Butler v. Jimmy John's Franchise, LLC et al

Filing 240

ORDER DENYING the plaintiff's 113 Motion to Certify Class and 186 Motion to Strike. [Public Redacted Version]. Signed by Chief Judge Nancy J. Rosenstengel on 7/23/2021. (cab).

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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
DONALD CONRAD,
On Behalf of Himself & All Others
Similarly Situated,
Plaintiff,
v.

Case No. 18-CV-00133-NJR

JIMMY JOHN’S FRANCHISE, LLC,
JIMMY JOHN’S ENTERPRISES, LLC,
and
JIMMY JOHN’S LLC,
Defendants.

MEMORANDUM AND ORDER
ROSENSTENGEL, Chief Judge:
This is an antitrust case brought by Plaintiff Donald Conrad against Defendants
Jimmy John’s Franchise, LLC; Jimmy John’s Enterprises, LLC; and Jimmy John’s LLC
(collectively “Jimmy John’s”). According to the Amended Complaint (Doc. 75), a “NoPoach Provision” in Jimmy John’s Franchise Agreement effectively prohibited employees
from switching between rival locations, stifling competition for labor in violation of
Section 1 of the Sherman Act, 15 U.S.C. § 1.
Based on an expert report from economist Dr. Hal Singer, Conrad alleges that the
Provision suppressed wages for every Jimmy John’s employee by 8.4 percent, causing
in class-wide damages. (Doc. 115-13). But in an Order entered on
February 24, 2021 (Doc. 223), the Court excluded the report under Daubert. Without
expert testimony, Conrad cannot satisfy the predominance requirement under Rule 23.
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Yet other issues also preclude class certification: Conrad’s claims are atypical of the
unnamed class members because the No-Poach Provision was admittedly irrelevant to
him; there is a potential conflict between managers and hourly employees; and several
individual questions exist that cannot be answered using common proof. So for the
reasons below, the Court denies Conrad’s Motion for Class Certification, as well as his
Motion to Strike.
BACKGROUND
Jimmy John’s is a franchised sandwich fast-food chain with nearly 3,000 stores
across 40 states. (Am. Compl. at 2). About 98 percent of those stores are independently
owned and operated by around 800 franchisees. (Id.). The individual franchisees—not
Jimmy John’s—determine how much their employees get compensated. (North Dep. at
56:19–21, Doc. 115-14). Simply put, Jimmy John’s “is not responsible for the employment
matters of franchisees” (id. at 60:3–6),

.” (JJE Bonus
Program at 2, Doc. 133-12; Franchise Operations at 6, Doc. 115-24).
Despite their relative independence, franchisees must maintain minimum brand
standards to ensure a consistent customer experience across the country. (North Dep.
at 70:19–22; McCrary Report ¶¶ 50, 85, Doc. 133-57). These brand standards include “a
set of specific training requirements on each franchisee” (McCrary Report ¶ 68), and on
“new and existing employees being promoted to the Certified Manager role.” (id. ¶ 72).
But Jimmy John’s will only pay to train “up to two employees”: “Franchisees must cover
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both fees and expenses for each additional employee sent for training.” (Id. ¶ 80). The
estimated total cost to train a certified manager is between

and

(Id.).

From at least 2014 to 2018, Jimmy John’s included a so-called No-Poach Provision
in its Franchise Agreement. (Conrad’s Mem. in Supp. of Mot. for Class Cert. [hereinafter
“Conrad’s Mem.”] at 1, 8, Doc. 115). Its terms changed over time. In 2014, for example,
the Provision prohibited franchisees from recruiting or hiring anyone “who was
employed within the preceding twenty-four (24) months, as a General Manager or
Assistant Manager at a JIMMY JOHN’S® Restaurant . . . without obtaining the
employer’s prior written permission.” (2014 Franchise Agreement § 7(d), Doc. 115-17).
The Provision was enforced by the franchisees themselves, who could be forced to pay
up to $50,000 for violating it. (Id.). In 2015, the Provision was amended to only prohibit
recruiting (not hiring) but applied to all employees (not only managers). (2015 Franchise
Agreement § 7(d), Doc. 133-15). And in 2016, it was limited even more so that the $50,000
penalty applied only when a manager was solicited in violation of the Provision.
(2016 Franchise Agreement § 7(d), Doc. 133-26).
With that in mind, about 88 percent of employee release requests “were approved
without conditions;” and “[o]nly

approved employee releases were associated with

conditions on reimbursement for training expenses.” (McCrary Report ¶ 96) (emphasis
omitted). In the rare case that “a release was refused for reasons other than poor
performance or was approved conditional on compensation, 74 percent . . . involved
managers—and training investments were explicitly mentioned in the negotiations for
approximately half of those managers.” (Id. ¶ 97) (emphasis omitted). On the other hand,
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non-managers were released 94 percent of the time. (Id.). “In other words, . . . the requests
were almost always granted, and almost always without cost.” (Id.).
In February 2018, Conrad started working at a Jimmy John’s in Winter Park,
Florida, “as an in-shop employee at $8.25 per hour.” (Conrad’s Resp. to Jimmy John’s
Second Set of Interrogs. at 7, Doc. 133-43). A month later, “he was promoted to Person In
Charge and given a raise to $9.00 per hour.” (Id.). And a month after that, he was
“promoted to a salaried manager earning $91.00 per day.” (Id.). Then, the area manager
asked Conrad to switch to the Orlando location, where he would become a co-manager.
(Id.). He did, receiving “a raise to $95.00 per day . . . .” (Id.). But the new position was
short-lived: Conrad did not get along with the franchise co-owner’s niece, who worked
in

the

same

store

and

supposedly

“specifically

targeted

[Conrad’s]

