Robinson v. Jackson Hewitt, Inc.
| Decision Date | 31 October 2019 |
| Docket Number | Case No: 19-9066 (SDW) (LDW) |
| Parties | JESSICA ROBINSON, STACEY JENNINGS, and NICOLE GIBSON, individually and on behalf of all others similarly situated, Plaintiffs, v. JACKSON HEWITT, INC., and TAX SERVICES OF AMERICA, INC., Defendants. |
| Court | U.S. District Court — District of New Jersey |
NOT FOR PUBLICATION
Before this Court are Defendants Jackson Hewitt, Inc. ("JHI") and Tax Services of America, Inc.'s ("TSA") (collectively, "Defendants") Motion to Dismiss Plaintiffs Jessica Robinson ("Robinson"), Stacey Jennings ("Jennings"), and Nicole Gibson's ("Gibson") (collectively, "Plaintiffs") Second Consolidated Class Action Complaint ("SAC") pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). Jurisdiction is proper pursuant to 28 U.S.C. §§ 1331 and 1337. Venue is proper pursuant to 28 U.S.C. § 1391(b). This opinion is issued without oral argument pursuant to Rule 78. For the reasons stated below, Defendants' motion is GRANTED in part, and DENIED in part.
Defendants JHI and TSA, doing business as "Jackson Hewitt," comprise "the second largest full-service tax preparation business in the United States with franchised and company- owned office locations through the country." (SAC ¶ 29, ECF No. 61.) TSA is Jackson Hewitt's largest franchisee, running "approximately 20% of the locations operating under the name 'Jackson Hewitt,' while the rest of the locations are run by non-owned franchisees." (Id. ¶ 32.) Franchisees "operate on standardized terms pursuant to a common franchise license agreement" ("Franchise Agreement"). (Id. ¶ 42.) According to the Franchise Agreement, franchisees "acknowledge that [they] are . . . independent contractor[s] and that no principal-agent, partnership, employment, joint venture or fiduciary relation exists" between them and Jackson Hewitt. (Id. ¶ 45; see also id. ¶ 49) Furthermore, franchisees are required to "hold themselves out as 'independently owned and operated[,]'" and they are expressly notified that they "may face competition from other franchisees, from outlets that [Jackson Hewitt] own[s], or from other channels of distribution or competitive brands that [Jackson Hewitt] controls." (Id. ¶¶ 45, 47.)
Plaintiffs bring this putative class action on behalf of themselves and "individuals who work or have worked for Jackson Hewitt" and its franchise locations.1 (Id. ¶ 1.) They allege that from at least September 1, 2011 to at least December 20, 2018, Defendants "engaged in a conspiracy to not compete for employees" by expressly agreeing "not to solicit, recruit, or hire" each other's personnel without prior approval. (Id. ¶ 4; see also id. ¶¶ 52-55.) During the relevant time period, the Franchise Agreement included a "Covenant Against Recruiting or Hiring Our Employees," referred to as the so-called "No-Poach Clause" (or "Hiring Limitation"), which states:
During the Term and for a period of two (2) years [afterward] . . . neither you nor any of your Owners may, without our prior written permission . . . solicit, recruit, or hire . . . any of our or ourAffiliates' employees whose duties with us or our Affiliates include(d) management of or over company-owned or franchised stores, franchisee training, tax preparation software writing or debugging, tax return processing, software writing or debugging, electronic filing of tax returns, tax return processing, processing support, tax return preparation, or tax return preparation advice or support.
(Id. ¶¶ 9, 56.) "This prohibition against soliciting, recruiting, or hiring such employees remains in effect for one year after the termination of their employment with Jackson Hewitt or its affiliates." (Id. ¶ 57.) The "No-Poach Penalty" (or "Recruiting Fee") punishes violations of the No-Poach clause by "imposing a severe monetary penalty, equal to 300% of the annual salary of the employee recruited or hired[.]" The No-Poach Penalty applies to "any person then employed, or who was employed within the immediately preceding 24 months by" Defendants or franchisees. (Id. ¶ 58.) Plaintiffs assert that these provisions unlawfully limited Plaintiffs' job mobility and suppressed their compensation. (Id. ¶¶ 6, 19-21, 60, 85-91.)
