Former Black Franchisees Sue McDonald's

Joining me is Eric Tallely, a professor at Columbia Law School. Start by telling us about the claims of the black McDonald's franchise Ease Sure the franchisees has sort of teamed together to bring forward two types of claims. One of the discrimination claims uh and the other is just an ordinary contract claim And they have some similarities of one

another and some differences with one another. But the discrimination claim is based on one of the very oldest of the nation statutes in the United States, who's been around since eighteen sixty six. How do they claim they were discriminated against? Location? Location? Location? Is that their main claim

that they weren't given the good locations. That's part of their claims it's a grab bag of a bunch of different claims, but one of the claims that the planets are making here was that they were systematically speared to some of the least profitable, highest cost locations that were in either a dangerous or rundown neighborhoods and weren't really given the opportunities to take on the more the more lucrative sorts of franchise that that that were standalone franchisees

uh and more well healed parts of town. That's only part of what the claims were, however, because there were additional claims that are related to how McDonald's engaged in routine or supposedly routine inspections of the franchise establishments, whether they graded them more harshly uh than they would have graded wide owned establishment, whether the franchisees were sort of forced by the franchises without really examining but with the

nature of the business, and sometimes forced to sell businesses that weren't doing as well without fully betting the market. So much of this is location, but I think a lot of it is also the nature of the relationship, the nature of the treatment that the franchise e's alleged that they had at the hands of McDonald's relative to what white branches were getting. So what kind of proof

might the plaintiffs be offering. I take it there'll be offering statistics about, you know, how the black franchises have been shrinking for years. What other kinds of things would they offer. Yeah, this is going to be really depend on the nature of which type of claim they're making. That discrimination claim they're making is a little bit tricky.

It not only has our short statute of limitations and only last for four years, which means some of those long standing patterns aren't necessarily going to be addressable, but the discriminations that you also requires that the plain is both demonstrate and plead that there was actually intent by McDonald's to discriminate against them, not just that their protocols, by whatever measure, led to unequal opportunities, but that McDonald's

intended to discriminate against them. And so that's going to be a limitation on the discrimination sort of claim. It's not going to be enough merely to show that the number of franchisees that were black declined either relative to the total number of stores or or relative to the total number of other franchisees. The other thing is going to be a challenge for the plaint is to demonstrate

the discrimination claim. They've got to be able to demonstrate that their race was what lawyers will call it but or cause of suffering loss. In other words, if they were not black, they would not have suffered the losses that they are alleging here. And this is some aspects of the case that really have changed quite recently due to recent Supreme Court opinion that put this higher burden

of demonstrating that the discrimination caused the bad outcome. McDonald's, no doubt, in this part of the case, is going to say that listen, we were, you know, in a contract relationship with entrepreneurs who knew that they were taking on risks, and McDonald's will probably argue that they if the plants suffered losses, those losses were due to a whole host of causes that could also include business decisions

made by the franchise themselves. And the key thing to note about this is that ties will tend to favor the defendant and McDonald's in this case. So the causation element of the of the case, I think it's going to be a little bit of challenging from a plaintiffs perspective when it comes to the discrimination play. Their argument maybe a little bit less problematic and a little bit while promising when it comes to their straight out claims that McDonald's just didn't live up to what they said

they were going to do in their franchise agreement. And my guess is the planets are going to push really hard on this as well. One thing to note is that you know, McDonald's is perfectly free in their franchise contracts to promise more than what they would be obliged

to do under antidiscrimination law. And and here that's one of the elements of what the plaintiffs are claiming that if you if you look at the franchise agreement the McDonald's signed with these franchise vs, that's exactly what McDonald's did.

That they had general provisions and these contracts and said that they were going to make franchises available and business opportunities available to their franchisees in ways that we're not going to discriminate amongst the different franchisees, that they were going to be reasonable in the way that they inspected and evaluated the McDonald's franchises, and one of the big planes, particularly of the franchisees who were a long time franchise these,

is that McDonald's just didn't live up to its own contractual obligations. And they said that they can demonstrate that. That becomes somewhat of a less challenging argument to make when it gets into litigation. McDonald's said that while it may recommend locations, ultimately it's up to the franchise eas and that the company has sold high performing franchises to black franchisees. So how does McDonald's proved the first part

of that? So this is going to be a big factual aspect of the case to make it all the

way to litigation. And all the different plaints may not be sitting in exactly the same position on this, but U McDonald's in in defending its actions, whether it's the discrimination charge or the preaching contract charge, is going to have to demonstrate or at least, you know, offer proof that listen, we were offering analogous forms of opportunities to all of our different franchisees about expansion, about buying up

