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Martino v. McDonald’s System, Inc.

United States Court of Appeals for the Seventh Circuit
598 F.2d 1079 (1979)


Martino (plaintiff) entered into a franchise and lease agreement with McDonald’s to lease a local franchise. The agreement included a clause providing that neither Martino nor his immediate family could acquire a financial interest in a competing self-service food business without the written consent of McDonald’s System and Financial Realty Interstate Corporation (FRIC). Six years later, Martino’s son bought a Burger Chef franchise in Kansas and Martino financed this purchase. FRIC and McDonald’s brought a federal diversity action in Iowa against Martino and his three brothers citing that Martino had violated the contract provision restricting the Burger Chef acquisition. The lawsuit ended with a consent judgment to which the district court appended both findings of fact and conclusions of law. Martino brought the current action in 1975, alleging that the enforcement of the restriction on acquisition in the franchise and lease agreements violated the Sherman Act. Martino claimed as damages the profits he would have earned as the owner of the McDonald’s franchise. McDonald’s has two theories under which this claim can be barred: (1) the preclusive effect of FRCP 13(a), applying to compulsory counterclaims, and that this action should be included as a compulsory counterclaim, and (2) res judicata.

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