work

performance . . . .” (Id. at 5). In November, Conrad was fired after he told the niece “that
he no longer cared for her opinions.” (Id.). More accurately, he called her “a fucking
bitch.” (Conrad Dep. at 308:4–9, Doc. 133-48).
Now, Conrad alleges that the No-Poach Provision “reflects a naked restraint of
competition” in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. (Am. Compl.
at 1). In brief, he alleges that the No-Poach Provision had the effect of suppressing wages
and stifling worker mobility, leading to class-wide injury and damages. (Conrad’s Mem.
at 1). The crux of his claim is that without the Provision, franchisees would be pressured
to increase their wages to match competing locations or else risk losing their employees.
(Id. at 15). Even so, Conrad admits that he “made no efforts to obtain employment at
[another] Jimmy John’s restaurant,” (Conrad’s Resp. to Second Set of Interrogs. at 6;
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from them.” (Conrad’s Mot. to Strike at 1, Doc. 186). He therefore asks the Court to strike
those franchisee-declarations under Federal Rule of Civil Procedure 37. (Id. at 5).
LAW AND ANALYSIS
A. Motion to Strike
In general, “a party must, without awaiting a discovery request, provide to the
other parties . . . the name and, if known, the address and telephone number of each
individual likely to have discoverable information . . . that the disclosing party may use
to support its claims or defenses . . . .” FED. R. CIV. P. 26(a)(1)(A). There is also a
continuing duty to supplement these disclosures “in a timely manner if the party learns
that in some material respect the disclosure or response is incomplete or incorrect, and if
the additional or corrective information has not otherwise been made known to the other
parties during the discovery process or in writing . . . .” FED. R. CIV. P. 26(e)(1)(A).
“If a party fails to” meet its disclosure obligations, then the Court may prohibit it
from using “that information or witness to supply evidence on a motion . . . unless the
failure was substantially justified or is harmless.” FED. R. CIV P. 37(c)(1). “The
determination of whether a Rule 26(a) violation is justified or harmless is entrusted to the
broad discretion of the district court.” Mid-America Tablewares, Inc. v. Mofi Trading Co.,
Ltd., 100 F.3d 1353, 1363 (7th Cir. 1996). “[T]he following factors should guide the district
court’s discretion: (1) the prejudice or surprise to the party against whom the evidence is
offered; (2) the ability of the party to cure the prejudice; (3) the likelihood of disruption
to the trial; and (4) the bad faith or willfulness involved in not disclosing the evidence at
an earlier date.” David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003).
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Conrad claims that he “made numerous attempts to contact the remaining three
franchisee declarants—Butler, Finner, and Severson—regarding their document and
deposition subpoenas,” but they never responded. (Conrad’s Mot. to Strike at 3). He also
claims that Jimmy John’s counsel refused to accept service of subpoenas on the
declarants’ behalf. (Id. at 3). He thus argues that sanctions are warranted. (Id. at 6–9). The
Court disagrees.
First, the Court rejects Conrad’s contention that Jimmy John’s had to serve
subpoenas on third parties outside its control. At the center of this case is Conrad’s claim
that the franchisees “are independently owned and operated as separate and distinct
entities from Jimmy John’s.” (Am. Compl. at 2). Cf. Copperweld Corp. v. Indep. Tube Corp.,
467 U.S. 752, 769 (1984) (“[O]fficers or employees of the same firm do not provide the
plurality of actors imperative for a § 1 conspiracy.”). In fact, Jimmy John’s itself had to
serve subpoenas on franchisees when they wanted to depose them or request document
production. (See Rose Decl., Exs. 1–3, Docs. 195-1, 195-2, 195-3). Conrad also
acknowledges that his efforts to serve the other 16 franchisees were made through their
respective counsel. (Chan Decl. ¶ 7, Conrad’s Reply Ex. 1). In short, Jimmy John’s did not
have to serve any of the franchisees on Conrad’s behalf.
The Court also has reviewed the communications between the litigants and finds
that Conrad’s inability to depose the remaining three franchisees did not arise from any
willfulness, bad faith, or fault of Jimmy John’s counsel. Jimmy John’s supplemented its
initial disclosures in July 2020 with an address for each of the three franchisees. (Jimmy
John’s Supp. Rule 26(A)(1) Initial Disclosures at 5–7, Doc. 197-2). For Butler and Scott,
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Court is vested with “broad discretion to determine whether certification of a classaction lawsuit is appropriate.” Keele v. Wexler, 149 F.3d 589, 592 (7th Cir. 1998) (cleaned
up); Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 630 (1997) (Breyer, J., concurring in part
and dissenting in part) (“The law gives broad leeway to district courts in making class
certification decisions, and their judgments are to be reviewed by the court of appeals
only for abuse of discretion.”).
Conrad seeks to certify a class under Rule 23(b). “To achieve certification, a
proposed class under Rule 23(b) must meet the requirements of Rule 23(a)—numerosity,
typicality, commonality, and adequacy of representation—and one of the alternatives
listed in Rule 23(b).” Howard v. Cook Cty. Sheriff’s Off., 989 F.3d 587, 597 (7th Cir. 2021).
Relevant here, Rule 23(b)(3) permits a class action if “the court finds that questions of law
or fact common to the members of the class predominate over any other questions affecting
only individual members, and that a class is superior to other available methods for the
fair and efficient adjudication of the controversy.” FED. R. CIV. P. 23(b)(3) (emphasis
added). “If the party certification fails to meet any of these . . . requirements, class
certification is precluded.” Kress v. CCA of Tenn., LLC, 694 F.3d 890, 893 (7th Cir. 2012).
“Rule 23 does not set forth a mere pleading standard. A party seeking class
certification must affirmatively demonstrate his compliance with the Rule—that is, he
must be prepared to prove that there are in fact sufficiently numerous parties, common
question of law or fact, etc.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011)
(emphasis in original). That said, “Rule 23 must be liberally interpreted”: “Its policy is to
favor maintenance of class actions.” King v. Kan. City S. Indus., Inc., 519 F.2d 20, 25–26
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(7th Cir. 1975); Messner v. Northshore Univ. Health Sys., 669 F.3d 802, 815 (7th Cir. 2012)
(“[I]n antitrust cases, Rule 23, when applied rigorously, will frequently lead to
certification.”) (cleaned up). Even so, Conrad bears “the burden of proving by a
preponderance of the evidence that . . . the requirements of Rule 23” are met. Howard,
989 F.3d at 597.
i. Numerosity
“Determining whether the proposed class is sufficiently numerous for certification
is usually straightforward. Affidavits, declarations, or even reasonable estimates in briefs
are often sufficient to establish the appropriate size of the class and whether joinder might
be a practical and manageable alternative to class action litigation.” Manual for Complex
Litigation § 21.141. “Numerosity is generally presumed when the proposed class would
have at least 40 members.” Lapin v Goldman Sachs & Co., 254 F.R.D. 168, 175 (S.D.N.Y.
2008) (citing 1 Newberg on Class Actions § 3.05 (2d ed. 1985)); e.g., In re Gen. Motors Corp.
Dex-Cool Prods. Liability Litig., 241 F.R.D. 305 (S.D. Ill. 2007); Exhaust Unlimited, Inc. v.
Cintas Corp., 223 F.R.D. 506 (S.D. Ill. 2004).
The numerosity requirement is uncontested here. Conrad seeks to represent a
putative class of over 615,000 current and former Jimmy John’s employees. (Conrad’s
Mem. at 21). The Court agrees that the putative class is “so numerous that joinder of all
members is impracticable,” thus satisfying the numerosity requirement. See FED. R. CIV.
P. 23(a)(1).

