriment to workers from the provision and remanded the case for further proceedings on the question. The Deslandes decision is important in the antitrust class action context because it supports the U.S. Department of Justice ’ s position that no-poach agreements can be adjudicated as per se violations of Section 1 of the Sherman Act. As a very general matter, it will be easier for plaintiffs in antitrust class actions to secure class certification and win on the merits if the alleged anticompetitive conduct at issue is treated as per se anticompetitive rather than analyzed under the so-called “quick-look” analysis or full rule of reason analysis. In another important “no-poach” antitrust class action, a court left open the possibility that certain no-poach agreements could constitute per se violations of Section 1 of the Sherman Act. In Borozny, et al. v. Raytheon Technologies Corp., 2023 U.S. Dist. LEXIS 9914 (D. Conn. Jan. 20, 2023), the plaintiffs filed a class action alleging that that six corporate defendants engaged in a conspiracy to restrain wages in violation of Section 1 of the Sherman Act by secretly agreeing to restrict competition for the recruitment and hiring of aerospace engineers and other skilled workers in the jet propulsion systems industry. The defendants moved to dismiss on the grounds that the plaintiffs failed to allege conduct deemed a per se antitrust violation and also failed to state a claim under the “rule of reason” test. The court denied the defendants’ motion. The defendants first argued that the alleged anticompetitive agreement was vertical in nature and horizontal; therefore, it could not be considered a per se violation of the Sherman Act. Even though the defendants operated at different levels of the aerospace products supply chain, i.e ., some were manufacturers and some were distributors, they all participated in the aerospace labor market horizontally. The plaintiffs also adequately alleged that the labor market restraint at issue was a naked restraint on trade and not ancillary to any legitimate or competitive purpose. Therefore, the court concluded that the alleged conduct could potentially constitute a per se violation of the Sherman Act. While some courts were keeping open the possibility that no-poach agreements could be per se violations, the court in Giordano, et al. v. Saks, 2023 U.S. Dist. LEXIS 17154 (E.D.N.Y. Feb. 1, 2023), concluded that no-hire agreement must be adjudicated under the rule of reason test and was not suitable for per se treatment. In that case, a group of former Saks employees filed a class action alleging that no-hire agreements between Saks and luxury brand defendants, including Louis Vuitton and Gucci, decreased their compensation and mobility in violation of Section 1 of the Sherman Act. The plaintiffs specifically asserted that they were denied opportunities to transfer to competitors with higher compensation or better work locations. The plaintiffs argued that the no-hire agreement – the existence of which several managers at the defendants allegedly admitted – deserved per se treatment, or in the alternative, quick-look analysis, because it was a naked, horizontal restraint among competitors. The court disagreed. It determined that the alleged anticompetitive agreement could not be considered a per se violation of the antitrust laws

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