other stores. The plaintiffs are claiming that that's just not true that McDonald's didn't offer black franchise these the same opportunities that were being offered to white cranchees, that they weren't being inspected and reviewed under the things that criteria. Obviously, it's a very factually detailed set of allegations, and both parties I would expect, are going to come out of

the box with fairly detailed accounts. Some of this may actually devolve into sort of statistical accounts which you can see a little bit already in the complaint about to

what extent were those opportunities. Even if one or two lucrative opportunities were offered to the black franchisees, that still could mask a more systematic system that had tended to deprive black franchisees from those sorts of opportunities and end a lot of this may end up coming down to making not just one or two examples in our but trying to establish overall patterns in in one direction or another. So this sounds like an uphill battle for the franchisees

as far as this lawsuit is concerned. Well, it's an uphill battle in some respects, But you have to remember that you know the plaintiffs are essentially litigating in two courts, one of the legal courts, and the other is the courts of public opinion. We are right now in a moment where economic inequality and institutionalized racism are are hugely salient political and economic issues, more so than they've been maybe even during the last half century. And and McDonald's

hasn't been a by standard to this either. It's staked out a very bold and public position on black lives matter at the very end of July, including an acknowledgement that you know, some people in the McDonald's system feel like they haven't been given a fair opportunity, and they even articulated a plan for trying to bring greater diversity to their community franchise, and so you know, on some level, this lawsuit is times at an interesting moment because it's

calling on McDonald's not just to talk to talk, but also to walk the walk. And the optics of defending the lawsuits might make it look like McDonald's is running the risk of looking sir disingenuous about their stated public commitment. And so the simultaneous case, I guess, in the court of public opinion is something that you know on some level is independent of the legal case, but in many

ways is highly intertwined with the legal case. On top of that, it's probably important to note that McDonald's is already employed into pretty messy lotagious matters involving the departure of their chief executive and a high profile discrimination suit brought by senior executives in the organization, which in many

ways helped contribute to this one. So while I would say that certain aspects of the legal case when viewed alone are a bit challenging, they also intertwined with some of the public relations aspects and the optics aspects of the case, and that could give rise to more leverage than you might otherwise expect if you were just analyzing the merits of the legal case. Alow, this is at least the second racial discrimination lawsuit filed against McDonald's this year.

Would that seem to lead to McDonald's wanting to settle these out of court before these allegations become wider known at a trial. Probably. So. One thing that is definitely true is that once allegations facts come out in one trial, they can easily be picked up by other litigants and other trials. One does get the sense that McDonald's has been negotiating pretty heavily with some of the plaintiffs in this case to see if they can settle before that

the complaints was filed. That evidently failed. But it's certainly logical to assume that those settlement efforts are going to be ongoing throughout the discovery phase of this particular lawsuit. And you know, many items of litigation end up, you know,

ending in settlement as well. Um, And so it's no doubt the case that McDonald's mindfulness fact that some of the allegations in the various lawsuits are common to one another, and they may not be in the best position to try to defend Adam only every single one of them, and settlement may be an attractive option. That's not to say that that McDonald's doesn't have reasonable legal argument at its disposal. It's just that the legal arguments that it

has is just one part of the picture. And another part of the case that I expect is going to come out a little bit um is that McDonald's may argue, you know, hey, listen, why would we deliberately go about setting up franchisees that were destined to fail. Why would

that ever be in our interest? Our rents are usually predicated against the revenues that are generated by these restaurants, and so it just wouldn't wouldn't make any economic sense for us to put franchise's deliberately in a position where they're going to fail, and that that's got some plausibility

to it. On the other hand, I would expect that the plans are going to point out that three quarters of the value of the assets that McDonald's is a corporation has is its land, and if that real estate is appreciating, then the key way that you make money off of it is really just to hold on to that real estate, even if you toy around with franchise these that may or may not be successful in their own businesses, particularly in poorer neighborhoods where recent tax incentives

such as enterprise zones have given rise to some property appreciation, then the value of just holding onto the property may end up swamping a lot of the value associated with whether you've lived up to your obligations to your franchise these or not. McDonald's has, of course, access to incredible

legal resources. Is it possible that they could just sort of overwhelm the plaintiffs in this case, It's certainly possible, and during the last year that is not a fun familiar story where a well capitalized defendant ends up overwhelming plaintiffs in that case that regardless of its merits the

plaintiffs and up deciding to draw one of the things. However, that's worth noting is certainly in the last twenty years, maybe the last fifteen years, an entire industry of litigation finance to sprawn up so as to bank roll some of these plaintiffs who would have otherwise ran out of money into the extent that there is a potentially viable

legal claim there. They be, combined with some of the public relations issues and the willingness of the Donalds to pay to have something go away, may end up doing some of those fires in ways that simply weren't possible twenty years ago on the litigation finance industry was at it's very infancy and in some cases not even legal, and a lot of a lot of jurisdiction. So uh so uh this this idea of the you know, of the of the well bankrolls corporate defendant basic basically being