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ii. Commonality
“Commonality requires the plaintiff to demonstrate that the class members have
suffered the same injury. This does not mean merely that they have all suffered a violation
of the same provision of the law.” Dukes, 564 U.S. at 350 (cleaned up). Rather, “[t]heir
claims must depend upon a common contention of such a nature that it is capable of
classwide resolution—which means that determination of its truth or falsity will resolve
an issue that is central to the validity of each one of the claims in one stroke.” Id.
“Identifying common questions typically requires examining the parties’ claims and
defenses, identifying the type of proof the parties expect to present, and deciding the
extent to which there is a need for individual, as opposed to common, proof.” Manual for
Complex Litigation § 21.141. “‘[E]ven a single [common] question’ will do.” Dukes,
564 U.S. at 359 (quoting Richard Nagareda, The Preexistence and the Structure of the Class
Action, 103 Colum. L. Rev. 149, 176 n.119 (2003)).
Courts often give “superficial treatment of” the commonality requirement given
that it “may be a superfluous provision, or at least partially redundant, since the existence
of common questions can be viewed as an essential ingredient of a finding that the case
falls within one of the three categories of class actions described in” Rule 23(b). Wright &
Miller, Federal Practice and Procedure § 1763. Relevant here, because predominance
(discussed below) is governed by “a more stringent standard than” commonality, some
“courts in actions brought under subdivision (b)(3) have not drawn a distinction between
the two requirements.” Id. Instead, they “either have dealt with the common-issue
question simultaneously with their inquiry into whether common questions predominate
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or have assumed that Rule 23(a)(2) was satisfied and thought it necessary only to rule on
the question whether the suit fit within subdivision (b)(3).” Id.; accord Comcast Corp. v.
Behrend, 569 U.S. 27, 34 (2013) (noting that “[t]he same analytical principles govern
Rule 23(b)” and Rule 23(a), but “Rule 23(b)(3)’s predominance criterion is even more
demanding than Rule 23(a)”); Amchem, 521 U.S. at 609 (“The Third Circuit recognized
that Rule 23(a)(2)’s ‘commonality’ requirement is subsumed under, or superseded by, the
more stringent Rule 23(b)(3) requirement that questions common to the class
‘predominate over’ other questions.”).
Conrad contends that there are at least three common issues of law and fact:
(1) “[w]hether Jimmy John’s restaurants entered into an unlawful agreement not to poach
one another’s employees;” (2) “whether the No-Poach [Provision] should be judged
unlawful;” and (3) “whether the agreement suppressed Class members’ compensation;
and if it did, the magnitude of that effect.” (Conrad’s Mem. at 22).
In response, Jimmy John’s blurs its commonality and predominance arguments;
but it devotes most of its attention to arguing that common issues do not predominate.
(See Jimmy John’s Resp. at 13–30) (“Plaintiff also fails to meet his burden of establishing
Rule 23(a) commonality and Rule 23(b)(3) predominance.”). Given the low threshold for
commonality, the Court will not belabor this discussion and will instead focus on the
more stringent standard for predominance below.
iii. Typicality
The typicality requirement “primarily directs the district court to focus on whether
the named representatives’ claims have the same essential characteristics as the claims of
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the class at large.” De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983).
“‘A plaintiff’s claim is typical if it arises from the same event or practice or course of
conduct that gives rise to the claims of other class members and his or her claims are
based on the same legal theory.’” Id. (quoting H. Newberg, Class Actions § 1115(b) at 185
(1977)). “The typicality requirement may be satisfied even if there are factual distinctions
between the claims and the named plaintiffs and those of other class members. Thus,
similarity of legal theory may control even in the face of differences of fact.” Id. But
“[e]ven though some factual variations may not defeat typicality,” Oshana v. Coca-Cola
Co., 472 F.3d 506, 514 (7th Cir. 2006), there must still “be enough congruence between the
named representative’s claim and that of the unnamed members of the class to justify
allowing the named party to litigate on behalf of the group,” Spano v. Boeing Co., 633 F.3d
574, 586 (7th Cir. 2011).
Conrad simply alleges that the typicality requirement is satisfied because “he
worked in a Jimmy-John’s-branded restaurant . . . .” (Conrad’s Mem. at 22–23). But his
core allegation is that the No-Poach Provision prevented workers from changing
locations for better wages. Yet Conrad was not among those employees: He did not leave
his job at Jimmy John’s in search of higher wages, and he was never denied the
opportunity to change locations because of the Provision. Indeed, he admits that he
“made no efforts to obtain employment at [another] Jimmy John’s restaurant” (Conrad’s
Resp. to Second Set of Interrogs. at 6; see also Conrad’s Dep. at 61:10–12), and that the NoPoach Provision was “irrelevant” and “just didn’t really have anything to” do with him
(Conrad’s Dep. at 189:9-14, 205:11-19). Rather, he was fired after he called a coworker—
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his boss’s niece—“a fucking bitch.” (Id. at 308:4–9). So while some factual distinctions will
not preclude class certification, Conrad’s claim is atypical of those putative class members
who were actually denied the opportunity to change locations for better wages because
of the No-Poach Provision. The typicality requirement is therefore not met.
iv. Adequacy
“[A]dequacy of representation is composed of two parts: ‘the adequacy of the
named plaintiff’s counsel, and the adequacy of representation provided in protecting the
different, separate, and distinct interest’ of the class members.” Retired Chi. Police Ass’n v.
City of Chi., 7 F.3d 584, 598 (7th Cir. 1993) (quoting Sec’y of Labor v. Fitzsimmons, 805 F.2d
682, 697 (7th Cir. 1986) (en banc)). Only the second part is at issue here.
“Rule 23 contemplates, and the district court should insist on, a conscientious
representative plaintiff. All class suits create some conflict between the representative
and the class; the representative and counsel may be tempted to sell out the class for
benefits to themselves. Judges are on the lookout for persons who may pay inadequate
attention to the interests of the others they purport to represent.” Rand v. Monsanto Co.,
926 F.2d 596, 599 (7th Cir. 1991), overruled on other grounds, Chapman v. First Index, Inc.,
796 F.3d 783, 787 (7th Cir. 2015). “[T]he presence of even an arguable defense peculiar to
the named plaintiff or a small subset of the plaintiff class may destroy the required
typicality of the class as well as bring into question the adequacy of the named plaintiff’s
representation. The fear is that the named plaintiff will become distracted by the presence
of a possible defense applicable only to him so that the representation of the rest of the

