Franchise Association Files Hilarious Lawsuit Challenging Seattle’s $15 Minimum Wage

The Washington DC based International Franchise Association has filed its promised lawsuit challenging Seattle’s $15 minimum wage ordinance, and while I’m not a lawyer, I have to say that in my expert opinion, much of the 34-page complaint (pdf) is downright laughable.

For example, Count IV, which preposterously alleges that the ordinance is preempted by the Lanham Act, the primary federal statute protecting trademarks, because it interferes with a trademark holder’s “right to control the quality of the goods or the services sold under its trademark.” Or Count I, which clearly contradicts the plaintiffs’ primary claim—that franchises should be treated like any other small, locally owned business—by arguing that to do otherwise would discriminate against interstate commerce. Or perhaps most hilariously, Count VIII, which alleges that the ordinance violates the First Amendment, because its higher labor costs would reduce the money available to spend on the franchisees’ constitutionally protected commercial speech:

[T]he Ordinance will curtail franchisee commercial speech in at least three important respects. First, by increasing the labor costs of franchisees, the Ordinance will reduce the ability of franchisees to dedicate funding to the promotion of their businesses and brands. Second, the increased labor costs the Ordinance mandates may cause some franchisees to shut their doors, reducing the amount of relevant commercial speech they engage in to zero. Third, and relatedly, the Ordinance will likely cause potential franchisees to forgo purchasing a franchise because of the associated higher operation costs, again eliminating all associated speech.

“That’s crazy talk,” says attorney Dmitri Iglitzin, a labor and employment lawyer who represents groups defending SeaTac’s $15 minimum wage ordinance. Iglitzin says that the First Amendment claim actually surprised him. Indeed, it’s so blatantly frivolous, he suggests, that it could even end up pissing off the court. “I don’t just throw everything I can imagine into a claim and hope that it sticks,” says Iglitzin about his own legal strategy.

Iglitzin doesn’t think much of the complaint’s other seven counts either, which include vague appeals to the Commerce Clause, the Equal Protection Clause, and the state constitutional prohibition on granting “rights and immunities” to specific corporations. Iglitzin characterizes the remarkably nonspecific alleged violation of Washington State corporation law as “equally nonsensical.” When asked if there was anything in the complaint that gave him pause,  Iglitzin said: “There’s really not.”

Iglitzin did say he would take a deeper look at Count V, which claims that the ordinance’s separate schedules for employees receiving health benefits is preempted by the federal Employee Retirement Income Security Act (ERISA). He doesn’t believe the claim has merit, but “ERISA is a complicated area of the law,” he concedes.

“If I saw a lawsuit that was just ERISA, I might have thought that maybe they saw something that I didn’t see,” says Iglitzin. But overall, “it seems like a pretty frivolous lawsuit to me.”

I’m not an attorney, but I’ve seen enough of these things to fashion an informed opinion. And I have to agree. It’s frivolous. I mean, how can anyone take seriously a legal document that authoritatively cites a Seattle Times editorial?

In fact, much of the complaint reads more like it was drafted by PR consultants than lawyers, with nearly a quarter of its pages devoted to detailing the alleged woes of the named plaintiffs, and how the Seattle ordinance unfairly discriminates against their franchise businesses. But unfortunately for the plaintiffs, there’s nothing illegal, preempted, or unconstitutional about these sorts of distinctions.

Under Seattle’s ordinance, “small” businesses—those with 500 or fewer employees—phase in to $15 slower than larger businesses: 7 to 10 years versus 3 to 4. The bone of legal contention in this lawsuit is the provision that counts the number of employees based on the entire franchise network, rather than the number employed at single franchise store. But whether or not this is unfair or disadvantageous to franchise owners, it is not illegal.

Government regulations discriminate between different businesses all the time—based on size, industry, location, and whatever. In fact Washington State already has an entire chapter of the RCW devoted specifically to regulating franchises! There’s nothing novel about these sorts of regulatory distinctions. The only possible legal question, Iglitzin insists, is whether these distinctions are rational.

“There is a reason why you open a Burger King franchise rather than a Goldy’s Hamburgers,” explains Iglitzin, “and that is because there is value in being part of a larger network.” The franchiser provides branding and advertising, legal and administrative support, even payroll and human resource guidelines. Franchisees benefit from preexisting good will, and franchisers have both the incentive and the ability to assist franchisees in adapting to higher labor costs.

The legal test for both the “equal protection” and the “rights and immunities” claims is “is there a rational argument for treating franchisees differently?” says Iglitzin. And his answer is an emphatic yes.

“It is self-evident that franchisees are different from other employers,” says Iglitizin. And so it is perfectly legal to write regulations that treat franchisees differently.

The Franchise Association’s complaint was filed in the US District Court of Western Washington. And FYI, there is not a single word in its 34 pages challenging the minimum wage itself, only the regulatory distinction between franchisees and other businesses. So yes, the fast food industry has capitulated on $15.

UPDATE: No, I’m not an attorney. But David Ziff is. And he also thinks that there’s “not much merit” in the complaint, and for a lot of the same reasons.

