Appeals court: Jimmy John's asst mgrs lawsuit vs corporate parent doesn't bar lawsuits vs franchisees

By Scott Holland | Dec 16, 2017

A federal appeals court in Chicago has ruled a group of assistant managers suing Jimmy John’s over their treatment can proceed with lawsuits against both the parent company and its franchisees, even though a federal district judge had said they had to wait to sue the franchisees until they progressed further in their class action against the sub sandwich chain.

Corey Coyle [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

A federal appeals court in Chicago has ruled a group of assistant managers suing Jimmy John’s over their treatment can proceed with lawsuits against both the parent company and its franchisees, even though a federal district judge had said they had to wait to sue the franchisees until they progressed further in their class action against the sub sandwich chain.

Seventh Circuit Chief Judge Diane P. Wood and Circuit Judges Joel M. Flaum and David F. Hamilton heard arguments Nov. 8 and issued a decision Dec. 14 ,settling a dispute between Champaign-based Jimmy John’s and a class of assistant store managers regarding whether the sandwich chain should be considered a joint employer of its franchisee’s workers under federal labor law.

U.S. District Judge Charles P. Kocoras earlier this year sided with Jimmy John’s and barred the workers from suing their direct employers under the federal Fair Labor Standards Act.

But the appellate panel, in an opinion written by Flaum, said the workers are allowed to bring separate, concurrent actions against both Jimmy John’s and franchisee employers.

Since 2014, Jimmy John’s has contested two primary class action lawsuits, brought by assistant managers who alleged the sandwich chain should be held responsible for the decision to classify the ASMs as management employees exempt from the overtime and other wage requirements under the FLSA. The plaintiffs have contended the classification was improper, as assistant managers at Jimmy John’s rarely, if ever, actually manage anyone or anything. Rather, plaintiffs estimated at least 90 percent of the ASMs’ duties are little different from those of hourly, so-called non-exempt restaurant employees, who qualify for overtime under the FLSA.

After the parties were unable to agree on accommodations so the cases did not conflict, Kocoras issued an anti-suit injunction that ultimately expanded to stall opt-in plaintiffs from proceeding in 13 lawsuits targeting franchisees in 12 federal district courts elsewhere in the country.

“The district court never identified the source of its authority to issue the anti-suit injunction,” Flaum wrote. He explained the principles behind avoiding duplicative litigation and circumstances under which district courts can stall certain state court actions, but said “an anti-suit injunction is an extraordinary form of relief” when all the cases involved are in federal courts.

The appellate judges further said Jimmy John’s relied on cases where the same parties were plaintiffs and defendants in multiple actions, but that argument can’t apply in this case because of the distinction between Jimmy John’s the corporate entity and franchise operators. The Chicago court in which the plaintiffs sued Jimmy John’s is not the proper jurisdiction for the action where the defendant pool includes out-of-state franchisees, meaning the cases cannot be merged even though they rest on the same legal principles.

They also rejected a Jimmy John’s concern about Kocoras’ pretrial discovery and notice orders, noting the judge himself never raised such concerns in issuing the injunctions, having cited only efficiency concerns the appellate panel had already addressed as unpersuasive.

The plaintiffs repeatedly said they were suing the franchisees before the statute of limitations expired and even agreed to stay those cases if the statutes would be tolled pending the case against Jimmy John’s, which Flaum cited as reasons Kocoras should have believed the plaintiffs weren’t using concurrent actions to evade court rulings.

Even if Kocoras had the authority to issue the injunction, the panel agreed with the plaintiffs that doing so would have constituted an abuse of discretion.

“He did not state the legal conclusions supporting the injunction or identify the relevant legal standard,” Flaum wrote.

The Seventh Circuit reversed the district court’s judgment, allowing all the lawsuits to proceed.

Jimmy John’s is represented in the action by attorneys with the firm of Seyfarth Shaw LLP, of Chicago.

The plaintiffs are represented by attorneys with the firms of Klafter Olsen & Lesser LLP, of Chicago; Myron M. Cherry & Associates, of Chicago; Foote, Mielke, Chavez & O'Neil LLC, of Geneva; Werman Salas P.C., of Chicago; and Outten & Golden, of Chicago.

In a release following the ruling, Seth Lesser, one of the lead attorneys for the plaintiffs and founding partner at Klafter, Olsen & Lesser, said: “This is a victory for workers across the country. Too often, companies intentionally misclassify workers in an effort to mask what is essentially wage theft. This ruling is an important step towards righting those wrongs.”

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Organizations in this Story

Foote Meyers Mielke & Flowers LLC Klafter Lesser & Olsen Myron M. Cherry & Associates LLC Outten & Golden Seyfarth Shaw, LLP Werman Salas

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