Court Opinion

ID: 7805449
Source: CourtListenerOpinion
Date Created: 2022-08-31 22:00:34.808754+00
Date Added: 2024-06-11T16:30:01.060766
License: Public Domain

USCA11 Case: 20-13561    Date Filed: 08/31/2022   Page: 1 of 18

                                                    [PUBLISH]
                          In the
         United States Court of Appeals
               For the Eleventh Circuit

                 ____________________

                        No. 20-13561
                 ____________________

JARVIS ARRINGTON,
                                            Plaintiff-Appellant,
SANDRA MUNSTER,
GENEVA BLANCHARD,
                                             Consol Plaintiffs-
                                                  Appellants,
MONIQUE MICHEL, et al.,
                                              Consol Plaintiffs,
versus
BURGER KING WORLDWIDE, INC.,
BURGER KING CORPORATION,
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2                      Opinion of the Court                20-13561

                                              Defendants-Appellees,

RESTAURANT BRANDS INTERNATIONAL INC.,

                                                 Consol Defendant,
                                                         Appellee.

                     ____________________

           Appeal from the United States District Court
               for the Southern District of Florida
              D.C. Docket No. 1:18-cv-24128-JEM
                    ____________________

Before WILSON, ROSENBAUM, and HULL, Circuit Judges.
ROSENBAUM, Circuit Judge:
        No self-respecting Dolphins fan would ever buy a Jets or Pa-
triots hat (at least not for herself). And Jets and Patriots fans are
pretty unlikely to purchase Dolphins garb (though they are missing
the boat on that one). Put simply, the teams of the National Foot-
ball League (“NFL”) compete against each other not only on the
field, but also in the sale of their intellectual property.
       So when the 32 teams of the NFL got together and formed
National Football League Properties (“Properties”) to grant an ex-
clusive license to Reebok International Ltd. to sell all teams’
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20-13561               Opinion of the Court                        3

intellectual property, the Supreme Court concluded that they and
Properties undertook “concerted action” for purposes of Section 1
of the Sherman Act. Am. Needle, Inc. v. Nat’l Football League, 560
U.S. 183, 186 (2010). After all, by agreeing to use one exclusive
vendor, the 32 teams and Properties had potentially deprived the
marketplace of their separate and independent decisions about
granting intellectual-property licenses for each team—decisions
that could have resulted in the hiring of different vendors with dif-
ferent products and profit margins, instead of just a single, exclu-
sive seller. For this reason, the Supreme Court concluded, the ex-
clusive-licensing decision of the teams and Properties amounted to
“concerted action” and satisfied the first condition of Section 1 of
the Sherman Act, an antitrust law. See 15 U.S.C. § 1 (declaring il-
legal “[e]very contract, combination in the form of trust or other-
wise, or conspiracy,” in restraint of trade).
        While the case before us today is not about football, Ameri-
can Needle is instructive here as to the “concerted action” element
of a Section 1 claim. And not only because it involves something
just as American—hamburger restaurants.
       As we explain below, 99% of Burger King restaurants are in-
dependently owned franchise restaurants. Each franchise is for a
single restaurant at a specific location without any protected (much
less exclusive) territory. Franchisees are independent contractors
and are not agents or employees of Burger King. And no fiduciary
relationship exists between the franchisee and Burger King.
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4                      Opinion of the Court                20-13561

        Despite their independence, Burger King and its separately
owned franchisees entered a “No-Hire Agreement,” under which
each agreed not to hire any employees of another Burger King res-
taurant for at least six months after the employee left employment
at another Burger King restaurant. So an employee who just left
employment at one Burger King restaurant and wanted to work at
a different, higher-paying Burger King restaurant, can’t do so for at
least six months. The question here is whether, in entering this
Agreement, Burger King and its independent franchisees under-
took “concerted action” for purposes of Section 1 of the Sherman
Act. We conclude that the complaint plausibly alleges they did.
       Like the 32 teams and Properties in American Needle,
Burger King and its separate and independent franchise restaurants
compete against each other—in this case, for employees. Even the
franchisees’ agreements with Burger King say so expressly. So the
No-Hire Agreement, like the exclusive-licensing agreement in
American Needle, deprives the marketplace of potentially different
hiring decisions by each of the separate restaurant owners that they
might make in their own economic interests in the absence of the
No-Hire Agreement. For purposes of the labor market, then, the
Plaintiffs here—proposed class representatives of former employ-
ees of various Burger King franchisees—plausibly alleged that
Burger King and its franchisees engaged in “concerted action” in
violation of Section 1 of the Sherman Act.
       The district court, though, dismissed the Plaintiffs’ com-
plaint on the basis that Burger King and its franchisees constituted
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20-13561                   Opinion of the Court                                5

