In re Arthur Treacher's Franchise Litigation

93 F.R.D. 590, 34 Fed. R. Serv. 2d 1436
CourtDistrict Court, E.D. Pennsylvania
DecidedMarch 9, 1982
DocketCiv. A. No. 81-1085; MDL No. 467
StatusPublished
Cited by9 cases

This text of 93 F.R.D. 590 (In re Arthur Treacher's Franchise Litigation) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Arthur Treacher's Franchise Litigation, 93 F.R.D. 590, 34 Fed. R. Serv. 2d 1436 (E.D. Pa. 1982).

Opinion

[591]*591MEMORANDUM AND ORDER

HANNUM, District Judge.

I. INTRODUCTION

Plaintiff, Arthur Treacher’s Fish & Chips, Inc. (ATFC), has moved the Court to certify a defendant class in Civil Action No. 81-1085. The class action would be limited to Count II of the complaint in which plaintiff seeks the following relief:

... an Order (1) enjoining the class of franchises from continuing to withhold from payment to Arthur Treacher’s the contractually mandated royalty payments due and owing to Arthur Treacher’s; (2) directing the class of franchises to pay to Arthur Treacher’s the contractually mandated royalty payments due and owing to Arthur Treacher’s; (3) awarding Arthur Treacher’s damages caused by the franchisee class’ breach of its contracts with Arthur Treacher’s; (4) granting plaintiff attorneys’ fees and costs of suit; (5) retaining jurisdiction over this action to insure compliance with the Order of this Court; and (6) granting such further relief as the Court deems necessary and proper.

The purported class is defined by plaintiff in paragraph 88 of the complaint as follows:

All franchisees of Arthur Treacher’s who have executed written contracts with Arthur Treacher’s and have refused and/or failed to make royalty payments owed to Arthur Treacher’s pursuant to the terms of the written contracts between them and Arthur Treacher’s.

In a prior opinion which discussed this motion, the Court found that plaintiff satisfied the “numerosity” and “commonality” requirements set forth respectively in Fed. R.Civ.P. 23(a)(1) & (2). What was not decided was whether plaintiff could demonstrate the presence of “typicality” and “adequacy of representation” as required by Fed.R.Civ.P. 23(a)(3) & (4). The question as to which subsection, if any, of Rule 23(b) the purported class fit into was similarly left open. See Memorandum And Order, (1981) 92 F.R.D. 398. The Court stated:

[Tjhere is a valid question as to the propriety of class treatment in this case. The record as it now stands does not provide an answer to these questions. The Court simply has not been provided with enough information with which to reach an informed judgment as to whether a class should be certified. In a sense, therefore, plaintiff has failed to sustain its burden. Nevertheless, an evaluation of whether the burden imposed by Rule 23 upon the class action proponent has been met in a given case naturally ought to be made after all available information is before the Court. The Court will not deny the present motion on the grounds that plaintiff failed to satisfy its burden of demonstrating the appropriateness of class action treatment if, in fact, there is evidence not presently before the Court with which the plaintiff could carry its burden. In other words, the Court is unwilling to render a decision, one way or the other, based upon what it perceives to be a lack of information. Therefore, the Court will order an evidentiary hearing and supplemental briefing before deciding this important issue.

Id. at 426. The evidentiary hearing, along with oral argument, was conducted on January 14, 1982. See Transcript, Docket Entry No. 463, at 97-163; 173-205 (hereinafter cited as “TV.”). Some of the questions which prompted the holding of the evidentiary hearing were set forth in the October 15th opinion:

First, what evidence supports the assertion that the claims or defenses of the representative parties are typical? In this regard defendants claim that variations in the contracts themselves and varying reasons for withholding royalties will neeessiarly [sic] lead to different claims or defenses, thus militating against a finding of typicality. Second, does the potential conflicts of law issue pointed out by defendants militate against class action treatment? Third, are there not viable conflicts among the class members which would result in some interests not being adequately represented? If so, would subclassing re[592]*592solve these conflicts? See Rule 23(c)(4)(B). If a class was certified and divided into appropriate subclasses, i.e., those defendants still operating restaurants as opposed to those who do not; those defendants who paid advertising coop fees as opposed to those who did not, etc.; do the named members of the putative class represent all of the potentially diverse interests or would additional representatives need to be named? These questions are not meant to be exclusive but merely indicative of the areas in which the court lacks evidence from which an informed judgment could be rendered. Thus, plaintiff will want to focus its attention upon the “typicality” and “adequate representation” prerequisites, as well as buttressing its contention with regard to which, if any, subsection of Rule 23(b) the class fits into. Pending a supplementation of the record with regard to questions similar to those mentioned above, a decision on whether to maintain Count II of No. 81-1085 as a class action will be deferred.

Memorandum And Order, supra at 426-27 (emphasis added).

After careful consideration of this important question the Court concludes that this motion must be denied. Although plaintiff has presented a viable case for the finding of typicality and adequacy of representation, see Part III, infra, this purported class does not fit into any of the categories set forth in Rule 23(b), and the present motion will be denied on that basis.

II. Rule 23(b)

In addition to satisfying the prerequisites of subdivision (a), it must be established that the action is maintainable within one of the categories described in subdivision (b). Plaintiff has moved for certification of this defendant class under all of the categories set forth in Rule 23(b)(1), (2) & (3).

A. Rule 23(b)(1)(A)

Rule 23(b)(1)(A) focuses upon the effect the prosecution of individual actions would have upon the party opposing the class, which is the plaintiff in this case. Thus, if “the prosecution of separate actions by [the plaintiff] against individual members of the [defendant] class would create a risk of . . . inconsistent or varying adjudications with respect to individual [defendants] which would establish incompatible standards of conduct for the [plaintiff],” then the action may be maintained as a class action under Rule 23(b)(1)(A). Absent class certification, plaintiff would be in a position of prosecuting separate actions against the defendant-franchisees in order to recover the disputed royalties. That situation would create a risk that the resultant judgments would impose an obligation on some, but perhaps not all, of the defendants to pay the disputed royalties to ATFC. As plaintiff describes it, “unless a defendant class action is certified, there is a distinct possibility that Arthur Treacher’s will be prevented from enforcing its contract against some recalcitrant franchisees in one court while permitted recovery in another.” Plaintiff's Brief In Support Of Its Motion For Certification Qf A Defendant Class Action, Docket Entry No. 49 at 12-13 (hereinafter cited as “Plaintiff’s Brief”).

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Bluebook (online)
93 F.R.D. 590, 34 Fed. R. Serv. 2d 1436, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-arthur-treachers-franchise-litigation-paed-1982.