1 Alejandro Ortiz, Esq. Jamie Rucker, Esq. Julie Ulmet, Esq. National Labor Relations Board ...

26 Pages·2015·0.83 MB·German

Alejandro Ortiz, Esq.
Jamie Rucker, Esq.
Julie Ulmet, Esq.
National Labor Relations Board, Region 2
26 Federal Plaza, Room 3614
New York, New York 10278-0104
[phone]
Rachel V. See, Esq.
National Labor Relations Board
1015 Half Street SE
Washington, DC 20570
[phone]
Counsel for the Applicant
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
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NATIONAL LABOR RELATIONS BOARD,
Applicant,
v. USDJ _________
15 - Misc. -3 2_2_______
MCDONALD’S USA, LLC,
Respondent.
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APPLICATION FOR AN ORDER REQUIRING OBEDIENCE
TO ADMINISTRATIVE SUBPOENA DUCES TECUM
The National Labor Relations Board (the “Board” or the “Applicant”), respectfully
applies to this honorable Court, pursuant to Section 11(2) of the National Labor Relations Act, as
amended, (the “Act”), 29 U.S.C. § 161(2), for an order requiring McDonald’s USA, LLC
(“McDonald’s” or “Respondent”), to obey a subpoena duces tecum issued by the Board and duly
served on Respondent in the manner provided by law. In support of said application, upon
information and belief, Applicant respectfully shows as follows:
1. Applicant is an administrative agency created by the Act, 29 U.S.C. § 151, et seq.,
and is empowered and directed to administer the provisions of the Act, including the power to
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investigate unfair labor practices as defined in Section 8 of the Act, 29 U.S.C. § 158, and issue
complaints and hold administrative hearings as provided in Section 10 of the Act, 29 U.S.C.
§ 160.
2. Pursuant to Section 6 of the Act, 29 U.S.C. § 156, the Board has issued Rules and
Regulations (the “Board’s Rules”), governing the conduct of its operations, which rules and
regulations have been duly published in the Federal Register (24 F.R. 9095), as provided for in
the Administrative Procedure Act, 5 U.S.C. § 552. This Court may take judicial notice of the
Board’s Rules by virtue of the Federal Register Act, 44 U.S.C. § 1507.
3. Jurisdiction is conferred on this Court by Section 11(2) of the Act, 29 U.S.C.
§ 161(2), giving the District Courts jurisdiction to issue orders, upon application of the Board, to
enforce subpoenas issued by the Board.
4. Jurisdiction is also conferred on this Court by 28 U.S.C. § 1337, which gives the
District Courts original jurisdiction “of all suits and proceedings under any law regulating
commerce,” without regard to citizenship of the parties or the sum or value in controversy.
5. Section 11(1) of the Act authorizes the Board, in furtherance of the broad
Congressional purposes of promoting the free flow of commerce and protecting workers’
exercise of full freedom of association, to issue to any person subpoenas requiring attendance
and testimony of witnesses or production of any evidence that “relates to any matter under
investigation or in question.”
6. The Fast Food Workers’ Committee, Service Employees International Union, CTW,
CLC, Pennsylvania Workers Organizing Committee, a Project of the Fast Food Workers
Committee, Workers Organizing Committee of Chicago, Western Workers Organizing
Committee, and Los Angeles Organizing Committee (collectively, the “Charging Parties”) filed
unfair labor practice charges (the “Charges”) pursuant to Section 102.9, et seq., of the Board’s
Rules, alleging that Respondent McDonald’s, as a joint employer with the franchisee named in
each charge, violated Sections 8(a)(1) and 8(a)(3) of the Act. (29 U.S.C. §§ 158(a)(1), (3)). The
charges were filed throughout the United States, in various of the Board’s regional offices,
including regional offices located in Philadelphia, Pennsylvania (Region 4); Chicago, Illinois
(Region 13); San Francisco and Los Angeles, California (Regions 20 and 31); Indianapolis,
Indiana (Region 25); and New York, New York (Region 2). A complete list of Charges, and the
Respondents identified in each Charge, is set forth in Appendix A. The Charges were filed and
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amended on the dates set forth in Appendix B. The relevant regional office of the National
Labor Relations Board conducted an investigation of each Charge.