a single economic enterprise and were not capable of the concerted
action that a Section 1 violation requires. Because we conclude the
complaint plausibly alleged concerted action, we reverse and re-
mand to the district court for further proceedings.

                            I.      Background1
       Founded in 1954, Burger King is one of the largest fast-food
restaurant chains in the world. Restaurant Brands International,
https://www.rbi.com/English/brands/default.aspx (last visited
Aug. 31, 2022). Among its offerings, Burger King is well-known for
its Whopper hamburger 2 and chicken fries 3. Across the globe,
more than 18,000 Burger King restaurants dot the landscapes of
more than 100 countries and United States territories. Id. In the
United States, it’s tough to travel through an urban area without
passing several Burger Kings along the way. Indeed, more than
7,000 Burger King restaurants exist throughout the United States.
      But Defendant Restaurant Brands International, Inc. (“Res-
taurant Brands”), which owns Defendant Burger King Worldwide,

1 Because we are reviewing an order on a motion to dismiss, we present the
facts as alleged in Plaintiffs’ amended complaint and draw all reasonable infer-
ences in Plaintiffs’ favor. Randall v. Scott, 610 F.3d 701, 705 (11th Cir. 2010).
The actual facts may or may not be as alleged.
2For those who have managed never to have been to a Burger King, a Whop-
per is a quarter-pound, flame-broiled burger with tomatoes, lettuce, pickles,
onions, mayonnaise, and ketchup on a sesame-seed bun.
3 Again, for the
               less indoctrinated, chicken fries are essentially chicken nuggets
shaped like French fries.
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6                      Opinion of the Court                20-13561

Inc. (“Worldwide”), which, in turn, owns Defendant Burger King
Corporation (“Corporation”) (we refer collectively to defendants
as “Burger King”) does not own most of these restaurants. Rather,
more than 99% of Burger King’s restaurants worldwide are inde-
pendently owned franchise restaurants. In fact, in the United
States, Burger King owns and operates only about 50 restaurants—
all in the Miami area.
        To obtain a Burger King franchise, a prospective franchisee
must sign a standard franchise agreement with the Corporation.
The agreement includes a typical term of 20 years and a franchise
fee of $50,000 that the franchisee must pay to Burger King. In total,
a franchisee generally must make an investment of between
$323,000 and $3.1 million to begin operating a Burger King restau-
rant. But the investment doesn’t end there. Once open for busi-
ness, franchisees pay Burger King royalties of as much as 4.5% of
gross sales and an “Advertising Contribution” of 4% of gross sales.
       A franchisee’s obligations also include non-financial ones.
From at least 2010 until at least September 13, 2018, Burger King
incorporated into its standard franchise agreement, a “No-Hire
Agreement.” The “No-Hire Agreement” appears in the franchise
agreement under the heading, “Interference with Employment Re-
lations of Others.” It binds the Corporation and its franchisees to
not attempt to hire away any current employee of the Burger King
or of another Burger King franchisee, and not to hire any employee
of the Corporation or of another Burger King franchisee for six
months after the employee leaves the first Burger King restaurant,
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20-13561                 Opinion of the Court                           7

unless the first Burger King employer gives the later Burger King
employer prior written consent. 4 If the Corporation or a franchisee
violates the No-Hire Agreement, it must pay all costs and attor-
neys’ fees incurred in any legal action brought to enforce the agree-
ment. And that’s not all: the Corporation enjoys the unilateral
power to terminate a franchisee’s right to operate its Burger King
franchise if the franchisee commits an act of default, which includes
breach of the No-Hire Agreement.
       Beginning in September 2018, Burger King purportedly re-
moved the so-called “no-poach, no-hire language” from new fran-
chise agreements on a going-forward basis. But at that point, thou-
sands of Burger King franchise restaurants already in existence had
signed older versions of the agreement, which included the No-
Hire Agreement, and continued to operate under them.
       This No-Hire Agreement is the source of the dispute here.
Plaintiffs were all employees of Burger King franchise restaurants
at some point between 2010 and 2018. Jarvis Arrington was a line