Comments

  1. 2

    Roger Rabbit spews:

    Actually, this lawsuit reminds me of Dino Rossi’s election contest lawsuit. You’d think that for $2 million, he’d get a better legal theory from his lawyers than he got. In case you missed that, his lawyers asked the judge to speculate that Rossi might have won if some ineligible felons who were inadvertently allowed to vote hadn’t voted, using prison statistics from east coast states to demonstrate that ex-felons tend to lean Democratic where there’s a much higher proportion of minorities in the prison population than here in Washington.

    Hell, I could have written that brief for him in an afternoon, and I would have charged him only $500, and he would have gotten exactly the same result.

  2. 3

    spews:

    @2 Actually, the Rossi election contest was a different kind of incompetence. This reminds me of some of the politically twisted bullshit we saw out of Rob McKenna’s office.

  3. 4

    Roger Rabbit spews:

    “But generalized grievances about unfairness don’t sustain lawsuits.”

    This is Ziff’s money quote. It’s true — “unfair” isn’t actionable under American law, and alleging “unfairness” won’t get you anything in American courts. In fact, it won’t survive a motion to dismiss based on failure to state a claim for which relief can be granted.

    IFA’s complaint asserts that the allegedly discriminatory language against franchisees was inserted in the ordinance by Mayor Murray at the behest of (here it comes) “union bosses” who don’t like franchise businesses. Assuming, arguendo, that a pernicious motive has a bearing on the constitutionality or legality of a regulatory provision that engenders some sort of discriminatory result, IFA would have to prove — with evidence — that in fact that was the reason for the franchise language. Seems like a tall order to me. Are they going to put Mayor Murray on the witness stand and cross-examine him about his relationships with “union bosses”? Are they going to subpoena “union bosses” and ask them if they hate franchise business (presumably because they’re harder to organize)? This seems to require more clairvoyance than lawyers are normally able to muster in courtrooms.

    I suppose if I were a small business owner, operating under the franchise model, I’d be upset by this ordinance. So it’s not surprising the IFA sued. Personally, I think the ordinance would work better for everyone involved if it mandated a uniform phase-in period and made no distinction between large or small, franchised or independent, businesses. I think you can plausibly argue that for at least some mom-and-pop franchises it’s unfair.

    But, as David Ziff correctly points out, unfair isn’t actionable.

  4. 5

    Roger Rabbit spews:

    The really interesting point I pull out of IFA’s complaint (now that I’ve read it) is that NONE of the plaintiffs pay ANY of their employees the existing $9.32 minimum wage. According to the factual recitations of the complaint, they all pay all of their employees MORE than the current minimum wage. Even though Washington has the highest minimum wage in the country. Hmmm. Could it be that $9.32 isn’t enough to attract workers in the Seattle labor market? The free market guys tell us minimum wage laws are bad because they destroy jobs. Well, it looks to me like the free market has spoken — a $9.32 wage isn’t high enough to get anyone to work for you here in Seattle.

  5. 6

    Roger Rabbit spews:

    Maybe the IFA lawsuit is good for something after all. They seem to have just proved that Washington’s existing statewide minimum wage is lagging behind the free market and is overdue for an increase.

  6. 7

    Breadbaker spews:

    The weird thing is all these claims are brought in the names of plaintiffs who, collectively, employ exactly zero people in the City of Seattle. There is the IFA, which employs no one here, and isn’t affected directly by the ordinance at all (it’s not a franchise) and then there are the individual plaintiffs, who are investors in corporations or limited liability companies that themselves employ people in Seattle, but themselves do not employ anyone and will not themselves pay a nickel more in wages because they don’t pay anyone wages. It is hard for me to see how such people have standing to bring these claims under Article III of the U.S. Constitution. But of course if the First Amendment means what Paul Clement says it means (and he’s presumably writing for Anthony Kennedy more than any judge of the federal bench in Seattle), then that hardly matters, since Article III can also be rewritten by the famous “balls and strikes” Chief Justice.

    Note also: their “local” lawyers are in Olympia and Spokane. They apparently couldn’t find a single firm in Seattle who would sign on.

  7. 8

    Deathfrogg spews:

    This strikes me as being not unlike the Seattle Police filing their lawsuit based on their 4th Amendment rights to search and their rights to beat people to death as they see fit.

    There is some serious cognitive dysfunction going on here. One cannot believe that these people can be this utterly incapable of understanding even the most basic purpose of Law. It seems to me that maybe we should start looking at how Lawyers are certified in this State.

  8. 12

    ChefJoe spews:

    Jews can be great cooks, but meat and dairy in same dish is non-Kosher… it’d be like Dan Savage asking Catholic Bishops about best positions for BDSM..

  9. 13

    jeff spews:

    I just can’t understand leftist logic: all the money that went into the effort to raise minimum wag is ‘good'; yet Citizen’s United is ‘bad’.

    I guess it is ok for the government to ‘discriminate’, as long as it is the right kind of discrimination.

    The answer to all this is simple: fire everybody and hire some of the illegals coming over the border this very minute for 1/2 the wages. Only a racist could be against that.

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