7. McDonald’s is one of the nation’s largest employers, with its U.S. restaurants
employing approximately 750,000 workers. In 2014, McDonald’s Corporation, the global entity
of which McDonald’s is a wholly-owned subsidiary, reported net income of $4.8 billion based
off of revenue of $27.4 billion, with $8.77 billion in revenue coming from its U.S. operations.
http://news.mcdonalds.com/press-releases/mcdonald-s-usa-announces-new-employee-benefit-
package-including-wage-increase-an-nyse-mcd-1185520 (last accessed September 18, 2015);
(See McDonald’s 2014 Form 10-K, attached hereto as Applicant Exhibit 1, at 12.)
8. McDonald’s is in the business of franchising. (McDonald’s 2013 Franchise
Disclosure Document, attached hereto as Applicant Exhibit 2.) And as it publicly states, it
expects its franchisees to adhere to specific operational requirements; the “essence” of operating
a McDonald’s franchise is “the establishment and maintenance of a close personal working
relationship with McDonald’s in the conduct of Franchisee’s McDonald’s restaurant business,
Franchisee’s accountability for the obligations contained in this Franchise, and Franchisee’s
adherence to the tenets of the McDonald’s System.” (Id.)
9. During the investigation, McDonald’s submitted a position statement to the Board in
which it described, among other topics, the role of its business consultants, also known as
operations consultants (“Operations Consultants”). (May 22, 2014 Goldsmith to Kearney letter,
attached hereto as Applicant Exhibit 3, pp. 9—10.) The statement describes these consultants as
primarily responsible for administering McDonald’s formal Restaurant Operations Improvement
Process and maintaining adherence to the McDonald’s franchise system. (Id.) McDonald’s has
also described the job duties of Operations Consultants in postings seeking applicants for those
positions. (See Appl. Exh. 29, below, at MCDNLRB 033099; see also e-mail messages from
Operations Consultants produced by McDonald’s pursuant to subpoena, attached hereto as
Applicant Exhibit 4.)
10. On December 19, 2014, based on their investigations of the relevant Charges, the
Regional Directors for Regions 2, 4, 13, 20, 25, and 31 of the Board, on behalf of the General
Counsel of the Board, each issued an Order Consolidating Cases, Consolidated Complaint, and
Notice of Hearing against Respondent McDonald’s, alleging that McDonald’s, as a joint
employer with the other named respondents, violated Sections 8(a)(1) and (3) of the Acts
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(collectively, the “December 2014 Complaints”). On February 13, 2015, the Regional Director
for Region 31 issued a second Order Consolidating Cases, Consolidated Complaint, and Notice
of Hearing against Respondent McDonald’s, alleging that McDonald’s, as a joint employer with
the other named respondents, violated Sections 8(a)(1) and (3) of the Act (the “February 2015
Complaint”; collectively, with December 2014 Complaints, the “Complaints”). (Complaints and
affidavits of service attached hereto as Applicant Exhibits 5a, 5b, 5c, 5d, 5e, 5f, and 5g; see also
https://www.nlrb.gov/news-outreach/fact-sheets/mcdonalds-fact-sheet (last accessed Sept. 29,
2015).)
11. On January 5, 2015, the General Counsel issued an Order transferring the December
2014 Complaints issued by the Regional Directors of Regions 4, 13, 20, 25, and 31 to Region 2.
(Order Transferring Cases to Region 2 attached hereto as Applicant Exhibit 6a). On January 6,
2015, the Regional Director for Region 2 issued an Order consolidating the December 2014
Complaints. (Order Consolidating Cases (the “January 2015 Consolidation Order”) attached
hereto as Applicant Exhibit 6b). By order dated January 7, 2015, Chief Administrative Law
Judge Biblowitz assigned Administrative Law Judge Lauren Esposito (“Judge Esposito” or “ALJ
Esposito”) to hear the consolidated McDonald’s cases. (Order Assigning Trial Judge attached
hereto as Applicant Exhibit 6c.) On March 3, 2015, the General Counsel issued an order
transferring the February 2015 Complaint to Region 2. (Order Transferring Cases to Region 2
attached hereto as Applicant Exhibit 6d.) On March 23, 2015, the Regional Director for Region
2 issued an Order consolidating the February 2015 Complaint with the consolidated cases
pending in Region 2, based on the December 2014 Complaints and January 2015 Consolidation
Order. (Order Consolidating Cases attached hereto as Applicant Exhibit 6e.)