      4   The No-Hire Agreement states,
      Neither BKC nor Franchisee will attempt, directly or indi-
      rectly, to entice or induce, or attempt to entice or induce any
      employee of the other or of another Franchisee of BKC to
      leave such employment, or employ such employee within six
      (6) months after his or her termination of employment with
      such employer, except with the prior written consent of such
      employer.
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8                       Opinion of the Court                  20-13561

cook for a Burger King franchisee in Illinois until August 2017; Ge-
neva Blanchard has been a crew member for a Burger King franchi-
see in New Orleans since 2013; and Sandra Munster worked for an-
other franchisee in Illinois for fifteen years, starting as a supervisor
and ultimately working her way up to general manager.
        Plaintiffs assert that the No-Hire Agreement prevented
them from being able to obtain employment at other Burger King
franchise restaurants and, as a result, caused them to be paid artifi-
cially depressed wages, suffer decreased benefits, and be deprived
of job mobility. In Plaintiffs’ view, the No-Hire Agreement
amounts to an unreasonable restraint on trade, in violation of § 1
of the Sherman Act. Plaintiffs allege that the No-Hire Agreement
prohibits Burger King franchisees from competing with each other
and with the Corporation in attracting (and retaining) labor.
        Because the nature of the relationships among the fran-
chisees and between the franchisees and the Corporation are criti-
cal to assessing Plaintiffs’ Section 1 Sherman Act claim, we take a
moment to further explore them. Burger King restaurants are in-
dependently owned and operated by individuals or entities that are
intended to be separate legal entities from Burger King. And under
the standard franchise agreement, a Burger King franchisee is an
“independent contractor and is not an agent, partner, joint ven-
turer, joint employer or employee of [the Corporation], and no fi-
duciary relationship between the parties exists.” To make sure
that’s clear to the public and to those with whom the franchisees
do business, “[i]n all public records and in FRANCHISEE’s
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20-13561               Opinion of the Court                         9

relationship with other persons, on stationery, business forms and
checks[,] FRANCHISEE shall indicate independent ownership of
the [Burger King] Restaurant.” And in the franchisee’s restaurant,
the franchisee must exhibit “a notification that the Franchised Res-
taurant is operated by an independent operator and not by [the
Corporation].”
        Consistent with this independence, each franchisee agrees
that it is “solely responsible for all aspects of the employment rela-
tionship with its employees,” and that it enjoys “the sole right to
hire, discipline, promote, demote, transfer, discharge, and establish
wages, hours, benefits, employment policies, and other terms and
conditions of employment for its employees without consultation
with or approval by [the Corporation].” The hiring page on Burger
King’s website reinforces the independence of franchisees’ employ-
ment decisions, declaring that “[j]ob descriptions, compensation,
benefits and other employment terms and conditions applicable to
positions at independent franchised BURGER KING® Restaurants
will vary and are determined solely by the Franchisee.”
        With the exception of the No-Hire Agreement, franchisees’
Burger King restaurants compete with other franchisees’ Burger
King restaurants and with Corporate Burger King restaurants.
Consistent with this scheme, in the Burger King Franchise Disclo-
sure Document, Burger King advises prospective franchisees that
their franchise is for a single restaurant at a specified location and
“does not grant [the franchisee] or imply any type of area or terri-
tory, exclusive, protected or otherwise, or protected customer
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10                     Opinion of the Court                 20-13561

