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Grunin v. International House of Pancakes

United States Court of Appeals for the Eighth Circuit
513 F.2d 114, 423 U.S. 864, 96 S.Ct. 124 (1975)


Current and former International House of Pancakes franchisees (plaintiffs) filed a class action lawsuit for antitrust violations against the IHOP division of International Industries, Inc. (defendant). The class was created when nine lawsuits were consolidated in the United States District Court for the Western District of Missouri. IHOP was accused of tethering the lease and purchase of equipment, supplies, and services at greater than fair value to the franchise agreement in violation of the Sherman Act, 15 U.S.C. §§ 1 and 2, and the Clayton Act, 15 U.S.C. § 14. The plaintiffs requested damages, injunctions, and fees. A settlement of $4,025,000 less attorneys’ fees was proposed, and class members were notified. Several plaintiffs objected to the proposal. The judge rejected the settlement because it failed to address the allegedly illegal leases, but noted that a large financial payout might bankrupt IHOP. The United States Court of Appeals for the Eighth Circuit upheld the rejection. A new settlement (1) substantially amending the lease terms for services, equipment, and supplies, (2) creating a $500,000 fund for former franchisees, and (3) awarding $1,250,000 in attorneys’ fees was accepted as “fair, reasonable, and adequate as to said class and sub-class plaintiffs.” The plaintiffs generally approved of the new settlement, but Grunin (plaintiff) appealed the notice and content to the court of appeals.

Rule of Law


Holding and Reasoning (Stephenson, J.)

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