On December 20, 2018, Jackson Hewitt entered into an "Assurance of Discontinuance" ("AOD") with the State of Washington under which JHI "agreed, among other things, to remove the No-Poach Clause from its franchise agreement going forward and to cease enforcement of the No-Poach Clause." (Id. ¶ 93.)2
Plaintiffs filed the SAC, which is the operative complaint, on May 13, 2019. The SAC alleges one count of violations under Sections 1 and 3 of the Sherman Act, 15 U.S.C. §§ 1, 3. Plaintiffs seek both injunctive relief and monetary damages. (Id. ¶ 130.) On May 27, 2019,Defendants filed the instant Motion to Dismiss. (ECF No. 65.) Plaintiffs opposed the Motion to Dismiss on June 24, 2019, and Defendants replied on July 8, 2019. (ECF Nos. 68-69.)
A motion to dismiss under Rule 12(b)(1) may present either a facial or factual attack to a court's subject matter jurisdiction. "A facial attack 'contests the sufficiency of the complaint because of a defect on its face,' whereas a factual attack 'asserts that the factual underpinnings of the basis for jurisdiction fail to comport with the jurisdictional prerequisites.'" Halabi v. Fed. Nat'l Mortg. Ass'n, No. 17-1712, 2018 WL 706483, at *2 (D.N.J. Feb. 5, 2018) (internal citations omitted). When reviewing facial attacks, "the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Constitution Party of Pa. v. Aichele, 757 F.3d 347, 358 (3d Cir. 2014) (citing In re Schering Plough Corp. Intron, 678 F.3d 235, 243 (3d Cir. 2012)). In contrast, with a factual attack, "a court may weigh and 'consider evidence outside the pleadings.'" Id. (quoting Gould Elecs. Inc. v. U.S., 220 F.3d 169, 176 (3d Cir. 2000)).
When considering a motion to dismiss under Rule 12(b)(6), the Court must "accept as true all material allegations set forth in the complaint, and must construe those facts in favor of the nonmoving party." In re Schering Plough Corp., 678 F.3d at 243 (citing Ballentine v. U.S., 486 F.3d 806, 810 (3d Cir. 2007)). In so doing, the court must "determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. Cty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (external citation omitted). Antitrust complaints, in particular, should be liberally construed. Knuth v. Erie-Crawford Dairy Co-op. Ass'n, 395 F.2d 420, 423 (3d Cir. 1968). However, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Additionally, a complaint must set forth a "short and plain statement of the claim showing that a pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "Factual allegations must be enough to raise a right to relief above the speculative level[.]" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted).
Defendants argue that dismissal of the SAC is necessary because: (1) Plaintiffs lack Article III standing to bring their Sherman Act claims or to seek injunctive relief; (2) Plaintiffs' claims prior to December 20, 2014 are barred by the statute of limitations; and (3) the "rule of reason" standard applies, and Plaintiffs fail to state a Sherman Act claim. (Def. Br. at 2, ECF No. 65-1.)
A federal court's jurisdiction under Article III of the United States Constitution is limited "to cases and controversies 'which are appropriately resolved through the judicial process.'" Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 278 (3d Cir. 2014) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). "A motion to dismiss for want of standing is . . . properly brought pursuant to Rule 12(b)(1), because standing is a jurisdictional matter." Aichele, 757 F.3d at 357 (citing Ballentine, 486 F.3d at 810).
A plaintiff has standing if it can show that:
(1) it has suffered an 'injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Freedom from Religion Found. Inc. v. New Kensington Arnold Sch. Dist., 832 F.3d 469, 476 (3d Cir. 2016) (quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000)). When "prospective relief [such as an injunction] is sought, the plaintiff must show that he is 'likely to suffer future injury' from defendant's conduct" to have standing. McNair v. Synapse Grp. Inc., 672 F.3d 213, 223 (3d Cir. 2012) (internal citations omitted). In the context of a motion to dismiss, "general factual allegations of injury resulting from the defendant's conduct may suffice[.]" Blunt, 767 F.3d at 279 (quoting Lujan, 504 U.S. at 561).
Defendants raise two challenges to Plaintiffs' Article III standing: (1) Plaintiffs have not alleged either injury-in-fact or causation sufficient to confer standing for their Sherman Act claims generally; and (2) Plaintiffs have not alleged prospective injury sufficient to confer standing for injunctive relief. Defendants make a facial attack on the SAC, so the court will "only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Aichele, 757 F.3d at 358.
Defendants first...
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