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class will suffer.” J.H. Cohn & Co. v. Am. Appraisal Assocs., Inc., 628 F.2d 994, 999 (7th Cir.
1980) (citations omitted).
To that end, “[a] class is not fairly and adequately represented if class members
have antagonistic or conflicting claims.” Rosario v. Livaditis, 963 F.2d 1013, 1018 (7th Cir.
1992). “The adequacy inquiry” thus “serves to uncover conflicts of interest between
named parties and the class they seek to represent.” Amchem, 521 U.S. at 625. In other
words, “a class representative must be part of the class and ‘possess the same interest and
suffer the same injury’ as the class members.” E. Tex. Motor Freight Sys., Inc. v. Rodriguez,
431 U.S. 395, 403 (1977) (quoting Schlesinger v. Reservists Comm. to Stop the War, 418 U.S.
208, 216 (1974)).
Jimmy John’s argues that Conrad failed to establish the adequacy requirement
because “there are significant economic conflicts between the interests of managers and
the employees they supervised.” (Jimmy John’s Resp. at 11). It points to two conflicts in
particular. First, Jimmy John’s contends that because managers were charged with
enforcing the allegedly anticompetitive No-Poach Provision, they cannot be in the same
class as nonsupervisory employees like in-shoppers and drivers. Put differently, “[a]t any
trial of this case, certain managers would be called as defense witnesses, testifying about
the very decisions at issue here, and explaining that [the No-Poach Provision] was
honored largely in the breach.” (Id. at 12). Jimmy John’s therefore argues that “[t]his is a
paradigmatic and preclusive intra-class conflict because many putative class members
participated in the challenged employment decisions.” (Id.) (cleaned up). The Court
agrees.
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As a general matter, the litigants disagree about whether supervisory and
nonsupervisory employees can ever be part of the same class. For its part, Jimmy John’s
points to Randall v. Rolls-Royce Corp., 637 F.3d 818 (7th Cir. 2011). There, the plaintiff
sought to represent a putative class of “female employees of a Rolls-Royce plant” who
charged the company “with sex discrimination . . . in paying the members of the class less
than comparable male employees by setting the base pay of women employees . . . below
that of male employees” and “denying them promotions they would have received had
they been men.” Id. at 820. In affirming the district court’s denial of class certification, the
Seventh Circuit acknowledged two conflicts between female supervisors and female
nonsupervisory employees. Id. at 824. For one, the court was concerned that some female
supervisors might “deliberately depress the salary of female employees whom they
supervise, or increase the salary of male employees whom they supervise, in order
increase evidence of discrimination.” Id. at 824. Additionally, there was “even evidence
that the [female supervisors] participated in decisions concerning female employees’
compensation that, on their theory of the case, were” in fact “discriminatory.” Id. (citing
Wagner v. Taylor, 836 F.2d 578, 595 (D.C. Cir. 1987) (“Supervisory employees are often
inappropriate representatives of nonsupervisory employees because the structure of the
workplace tends to cultivate distinctly different interests between the two groups.”)).
Conrad tries to differentiate Randall by noting that this case turns on actions by
franchise owners, not managers. (Conrad’s Reply at 3). In other words, the owners were
the ones who entered into the supposedly anticompetitive Franchise Agreement, while
the managers were just neutrally applying it. (Id.). But that position contradicts testimony
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suggesting that at least some managers were given broad discretion whether to enforce
the No-Poach Provision. For example, one delivery driver and member of the putative
class said that “[t]o apply for the job . . . , [he] simply walked into the store, told the
manager that [he] was currently working at” another Jimmy John’s location “and asked
if they needed any help. The manager’s response was, ‘when can you start?’” Indeed, the
manager did not “even notify” the franchise owner. (Hanzlik Decl. ¶ 7, Doc. No. 133-82)
(emphasis added). Another manager similarly stated that he “never received
instructions” from the franchise owner “to seek permission or releases when hiring
applicants with prior Jimmy John’s experience,” and he “recall[ed] hiring about a dozen
former Jimmy John’s employees.” (Arredondo Decl. ¶ 12, Doc. No. 133-78). While
Conrad points to Staton v. Boeing Co. 327 F.3d 938 (9th Cir. 2003), for the proposition that
“supervisors and nonsupervisors may be included in the same certified class when both
are subject to the policy or practice challenged by the lawsuit” (Conrad’s Reply at 2), the
Ninth Circuit there recognized that “whether employees at different levels of the internal
hierarchy have potentially conflicting interests is context-specific and depends upon the
particular claims alleged in a case.” Staton, 327 F.3d at 958. The court then said that to
satisfy the adequacy requirement, plaintiffs “‘must offer evidence of coextensive interests
or at least allege the existence of a general discriminatory policy.’” Id. at 959 (quoting 5
Herbert B. Newberg & Alba Conte, Newberg on Class Actions, § 24.42 at 24-170-71 (3d ed.
1992)). “Given that the named plaintiffs include[d] representatives of each major
employee sub-group,” the court found no conflicts. Id. at 959.

