Siegel v. Chicken Delight, Inc.

Chicken Delight, Inc. (defendant) was a restaurant that offered franchises. Under Chicken Delight’s standard franchise agreement, its franchisees were required to purchase certain cooking equipment, food items, and packaging bearing Chicken Delight’s trademarks exclusively from Chicken Delight in order to receive a Chicken Delight trademark license. The prices Chicken Delight charged for these items were higher than prices charged by other suppliers. A group of franchisees (collectively, the plaintiff franchisees) (plaintiffs) filed a class-action lawsuit in federal district court against Chicken Delight, alleging that the requirements imposed by Chicken Delight’s franchise agreement constituted a tying arrangement that was per se illegal under § 1 of the Sherman Act. Under the plaintiff franchisees’ theory of the case, the tied products were the cooking equipment, food items, and packaging, and the tying product was the trademark license. Chicken Delight attempted to justify its actions by arguing that the equipment, food items, and packaging it required its franchisees to purchase were an integral part of its franchise system and necessary to ensure quality. After a trial, the plaintiff franchisees moved for a directed verdict finding that the franchise requirements constituted an unjustified and illegal tying arrangement. The district court partially granted the motion but submitted Chicken Delight’s justification defense to the jury. The jury returned a verdict in favor of the plaintiff franchisees. Chicken Delight appealed.