base.” In fact, Burger King expressly warns franchisees that
“[o]ther BURGER KING Restaurants may compete with your Res-
taurant or may affect customer trading patterns. Because you will
not receive an exclusive territory, you may face competition from
other franchisees, from outlets that we own, or from other chan-
nels of distribution or competitive brands that [Restaurant Brands]
control[s].”
        Based on their concerns about the No-Hire Agreement,
Plaintiffs filed a complaint alleging antitrust violations. They as-
serted that Burger King and its independently owned and operated
franchisee stores “have together colluded to depress the wages and
employment opportunities of employees who work in Burger King
branded restaurants throughout the United States” by “agree[ing]
not to solicit or hire each other’s employees.” According to Plain-
tiffs’ complaint, the No-Hire Agreement represents an unreasona-
ble restraint of trade.
       Burger King responded by moving to dismiss for failure to
state a Section 1 Sherman Act claim. To establish such a claim, a
plaintiff must allege facts that plausibly show (1) a contract, combi-
nation, or conspiracy that (2) unreasonably (3) restrains interstate
or foreign trade. Quality Auto Painting Ctr. of Roselle, Inc. v. State
Farm Indem. Co., 917 F.3d 1249, 1260 (11th Cir. 2019).
        After briefing on Burger King’s motion to dismiss, the dis-
trict court granted the motion and dismissed the action. In so do-
ing, the court concluded that the complaint flunked the first ele-
ment of a Section 1 Sherman claim. More specifically, the court
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20-13561                   Opinion of the Court                     11

determined that Burger King and each of its independent fran-
chisees together constituted a single economic enterprise, so they
were not capable of conspiring under the Sherman Act. Having
held the complaint failed to establish the first element, the district
court declined to consider the other two. So it had no reason to
evaluate what antitrust approach would apply, had it reached the
other two elements. The district court also denied as futile Plain-
tiffs’ request for leave to amend their complaint.
       Plaintiffs now appeal.
                     II.      Standard of Review
       We review de novo a district court order granting a motion
to dismiss. See Gardner v. Mutz, 962 F.3d 1329, 1338 n.9 (11th Cir.
2020). At the motion-to-dismiss stage, we must accept the com-
plaint’s allegations as true, construing them in the light most favor-
able to the plaintiff. Darrisaw v. Pa. Higher Educ. Assistance
Agency, 949 F.3d 1302, 1303 (11th Cir. 2020).
       A district court should grant a motion to dismiss only if the
plaintiff has not pled “enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). So a district court properly dismisses a complaint for failure
to state a claim only when, “ignoring any ‘mere conclusory state-
ments,’ the remaining allegations do not ‘plausibly suggest’ that the
defendant is liable.” Harper v. Prof’l Prob. Servs. Inc., 976 F.3d
1236, 1240 n.4 (11th Cir. 2020) (quoting Ashcroft v. Iqbal, 556 U.S.
662, 678, 681 (2009)).
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12                     Opinion of the Court                 20-13561

                         III.   Discussion
       The Sherman Act is an antitrust law that outlaws monopo-
lization and other unreasonable restraints on trade. See, e.g., 15
U.S.C. §§ 1 & 2. In so doing, the law imposes different limitations
on antitrust conduct, depending on whether separate entities or in-
dividuals act together to take the challenged action, see 15 U.S.C. §
1, or whether instead what may be deemed a single actor engages
in the activity, see id. § 2. Copperweld Corp. v. Indep. Tube Corp.,
467 U.S. 752, 767 (1984). The Supreme Court has explained that
Congress decided to treat concerted actors and independent actors
differently, “authoriz[ing] Sherman Act scrutiny of single firms
only when they pose a danger of monopolization” “[i]n part be-
cause it is sometimes difficult to distinguish robust competition
from conduct with long-run anti-competitive effects.” Id. at 767–
68.
       As we have noted, this case involves an alleged Section 1 vi-
olation. Section 1 of the Sherman Act prohibits any “contract, com-
bination in the form of trust or otherwise, or conspiracy” that re-
strains trade or commerce. 15 U.S.C. § 1. Because Plaintiffs raise a
Section 1 challenge, at the outset, they must sufficiently allege
“concerted . . . action.” Copperweld, 467 U.S. at 767. After all, by
its terms, Section 1 prohibits only “contract[s], combination[s] . . .
, [and] conspirac[ies]” that unreasonably restrain trade. See 15
U.S.C. § 1.
      Here, the district court concluded that Burger King and its
franchisees were not separate actors for antitrust purposes. That
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20-13561                Opinion of the Court                        13