12. On December 31, 2014, Respondent McDonald’s filed Answers to each of the
December 2014 Complaints. On February 27, 2015, Respondent McDonald’s filed an Answer to
the February 2015 Complaint. In each Answer, McDonald’s denied the joint employer
allegations regarding it. Respondent McDonald’s also filed a Motion to Sever the consolidated
cases on about January 15, 2015. (McDonald’s’ Motion to Sever is attached hereto as Applicant
Exhibit 7.)
13. On February 9, 2015, Counsel for the General Counsel served on Respondent
McDonald’s Subpoena Duces Tecum B-1-L39K3Z (“the Subpoena”), directed to the Custodian
of Records of Respondent McDonald’s USA, LLC, 2111 McDonald’s Drive, Oak Brook, IL
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60523, directing Respondent McDonald’s to produce certain documents at the hearing on the
Complaint, at 26 Federal Plaza, Suite 3614, New York, NY 10278, on March 30, 2015. The
subpoena requests the production of 118 categories of information, all relevant to the allegation
of joint employer, broken down into the following categories: (1) McDonald’s Organization and
System (Pars. 1 through 14); (2) Hiring Practices With Respect to Charged Franchises (Pars. 15
through 23); (3) Employee Training (Pars. 24 through 41); (4) Employee Conduct (Pars. 42
through 51); (5) Wages and Benefits (Pars. 52 through 62); (5) Hours and Assignments (Pars. 63
through 92); (6) Direct Review and Control (Pars. 93 through 108); and (7) Response to the Fast
Food Fight for $15 Campaign (Pars. 109 through 118). Service was effectuated,1 pursuant to
agreement of the parties,2 via regular first class mail to Respondent’s attorney, Willis J.
Goldsmith, Esq., Jones Day, 222 East 41st Street, New York, NY 10017. (Subpoena Duces
Tecum and cover letter attached hereto as Applicant Exhibit 8a.)
14. On February 23, 2015, Respondent McDonald’s, pursuant to Section 102.31(b) of the
Board’s Rules, filed a Petition to Revoke the Subpoena (the “Petition to Revoke”), amended on
about March 24, 2015. (Petition to Revoke and Amended Petition attached hereto as Applicant
Exhibits 9a and 9b.) In its Petition to Revoke, McDonald’s said there were about 240 custodians
located throughout the country for whom McDonalds would have to review e-mail or non-email
ESI (“electronically stored information”) to respond to the Subpoena. (Applicant Exhibit 9a, p.
20.) Further, McDonald’s estimated the costs of reviewing and producing the requested ESI and
argued complying with the Subpoena would be unduly burdensome under Federal Rule of Civil
Procedure 26(b)(2)(C) and the Sedona Principles. (Applicant Exhibit 9a, p. 17–22).
15. On March 3, 2015, ALJ Esposito issued a Case Management Order (the “Case
Management Order”). (Case Management Order attached hereto as Applicant Exhibit 10.) The
Case Management Order, inter alia, set dates for the administrative hearing to open on March
30, 2015, and continue on May 11, 2015, and additional dates thereafter.
16. On March 5, 2015, counsel for the General Counsel filed an Opposition to the
Petition to Revoke the Subpoena (the “Opposition to Petition to Revoke”). In the Opposition to
the Petition to Revoke, counsel for the General Counsel noted that he had made various

1 McDonald’s admitted it received the subpoena by mail on February 17, 2015. (Applicant Exhibit 9a (Petition to
Revoke, p. 7).)
2 Counsel for McDonald’s agreed to accept service on behalf of McDonald’s via a February 9, 2015 email.
(February 9, 2014 Goldsmith to Rucker email attached hereto as Applicant Exhibit 8b.)
