News Briefs

Becker had argued ' and the NLRB's general counsel had argued on his behalf ' that he was being fired for complaining about the downscale nature of the hot dog truck at the 5-Series launch. NLRB counsel argued that Becker's hot dog comments were protected under the National Labor Relations Act because he was discussing “the effect of the low-cost food on the image of the dealership and, ultimately, the sales and commissions.” The Act protects employees when they discuss terms and conditions of employment.

The judge ruled that Becker's postings about the hot dog cart were protected speech, but that those about the accident were not. The appeals board agreed with the judge about the accident postings, but it did not issue a statement about the hot dog comments.

The board did find (by a 2-to-1 vote) that Knauz BMW will have to modify its employee handbook because its language about employee communications was too restrictive. “Employees would reasonably believe that it prohibits any statements of protest or criticism, even those protected by the National Labor Relations Act,” the board found.

“The bottom line is that the NLRB is more and more focused on the rights of nonunion employees,” said Brian Kurtz, a partner in the Chicago office of FordHarrison law firm, and one of the attorneys who represented Knauz BMW. “Employers, especially nonunion employers, must be mindful of the concept of protected concerted activity before taking adverse action against an employee. If one of your employees publishes something offensive or confidential on Facebook, Twitter, or YouTube, proceed with caution before taking action.”

Kurtz added that other Facebook and social media cases before the NLRB might address or give guidance on issues such as:

• Is an employee engaged in concerted activity if he re-tweets on Twitter or simply “likes” another person's Facebook post?
• Is an employer engaged in unlawful surveillance if it reviews an employee's unrestricted Facebook page or Twitter account?
• To what extent can employers restrict social media access in the workplace?
• Are there evidentiary challenges to introducing social media activity at a hearing?

Swipe Fee Settlement Gets Preliminary Approval, But Opposition Remains High

Despite opposition from many retailers and trade groups, the proposed $7.25 billion settlement between merchants and Visa, MasterCard and several large banks over interchange fees took another step to becoming reality on Nov. 9 when U.S. District Judge John Gleeson of Brooklyn granted preliminary approval of the settlement. The decision enables the plaintiffs to begin signing up retailers that might be eligible to receive payment, though Gleeson still has to give final approval before the settlement
takes effect.

The National Association of Convenience Stores, the National Restaurant Association, the National Grocers Association, and many franchisors are opposed to the settlement. The settlement would be the largest in U.S. history, and an estimated 8 million merchants would receive cash payments.

The case began in 2005 when retailers filed complaints against Visa, MasterCard and other credit card companies, accusing the issuers of collaborating to fix the interchange (or “swipe”) fees they charge merchants for accepting credit cards. In July 2012, MasterCard, Visa and major banks agreed to pay more than $6 billion to resolve accusations that they engaged in anticompetitive practices and price fixing in payment processing. In addition, credit card companies agreed to reduce swipe fees for eight months, an
adjustment valued at $1.2 billion. (See FBLA, September 2012.)

“However, the majority of the plaintiffs feel the settlement leaves issuers with too much control over swipe fees and prevents further litigation. They feel the industry would continue to take advantage of merchants and their customers,” said Bill Hardekopf, with LowCards.com, an online resource for consumers to compare credit cards. He said that at least 10 of the 19 named plaintiffs have publicly stated that they oppose the settlement.

The International Franchise Association (“IFA”) is not a plaintiff in the lawsuit, but Jay Perron, IFA vice president of government relations and public policy, said that the association has received input from its members on the situation. “Most of them are opposed to the settlement,” he told FBLA. “Their biggest concern is that the settlement takes away any ability to go back to court and look at additional provisions or compensation. Also, the $6 billion payment looks like a lot of money, but it's not when you consider it being spread across so many plaintiffs.”

On Nov. 27, 10 plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Second Circuit to challenge the preliminary approval of the settlement. They plan to argue that they should be able to opt out of the settlement.

Papa John's Class Action Certified

A judge in the U.S. District Court for the Western District of Washington has certified a class action lawsuit against Papa John's International Inc., several franchisees, and a marketing firm that worked for the franchisees for violating the Telephone Consumer Protection Act (“TCPA”). The lawsuit was filed on behalf of Papa John's customers who allege that they received unwanted promotional text messages from the marketing firm.

On Nov. 9, Judge John C. Coughenour certified the class action filed by three named Papa John's customers. The lawsuit is seeking up to $250 million in damages for the alleged transmission of 500,000 text messages to consumers who claim they did not consent to receive such texts. Under the TCPA, each violation, such as sending an unsolicited advertisement by text message without prior consent, carries up to $500 in statutory damages.