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This Court too rejects the invitation to adopt a bright-line rule barring classes
representing both supervisory and nonsupervisory employees. Yet even under the Ninth
Circuit’s level-handed approach, Jimmy John’s has identified another significant conflict
between managers and nonsupervisory employees that precludes certification. Jimmy
John’s franchisees take part in a profit-sharing program
.”
(JJE Bonus Program at 2). Given that Conrad accuses the company of using the No-Poach
Provision as a tool to “keep labor costs low” (Am. Compl. ¶ 119, Doc. 75), Jimmy John’s
argues that managers would be encouraged to enforce the provision to increase store
profits. (Jimmy John’s Resp. at 12). Simply put, not unlike the complicit female employees
in Randall, “the fact that managers with profit-based bonuses allegedly made more money
during the class period by taking steps to lower employee wages would put those class
members against one another.” (Id.).
Conrad, on the other hand, says that the profit-sharing program does not present
a conflict because he “does not seek compensation for suppressed bonuses,” only
suppressed base pay. (Conrad’s Reply at 3–4). But even assuming Conrad’s theory—that
the No-Poach Provision suppressed base pay across the board—is correct, it may equally
be true that managers’ bonuses exceeded their suppressed base pay. By extension,
managers may be willing to suppress their own base pay if enforcing the No-Poach
Provision would lead to a greater bonus. And unlike in Staton, Conrad is the only named
plaintiff: He does not adequately represent the interest of managers who were motivated