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unsuccessful attempts to confer with counsel for McDonald’s in an effort to reduce the scope of
McDonald’s’ search by, inter alia, reducing the number of relevant custodians, improving
McDonald’s’ search methodologies, and the use of filtering tools prior to attorney review, all
issues that should be discussed between the parties, as envisioned by both the Federal Rules and
the Sedona Principles. (Applicant Exhibit 11 p. 10.) General Counsel pointed out that through
discussion it might be possible to reduce the document volume and hence the burden on
McDonald’s (Id., at p. 10-11.).
17. On March 19, 2015, ALJ Esposito issued an Order Denying the Petition to Revoke
(the “Order Denying Petition to Revoke”). (Order Denying Petition to Revoke attached hereto as
Applicant Exhibit 12.) The ALJ denied the Petition to Revoke in its entirety and directed the
parties to meet and confer in good faith beginning on March 26, 2015. (Applicant Exhibit 12, p.
11.) The ALJ observed that determinations of burdensomeness were “premature, because the
parties have yet to even begin the process of meaningfully conferring regarding the [ESI] sought
by the Subpoena.” (Id., p. 10-11.) In particular, she noted, “Without even the barest attempt to
engage in meaningful dialogue which could limit the scope of production, the various statements
and calculations provided by [McDonald’s] in its Petition to Revoke regarding the purported cost
of producing electronically stored information in response to the Subpoena have no probative
value whatsoever.” (Id., p. 11.)
18. On about March 24, 2015, McDonald’s counsel submitted a motion to amend its
petition to revoke the Subpoena, the most notable change of which was to further reduce, by a
factor of about 4, its estimate of the cost of searching for ESI. (Applicant Exhibit 9b.)
19. On March 26, 2015, counsel for McDonald’s and for the General Counsel met and
conferred regarding McDonald’s’ response to the subpoena, especially the production of ESI (the
“March 26 Meet and Confer”). (See (March 27, 2015 Rucker to Goldsmith letter attached hereto
as Applicant Exhibit 13; see also Applicant Exhibit 15 (Hearing Transcript, Vol. I), at 74:13.) At
this meeting, McDonald’s disclosed the names and/or job titles of 28 custodians it believed had
documents responsive to the Subpoena. (See Appl. Exh. 13.) It did not disclose the names and
job titles of the remaining 212 custodians it previously cited in its Petition to Revoke. (See id.)
20. In a March 27, 2015 letter, the General Counsel followed up on discussion at the
March 26 Meet and Confer about McDonald’s’ initial search for ESI responsive to the Subpoena.
(Applicant Exhibit 13.) In that letter, the General Counsel requested “(1) the list of the 240
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custodians (by name and job title) you initially identified as potentially possessing relevant
evidence and (2) the organizational chart asked for in paragraph one of the General Counsel’s
subpoena.” (Id.)
21. In a March 29, 2015 letter responding to the March 27, 2015 letter, counsel for
McDonald’s, instead of providing the General Counsel with the list of the 240 custodians and the
organizational chart, again identified the twenty-eight (28) custodians who he “believe[s] are
most likely to possess documents and ESI responsive [to the McDonald’s Subpoena].” Of those
28 custodians, only 6 were Operations Consultants responsible for a metropolitan area covering a
charged franchisee. (March 29, 2015 Goldsmith to Rucker Letter attached hereto as Applicant
Exhibit 14.)
22. The unfair labor practice hearing before ALJ Esposito opened on March 30, 2015, for
the purpose of addressing issues such as outstanding petitions to revoke and subpoena
compliance. At this hearing, counsel for McDonald’s acknowledged the General Counsel’s
request for the names and job titles of the remaining 212 custodians and, while not providing that
information, clarified that “we are not limiting the search to the 28 people whose names we have
provided to the General Counsel. It’s a start.” (Relevant portions of administrative transcript
(pages 74–86) attached hereto as Applicant Exhibit 15.)
23. On April 1, 2015, the General Counsel sent a letter to McDonald’s regarding the ESI
production. In the letter, General Counsel again asked McDonald’s to disclose its remaining
custodians and identified, by Subpoena paragraph, the documents he believed McDonald’s could
readily identify and produce, such as training manuals it provides franchisees. (April 1, 2015
Letter from Rucker to Goldsmith attached hereto as Applicant Exhibit 16.) McDonald’s
responded in an April 6, 2015 letter. (April 6, 2015 Goldsmith to Rucker Letter attached hereto
as Applicant Exhibit 17.) In the letter, McDonald’s again refused to disclose the names and job
titles of its 212 remaining custodians, asserting that such a request “is little more than an
interrogatory.” (Id. at 3.)