According to court filings, the violations occurred because OnTime4U, a firm specializing in targeted marketing, sent text messages on behalf of four multi-unit Papa John's franchisees in Oregon and Washington beginning in April 2010. The franchisees had provided phone numbers for the texts from their databases of customers. The franchisees and OnTime4U believed that because the people being contacted were actual prior customers, sending them a promotional offer by text would be allowed under the TCPA. However, those solicitations are not allowed under the TCPA unless the recipient of the message has given prior consent.

Franchisor Papa John's unsuccessfully sought to be excluded from the lawsuit, arguing that it did not select nor supervise the work of OnTime4U. Judge Coughenour agreed that “there is no evidence that Papa John's contracted directly with OnTime4U.” But he ruled that preliminary discovery supported allegations that “Papa John's directed, encouraged and authorized its franchisees to use OnTime4U's services.”

Papa John's Senior Vice President, Legal Affairs Caroline Oyler provided a statement after the class action was certified. “Papa John's plans to appeal this preliminary court ruling,” she wrote. “The preliminary ruling is not based on the merits of the case. This lawsuit does not involve Papa John's corporate text messaging program. It is related to a third-party text messaging vendor used by a small number of Papa John's franchisees more than two years ago. While it is premature to comment on the merits, we have seen no basis for the plaintiff's damages estimate, and we will continue to aggressively defend the case.”

Heyrich Kalish McGuigan PLLC, based in Seattle, is representing the plaintiffs.

Auto Dealers Charge Tesla Motors with Violating Franchise Dealer Laws

Tesla Motors, maker of high-profile electric vehicles, and auto dealers in several states are in the early stages of a dispute about whether Tesla's auto showrooms are actually car dealerships. Tesla claims that the showrooms operate as informational sites and do not actually sell the vehicles, so they are not covered by state auto dealer laws. Purchase of a Tesla car is done through an online process, and showrooms only take deposits. Auto dealers see it differently, arguing that employees in the showrooms essentially perform all of the processes of traditional dealers. Dealer associations in Massachusetts, New York and Oregon, as well as the Illinois secretary of state, have filed lawsuits to claim that the showrooms are dealerships in disguise.

As the lawsuits have multiplied, the National Automobile Dealers Association (“NADA”) has become involved. “NADA has serious concerns about Tesla's intentions. We are seeking a meeting with Tesla executives, including its CEO Elon Musk, to discuss these concerns,” said Bill Underriner, chairman of NADA, in a statement provided to FBLA.

“Tesla may not yet recognize the value of the independent, franchised dealer system, but as its sales increase, NADA is confident it will re-examine its business model. Other companies, such as Daewoo did,” Underriner continued. “Over the years, other manufacturers have tried operating their own retail networks, but have concluded that the franchised
new-car dealer system is the best method of serving the public for its vehicle transportation needs.” He added that “individual state dealer associations will decide whether to proceed with legal action against Tesla Motors. NADA supports the franchised new-car dealer system, and will provide legal support to state dealer associations if necessary.”

Tesla's position was laid out in a blog posting written by Tesla Chairman, Product Architect and CEO Elon Musk in early November (see www.teslamotors.com/blog/tesla-approach-distributing-and-servicing-cars). “The U.S. automotive industry has been selling cars the same way for over 100 years and there are many laws in place to govern exactly how that is to be accomplished. We do not seek to change those rules and we have taken great care not to act in a manner contrary to those rules. ' ” he wrote.

Musk wrote that Tesla interprets auto dealership laws as designed to protect existing franchises from adverse actions by the manufacturers who supply them, such as opening another dealership selling the same brand within the dealer's market area. Since Tesla is a new manufacturer without dealerships, Musk wrote that those protections are unnecessary. “We have granted no franchises anywhere in the world that will be harmed by us opening stores,” he wrote.

NLRB Affirms Discharge of Car Dealer Salesman for Facebook Posting

On Sept. 28, the National Labor Relations Board (“NLRB”) issued its first finding about the firing of an employee for a Facebook posting, and it found in favor of a car dealership that fired a salesman for his online statements. Robert Becker was fired as a salesman for Knauz BMW in Lake Bluff, IL, after posting two sets of critical comments online. The first were about plans to bring a hot dog truck on-site for the rollout of the newly redesigned BMW 5-Series; Becker felt that more-upscale food would be appropriate. Then, Becker posted another set of critical comments when an accident occurred at the adjoining Knauz Land Rover dealership because a 13-year-old boy was allowed to drive a vehicle.