able to spend plaintiffs into the ground. It still exists, but it's probably more moderated thing used to be because of the availability of litigation finance. Thanks Eric. That's Eric Tally of Columbia Law School. The legal saga of Michael Flynn will continue. The DC Federal Court of Appeals has ruled that the Justice Department and the former Trump National Security advisor cannot force a trial judge to dismiss the

criminal case against him without a hearing. The aid to two decision was the result of a rare ombank hearing after a three judge panel ruled in favor of Flynn in June. This ruling is the latest development in a legal case that has taken unusual twists and turns, leading to the latest separation of powers fight between a veteran

federal judge and the Trump administration. Joining me as former federal prosecutor Robert Mints a partner McCarter and English So Bob, what was the reason the court gave for reversing the decision of the three judge panel. The Federal Appeals Court rejected a bid by Michael Flynn, President trump first national security adviser to forced the immediate dismissal of the criminal case and which he's been convicted of lying to FBI agents.

The appeals court judges decided that Flynn's request to have the case immediately dismissed was premature since the U. S. District Court judge had not yet ruled on the dismissal request by the Department of Justice. The Court of Appeals also rejected Flynn's request that the judge be removed from the case, arguing that the trial judge was biased against him and he was entitled to a different judge to

make a determination after sentencing. The DC Court confirmed what many legal experts have been saying that this was an unprecedented move by Flynn, saying that Flynn has not cited any case in which our court or any court issued the writ to compel a district court to decide an undecided motion in a particular way. Does that put into context how odd this motion was at this time? Yes, this whole case has been extremely unusual for whole variety

of reasons. And what it really turns on is this question of who has the right to determine whether a case should be dismissed. Essentially, the executive branch clearly has the authority to commence or to continue a prosecution. That's something that is up to the Department of Justice. But real four yate A requires leave of court before a case is dismissed. And that's exactly what this entire controversy

is about. What does leave of court means? Does active the trial judge the authority to probe the Department of Justice for the reasons that they are dismissing a case, or does the trial judge that we have to accept the dismissal at face value and dismissed the case regardless of any concerns that the trialing judge may have about

the motivation behind the Department of Justice's decisions. What were the dissents by two Republican appointees based on the on Bond decision, which is a decision by all ten active circuit judges that were not refused from the case, lie

up against the two dissenting Republican appointees. Those two judges in May had formed the majority of a three judge panel that initially ruled in flann favor, and the first ruling by the three judge panel, the two judges in the majority found that the trial judge did not have the authority to question the decision by the Department of

Justice to dismiss the case. In the opinion written by the two to one panel decision, Judge Rao had argued that there was no prosecution left here because there was no prosecutor. Essentially, that it is a Department of Justice is loan authority to decide whether to prosecute a case, and if they, for whatever reason, decide not to continue that prosecution, there is no prosecutor to argue the government side of the case, and therefore the case had to

be dismissed. But what's really underlying all of this is not so much the final ruling. In other words, the question of whether or not the prosecution will continue, because it's unlikely that it will. What this hearing is really about is the question of whether or not the trial judge gets to probe into the reasoning behind the Department

of Justice and decision to drop this case. Essentially, what the dissenting judges are arguing is that the trial judge does not have the authority to probe into the internal decision making by the Department of Justice, that that's an executive department decision and that what the court here is doing is usurping the authority of the Executive Department to decide whether or not to prosecute criminal cases. This is obviously a victory for Judge m It's Sullivan, but how

much of a victory? And what I mean by that is, do the d C. Circuit Court define what kind of hearing he can hold? Can he actually dig into the administration's motives for dismissing the case against Flynn. What this ruling does is it sends the case back for consideration

by Judge Sullivan. Judge Sullivan could dismiss the case as requested, or request that the case moved to sentencing and have some kind of hearing to determine whether or not the Department of Justice was correct in making a decision to drop this case. But the Court of Appeals also sent a very clear signal to the trial judge that they do not expect this hearing to turn into any kind

of a circus. And in fact, the lawyer who was representing Judge Sullivan before the full Court of Appeals actually represented during the argument that there will be no discovery from the Department of Justice during any kind of sharing. There will be no evidentiary hearing, and in fact, she argued that the judge may well decide to dismiss this

case after the party's simply filed briefs. The argument that was essentially made on behalf of Judge Sullivan was that it was premature at this point for the Court of Appeals to force him to dismiss the case since he had not yet even ruled on the govern meants motion to dismiss. So I've explained the motion from man Dams and what the d C Circuit ruled about it. Well, the opinion by the Full Court of Appeals really was

a procedural decision. It really turned on the question of whether or not the Court of Appeals should be granting this rarely granted writ of mandamus, and a writ of mandamus is something that is only infrequently used. It was really not a surprise that the Full Court of Appeals ruled the way it did because in this case, Judge Sullivan had not actually done anything yet, he had not even had a hearing yet, he had not ruled against

the Department of Justice's motion to dismissed. And so in this case it was difficult or really impossible for Flynn's lawyers to argue that they would have to be some manifest injustice if this writ of mandamus was not granted, and that they had no adequate alternative means in order to satisfy their claim or gain the release they were seeking. Here, the relief could simply come on appeal was back to

