Kentucky District Court Rejects Class Action Settlement in Papa John’s Case

This happened last September, but I’m just catching up.  Unfortunately, I could find no updates on the posture of the case.

A proposed class of Papa John’s employees formed, alleging that its franchisors systematically restricted employee compensation and opportunities by agreeing that individual Papa John’s franchises would not seek to hire each other’s employees.  After protracted discovery, motion practice, and sending some class members to arbitration, the parties agreed to a $5 million settlement, which would come out to $33/class member, less attorneys’ fees.  In addition, Papa John’s promised to stop using and enforcing such no-poach provisions for five years.

The question before the U.S. District Court for the Western District of Kentucky in In Re: Papa John’s Employee and Franchisee Employee Antitrust Litigation was whether to preliminarily certify the class and approve the class-wide settlement.  In a decision that surprised the class-action community, the court refused to do so.

The applicable standard, from Fed. R. Civ. P. 23(e)(2), is that a court should approve a class-action settlement if it is “fair, reasonable, and adequate.”  The court found that standard likely met.  Beyond that, the court also looked at the prerequisites under Rule 23(a): numerosity, commonality, typicality and adequacy of representation.  The class, which boasted over 400,ooo members, was certainly numerous, and given the expenses incurred and the small per-person recovery, the class action vehicle was obviously superior to individual litigation of claims.

However, the court was not satisfied that the sole named plaintiff was an adequate representative of the class, nor was it satisfied that plaintiffs had made a showing that common issues predominated in the case.  The court expressed reluctance to be the first to certify a class in a no-poach claim against a restaurant.  Moreover, the court recognized possible adequacy issues in that the named plaintiff was a manager who may not be best-situated to represent the interests of non-managerial employees.  There also might be a split between the interests of employees subject to arbitration agreements (which include class-action waivers) and those not subject to such agreements.  The court’s typicality concern simply sounded in the lack of evidence that the named plaintiff tried to move between Papa John’s stores.  We don’t know whether she, as a manager, could have done so.

Perhaps most controversially, the court found that it could not address whether common issues predominate without some exploration of the merits of plaintiffs’ anti-trust claims.  The court expressed skepticism regarding plaintiffs’ core claim.  Yes, the no-poach rule would prevent a Papa John’s employee from working at another Papa John’s franchise.  But why wouldn’t they then just find another job in the vast fast-food industry?

The court invited plaintiffs to supplement their submission and refile their amended motion for class settlement or extension request within thirty days. The amended motion seems to have been filed in November 2023. I have been unable to find more any more rulings. The case dates from 2018.