“The question came down to whether the salesman was fired exclusively for posting photos of an embarrassing and potentially dangerous accident at an adjacent Land Rover dealership, or for posting mocking comments and photos with co-workers about serving hot dogs at a luxury BMW car event. Both sets of photos were posted to Facebook on the same day; a week later, the salesman was fired from Knauz BMW,” wrote the NLRB's appeals board in its final decision. “The Board agreed with Administrative Law Judge Joel P. Biblowitz, who found after a trial that the salesman was fired solely for the photos he posted of a Land Rover that was accidently driven over a wall and into a pond at the adjacent dealership after a test drive. Both dealerships are owned by the same employer.”

Becker had argued ' and the NLRB's general counsel had argued on his behalf ' that he was being fired for complaining about the downscale nature of the hot dog truck at the 5-Series launch. NLRB counsel argued that Becker's hot dog comments were protected under the National Labor Relations Act because he was discussing “the effect of the low-cost food on the image of the dealership and, ultimately, the sales and commissions.” The Act protects employees when they discuss terms and conditions of employment.

The judge ruled that Becker's postings about the hot dog cart were protected speech, but that those about the accident were not. The appeals board agreed with the judge about the accident postings, but it did not issue a statement about the hot dog comments.

The board did find (by a 2-to-1 vote) that Knauz BMW will have to modify its employee handbook because its language about employee communications was too restrictive. “Employees would reasonably believe that it prohibits any statements of protest or criticism, even those protected by the National Labor Relations Act,” the board found.

“The bottom line is that the NLRB is more and more focused on the rights of nonunion employees,” said Brian Kurtz, a partner in the Chicago office of FordHarrison law firm, and one of the attorneys who represented Knauz BMW. “Employers, especially nonunion employers, must be mindful of the concept of protected concerted activity before taking adverse action against an employee. If one of your employees publishes something offensive or confidential on Facebook, Twitter, or YouTube, proceed with caution before taking action.”

Kurtz added that other Facebook and social media cases before the NLRB might address or give guidance on issues such as:

• Is an employee engaged in concerted activity if he re-tweets on Twitter or simply “likes” another person's Facebook post?
• Is an employer engaged in unlawful surveillance if it reviews an employee's unrestricted Facebook page or Twitter account?
• To what extent can employers restrict social media access in the workplace?
• Are there evidentiary challenges to introducing social media activity at a hearing?

Swipe Fee Settlement Gets Preliminary Approval, But Opposition Remains High

Despite opposition from many retailers and trade groups, the proposed $7.25 billion settlement between merchants and Visa, MasterCard and several large banks over interchange fees took another step to becoming reality on Nov. 9 when U.S. District Judge John Gleeson of Brooklyn granted preliminary approval of the settlement. The decision enables the plaintiffs to begin signing up retailers that might be eligible to receive payment, though Gleeson still has to give final approval before the settlement
takes effect.

The National Association of Convenience Stores, the National Restaurant Association, the National Grocers Association, and many franchisors are opposed to the settlement. The settlement would be the largest in U.S. history, and an estimated 8 million merchants would receive cash payments.

The case began in 2005 when retailers filed complaints against Visa, MasterCard and other credit card companies, accusing the issuers of collaborating to fix the interchange (or “swipe”) fees they charge merchants for accepting credit cards. In July 2012, MasterCard, Visa and major banks agreed to pay more than $6 billion to resolve accusations that they engaged in anticompetitive practices and price fixing in payment processing. In addition, credit card companies agreed to reduce swipe fees for eight months, an
adjustment valued at $1.2 billion. (See FBLA, September 2012.)

“However, the majority of the plaintiffs feel the settlement leaves issuers with too much control over swipe fees and prevents further litigation. They feel the industry would continue to take advantage of merchants and their customers,” said Bill Hardekopf, with LowCards.com, an online resource for consumers to compare credit cards. He said that at least 10 of the 19 named plaintiffs have publicly stated that they oppose the settlement.

The International Franchise Association (“IFA”) is not a plaintiff in the lawsuit, but Jay Perron, IFA vice president of government relations and public policy, said that the association has received input from its members on the situation. “Most of them are opposed to the settlement,” he told FBLA. “Their biggest concern is that the settlement takes away any ability to go back to court and look at additional provisions or compensation. Also, the $6 billion payment looks like a lot of money, but it's not when you consider it being spread across so many plaintiffs.”

On Nov. 27, 10 plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Second Circuit to challenge the preliminary approval of the settlement. They plan to argue that they should be able to opt out of the settlement.

