United States District Court, W.D. Kentucky, Louisville Division
IN RE PAPA JOHN'S EMPLOYEE AND FRANCHISEE EMPLOYEE ANTITRUST LITIGATION
MEMORANDUM OPINION AND ORDER
H. McKinley Jr., Senior Judge
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.
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].
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].
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.
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].
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].
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].
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].
Standard of Review
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)).
“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).
Motion to Compel Arbitration
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].
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
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
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 ...