Compass Lexecon’s Client Jimmy John’s Defeats Motion for Class Certification in Fast Food No-Poach Case

Compass Lexecon Senior Consultant Dr. Janusz Ordover Cited Favorably in Class Certification Order; Plaintiff’s Expert Excluded under Daubert

Compass Lexecon’s client Jimmy John’s defeated a motion for certification of a putative class of Jimmy John’s restaurant employees in Conrad v. Jimmy John’s, relying in part on the expert testimony of Compass Lexecon Senior Consultant Dr. Janusz A. Ordover. The case is one of the first fast food franchise no-poach cases for which a motion for class certification has been decided. Plaintiff alleged that the so-called “no-poach provision” contained in Jimmy John’s franchise agreements constituted a per se horizontal agreement to suppress the wages of employees of Jimmy John’s branded stores. Judge Nancy J. Rosenstengel denied Plaintiff’s motion for class certification, finding that it did not meet the Rule 23 standards for adequacy, typicality, and predominance. In particular, Judge Rosenstengel ruled that Plaintiff had not shown that common issues predominated over individualized issues. Judge Rosenstengel elaborated that, while Plaintiff’s economic expert (who was excluded under Daubert in an opinion citing Dr. Ordover’s analysis) claimed that all putative class members’ wages were suppressed, Dr. Ordover “ably demonstrated that—after adjusting for [Plaintiff’s expert’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.’”

Further, Judge Rosenstengel held that Plaintiff’s allegations should be analyzed under the rule of reason, necessitating an analysis of the relevant market, which Plaintiff’s expert narrowly defined as employment at Jimmy John’s branded restaurants. Judge Rosenstengel found that the relevant market was much broader, stating that “the Court remains of the same mind as Dr. Ordover … 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.’ … 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’ and ’an average number of QSR locations of nearly 257.’”

Dr. Ordover was supported by a Chicago-based Compass Lexecon team that included Thomas A. Stemwedel, Ron Laschever, Alice Kaminski, and Deborah Healy. Jimmy John’s was successfully represented by Rachel S. Brass and Caeli A. Higney of Gibson Dunn & Crutcher LLP.