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to reduce labor mobility so they can reap the benefits of the profit-sharing program. This
conflict presents another reason why class certification is inappropriate.
v. Predominance
“The Rule 23(b)(3) predominance inquiry tests whether proposed classes are
sufficiently cohesive to warrant adjudication by representation.” Amchem, 521 U.S. at 623.
“While similar to Rule 23(a)’s requirements for typicality and commonality, ‘the
predominance criterion is far more demanding.’” Messner, 669 F.3d at 814 (quoting
Amchem, 521 U.S. at 623). “In order to meet the predominance requirement of
Rule 23(b)(3), a plaintiff must establish that ‘the issues in the class action that are subject
to generalized proof, and thus applicable to the class as a whole, . . . predominate over
those issues that are subject only to individualized proof.’” In re Visa Check/MasterMoney
Antitrust Litig., 280 F.3d at 136 (quoting Rutstein v. Avis Rent-A-Car Sys., Inc., 211 F.3d
1228, 1233 (11th Cir. 2000)). “Common issues may predominate when liability can be
determined on a class-wide basis, even when there are some individualized damage
issues.” Id. at 139 (collecting cases). But “[t]here is no mathematical or mechanical test for
evaluating predominance.” Messner, 669 F.3d at 814. “[A] court weighing class
certification must” therefore “walk a balance between evaluating evidence to determine
whether a common question exists and predominates, without weighing that evidence to
determine whether the plaintiff class will ultimately prevail on the merits.” Bell v. PNC
Bank, Nat’l Ass’n, 800 F.3d 360, 376 (7th Cir. 2015) (emphasis in original).
The “predominance requirement is satisfied when ‘common questions represent a
significant aspect of [a] case and . . . can be resolved for all members of [a] class in a single
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adjudication.’” Id. at 815 (quoting 7AA Wright & Miller, Federal Practice & Procedure
§ 1778 (3d ed. 2011)). “Or, to put it another way, common questions can predominate if a
‘common nucleus of operative facts and issues’ underlies the claims brought by the
proposed class.” Id. (quoting In re Nassau Cnty. Strip Search Cases, 461 F.3d 219, 228
(2d Cir. 2006)) “‘If, to make a prima facie showing on a given question, the members of a
proposed class will need to present evidence that varies from member to member, then
it is an individual question. If the same evidence will suffice for each member to make a
prima facie showing, then it becomes a common question.’” Id. (quoting Blades v.
Monsanto Co., 400 F.3d 562, 566 (8th Cir. 2005)). That said, “[i]ndividual questions need
not be absent. The text of Rule 23(b)(3) itself contemplates that such individual questions
will be present. The rule requires only that those questions not predominate over the
common questions affecting the class as a whole.” Id.
“Analysis of predominance under Rule 23(b)(3) ‘begins, of course, with the
elements of the underlying cause of action.’” Messner, 669 F.3d at 815 (quoting Erica P.
John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809 (2011)). Here, the Court must examine
whether Conrad can “establish each of the three required elements of an antitrust claim—
(1) a violation of antitrust law; (2) injury and causation; and (3) damages—using common
evidence.” Id.
As for the first requirement, “Section 1 of the Sherman Act is designed to prevent
businesses from entering into collusive agreements . . . .” Omnicare, Inc. v. UnitedHealth
Grp., Inc., 629 F.3d 697, 705 (7th Cir. 2011). “By its terms, § 1 prohibits ‘[e]very contract,
combination . . . or conspiracy, in restraint of trade or commerce,’ though courts have
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long restricted its reach to agreements that unreasonably restrain trade.” Id. (quoting
15 U.S.C. § 15). “To prevail under § 1 under any theory, plaintiffs generally must prove
three things: (1) that defendants had a contract, combination, or conspiracy (‘an
agreement’); (2) that as a result, trade in the relevant market was unreasonably restrained;
and (3) that they were injured.” Id.
In the first place, Conrad must present common evidence that Jimmy John’s and
its franchisees “had a conscious commitment to a common scheme designed to achieve
an unlawful objective.” See Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 768 (1984).
And because Conrad alleges a “hub-and-spokes conspiracy” (see Conrad’s Mem. at 1–2),
he must ultimately establish “both that there was a central coordinating party (the ‘hub’),
and that each participant (along the ‘rim’) recognized that it was part of the greater
arrangement, and it coordinated or otherwise carried out its duties as part of the broader
group,” Marion Healthcare, LLC v. Becton Dickenson & Co., 952 F.3d 832, 842 (7th Cir. 2020).
“In other words, a ‘hub-and-spokes conspiracy’ requires a ‘rim’ connecting the various
horizontal agreements.” Id. “[F]or such a conspiracy to exist, ‘those people who form the
wheel’s spokes must have been aware of each other and must do something in
furtherance of some single, illegal enterprise.’” United States v. Bustamante, 493 F.3d 879,
886–87 (7th Cir. 2007) (quoting United States v. Levine, 546 F.2d 658, 663 (5th Cir. 1977));
see also MM Steel, L.P. v. JSW Steel (USA) Inc., 806 F.3d 835, 844 (5th Cir. 2015) (noting that
the antitrust plaintiff must show that the spokes “knew the essential nature and general
scope of the joint plan”) (cleaned up). “[A] rimless wheel conspiracy,” on the other hand,
“is not a single, general conspiracy but instead amounts to multiple conspiracies between
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the common defendant and each of the other defendants.” Dickson v. Microsoft Corp.,
309 F.3d 193, 203 (4th Cir. 2002) (citing Kotteakos v. United States, 328 U.S. 750, 768–69
(1946)). So in the end, “to secure class certification,” Conrad must “demonstrate (not
merely allege) that there is proof common to all class members, and that this proof would
show that they suffered ‘injuries that reflected the anticompetitive effect of either the
violation or the anticompetitive acts made possible by the violation.’” Kleen Prods. LLC v.
Int’l Paper Co., 831 F.3d 919, 926 (7th Cir. 2016) (quoting James Cap & Sons Co. v. PCC
Constr. Co., 453 F.3d 396, 399 (7th Cir. 2006)).
The predominance requirement is not satisfied here because, among other reasons,
Conrad failed to establish that common evidence will show that the Jimmy John’s
franchisees had a conscious commitment to suppress labor mobility. Given that the NoPoach Provision was independently enforced (Jimmy John’s itself having no hand), some
franchisees took no part in doing so. For example, one franchisee suggested that he does
not enforce the Provision because “employees are allowed to work wherever they want.”
(Jimmy John’s Franchisee Forum Post from December 2017, Jimmy John’s Resp. at Ex.13319). Another posited, “Who really enforced that in their units? I’m not going to track
where each employee goes to work at next.” (Jimmy John’s Franchisee Forum Post from
July 2018, Jimmy John’s Resp. at Ex. 45). (See also McNulty Decl. ¶ 33, Jimmy John’s Resp.
at Ex. 133-69) (franchisee hired manager after receiving verbal consent from previous
franchisee-employer). Some also thought that the Provision only applied to managers—
possibly because some versions of the Provision did only apply to managers. (E.g., Email
from Franchisee to Jimmy John’s from August 2014, Jimmy John’s Resp. at Ex. 133-14).
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These franchisees surely are not alone in their practice of not enforcing the Provision,
permitting employees to change locations without exercising their right of enforcement.
Indeed, Jimmy John’s expert, Dr. McCrary, determined that 88 percent of releases—when
requested at all—were granted. (McCrary Report ¶ 87, Jimmy John’s Resp. at Ex. 133-57).
While the evidence so far suggests that other franchisees did, in fact, enforce the Provision
(e.g., Jimmy John’s Franchisee Forum Post from December 2017) (“[W]e were already
sued last year for this.”), that only highlights the individualized nature of Conrad’s
claims. See United States v. Townsend, 924 F.2d 1385, 1391 (7th Cir. 1991) (“[M]ere
knowledge of the hub’s activities, or those of the other spokes, is not enough to tie the
conspiracy together.”).
Although “[t]here have been many antitrust class actions in which the relief sought
was damages, and the fact that the damages would generally be different for each
member of the class was not deemed an insuperable obstacle,” Hardy v. City Optical Inc.,
39 F.3d 765, 771 (7th Cir. 1994), separate proof would be needed to establish which
franchisees, if any, consciously acted to further the unlawful objective of suppressing
labor mobility. Along those lines, though “[t]he justification for cooperation is not
relevant to whether that cooperation is concerted or independent action,” id. at 199, the
circumstances must still reveal “a unity of purpose or a common design and
understanding, or a meeting of minds in an unlawful arrangement,” Am. Tobacco Co. v.
United States, 328 U.S. 781, 810 (1946). No such evidence exists here. In sum, Conrad has
not shown that common evidence will establish that each (or even most) of the franchisees
conspired with Jimmy John’s in the common pursuit of suppressing labor mobility.
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Individual inquiries also arise from the changing face of the No-Poach Provision.
True, each of the nearly 800 franchisees signed a franchise agreement containing some
form of the Provision. But Conrad claims that there was a “standard franchise
agreement.” (Am. Compl. at 9). Not so. In 2014, for example, the No-Poach Provision
prohibited franchisees from hiring managers who had worked for another franchisee
within the past two years. In 2015, that prohibition was removed; from then on,
franchisees were simply not allowed to solicit other franchisee’s workers. While Conrad
contends that most franchisees were governed by a similar version of the Provision found
in the 2014 Franchise Agreement (Conrad’s Mem. at 8–9), the agreements expired every
10 years (see, e.g., 2007 Franchise Agreement § 1(D), Doc. 133-3; 2015 Franchise
Agreement § 1(D); 2016 Franchise Agreement § 1(D)). In other words, the class members
“‘held a multitude of jobs, at different levels of [Jimmy John’s] hierarchy, for variable
lengths of time, in [3,000] stores, sprinkled across [40] states,’” with each franchisee
having its own philosophy on enforcing the No-Poach Provision, “subject to a variety of
[agreements] that all differed . . . .’” See Dukes, 564 U.S. at 360 (quoting Dukes v. Wal-Mart
Stores, Inc., 603 F.3d 571, 652 (9th Cir. 2010) (Kozinski, C.J., dissenting)). Proof of impact
would thus vary among class members depending on their position and which version
of the Franchise Agreement they were governed by. Similarly, given that Conrad seeks
to certify a class of all Jimmy John’s employees from 2014 to 2018 whose franchisees
signed different agreements, overwhelming individualized inquiries would be required
to establish that each franchisee participated in the same “conspiracy.”