24. On April 8, 2015, the General Counsel and McDonald’s participated in a second
meet-and-confer session. On April 15, 2015, General Counsel sent McDonald’s a letter
following up on this meeting, acknowledging receipt of some documents but noting the absence
of the governing franchise agreements and other documents he expected to receive. (April 15,
2015 Rucker to Davis Letter attached hereto as Applicant Exhibit 18.) McDonald’s responded in
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an April 16, 2015 email message, saying documents would be produced on a “rolling basis.”
(April 16, 2015 Goldsmith to Rucker email attached hereto as Applicant Exhibit 19.)
25. On April 9, 2015, the ALJ approved a Stipulated Protective Order, and on April 27,
2015, approved a revised Stipulated Protective Order (the “Protective Order”). (April 9, 2015
Stipulated Protective Order attached hereto as Applicant Exhibit 20a; April 27, 2015 Stipulated
Protective Order attached hereto as Applicant Exhibit 20b.) The Protective Order allows parties
to designate sensitive information “confidential” or “highly confidential—attorney’s eyes only,”
provides express instructions on how parties are to handle such material, and includes a
procedure for any breaches of that order.
26. On April 30, 2015, the General Counsel sent a letter to McDonald’s regarding the
ESI production. (April 30, 2015 Rucker to Goldsmith Letter attached hereto as Applicant
Exhibit 21.) In that letter, General Counsel asked for estimated dates by which McDonald’s
would complete ESI production from the 28 custodians it previously disclosed and offered to
consider limiting the scope of the ESI demanded by the Subpoena once he reviewed that
production, including the data sources reviewed and search methods used. (Id.) McDonald’s
responded in a letter of even date. (April 30, 2015 Goldsmith to Rucker Letter attached hereto as
Applicant Exhibit 22.) In the letter, McDonald’s detailed its efforts to comply with the
Subpoena. It said it intended to focus on ESI from the 28 previously identified custodians, that it
anticipated making rolling productions every 7–10 days, but concluded that “the end date for
overall compliance, or even compliance with particular aspects of the subpoena, is unknowable.”
(Id.)
27. On May 13, 2015, the General Counsel sent a letter to McDonald’s noting that many
of the documents provided by McDonald’s in response to the Subpoena “contain significant
redactions of unprivileged material” and requesting that McDonald’s “promptly provide
unredacted versions of those documents and that future productions comply with the subpoena
instructions.” (May 13, 2015 Ortiz to Goldsmith letter attached hereto as Applicant Exhibit 23.)
In a May 28, 2015 email, McDonald’s indicated that it would respond to this letter at the next
scheduled hearing before the ALJ. (May 28, 2015 Davis to Ortiz email attached hereto as
Applicant Exhibit 24.)
28. On May 19, 2015, ALJ Esposito issued an Order Adjourning Hearing from May 26,
2015 and Establishing Procedures for the Production of Information Pursuant to Subpoena (the
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“May 19 Order”). (May 19 Order attached hereto as Applicant Exhibit 25.) In the May 19
Order, ALJ Esposito set dates for a series of conferences to discuss the production of documents
and ESI and set a new date of October 5, 2015 for continuation of the administrative hearing.
She also said she anticipated that by June 2 McDonald’s would be prepared to establish a date to
complete production and that she hoped by June 2 McDonald’s would be done with ESI
production from the 28 previously identified custodians.
29. On June 1, 2015, McDonald’s sent the General Counsel a letter setting forth the status
of its compliance with the McDonald’s Subpoena. (June 1, 2015 Goldsmith to Rucker letter
attached hereto as Applicant Exhibit 26.) In this letter, McDonald’s said it expected to complete
ESI production from the 28 custodians by July 1, 2015. (Id. at 1.) It also said it had no
documents responsive to a number of Subpoena paragraphs, including Nos. 17, 22, 45, 65, and
68–74. (Id.)
