After a first failed attempt, two class actions against 7-Eleven are trying again to restrict communications between the convenience store giant and franchisees ahead of a settlement approval hearing with ANZ, the bank that loaned money to store owners.
Despite a ruling by Justice John Middleton in July last year finding that 7-Eleven was free to make confidential settlement offers to group members, the applicants filed another interlocutory application on May 24 seeking to restrain 7-Eleven from discussing “the prospects of, progress of, or any proposal to compromise, any claim in or arising out of the subject matter of this proceeding” without first giving 14 days notice to Levitt Robinson, the law firm running the actions.
Under the protocol, the firm would then have 12 days to apply to the court to block the communication.
The class actions accuse 7-Eleven of breach of contract, misleading and deceptive conduct, and unconscionable conduct that has kept franchisees from making a profit.
The communications protocol would also require 7-Eleven to communicate with group members through Levitt Robinson alone and prevent the company from demanding a release or indemnity from the proceedings from group members selling their franchises.
In shooting down the prior application to restrict 7-Eleven’s communications with group members, Justice Middleton said it was important to preserve the company’s rights in the proceedings.
“The ability of a respondent to communicate with individual group members is an important feature of the individual rights of a respondent and a group member to enter into negotiations without inhibition. Unless there is a basis upon the evidence for the court to intervene to prevent or cure the effects of improper conduct on the part of a respondent, the court should not do so in the pretext of some guardianship role to protect individual unrepresented group members,” he wrote.
A spokesperson for 7-Eleven told Lawyerly it would “vigorously defend” the application to implement restrictions on communications.
“7-Eleven intends to vigorously defend the current application, noting that a previous application for a communications protocol was dismissed by the court in May 2018,” the spokesperson said.
A galactic settlement
The class actions have also sought orders for opt out notices to be sent out to group members ahead of a settlement approval hearing with ANZ.
The lawsuits claim ANZ should have known that very few of the franchises in the 7-Eleven system were financially viable without employees being underpaid or the owners of the franchises or their family members working “unreasonable or unsociable” hours at below-award rates. ANZ is also accused on breachng its responsible lending obligations and the Code of Banking Practice, and engaging in unconscionable conduct by providing the loans to purchasers of 7-Eleven franchises.
After reaching a tentative settlement reached with ANZ in April this year, the class actions are seeking an opt out notice to be delivered to group members and potential group members, including those who have already signed a funding agreement with litigation funder, the Wyoming-based Galactic Seven Eleven Litigation Holdings LLC.
The approved opt out notice would be displayed on Levitt Robinson’s website, and printed in The Australian, on Facebook and on the Federal Court’s website.
ANZ would also have to identify group members participating in the proposed settlement. This includes those “who have provided indemnities, guarantees, mortgages or other securities in respect of obligations under a loan agreement with ANZ to assist prospective franchisees of 7-Eleven with the purchase of a 7-Eleven store franchise”.
Group members identified in this manner who had not issued a release to 7-Eleven through their own private settlement agreements would then be invited to object to the proposed settlement with ANZ at a settlement approval hearing.
A case management and interlocutory hearing to determine the communications protocol, opt out notice, and ANZ settlement has been set for June 13.
Details of the ANZ settlement were not known at the time of writing.
An ANZ spokesperson declined to comment Wednesday. Levitt Robinson has yet to respond to a request for further information.
7-Eleven is represented by Norton Rose Fulbright. ANZ is represented by Herbert Smith Freehills.
The cases are Davaria Pty Limited v 7-Eleven Stores Pty Ltd & Ors which defines its group members as franchisees. The second action is Pareshkumar Davaria & Anor v 7-Eleven Stores Pty Limited & Anor, which encompasses a broader class member definition that includes franchise principles and guarantors.