is, it found they were incapable of taking “concerted” action for
purposes of Section 1 of the Sherman Act. So the court dismissed
the complaint and denied Plaintiffs’ request to amend. We disagree
because the complaint plausibly alleged “concerted action.”
        To start our analysis, we emphasize that whether an ar-
rangement rises to the level of “concerted . . . action” depends on
“substance, not form.” Am. Needle, 560 U.S. at 195 (citation and
quotation marks omitted). Taking a deeper dive into the govern-
ing principles, we note that the “key” to ascertaining whether an
arrangement amounts to “concerted action” is “whether it joins to-
gether separate decisionmakers.” Id. As the Supreme Court has
explained, “[t]he relevant inquiry . . . is whether there is [an ar-
rangement] amongst separate economic actors pursuing separate
economic interests, such that the agreement deprives the market-
place of independent centers of decisionmaking, and therefore of
diversity of entrepreneurial interests.” Id. (cleaned up). “Because
the inquiry is one of competitive reality, it is not determinative that
two parties to an alleged § 1 violation are legally distinct entities.”
Id. at 196. The question is “whether the agreement joins together
independent centers of decisionmaking.” Id. (internal quotation
marks omitted). When we conduct that American Needle analysis
here, we conclude that the Plaintiffs’ complaint plausibly alleges
that Burger King and its franchisees’ No-Hire Agreement arrange-
ment constitutes concerted action under Section 1.
      As we’ve mentioned, in American Needle, the Supreme
Court considered whether the 32 teams of the NFL and Properties
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14                      Opinion of the Court                 20-13561

engaged in concerted action within the coverage of Section 1 of the
Sherman Act when they granted an exclusive license to Reebok In-
ternational Ltd. to make and sell trademarked headwear for all 32
teams and declined to renew the nonexclusive licenses of other
manufacturers that had enjoyed them up to that point. Id. at 186.
The Court concluded they did. Id. at 199–200.
        In arriving at this determination, the Court was careful to
first specifically identify the decision of the 32 teams and Properties
that it was evaluating for purposes of assessing whether they en-
gaged in concerted action: the decision to grant an exclusive li-
cense and decline to renew nonexclusive licenses. See id. at 186–
87. In this way, American Needle teaches that the concerted-action
inquiry is a focused one, and we do not consider whether actors
engage in concerted activity for all purposes; we evaluate only
whether the decision or decisions in question involved concerted
action.
      Here, that means we train our attention on whether Burger
King and its independently owned and operated franchisee restau-
rants undertake concerted activity through the No-Hire Agree-
ment. That is the only activity Plaintiffs challenge under Section 1.
      Next, we turn to the “key” question of “whether the [al-
leged] agreement joins together independent centers of deci-
sionmaking.” Id. at 196 (internal quotation marks omitted). The
question here “is whether there is a ‘contract, combination . . . , or
conspiracy’ amongst ‘separate economic actors pursuing separate
economic interests,’ such that the agreement ‘deprives the
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20-13561                Opinion of the Court                        15

marketplace of independent centers of decisionmaking,’ and there-
fore of ‘diversity of entrepreneurial interests,’ and thus of actual or
potential competition.” Id. at 195 (internal citations omitted). In
conducting this analysis in American Needle, the Court observed
that, despite their common interest in Properties and in promotion
of the NFL, the 32 teams “compete[d] with one another, not only
on the playing field, but to attract fans, for gate receipts, and for
contracts with managerial and playing personnel.” Id. at 196-97.
And “[d]irectly relevant,” they also competed against one another
in the market for intellectual property, each trying to sell its own
separate brand. Id. at 197.
        So, the Court explained, when the separate teams license
their intellectual property, they are not “pursuing the common in-
terests of the whole league” but instead, the interests of each sepa-
rate team corporation. Id. (internal quotation marks omitted). In
that way, the teams each act to better their own economic interests
and therefore represent “potential independent center[s] of deci-
sionmaking.” Id. (cleaned up). But when the 32 teams came to-
gether to make a decision to license all their trademarks exclusively
to one vendor, the Court concluded, they “deprive[d] the market-
place of independent centers of decisionmaking and therefore of
actual or potential competition.” Id. (cleaned up). As the Court
observed, the NFL teams were still “separate, profit-maximizing
entities and their interests in licensing team trademarks [we]re not
necessarily aligned.” Id. at 198. The Court pointed out that “illegal
restraints often are in the common interests of the parties to the
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16                     Opinion of the Court                20-13561

