Martino v. McDonald's System, Inc.

81 F.R.D. 81, 3 Fed. R. Serv. 1680
CourtDistrict Court, N.D. Illinois
DecidedJanuary 5, 1979
DocketNo. 77 C 98
StatusPublished
Cited by14 cases

This text of 81 F.R.D. 81 (Martino v. McDonald's System, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Martino v. McDonald's System, Inc., 81 F.R.D. 81, 3 Fed. R. Serv. 1680 (N.D. Ill. 1979).

Opinion

MEMORANDUM DECISION

MARSHALL, District Judge.

The plaintiffs in this treble damage antitrust class action allege that the defendants have imposed on the plaintiff class tying arrangements illegal under § 1 of the Sherman Act, 15 U.S.C. § 1. Jurisdiction is invoked under 15 U.S.C. §§ 15, 26. The defendants are McDonald’s System, Inc. and Franchise Realty Interstate Corporation, an affiliate of McDonald’s. The [84]*84named plaintiff is Michael Martino, who is currently the owner-franchisee of two McDonald’s restaurants. Martino seeks to represent a class of all current McDonald’s franchisees. Martino alleges that the defendants required prospective franchisees, as a condition to obtaining a franchise, to lease or sublease from Franchise Realty Corporation the property underlying the restaurant. The motion for certification of the class of all current McDonald’s franchisees is now pending.1

The defendant McDonald’s is a franchisor of over 4,000 fast food drive-in restaurants. Approximately twenty-five per cent of all McDonald’s franchises are owned by McDonald’s System. The remaining seventy-five per cent are owned by individual operators. In almost all cases, McDonald’s finds an appropriate site for a restaurant, and supervises the planning and construction of the restaurant. McDonald’s then either retains ownership or offers it to a current franchisee or a potential franchisee who has expressed interest in becoming the operator of a McDonald’s franchise. McDonald’s affiliate, Franchise Realty, currently either owns or leases the underlying property of over 99% of the franchises. The license of the franchise and the lease of the property generally are for terms of twenty years.

Plaintiff Michael Martino is a franchisee who currently owns two franchises, one in Manitowoc, Wisconsin and the other in Appleton, Wisconsin. Martino began his career with McDonald’s in 1959 by managing a store owned by his brother Bruno in Be-loit, Wisconsin. Then in 1962 Michael and Bruno Martino purchased the McDonald’s unit in Manitowoc from its original owners. In 1963, Michael and Bruno purchased the Appleton unit directly from McDonald’s. The management of McDonald’s has informed Michael Martino that it will not renew the license for the Manitowoc franchise when the license expires in 1979. No such indication has been made with respect to the Appleton restaurant.

The plaintiffs have made two tying claims. They allege first that McDonald’s would not license a franchise unless the franchisee also leased the property underlying the restaurant from Franchise Realty. Plaintiffs allege that this requirement forces franchisees to pay a considerably higher rent than they would have absent the requirement. Martino alleges that he leased the Manitowoc property from Franchise Realty for $1,100 per month, over $300 more than Franchise Realty paid in rent to the owner of the property.

The plaintiffs’ second tying allegation is that defendants tied the purchase of Coca Cola to the licensing of the franchise. According to the plaintiffs, the McDonald’s franchise letter agreement requires franchisees to agree to purchase only those supplies and foodstuffs which meet McDonald’s specifications and quality standards. Because Coca Cola is the only cola that meets with McDonald’s approval, plaintiffs must purchase Coca Cola. Plaintiffs allege that McDonald’s receives the benefit of this tie in the form of free advertising. Until 1973 Coca Cola rebated thirty-five cents per gallon of Coca Cola purchased to the Operators National Advertising Fund (OPNAD), a corporation established by owners of McDonald’s franchises to conduct national advertising. After 1973, Coca Cola paid the thirty-five cent rebate directly to the franchisee as an advertising allowance. Plaintiffs allege that even considering these rebates as benefits to them, they could have saved money by buying a comparable cola.

Rule 23 Requirements

In a motion for class certification, we must take care not to consider the merits of the plaintiff’s claims. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). Although the plaintiffs have the burden of proof in [85]*85demonstrating that the elements of Rule 23 have been satisfied, Windham v. American Brands, Inc., 565 F.2d 59, 64 n.6 (4th Cir. 1977) (en banc), we must determine whether the plaintiffs have satisfied Rule 23’s requirements without prejudging any issues relevant to the named plaintiff’s or the class’s recovery on the merits. Inherent in this process is an element of speculation imposed by the limited state of the record. See Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975)2

Rule 23(a)

Defendants do not doubt, nor do we, that 2,600 potential class members is sufficiently numerous so as to make joinder impracticable as required by Rule 23(a)(1). Rule 23(a)(2) requires the existence of questions of law or fact common to the class. This requirement seems superfluous, especially in a Rule 23(b)(3) case such as this one, in which common questions must predominate over individual ones. See 3B Moore’s Federal Practice, ¶ 23.06-1 at 23-171 (1978). Nevertheless, as our later discussion will indicate, plaintiffs have met their burden here. Because the Coca Cola requirement is imposed on all franchisees, legal and factual questions with respect to the alleged Coca Cola tie are common to the class. Common legal and factual questions also exist with respect to the legality of McDonald’s leasing practices.

Rule 23(a)(3) requires that the named plaintiff’s claims be typical of the claims of the class members. Defendants argue that Martino’s situation is atypical because this action is only a vehicle for Martino’s real grievance, which is Martino’s impending loss of his Manitowoc franchise. To support this theory, the defendants note that Marti-no could not have been aggrieved by leasing from Franchise Realty or buying only Coca Cola, inasmuch as he waited many years after acquiring his franchises and even several years after learning of the damage resulting from the alleged ties before bringing suit. Moreover, defendants assert that most potential class members, unlike Marti-no, are satisfied with their treatment from McDonald’s System and do not wish to challenge the leasing arrangement or the approved source requirement. Finally, defendants assert that Martino’s substandard performance in operating his units makes him an atypical franchisee.

None of these assertions by defendants demonstrates atypicality. The named plaintiff satisfies Rule 23(a)(3)’s requirement if his claim is based on the same legal theory as the class members’ claims. Santiago v. City of Philadelphia, 72 F.R.D. 619, 625 (E.D.Pa.1976); 7 C. Wright & A. Miller, Federal Practice and Procedure, § 1769 at 614 (1972). Once the named plaintiff has shown that the issues in his claim are in approximately the same posture as those issues would be in the class members’ claims, the plaintiff has shown typicality. Cottrell v. Virginia Electric & Power Co., 62 F.R.D. 516, 520 (E.D.Va.1974).

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Bluebook (online)
81 F.R.D. 81, 3 Fed. R. Serv. 1680, Counsel Stack Legal Research, https://law.counselstack.com/opinion/martino-v-mcdonalds-system-inc-ilnd-1979.