30. On June 2, 2015, McDonald’s and the General Counsel participated in a conference
before ALJ Esposito. (Relevant portions of the transcript (pp. 164–202) attached hereto as
Applicant Exhibit 27.) Two issues related to compliance with the subpoena were discussed:
(1) the General Counsel’s request for a list of the 240 custodians and (2) McDonald’s redaction
of responsive documents. In that hearing, the ALJ ordered McDonald’s to provide to the
General Counsel by June 15, 2015, the job descriptions for the McDonald’s employees who had
been identified in McDonald’s’ February 23, 2015 list of 240 custodians likely to possess
relevant information. (Applicant Ex. 27, at 202:12.) The ALJ also ordered the parties to provide
her with statements of their position on the redaction issue by June 9, 2015. (Applicant Ex. 27,
at 169:7.)
31. On June 12, 2015, McDonald’s produced certain responsive documents to the
General Counsel, and, instead of producing the job descriptions for the 240 custodians,
McDonald’s produced job postings for approximately 44 jobs. (See June 23, 2015 Transcript at
312:4–313:14, attached hereto as Applicant Exhibit 28.) Among those were job postings for
Operations/Field Consultants and Human Resources Consultants. (Copies of the Operations
Consultants and Human Resource Consultant postings are attached hereto as Applicant Exhibits
29 and 30, respectively.)
32. On June 9, 2015, General Counsel filed a Motion to Compel Production of
Unredacted Documents (the “June 9 Filing”). On the same date, McDonald’s filed a Statement
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Regarding Redaction of Certain Documents Produced in Response to Subpoenas (the “June 9
Statement”). On June 15, 2015, ALJ Esposito issued an Order Requiring McDonald’s USA,
LLC to Produce Unredacted Documents (the “June 15 Order”). (June 9, 2015 Filing, June 9,
2015 Statement, and June 15 Order attached hereto as Applicant Exhibits 31, 32, and 33.)
33. On June 22, 2015, McDonald’s sent a letter to ALJ Esposito stating that McDonald’s
would not comply with the June 15 Order “[a]bsent a federal court order”. (June 22, 2015
Goldsmith to ALJ Esposito Letter attached hereto as Applicant Exhibit 34.)
34. On June 22, 2015, General Counsel sent a letter to McDonald’s regarding the status
of McDonald’s’ compliance with the McDonald’s Subpoena. (June 22, 2015 Rucker to
Goldsmith Letter attached hereto as Applicant Exhibit 35.) In that letter, the General Counsel
stated his position that McDonald’s should expand its set of custodians for purposes of the ESI
searches conducted in response to the Subpoena, in addition to the unilaterally selected 28.
Specifically, General Counsel identified approximately 52 additional custodians whose records
should be reviewed: twenty-three Business or Operations Consultants, seven VPs GM [General
Managers], ten VPs of QSC [Quality, Service, and Cleanliness], one of whom also served as a
VP GM, seven Directors of Operations, Field Services, and six additional personnel who,
because of their positions, duties, and anticipated knowledge, warranted inclusion as potential
custodians. (Id., at p. 2—4; PDF copies of LinkedIn websites for Heather Smedstad, John
Kujawa, and Troy Brethauer, printed on September 28, 2015, attached hereto as Applicant
Exhibits 36, 37, and 38.) In addition, based on the General Counsel’s review of the job postings
provided by McDonald’s, the General Counsel also took the position that the Human Resources
Consultants assigned to each one or more of the Respondent franchisees during the time period
should be included as relevant ESI custodians, an approximate number being 6, for a total of 58
additional custodians.3 In this letter, the General Counsel also registered his opposition to
McDonald’s’ position that it could not produce some documents because it lacked “possession,
custody, or control” over them. These include documents responsive to Subpoena paragraphs
17, 19, 21-22, 45, 65, and 69–74. (See June 1, 2015 Goldsmith to Rucker letter, attached hereto
as Applicant Exhibit 39.) In the General Counsel’s view, other documents provided by
McDonald’s undermine McDonald’s’ position and show that McDonald’s does have access to

3 Documents provided by McDonald’s state that Human Resources Consultants are “the first line of support for the
McDonald’s System, responsible for consulting on People issues and initiatives to Restaurant employees, Operations
Staff, Franchise Owners, and Field HR.” (Exh. 30 at MCDNLRB033059.)
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