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Case 2:04-cv-01895-MJP Document 1 Filed 09/02/04 Page 1 of 8

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UNITED STATES DISTRICT COURT
~
Vl 9 WESTERN DISTRICT OF WASHINGTON

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ABBOUDS' McDONALD'S, LLC,
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Plaintiff,
~
12 v.
5
)
13
McDONALD'S CORPORATION, ~
)
JURY DEMAND
14
Dllfondant. )
15

16

17 I. PARTIES.JUW,SDJ&J'ION AND VENUE

I. Plaintiff Abbouds' McDonald's is a Washington limited liability corporation.
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Its principals are Claude and Alia Abboud, husband and wife.
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2. Defendant McDonald's Corporation is a Delaware corporation with its principal
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place ot'business in nii11ois.
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3. Jurisdiction exists under (i} 28 U.S.C. §§ 1331 and 1337 based on the claim
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herein under IS U.S.C. § I, and (ii) 28 U.S.C. § 1332 because there is complete diversity
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between the parties and the amount of controversy exceeds $75,000. Supplemental jurisdiction
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also eltists under28 U.S.C. § 1367 for the state law claims.
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4. Venue is proper under 28 U.S.C. § 1391 because a substantial part of the acts and
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omissions complained of oc1..-urred in the Western Di~1rict of Washington.

COMPLAINT FOR DAMAGES • l

3H'J'Jt ll'LOOK
1000 SKOOND A'VlllNtlE
IIICA!l''1'1Jt:, W.t.!IHIN'G'1'0N 9i110<l
1110$1 fit2,2oan

----~--'------· ---- .. -·------------------------

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Case 2:04-cv-01895-MJP Document 1 Filed 09/02/04 Page 2 of 8

1 11. THE ABBOUDS-A CLASSIC SUCCESS STORY

2 5. Claude and Alia Abboud are the principals of Abbouds' McDonald's, LLC. Both
3 moved to tb.e United States from Lebanon. They met at a McDonald's where Alia took Claude's
4 order, and they have now been married 18 years. As immigrants, th.ey have worked hard and
5 succeeded. They have done well for themselves and their family.
6 6. In 1991, the Abbouds became interested in owning a McDonald's franchise. Alia
7 had worked at McDonald's, and Claude owned a small grocery store and a Subway franchise.
8 After Claude went through McDonald's training program, the company offered them the chance

9 to purchase a store in Lovelock, Nevada. No one else thought the store could succeed. Claude

IO and Alia bought it, moved to Nevada., rolled up their sleeves, and made it a success.
11 7. By 1997, the Abbouds wanted to expand. McDonald's allowed them to purchase
12 two stores in Sacramento, California. Both stores had performed poorly over the years. Claude
13 and Alia moved to Sacramento, worked hard, and made the stores profitable.
14 8. In 1999, the Abbouds learned that there were five stores in Seattle for sale. Th.ey
15 bought the Seattle stores, sold their Sacramento stores, and moved to Seattle. The Seattle stores
16 needed significant attention and effort. As with their prior stores, the Abbouds have since made
I7 them quite successful. The Abbouds' stores in Seattle are leaders in various perfonnance
18 categories measured by McDonald's.
19 9. Despite the Abbouds' success running McDonald's store.~, their relationship with
20 McDonald's has sometimes been difficult. McDonald's has, over the years, repeatedly made it
21 hard for the Abbouds to expand their operations, offering only the chance to buy stores no one
22 else wanted or which needed significant work. Claude is also a forceful advocate for himself and
23 fellow 1ranchisees. McDonald's prefers franchisees that "go along to ge1 along." Claude refuses
24 to do this.
25 10. One of the issues that particularly troubled the Abbouds was the low percentage
26 of' stores owned by Asian American McDonald's owners in the Northwest. This cCJt1Cem led

COMPLAINT FOR DAMAGES. 2 BYRNES & :KELLER 1.1.r

3"-TKll"T.C)OR
1000 BEC.'OlUl AVJ:Ntut
Slil&TTLZ, WAlllDNU'I'ON 88'104
UIC~ ei!sr-2000
 Case 2:04-cv-01895-MJP Document 1 Filed 09/02/04 Page 3 of 8