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The Court also excluded Dr. Singer’s testimony because he used a flawed
methodology to predict antitrust impact. More specifically, the Court determined that
Dr. Singer’s regression models suffered from a systemic failure to adjust for those two
percent of the wage data that did not consistently record employee wages as per-shift or
per-hour, leading to inflated estimates of impact. Fatally, Conrad relies only on
Dr. Singer’s report to support his claim that the wages of every Jimmy John’s employee
nationwide were suppressed by the No-Poach Provision. On the other hand, the Court
admitted the testimony of Dr. Ordover, Jimmy John’s expert, who ably demonstrated
that—after adjusting for Dr. Singer’s error—“managers paid on an hourly basis had an
average wage suppression of approximately two percent, while salaried managers
suffered no suppression at all.” (Ordover Report at 21, Jimmy John’s Resp. at Ex. 133-67).
“Without presenting another methodology, [Conrad] cannot show Rule 23(b)(3)
predominance: Questions of individual damages calculations will inevitably overwhelm
questions common to the class.” See Comcast Corp., 569 U.S. at 34.
Additionally, the United States Supreme Court recently concluded in NCAA v.
Alston that the plaintiff’s monopsony claims were appropriately analyzed under the rule
of reason, not the per se rule. 141 S. Ct. 2141, 2157 (2021). In brief, a class of current and
former student-athletes sued the NCAA and 11 Division I conferences for using their
“monopsony power to cap artificially the compensation offered to recruits.” Id. at 2152
(cleaned up). Even though the defendants admitted that their conduct constituted
“horizontal price fixing in a market where [they] exercise monopoly control” id. at 2154,
the Court took “special care not to deploy” the per se rule given the “often hard-to-see
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efficiencies attendant to complex business arrangements,” id. at 2156. Cf. Nat’l Collegiate
Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 100 (1984) (“[A] per-se rule is
applied when ‘the practice facially appears to be one that would always or almost always
tend to restrict competition and decrease output.’”) (quoting Broad. Music, Inc. v. Columbia
Broad. Sys., Inc., 441 U.S. 1, 19–20 (1979)). Rather, the Supreme Court agreed with the
district court’s finding that the “fuller review” offered by the rule of reason was more
appropriate in a monopsony case involving “an industry in which some horizontal
restraints on competition are essential if the product is to be available at all.” Alston,
141 S. Ct. at 2157 (cleaned up); see also id. at 2158 (“Whether an antitrust violation exists
necessarily depends on a careful analysis of market realities.”).
Alston thus answers a question this Court punted at the motion-to-dismiss stage:
The rule of reason applies in this monopsony case challenging a nationwide franchise’s
use of intrabrand restraints that were arguably “designed to help [the company] more
effectively compete with other brands by ensuring cooperation and collegiality among
franchisees, and by encouraging investment in training.” (Jimmy John’s Resp. at 5). See
also United States’ Statement of Interest, Stigar v. Dough, Inc., No. 2:18-CV-00244-SAB,
Doc. 30, at 11–16 (E.D. Wash. Mar. 7, 2019) (arguing that no-poach provisions in franchise
agreements are subject to the rule of reason).
With that in mind, the rule of reason raises more individualized issues precluding
class certification. “Especially in view of the increasing complexity of corporate
operations, a business enterprise should be free to structure itself in ways that serve
efficiency of control, economy of operations, and other factors dictated by business
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judgment without increasing its exposure to antitrust liability.” Copperweld Corp., 467 U.S.
at 773. To that end, “even under the best of circumstances, applying the antitrust laws
can be difficult—and mistaken condemnations of legitimate business arrangements are
especially costly, because they chill the very procompetitive conduct the antitrust laws
are designed to protect.” Alston, 141 S. Ct. at 2161. Indeed, “[t]he whole point of the rule
of reason is to furnish ‘an enquiry meet for the case, looking into the circumstances,
details, and logic of a restraint’ to ensure that it unduly harms competition before a court
declares it unlawful.” Id. at 2160 (quoting Cal. Dental Ass’n v. FTC, 526 U.S. 756, 781
(1999)); see also id. at 2164 (“[A]ntitrust courts must give wide berth to business judgments
before finding liability.”); Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1,
15 (1984) (“For a number of reasons, errors on the side of excusing questionable practices
are preferable.”).
Here, Jimmy John’s expert Dr. McCrary persuasively described how most putative
class members likely benefited from the No-Poach Provision because it gave franchisees
an added incentive to provide more training, thus promoting employee advancement.
(McCrary Report ¶¶ 96–98). For example, the Senior Director of Marketing Execution and
Operations refused to release one certified manager because the franchisee “invested a
lot of time and money in training him and getting him certified”: The No-Poach Provision
protected the investment franchisees made in training their employees. (Email from
Buergler to Hooper at 1, Doc. 133-20) (emphasis added). Similarly, the Director of
Franchise Development understood the Provision as a means “to keep the peace among
franchisees,” thereby “reduc[ing] friction within the system.” (Morena Dep. at 12:16–18,
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Doc. 133-53). In other words, the No-Poach Provision not only had the potential to
encourage investment in training, but it may also have promoted cooperation between
franchisees, increasing coordination and thus “increasing the overall demand for the
brand.” (McCrary Report ¶ 153; see id. § 6.2). (See also Hooper Dep. at 87:12–15) (“I think
that the brand is stronger when [franchisees support each other] instead of bickering and
squabbling over stuff that is external to serving customers freaky fast.”). Perhaps more
importantly, Dr. McCrary suggests that increasing the use of certified managers
“improves the speed at which orders are executed and the frequency of complaints with
the store.” (McCrary Report ¶ 147; see id. § 6.1). These procompetitive justifications,
coupled with the fact that most release requests were approved without conditions,
present overwhelming individualized questions precluding certification. See Kohen v. Pac.
Inv. Mgmt. Co. LLC., 571 F.3d 672, 677 (7th Cir. 2009) (“[A] class should not be certified if
it is apparent that it contains a great many persons who have suffered no injury at the
hands of the defendant . . . .”).
Along those lines, the Court noted in excluding Dr. Singer’s testimony that
Conrad’s baseline premise—that every Jimmy John’s employee nationwide was injured
by the No-Poach Provision, no matter their position or location—was mere ipse dixit.
Indeed, “[c]ommon proof of actual injury to each class member requires that all class
members operate in the same relevant market, otherwise, they could not be affected in a
common manner by the challenged conduct.” Exhaust Unlimited, Inc., 223 F.R.D. at 513.
And “[i]t is by now well established that any rule of reason analysis requires a showing
of anticompetitive market effect. To hold otherwise would ignore the very purpose of the
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antitrust laws which were enacted for the protection of competition, not competitors.”
Lektro-Vend Corp. v. Vendo Corp., 660 F.2d 255, 268 (7th Cir. 1981) (applying the rule of
reason to noncompetition covenant).
With that in mind, the Court remains of the same mind as Dr. Ordover and Dr.
McCrary, whose prudent analyses revealed that the relevant labor market includes not
merely Jimmy John’s franchisees but also other quick-service restaurants (“QSRs”). Dr.
Ordover recognized, for example, that “it is likely that the putative class members seek
employment in a labor market (or multiple labor market) that is (or are) much
broader than Jimmy John’s branded stores.” (Ordover Report ¶ 91). He then aptly
demonstrated that “99 percent of Jimmy John’s branded stores have at least ten other
QSR brands within ten miles, with an average number of nearby brands of 53” (id. ¶
103), and “an average number of QSR locations of nearly 257” (id. ¶ 104).
Similarly, given that “[s]ome franchisees indicate that they compete with all other
employers in the local area hiring minimum wage employees,” Dr. McCrary explained
how “the only way an individual worker’s wage could be suppressed by the [No-Poach
Provision] is if the worker had developed specific skills at Jimmy John’s that raised their
productivity at Jimmy John’s more than at other competing brands. If not, then
competition from other brands would push the worker’s wage at Jimmy John’s up to the
competitive level associated with that worker’s skills.” (McCrary Report ¶ 93). Without
reaching the merits on that question here, individualized inquiries would still be needed
to determine whether a given Jimmy John’s employee could have been injured given the
varied and dynamic labor markets across the country. In sum, the Court agrees with
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Jimmy John’s that Conrad’s “failure to offer classwide evidence of a relevant labor market
is case-ending.” (Jimmy John’s Resp. at 22).
i. Superiority
“Rule 23(b)(3) also conditions class certification on whether the class action device
is superior to other available methods for fairly and efficiently resolving the dispute in
question.” Messner, 669 F.3d at 814 n.5. Relevant considerations include:
(A) The class members’ interests in individually controlling
the prosecution or defense of separate actions;
(B) The extent and nature of any litigation concerning the
controversy already begun by or against class members;
(C) The desirability or undesirability of concentrating the
litigation of the claims in the particular forum; and
(D) The likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(3).
The superiority requirement is satisfied when “a class action would achieve
economies of time, effort, and expense and promote . . . uniformity of decisions as to
persons similarly situated, without sacrificing procedural unfairness or bringing about
other undesirable results.” Amchem, 521 U.S. at 615. Indeed, “[t]he policy at the very core
of the class action mechanism is to overcome the problem that small recoveries do not
provide the incentive for any individual to bring a solo action prosecuting his or her
rights.” Id. at 617 (quoting Mace v. Van Ru Credit Corp., 109 F.3d 388, 344 (7th Cir. 1997)).
“But when a separate evidentiary hearing is required for each class member’s claim, the

