Like most courts to consider the issue, the California Supreme Court in a case involving Domino’s Pizza has held that a franchisor generally cannot be held liable for the independently made employment decisions of one of its franchisees. Who would disagree with that commonsense view? Well, the Obama National Labor Relations Board (NLRB), as well as three liberal dissenters on the seven-member California court, who would have left it up to case-by-case jury factual balancing, an arrangement likely to coax settlement offers from risk-averse franchisor defendants. [Daniel Fisher, Forbes, also; Shaw Valenza; Fox Rothschild; Gordon Rees; related, Epoch Times last week quoting me; earlier here, here, and here]
Aaron Schepler, Quarles & Brady;
In the supreme court’s view, the fact that Domino’s exercised extensive control over the manner in which the franchisee operates its business was merely a way to ensure the uniformity of the customer experience at its franchised outlets. As the court explained, this uniformity actually benefits both parties to the franchise relationship because “chain-wide variations … can affect product quality, customer service, trade name, business methods, public reputation, and commercial image” and, thus, the value of the brand. And because “comprehensive operating system[s]” are present in nearly every franchise relationship, those systems standing alone could not reasonably “constitute the ‘control’ needed to support vicarious liability claims like those raised here.”
In this Cato podcast (7:01), I talk with Caleb Brown about the National Labor Relations Board’s groundbreaking attempt last week to tag McDonald’s with liability for labor violations found at its independently owned local operators. (Reportage: Steven Greenhouse, NYT; Jon Hyman; Diana Furchtgott-Roth/RCP) It’s a drastic departure from current law that would carry implications for outsourcing more generally: a food company that contracts with independent farmers to grow a particular crop, for example, might wind up being liable for the farmers’ treatment of farm workers, a company that outsources its cafeteria, vehicle maintenance, or janitorial services to outside vendors might become legally responsible for ensuring the labor-law compliance of those contractors, and so forth.
The McDonald’s case is the first of what is expected to be multiple cases filed by the NLRB’s general counsel (akin to a prosecutor), and the full Board has not ruled on the resulting complaints, although given the union-friendly role of the Obama NLRB that is likely to be little more than a formality. The initiative will inevitably land in the courts, which have not always been friendly toward Obama regulatory adventurism, and perhaps eventually the Supreme Court.
One consequence, successful or otherwise, if this ploy works: by treating legally distinct entities that contract with each other as if they were parts of a single vertically integrated enterprise, progressive labor law thinkers will create an incentive for giantism to become more real, by giving fast-food franchisers, for example, legal reason to move toward company-owned rather than independently-owned store arrangements. Not for the first time, the law would mow down the ranks of mid-sized businesses in favor of large or nothing. Commentary from others: Megan McArdle; Stephen Bainbridge; Catherine Fisk, On Labor (supporting the idea); Steve Caldeira, The Hill; Alex Bolt. And a relevant House hearing.
“Wayne County, Mich. Judge Kathleen MacDonald slapped a Dearborn man with an injunction ordering him to take down his Facebook comments critical of a class-action settlement of a case against McDonald’s for selling non-halal meat.” [Daniel Fisher, Forbes; Paul Alan Levy, Public Citizen; Ted Frank, PoL] More: Blue Dog Thoughts.
In San Francisco, Judge Richard Kramer has dismissed the Center for Science in the Public Interest’s lawsuit on behalf of parent Monet Parham seeking to declare unlawful McDonald’s practice of including a toy in its Happy Meal. I wrote about the case last year. [SF Weekly, earlier here, here]
Some stories just seem destined for this site, including this one about a woman whose legal complaint alleges that “her ex-husband met her after she was hired to work at McDonald’s and later pushed her into prostitution in Nevada.” [Courthouse News, NY Daily News]
Another law professor finds the hot-coffee and obesity lawsuits admirable, and Ted Frank once more begs to differ.
It takes effect Thursday, but, as some had predicted, the hamburger chain seems to be evading its reach fairly easily just by assigning a separate price to the toy. [SF Weekly]
This week has brought one nudge forward and one push back for the paternalistic “food policy” crowd, or so I argue in a new opinion piece for the New York Daily News (& welcome Instapundit/Glenn Reynolds readers, Center for Consumer Freedom “Quote of the Week“).
Great review by Miami Herald TV critic Glenn Garvin casting a skeptical eye on the trial-lawyer film project (“done in by its essential dishonesty… like any good lawyer — and unlike any good documentarian — [director Susan Saladoff is] intent on concealing the weakness in her case).” Read it here. Meanwhile, from the “How does this sort of thing get past the editors of the Washington Post?” files, there’s this from Hank Stuever:
For to really embrace tort reform, you have to be willing to treat all potential plaintiffs as no-good grifters. … To support tort reform, you have to believe all lawsuits against businesses are a threat to the free market.
Stuever does not, for some reason, name any proponent of reform who has actually asserted either of the propositions. Do you think that might be because he’s trafficking in absurd caricatures? (earlier on “Hot Coffee” here, here, here, etc.)
P.S. More: Cory Andrews, WLF. And if lawyers are really eager to have the facts of the Liebeck v. McDonald’s case come out, it’s curious they don’t take steps to release the trial transcript, in the absence of which critics of the case are obliged to speculate on key points. And as I just wrote in a comment at Abnormal Use:
I believe organized tort reform groups were caught flat-footed by the McDonald’s case and didn’t get around to doing much with it until it had already become the talk of the nation through talk shows, late night TV and so forth. As often happens, plaintiff’s-side advocacy groups were more aggressive in seeking coverage for their side in the media. Thus Public Citizen and allies gave a press conference on Capitol Hill and were rewarded with a big Newsweek story summarizing their talking points (as well as, earlier, coverage in the news-side WSJ). I’m pretty sure no groups critical of the Liebeck award ever did a comparable press push; and the McDonald’s company itself, so far as I know, never chose to cooperate with commentators who might be sympathetic to its legal case.
Columnist Steve Chapman has their number:
People don’t like cheap, tasty, high-calorie fare because McDonald’s offers it. McDonald’s offers it because people like it. … We live in an age of inexpensive, abundant food carefully designed to please the mass palate. Most of us, recalling the scarcity, dietary monotony and starvation that afflicted our ancestors for hundreds of millennia, count that as progress. But those determined to save human beings from their own alleged folly see it as catastrophic.
A survey by Tampa’s ABC Action News confirms a point often made by Ted in this space: “The Liebeck case did little, if anything, to alter the manner in which fast food restaurants serve coffee.” [Nick Farr, Abnormal Use]