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7-Eleven Owners For Fair Franchising v. Southland Corp.12/29/2000
, a company that had purchased distribution centers from Southland Corporation and which plaintiffs alleged had paid Southland a premium that should have been shared with franchisees as an RDA. Throughout the litigation, Southland contended that under the text of the franchise agreement provision, it was not required to share with its franchisees any of the four categories of RDAs at issue for a variety of reasons.
For plaintiffs, moreover, the California lawsuit was made problematical by parallel litigation filed in 1996 in the District Court of Dallas County, Texas, 14th Judicial District, under the caption Valente v. Southland Corporation, No. 96-11972-A (Valente). The Valente suit, also brought by 7-Eleven franchisees against Southland, was filed some three years after the California suit was commenced, and sought comparable relief, including class action certification. Because the bulk of the contested RDAs had been received in the late 1980s, the Valente plaintiffs faced a statute of limitations defense interposed by Southland, which had already been the subject of a favorable ruling by the Texas state court. And because some two-thirds of the total number of 7-Eleven franchisees nationally were putative members of the Valente plaintiff class, a ruling by the Texas court upholding Southland's limitations defense would have been a death knell for recoveries by a majority of the national plaintiff class.
That is, had Southland prevailed on its limitations defense in the Texas litigation, a majority of the franchisees would have recovered little or nothing, even if their view of the merits of the RDA claims proved correct in all respects. The Texas court had upheld Southland's limitations defense but granted the Valente plaintiffs leave to amend their complaint in an attempt to circumvent the time bar. An amended complaint, together with Southland's limitations opposition to it, was pending in the Texas trial court at the time the settlement agreement was approved in the California litigation.
Settlement of the California suit came after more than four and a half years of litigation, including voluminous discovery. The settlement proposal itself was preceded by three months of negotiations between the parties and their counsel in the summer and fall of 1997; a compromise proposed settlement was reached in negotiations between company officials and representatives of the class that August, counsel for both sides having been excluded from the talks. After being vetted by attorneys for both sides and following additional negotiations with counsel present, the proposed agreement was presented to the trial court for its tentative approval. There followed a prolonged review by the trial court of the fairness, adequacy, and reasonableness of the proposed settlement at lengthy "fairness hearings." First, the trial court held three daylong evidentiary hearings on October 10 and November 6 and 7, 1997, to consider the objectors' claims that the settlement was the product of collusion between class counsel and defendants. At the conclusion of those hearings, the trial judge made oral findings from the bench and later filed a memorandum order and opinion finding no factual basis for the claims of collusion alleged by former class counsel.
Apace of these developments, other events led to a rupture of the solidarity among class counsel. After former counsel to the Texas Valente plaintiffs joined forces with two California attorneys representing members of the California class action, the Franklin group moved the trial court to discharge both the class representatives and associate Texas class counsel, alleging conflicts of interest and self- dealing. The Franklin group later filed s
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