Papa John's Class Action Certified

A judge in the U.S. District Court for the Western District of Washington has certified a class action lawsuit against Papa John's International Inc., several franchisees, and a marketing firm that worked for the franchisees for violating the Telephone Consumer Protection Act (“TCPA”). The lawsuit was filed on behalf of Papa John's customers who allege that they received unwanted promotional text messages from the marketing firm.

On Nov. 9, Judge John C. Coughenour certified the class action filed by three named Papa John's customers. The lawsuit is seeking up to $250 million in damages for the alleged transmission of 500,000 text messages to consumers who claim they did not consent to receive such texts. Under the TCPA, each violation, such as sending an unsolicited advertisement by text message without prior consent, carries up to $500 in statutory damages.

According to court filings, the violations occurred because OnTime4U, a firm specializing in targeted marketing, sent text messages on behalf of four multi-unit Papa John's franchisees in Oregon and Washington beginning in April 2010. The franchisees had provided phone numbers for the texts from their databases of customers. The franchisees and OnTime4U believed that because the people being contacted were actual prior customers, sending them a promotional offer by text would be allowed under the TCPA. However, those solicitations are not allowed under the TCPA unless the recipient of the message has given prior consent.

Franchisor Papa John's unsuccessfully sought to be excluded from the lawsuit, arguing that it did not select nor supervise the work of OnTime4U. Judge Coughenour agreed that “there is no evidence that Papa John's contracted directly with OnTime4U.” But he ruled that preliminary discovery supported allegations that “Papa John's directed, encouraged and authorized its franchisees to use OnTime4U's services.”

Papa John's Senior Vice President, Legal Affairs Caroline Oyler provided a statement after the class action was certified. “Papa John's plans to appeal this preliminary court ruling,” she wrote. “The preliminary ruling is not based on the merits of the case. This lawsuit does not involve Papa John's corporate text messaging program. It is related to a third-party text messaging vendor used by a small number of Papa John's franchisees more than two years ago. While it is premature to comment on the merits, we have seen no basis for the plaintiff's damages estimate, and we will continue to aggressively defend the case.”

Heyrich Kalish McGuigan PLLC, based in Seattle, is representing the plaintiffs.

Auto Dealers Charge Tesla Motors with Violating Franchise Dealer Laws

Tesla Motors, maker of high-profile electric vehicles, and auto dealers in several states are in the early stages of a dispute about whether Tesla's auto showrooms are actually car dealerships. Tesla claims that the showrooms operate as informational sites and do not actually sell the vehicles, so they are not covered by state auto dealer laws. Purchase of a Tesla car is done through an online process, and showrooms only take deposits. Auto dealers see it differently, arguing that employees in the showrooms essentially perform all of the processes of traditional dealers. Dealer associations in Massachusetts, New York and Oregon, as well as the Illinois secretary of state, have filed lawsuits to claim that the showrooms are dealerships in disguise.

As the lawsuits have multiplied, the National Automobile Dealers Association (“NADA”) has become involved. “NADA has serious concerns about Tesla's intentions. We are seeking a meeting with Tesla executives, including its CEO Elon Musk, to discuss these concerns,” said Bill Underriner, chairman of NADA, in a statement provided to FBLA.

“Tesla may not yet recognize the value of the independent, franchised dealer system, but as its sales increase, NADA is confident it will re-examine its business model. Other companies, such as Daewoo did,” Underriner continued. “Over the years, other manufacturers have tried operating their own retail networks, but have concluded that the franchised
new-car dealer system is the best method of serving the public for its vehicle transportation needs.” He added that “individual state dealer associations will decide whether to proceed with legal action against Tesla Motors. NADA supports the franchised new-car dealer system, and will provide legal support to state dealer associations if necessary.”

Tesla's position was laid out in a blog posting written by Tesla Chairman, Product Architect and CEO Elon Musk in early November (see www.teslamotors.com/blog/tesla-approach-distributing-and-servicing-cars). “The U.S. automotive industry has been selling cars the same way for over 100 years and there are many laws in place to govern exactly how that is to be accomplished. We do not seek to change those rules and we have taken great care not to act in a manner contrary to those rules. ' ” he wrote.

Musk wrote that Tesla interprets auto dealership laws as designed to protect existing franchises from adverse actions by the manufacturers who supply them, such as opening another dealership selling the same brand within the dealer's market area. Since Tesla is a new manufacturer without dealerships, Musk wrote that those protections are unnecessary. “We have granted no franchises anywhere in the world that will be harmed by us opening stores,” he wrote.