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aggregate expense may, if each claim is very small, swamp the benefits of class-action
treatment.” Pastor v. State Farm Mut. Auto. Ins. Co., 487 F.3d 1042, 1047 (7th Cir. 2007).
Jimmy John’s argues that the superiority argument is not satisfied because the
individualized questions discussed above—and more like them—would make a trial
unmanageable:
For instance, for any given class member, it would first be
necessary to identify her employer and determine if they were
aware of Section 7(d), and, if so, whether they enforced or
ignored it. What were that franchisee’s practices with respect
to hiring, pay, and retention of employees—e.g., did the
franchisee pay more than other QSRs in the area, or pay more
at one of its Jimmy John’s stores than others? Did the class
member work for only a few weeks before quitting—and if
so, could a reasonable factfinder still conclude that she would
have received a promotion or raise but-for 7(d)? For a longertenured class member, did he receive a promotion, bonus, or
raise? Did he move between stores—if so, did he do it for
increased pay, or did he accept lower pay for other perceived
advantages, such as proximity to his home? Were there any
other separately-owned Jimmy John’s stores within a
reasonable commute of the class member’s store? Was she an
in-shopper or a manager—if the latter, what was her role in
setting pay for other class members? Did she keep wages low
in order to increase her own bonus?
(Jimmy John’s Resp. at 30).
The Court agrees. Conrad characterizes these assertions as a “fiction that [he] is
unable to quantify the wage suppression of each Class Member attributable to the
restraint.” (Conrad’s Reply at 14). But Jimmy John’s contentions go beyond mere
difficulties in assessing individual damages. See Mullins v. Direct Digit., LLC, 795 F.3d 654,
663 (7th Cir. 2015) (“It has long been recognized that the need for individual damages

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determinations at this later stage of the litigation does not itself justify the denial of
certification.”).
True enough, individual actions for suppressed wages may ultimately prove
impractical, prohibitively expensive, or inefficient. Even so, a class action is hardly
desirable when predominance is so lacking. See Messner, 669 F.3d at 814 n.5 (citing Klay
v. Humana, Inc., 382 F.3d 1241, 1269 (11th Cir. 2004) (“Superiority analysis is intertwined
with predominance analysis; when there are no predominant common issues of law or
fact, class treatment would be either singularly inefficient or unjust.”) (cleaned up)).
The issue is not simply one of assessing individual damages—rather, it is one
where “it is apparent that [the class] contains a great many persons who have suffered
no injury” and “thus require more than a thousand separate hearings” to assess the
validity of each claim. See Kohen, 571 F.3d at 677. For example, the Court described above
how the No-Poach Provision changed over time; how enforcement practices differed
among franchisees; and how most class members—including Conrad—were never
actually denied the chance to change shops, either because the franchisees acquiesced or
because they did not seek a move in the first place. In the end, a class action is not superior
to individual suits when the class is “defined so broadly as to include many members
who could not bring a valid claim even under the best of circumstances.” See Messner,
669 F.3d at 824. Thus the superiority requirement, too, is unsatisfied.

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Case 3:18-cv-00133-NJR Document 240 Filed 07/30/21 Page 33 of 33 Page ID #11267