Judge Sullivan. Judge Sullivan could make a decision, and what the Court of Appeal says is, if you don't like the decision he made, you could be right back before the Court of Appeals again and we will reconsider the case at that point. Is this one of the longest guilty please you've ever seen? Michael Flynn pleaded guilty in December of ten. Yeah, this case does have a rather

convoluted history. It began with a guilty plea in twenty seventeen, where he admitteds align to FBI agents about his conversations with Russia's ambassador to the United States in the weeks leading up to President Trump's inauguration. Then General Flynn agreed to cooperate with Special Counsel Robert Mueller's investigation. Then he hired a new lawyer. In the twenty nineteen he began to retreat from his prior position trying to undo his

guilty plea. Initially in the Department of Justice opposed efforts to withdraw the guilty plea, and then in an about face, took the position that the case should be dismissed. That's what led us to where we are today. But this has been a protracted battle where we've seen the defendant admit twice in court to lying to federal agents on Nan is now attracting his plea and wants the case

to be dismissed. Interestingly, the Department of Justice is logic for dismissing the case is not the General Flynn did not lie the federal agents, but it's that it wasn't material. They essentially attack the investigation itself and said there was no basis for the interview of General Flynn at the time, and therefore the statements that Flynn made FBI agents, even if they were false, were not material to any matter

under investigation. That's the basis of the Department of Justice has suggested to Judge Sullivan as the reasoning for their decision to drop this case. You know, Bob, if this case were at an earlier stage of the proceedings, not just at the point where the judge will sentence Flynn or dismiss the case. How could a court force prosecutors to continue with the case that they didn't want to

proceed to trial on. Well, and that's exactly what the government has argued, what Flynn's lawyers have argued, and what the dissenting judges have argued. They're basically saying, dismissal of this case is inevitable. There is no way around it. You don't have a prosecutor here to argue the case on behalf of the government, and therefore the case can proceed.

So why not we simply dismiss it now rather than have a hearing that is designed, according to the government and according to Flynn's lawyers, simply to try to embarrass the Department of Justice by peeling back the layers of their internal decision making and try to suggest that there was something improper about that decision. Did it strike you as odd that in one of the dissenting opinions the judge basically said that Judge Sullivan was biased against Flynn.

It seemed like a broad assertion to make against a fellow judge. It was unusual and that the battle lines here were starkly drawn, where you had judges making harsh assessments against one another, something that you don't often see to accuse the judge of biases, really to attack their core integrity, to say that they are not in a

position to rule impartially on a case. Here you had the dissenters essentially arguing that they should have granted Judge Flynn's motion to have Judge Sullivan reassigned and have another judge here this case because he had made certain statements during the criminal case that showed his bias. Ultimately, the majority of the Court of Appeals found that that was an extremely high bar and did not find that the

defendant had met it in this case. Are there still unsettled questions about the power of courts to check the

executive branch in these kinds of cases. The Court of Appeals went to great length to try to point out that this was not a partisan decision, that they were not mandating an outcome one way or the other here, but essentially viewed this as holy procedural that they felt that the trial judge had not yet ruled on the case and it was not their position to userve the judges authority and presume what kind of ruling he was

going to issue here. So they sent the case back to Judge Sullivan, although they did send a clear signal that they expect this hearing to go forward very promptly and that they do not expect to turn into an ebidentious here where witnesses would be called and this would turn into essentially a trial about the Department of Justice

and their decision making process. I think the Court of Appeals knows that at the end of the day, Judge Sullivan will likely end up dismissing this case because there's really not many other options. And then eventually this case will be resolved at the trial court level, and for some reason it's not it will come back to them and they'll have an opportunity at that point to make another decision, but at that point they will have a final decision by the trial court upon which to base

their ruling. Thanks for being on the Bloomberg Law Show, Bob. That's Robert Mints a part in the Carter in English, and that's it for this edition of the Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast. You can find them on iTunes or wherever you get your favorite podcasts. I'm June Grasso. Thanks so much for listening, and remember to tune into The Bloomberg Law Show every weeknight at ten pm Eastern, right here on Bloomberg Radio