I Claude and another owner/operator, Rowan:! Hayashi, in Portland, to form an association called
2 McDonald's Operators of Asian Descent. McDonald's was upset by this because there was
3 already a national association of Asian American operators with which McDonald's worked
4 closely. Howard and Claude believed the relationship between that association and McDonald's
5 was too cozy, and felt that a stronger, more independent, association was necessary.
6 McDonald's has been upset with Claude about this and related issues ever since.
7 Ill. THE ABBOUDS' LATEST EXPANSION
8 :EFFORTS ANO McDONALD'S BIO RlG!',zlNG CONSPIRACY
IL Fred Schulti owned ts McDonald's stores in the Seattle area. He died in late
9
~-pring 2004. His estate decided to sell 12 of the stores by holding an auction for the stores.
10
12. The Abbouds were very int.crested in purchasing the stores. There was, however,
II
a problem. Cody Teets, McDonald's Vice President in the Seattle area, had other plans for the
12
stores, and did not want the Abbouds to purchase them. She wanted some of the stores to be
13
purchased by certain other franchisees, and so!lle by McDonald's itself. As detailed below,
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Teets set about to orchestrate and rig the bidding for the stores. As a part of that, she decided to
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block the Abbouds from bidding.
16
13. Teets told the Abbouds they could not bid on the stores. She had previously
17
decided that under McDonald's rules, the Abbouds were not eligible to expand. Teets' decision
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was based on a faulty interpretation and application of McDonald's roles. Indeed, other
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operators in the same position as the Abbouds, and with the same allegoo defects, were deemed
20
eligible for expansion.
21
14. The Abbouds asked Teets to review her decision, because even under her
22
interpretation ofthc rules, they were in compliance with the standards. Teets said she would
23
review her decision, but not until mid-July, 2004, after the bidding on the Shultz stores was over.
24
This guaranteed, of course, that the Abbouds could not purchase the stores. Teets told the
25
Abbouds that the delay in the review was irrelevant in any event because "all the stores were
26

COMPLAINT FOR DAMAGES· 3 l;l,rrtNEB & KELLER ua1·

31t•rH fl't .cKIR
lUOO &OOND AVll:NJHt.
S.E.A.T'l.':LE. WAtill1NUTON 081.04
/MOUi 622-2000
 Case 2:04-cv-01895-MJP Document 1 Filed 09/02/04 Page 4 of 8

'

1 already ~poken for." Teets did not explain how she knew that all the stores were "spokeo fot"

2 even though the bidding had not yet started.

3 15. The evidence indicates that by the time Teets told Claude that the stores were
4 "spoken for," Teets had already spoken with two other potential bidders, who were existing

5 franchisees in the Seattle area. In those conversations, Teets and these two other bidders agreed
6 on who would bid on, and purchase, which stores. Specifically, one of the potential bidders was

7 told by Teets, and agreed, to bid on two stores. The other prospective bidder was told, aod

8 agreed, to bid on three stores. McDonald's, in tum, would bid on, and purchase, the rest of the

9 stores. It was understood and agreed that McDonald's and the other two bidders would not bid

LO against each other for the stores allocated pursuant to the conspiracy. Tt was a classic bid rigging

11 conspiracy.

12 l 6. After being told by Teets that he was ineligible for expansion, and that the stores

13 were "spoken for," Claude nevertheless contacted the attorney for the estate who was handling

14 the auction. Claude asked whether the stores were "spoken for," and the attorney said no - that

15 they were being put up for bid. The attorney, of course, did not know that a conspiracy was

16 already in place. The attorney urged Claude to bid.

17 17. The estate originally put all 12 stores up for sale at once. £n this initial round, the

18 biddit1g among the conspirators went as orchestrated. But to the surprise of the conspirators,

19 Howard Hayashi from Portland bid on nine of the 12 stores. Teets had spoken with Hayashi
20 earlier and told him that although he could expand, he could bid only on two or three. Hayashi

21 told Teets that he would bid as he saw fit. Teets, meanwhile, told the estate's attorney that there

22 might be issues about llayashi's finances, and that the estate should reject any bid from him in

23 favor of Mcbonald' s.

