Abercrombie v. Lum's Inc.

345 F. Supp. 387, 16 Fed. R. Serv. 2d 658, 1972 U.S. Dist. LEXIS 13254, 1972 Trade Cas. (CCH) 74,118
CourtDistrict Court, S.D. Florida
DecidedJune 14, 1972
Docket71-602-Civ.
StatusPublished
Cited by61 cases

This text of 345 F. Supp. 387 (Abercrombie v. Lum's Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Abercrombie v. Lum's Inc., 345 F. Supp. 387, 16 Fed. R. Serv. 2d 658, 1972 U.S. Dist. LEXIS 13254, 1972 Trade Cas. (CCH) 74,118 (S.D. Fla. 1972).

Opinion

OPINION, FINDINGS AND ORDER

KING, District Judge.

This antitrust suit was brought as a class action by Jack and Margaret Abercrombie and their franchisee corporations against their franchisor, Lum’s Inc., and its subsidiaries. Plaintiff seeks to represent approximately 400 past and present Lum’s franchisees in a class action.

Plaintiffs claim defendants violated §§ 1 and 2 of the Sherman Act and § 3 of the Clayton Act (15 U.S.C. §§ 1, 2, and 14) by imposing tying arrangements through their franchise agreements (Complt. fffl 14-16).

The question of whether to maintain this suit as a class action has been raised by cross motions.

The instant antitrust claim was transferred to this Court on April 18, 1971, upon defendants’ motion under 28 U.S.C. § 1404(a) from the Eastern District of Virginia, where it had been filed on July 17, 1970 as one claim of a five-count complaint. 1 The Virginia Court made an initial determination that this case could proceed as a class action. The Court inferred that there was “some sort of standard franchise agreement between Lum’s and its franchisees”, and, relying on Siegel v. Chicken Delight, Inc., 271 F.Supp. 722 (N.D.Cal.1967), modified sub nom., Chicken Delight, Inc. v. Harris, 412 F.2d 830 (9th Cir. 1969), concluded that class treatment was proper.

In its order determining this cause to be a proper class action, the Virginia Court stated: “That there is some sort of standard franchise agreement between Lum’s and its franchisees, at least in terms of the alleged Sherman Antitrust violations, seems a fair inference from the pleadings and oral arguments presented”. The transferor Court did not, however make specific findings relative to Rule 23(b).

Plaintiffs renewed their motion to send out class notices after the case was transferred to this District. By order dated September 27, 1971, the motion was denied, with leave to renew upon termination of discovery relating to the class action issue. A hearing was held on October 27, 1971 on the class action issue, and decision was reserved. A second hearing was held on November 11, 1971 in order to consider possible communication with the class members.

A final extended hearing on the class question was held on March 9, 1972 at which time all aspects of the class motion were reviewed. Counsel subsequently submitted additional briefs on the class action question. Since the transfer of this case the parties have conducted extensive discovery. Tortuous examination of what is now an adequate record for such a determination convinces the Court that this case should not proceed as a class action. 2

The essence of plaintiffs’ claim is that, through their franchise agreements with defendants, they were unlawfully required (Complt. 14): (a) to purchase signs and equipment from defendants and to purchase furniture, fixtures, supplies, *389 foods, and beverages from defendants or their approved suppliers, (b) to lease their restaurant sites to defendants who would then sublease the sites back to plaintiffs at the same rental paid by defendants plus 5% of their gross sales and, in some cases, other charges, (c) in some cases to secure their sites from persons designated by Lum’s and to deal with building contractors designated by Lum’s, and (d) to permit Lum’s, upon termination of the franchise agreement, to repurchase equipment and fixtures from them. The defendants have denied these allegations.

Some understanding of the Lum’s franchise system is necessary in order to place the contentions of the parties on this motion in proper perspective. In addition to operating company-owned restaurants, Lum’s franchises third parties to operate restaurants under the “Lum’s” trademark and to sell products under the trademarks and trade names “Lumdog” and “Lumberger”. Although the Lum’s franchise agreements followed the same general format, the substance was changed materially on a number of occasions. Defendants have submitted approximately 12 different types of agreements which were executed from time to time. Both plaintiffs and defendants have submitted analyses of the agreements which reveal that there are at least three groups of agreements differing materially in substance from one another.

With the exception discussed below, these agreements do not require purchases by the franchisee from any particular source. A common provision in virtually all plaintiffs’ agreements, for example, states:

“FRANCHISEE further covenants to purchase fixtures, equipment, foods and supplies from such suppliers as are designated or approved by LUM’S from time to time.”

Paragraph (d) of the franchise agreement .for Abercrombie’s Titusville store provided:

“FRANCHISEE further covenants to purchase equipment,. furniture, fixtures, foods, beverages and supplies from such suppliers as are designated or approved by Lum’s from time to time, at prices that shall be competitive with national suppliers, in the area for the franchise, for equal quality merchandise.”

The franchise agreements also provide that the franchisees are responsible for locating their own sites for their restaurants, with Lum’s having a right of approval, and that the franchisees are to lease the sites so selected to Lum’s or its subsidiaries. The sites are then, under the provisions of the franchise agreements, leased back to the franchisees at the same rental plus 5% of the gross sales from the respective restaurants. Defendants contend that the 5% charge is in effect, a royalty payment. There are no other provisions for royalty payments in the franchise relation.

The franchise agreements further provide that the franchisor will assist the franchisee, who may be inexperienced, in various ways. Normally, it appears, an opening crew from the franchisor assists in readying each store to open. Among other duties, that crew stocks the stores for the opening, but there is no express agreement that the same brands be stocked thereafter.

No extended discussion is necessary to confirm the desirability of class actions in a proper case. The advantages to such actions are apparent in the resolution of claims “based on a wrong common to all.” Green v. Wolf Corporation, 406 F.2d 291, 300 (2d Cir. 1968). The rule serves the interests of both the parties and the courts by eliminating the need for repetitious and possibly inconsistent litigation. E. g., Schaffner v. Chemical Bank, [339 F.Supp. 329] (S.D.N.Y.1972): Philadelphia v. American Oil Co., 53 F.R.D. 45, 51 (D.N.J.1971).

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345 F. Supp. 387, 16 Fed. R. Serv. 2d 658, 1972 U.S. Dist. LEXIS 13254, 1972 Trade Cas. (CCH) 74,118, Counsel Stack Legal Research, https://law.counselstack.com/opinion/abercrombie-v-lums-inc-flsd-1972.