McCoy v. Convenient Food Mart, Inc.

69 F.R.D. 337, 20 Fed. R. Serv. 2d 858
CourtDistrict Court, N.D. Illinois
DecidedOctober 3, 1975
DocketNos. 72 C 1860, 73 C 3004
StatusPublished
Cited by4 cases

This text of 69 F.R.D. 337 (McCoy v. Convenient Food Mart, 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
McCoy v. Convenient Food Mart, Inc., 69 F.R.D. 337, 20 Fed. R. Serv. 2d 858 (N.D. Ill. 1975).

Opinion

MEMORANDUM DECISION

MARSHALL, District Judge.

These private anti-trust actions now brought solely by former Convenient Food Mart franchisees on behalf of themselves and others similarly situated are here under Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 1px solid var(--green-border)">2), and Sections 3 and 4 of the Clayton Act (15 U.S.C. §§ 14 and 15).1 In both cases plaintiffs seek only money damages. Presently pending is plaintiffs’ motion to certify a national class of former retail franchisees of Convenient Food Marts pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure.

On October 31, 1974, a somewhat similar motion was denied for reasons stated in a memorandum decision of that date. Plaintiffs maintain that they have tracked that decision to the end that certification of the class they seek to represent should be pro forma. Defendants, on the other hand, vigorously oppose class certification upon four grounds: lack of numerosity under Rule 23(a)(1), inadequacy of representation [339]*339under Rule 23(a)(4), lack of common issues of fact under Rule 23(a)(2) and unmanageability or lack of superiority under Rule 23(b)(3). These objections will be considered seriatim after a brief resume of the overall nature of the business involved, the allegations of plaintiffs’ third consolidated amended complaint and the thrust of the decision of October 31, 1974 as it relates to the present motion.

Convenient Food Marts are neighborhood food stores independently owned and operated under a franchise which originates with defendant, Covenient Food Mart, Inc. (CFM). CFM uses a stratified system for granting retail store franchises. It licenses regional franchisors in designated areas as outlets for the retail franchises. Anyone desiring a retail franchise must negotiate with the regional franchisor in his area. CFM maintains control, however, by requiring the regional franchisors to grant retail franchises only in accord with the terms of a standard agreement which is attached and expressly made a part of the regional franchisor’s agreement with CFM.

The regional franchisors in every region except Region 8—Chicago—are independent business entities. In Region 8 CFM is the regional franchisor. The named plaintiffs in these consolidated actions are former retail franchisees in Nebraska and Massachusetts. Plaintiff Rita McCoy obtained her retail franchise from CFM of Nebraska, Inc., which is not a party. Plaintiffs Hoaglund and Paul obtained their franchise from CFM of New England, Inc., which is not a party. None of the plaintiffs obtained their franchise directly from CFM which is the prime defendant.

Defendant Scot Lad Foods, Inc. is alleged to own 50% of the stock of defendant CFM. One of its divisions, Meadowmoor Dairy, is a Chicago dairy. The third and final defendant is Bresler Ice Cream Company. It is alleged that the owners of Bresler own 50% of the stock of CFM. Bresler manufactures and sells ice cream products.

At the time of the October 31, 1974 decision denying class certification, the then plaintiffs 2 alleged a monopoly, an attempt to monopolize and a conspiracy in the furnishing of business premises for food marts, and in the sale and distribution of food mart products to the public. In essence, plaintiffs claimed that CFM, pursuant to a conspiracy among the named defendants and CFM, regional franchisors, had used its registered name in violation of Sections 1 and 2 of the Sherman Act and 3 of the Clayton Act in that (1) a CFM franchise was obtainable only if the business premises were leased from Convenient Franchise Leasing Corporation (a wholly owned subsidiary of CFM) or a CFM regional franchisor, and (2) the franchise agreement required each retail franchisee to purchase and use only such products as are designated by CFM and to order exclusively from suppliers approved for quality by CFM. Plaintiffs sought certification of a national class of present and former CFM retail franchisees and they sought both money damages and injunctive relief.

In essence, the October 31, 1974 decision denying class certification was premised on the following conclusions. First, it was assumed that the requirements of Rule 23(a) were met. Second, Rule 23(b)(2) was rejected because plaintiffs sought money damages (indeed it was the only relief available to [340]*340former franchisees), and 23(b)(2) “does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.” Advisory Committee Notes to Rule 23. The difficult inquiry was whether the ease could proceed as a 23(b)(3) action: that is to say, did it sufficiently involve “questions of law or fact common to the members of the class [which predominated] over any questions affecting only individual members”? Rule 23(b)(3). The conclusion was reached that insofar as plaintiffs complained of an alleged illegal tie of food products to the Convenient name, their case appeared suitable for 23(b)(3) treatment. 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), it was observed that “if the sole question is whether a standardized trademark protection clause, however worded, constitutes a violation of the anti-trust laws, a class action is the appropriate mode for testing the legality of the clause for it is the standard form franchise agreement which forms the focal point of the allegedly illegal acts and thus establishes a 'common nucleus of operative facts’ permitting class treatment.” (Emphasis supplied.) Assuming that coercion is a necessary element of an unlawful tying arrangement, it was concluded that it could be inferred on a class-wide basis from the standardized contractual provision, for contractual provisions are in and of themselves coercive because they are backed by force of law. Thus it was concluded in the posture of the case as then presented that liability to the class on the alleged food-name tie could be established without consideration of individual claims.

Insofar as the alleged tie between premises and the Convenient name was concerned, a different conclusion was reached. Nowhere in the franchise agreement was it provided that the retail franchisee must lease his premises from a regional franchisor. Plaintiffs asserted that the practical economic effects of various provisions in both the retail franchise and regional franchisor agreements were to compel the franchisee to obtain his premises from the regional franchisor. But the conclusion was reached that the determination of the anti-trust consequences of the alleged lease-name tie required a factual determination in respect to each franchisee-lessee. Accordingly, 23(b)(3) commonality of fact was absent on that issue and because plaintiffs pressed both contentions, class certification was denied.

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Bluebook (online)
69 F.R.D. 337, 20 Fed. R. Serv. 2d 858, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mccoy-v-convenient-food-mart-inc-ilnd-1975.