24 18. Meanwhile, the Abbouds returned to Teets, and told her that they intended to bid

25 for the stores regardless of whether she deemed them eligible for expansion. They again
26 demanded to be made eligible for expansion. She refused, and the Abbouds went over her head,

COMPLAINT FOR DAMAGES. 4 BV)~NI~$ & K1~1~I~'l1!~ 1.:1,P

3STX FI.OOR
1000 SEOOlffl AV1''NU1=;;
8KA.TTL:i;, W11.BH1l!ro'l'Ol'l 9810,A
(2081 622-2000
 Case 2:04-cv-01895-MJP Document 1 Filed 09/02/04 Page 5 of 8

J to the President of McDonald's and his staff. Those officials were apparently unaware of the

2 conspiracy Teets had orchestrated. At'ter the Abbouds contacted Teets' superiors, Teets relented
3 and told the Abbouds that they would be deemed eligible for expansion, and "allowed" to bid on
4 a fow stores, provided they agreed not to start a "bidding war" in the process. The Abbonds
5 declined this solicitation to join the conspiracy, and submitted bids on the 12 stores.
6 19. On June 14, 2004, after reviewing the initial bids, the estate illlnounccd that the
7 stores would be sold in two rounds, with seven stores being sold in the first round, and the
8 remaining five stores in a second round.
9 20. The Abbouds bid vigorously for the first seven stores. Ultimately, however,
IO McDonald's submitted the winning bid. Consistent with the conspiracy, the two bidders with
11 whom McDonald's had conspired did notsubmit bids on these stores.
12 21. When the second five stores were put up for bid, the co-conspirators submitted
13 bids consistent with their agreement with McDonald's. One bid on three of the stores; the other
14 bid on the remaining two. There was no overlap, and no competition, between them.
15 McDonald's, upholding its part of the conspiracy, did not bid on any of the five stores.
16 22. Tn the second round, Howard Hayashi bid for four of the stores. Hayashi plaoned
17 that ifhe won the stores, he would sell his store in Portland and move to Seattle. An Oregon

18 franchisee spoke to Michelle Wherry, a McDonald's representative, about purchasing Hayashi's

19 Portland store if Hayashi purchased the Seattle stores. Wherry responded that he should. not
20 bother because Hayashi would not be getting any of the Seattle stores. This conversation
21 occurred before the bidding on the five stores was concluded.
22 23. The Abbouds bid on all five stores, and were ultimately the winning bidders.
23 24. McDonald's had, under its franchise agreement with Schultz, a right of first
24 refusal to purchase the five stores for which the Abbouds were the winning bidder. To the
25 Abboud~' deep disappointment, McDonald's exercist:d its right of first refusal, and purchased the
26 stores from the Schultz estate at the winning price the Abbouds had bid. McDonald's di(! so in

COMPLAINT F()R DAMAGES - 5

1000 Sli:L'ONfl AYlllm!lll
,Sr,:.11,!1''1'1..IC, WAs1nrc1;1-n1l'f ~810.f
12ot1t Oii>li:000
 Case 2:04-cv-01895-MJP Document 1 Filed 09/02/04 Page 6 of 8

1 order to preserve the ability of the co-conspirators to obtain the stores allocated to them as a part
2 cf the conspiracy despite the Abbouds' winning bid.

3 25. McDonald's ultimately did net resell the five stores to the co-conspirators.
4 McDonald's knew, by then, that questions were being raised about the bidding process and.
5 McDonald's role in it. McDonald's apparently realized that to sell the stores to its co-
6 conspirators would be another act in furtherance of the bid-rigging conspiracy.
7 26. But for the conspiracy, and McDonald's exercise of it.s right of first refusal in
8 furtherance of the conspiracy, the Abbouds would have purchased the five stores.