restraint at the expense of those who are not parties.” Id. In other
words, the teams and Properties engaged in “concerted action,” for
purposes of Section 1 of the Sherman Act.
       So too here. Burger King and its franchisees, though they
certainly have some economic interests in common, each sepa-
rately pursue their own economic interests when hiring employ-
ees. For starters, the standard franchise agreement expressly em-
phasizes the “independent” nature of each franchisee’s relationship
with Burger King, pointing out that “no fiduciary relationship be-
tween the parties exists.” And as we have mentioned, the Burger
King Franchise Disclosure Document explicitly warns that “[o]ther
BURGER KING Restaurants may compete with your Restaurant”
and that “you may face competition from other franchisees, from
outlets that we own, or from other channels of distribution or com-
petitive brands that [Restaurant Brands] control[s].” Indeed,
there’s just no question that Burger King and its franchisees com-
pete against each other and have separate and different economic
interests.
       Not only that, but that independence expressly extends to
hiring decisions. Each franchisee agrees that it is “solely responsi-
ble for all aspects of the employment relationship with its employ-
ees,” and that it enjoys “the sole right to hire . . . and establish
wages, hours, benefits, employment policies, and other terms and
conditions of employment for its employees without consultation
with or approval by [the Corporation].” Thus, each franchisee is
an independent center of decisionmaking as to hiring or
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20-13561                Opinion of the Court                        17

employment agreements. Burger King’s website echoes the inde-
pendence of franchisees’ employment decisions, noting that “[j]ob
descriptions, compensation, benefits and other employment terms
and conditions applicable to positions at independent franchised
BURGER KING® Restaurants will vary and are determined solely
by the Franchisee.”
       Besides that, Plaintiffs alleged (or would have alleged in their
proposed amended complaint) that the three franchisees that each
of the named Plaintiffs worked for had differing approaches to re-
cruitment on their websites. One “boasts” of various bonuses for
managers, including “keys to a Jeep Wrangler or Chevy Camaro
for one month.” Another attempts to recruit by claiming it “is a
wonderful company to work for. With competitive wages, out-
standing employee benefits, and a vast variety of positions, all jobs
here are accommodating to any schedules.” Yet another chooses
not to recruit on its own website but prefers to accept applications
only through Burger King’s website.
       So in the absence of the No-Hire Agreement, each independ-
ent Burger King restaurant would pursue its own economic inter-
ests and therefore potentially and fully make its own hiring deci-
sions, including about wages, hours, and positions. They might
even attempt to entice stand-out employees to leave one restaurant
and join their own. But the No-Hire Agreement removes that abil-
ity and also prohibits the hiring of any Burger King employee for
six months after they have left another Burger King restaurant. In
this way, the No-Hire Agreement “deprive[s] the marketplace of
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18                     Opinion of the Court                 20-13561

independent centers of decisionmaking [about hiring], and there-
fore of actual or potential competition.” 560 U.S. at 197.
       For this reason, the Plaintiffs have plausibly alleged that the
No-Hire Agreement qualifies under Section 1 of the Sherman Act
as “concerted activity,” and the Plaintiffs sufficiently alleged that
aspect of a Sherman Act Section 1 violation. Thus, the district court
should not have dismissed the Plaintiffs’ complaint on this basis.
        Burger King argues that, even if the district court erred in
holding its relationship with its franchisees was not subject to § 1
scrutiny, we may still affirm because, in its view, any restraint on
trade was not unreasonable. To so hold would require this Court
to determine what level of scrutiny it should apply here—per se,
quick-look, or rule of reason, see Procaps S.A. v. Patheon, Inc., 845
F.3d 1072, 1084 n.3 (11th Cir. 2016), and then conduct the relevant
analysis. We think those inquiries are best left to the district court
in the first instance. We therefore decline Burger King’s invitation.
                         IV.      Conclusion
       For the foregoing reasons, we reverse the district court’s or-
der dismissing the complaint to the extent it was based on the “con-
certed action” element for a Section 1 violation, and we remand for
further proceedings.
      REVERSED AND REMANDED.