9 IV, CLAIMS FOR RELIEF

10 First Cause of Action -15 u.s.c. § 1
11 27. McDonald's and its two conspirators agreed not to compete iigainst among
12 themselves in connection with the auction of the Schultz estate stores. That agreement
13 constituted a contract, combination or conspirllCy in restraint of trade in interstate commerce.
14 The Abbouds were damaged by this conspiracy in an amount to be proven at1rial.
15 Second Cause of Action Violation of Washington Franchise .;,ct

16 28. Under RCW 19.100.180, the franchisee ''Bill of Rights," McDonald's has an
17 obligation not to discriminate between franchisees. The only exception is if the franchisor
18 satisfies its burden of proving that discrimination between franchisees was reasonable, and that
19 the discrimination was reasonably related to these differences.
20 29. McDonald's, by agreeing 10 allow the co-conspirator franchisees to obtain stores,
21 while denying the A.bbouds that same right, discriminated among fumchisees based on their
22 willingness to enter into an illegal conspiracy. This is an improper basis for discrimination under
23 the statute. The Abbouds have been damaged in an amount to be proven at trial. but in excess of
24 $75,000.
25
26

COMPLAINT FOR DAMAGBS • 6 BYRNES & KELJ...:ER Lr,p,

311Tfl l:f'IAXJlil
1000 s.:r.oxn Avir.Nu.t;.
$1lA'rTI.E, WA(.oHINOTON 0~104
1206) 81ill-2000

L.----.......= = = = = - - - = = - - - · · · - · - -.. ··-·-·-·-·.

 \ (

"
Case 2:04-cv-01895-MJP Document 1 Filed 09/02/04 Page 7 of 8

Third Cause of Action - Breach of Contract

30. The franchise agreement between the Abbouds and McDonald's is a contract.
3 Implicit in that contract is the obligation of good faith and fair dealing. McDonald's, by
4 exercising its right of first refusal p=uant to the conspiracy, has breached its obligation of good
5 faith and fair dealing. The Abbouds have been damaged in an amount to be proven at trial, but
6 in excess of$75,000.

7 Fourth Cimse of Action - Tortious Interference with Business Expectancy

8 31. The Abbouds had a business expectancy by which tbey would purchase five
9 stores from the Schultz estate. McDonald's interfered with that expectancy for an unprivileged

IO purpose (i.e., acting in furtherance oftbe conspiracy which McDonald's had spearheaded). The
11 Abboud& have been damaged in an amount to be proven at trial, but in excess of$75,000.
12 Flflh Cause of Action - RCW 19.86
13 The acts alleged herein constitute unfair and deceptive practices, and illegal restraints of

14 trade, under RCW 19.86. The acts occurred in trade or C-Ommerce in the state of Washington,
15 and plaintiff has been damaged in an amount to be proven at trial, but in excess of$75,000.
16 V. RELIEF REQUESTED
17 The Abbouds pray for relief as follows:
18 A. For damages in an amount to be proven at trial, trebled;
19 B. For their costs and foes; and
20 c. For such other relief as the Court deems just and proper.
21 VI. JURY DEMAND
22 Plaintiff demands a trial by jury.
23
24
25
26

COMPLAINTFORDAMAGES-7 BYRNES & KELLER u.P

3~'\'H ¥"1,:.Q(.)~
1000 S£00N~ AV:t';Nl/'lt
8EA'I"1'LIC. WAB'HINOTON 08104
00061 Sl!\l-!4000
 ' !
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------------~~~~~~~~~~~~~~~~~~~~~~~~~~~,·1--i
Case 2:04-cv-01895-MJP Document 1 Filed 09/02/04 Page 8 of 8
.. I

DATED this 2"~ day of September, 2004.

2 BYRNES & KELLER LLP

4 By~~=-',,,,~~11:/-~=---
Paul R. Taylor, WSBA #14851
5 Attorneys for Plaintiff Abbouds' McDonald's, LLC

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COMPLAINT FOR DAMAGES· K )::IVH:N:ES & KELLE.II 1,1.r

:fd'rH 'P'f.OOR
1000 SW..'ONP A,VRil'Ql!m
St11!l''1'LIC, WAMIUl't'i:-'fflN 98104
1~Vf111U:2·2000