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JESSICA RIGGIN (SBN 281712)
1
jriggin@rukinhyland.com
VALERIE BRENDER (SBN 298224) 11/2/2021
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vbrender@rukinhyland.com
3 RUKIN HYLAND & RIGGIN LLP
1939 Harrison Street, Suite 290
4 Oakland, CA 94612
5 Telephone: (415) 421-1800
Facsimile: (415) 421-1700
6
MATTHEW C. HELLAND (SBN 250451)
7 helland@nka.com
DANIEL BROME (SBN 278915)
8 dbrome@nka.com
NICHOLS KASTER, LLP
9 235 Montgomery Street, Suite 810
San Francisco, CA 94104
10 Telephone: (415) 277-7235
Facsimile: (415) 277-7238
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Attorneys for Plaintiff
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(Additional Counsel on next page)
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14 SUPERIOR COURT OF THE STATE OF CALIFORNIA
15 COUNTY OF SAN MATEO
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ALIDA MAZARIEGOS, PAULA CASE NO.: 20-CIV-04267
17 GONZALEZ, and JAIME AMAYA
JOINT STATUS CONFERENCE
18 STATEMENT
Plaintiffs, on behalf of themselves
19 and all others similarly situated,
Date: November 9, 2021
v. Time: 8:30 a.m.
20
Judge: Hon. Nancy L. Fineman
VANGUARD CLEANING SYSTEMS,
21 Dept.: 04
INC.; RR FRANCHISING, INC., D/B/A
22 VANGUARD CLEANING SYSTEMS
OF SOUTHERN CALIFORNIA AND
23 D/B/A VANGUARD CLEANING
SYSTEMS OF NORTHERN
24 CALIFORNIA; BUDDHA CAPITAL
CORPORATION, D/B/A VANGUARD
25 CLEANING SYSTEMS OF
26 SACRAMENTO, D/B/A VANGUARD
CLEANING SYSTEMS OF THE
27 CENTRAL VALLEY, AND D/B/A
VANGUARD CLEANING SYSTEMS
28 OF THE CENTRAL COAST; AND
JOINT STATUS CONFERENCE STATEMENT
1 WINE COUNTRY VENTURES, INC.
D/B/A VANGUARD CLEANING
2 SYSTEMS OF THE NORTH BAY,
AND DOES 1 THROUGH 10,
3 INCLUSIVE,
4 Defendants.
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JOINT STATUS CONFERENCE STATEMENT
DAMON M. OTT, Bar No. 215392
1
dott@littler.com
2 PHILIP B. BALDWIN, Bar No. 307920
pbaldwin@littler.com
3 ROBERT M. GEIGER, Bar No. 322914
rgeiger@littler.com
4 LITTLER MENDELSON, P.C.
5 333 Bush Street
34th Floor
6 San Francisco, CA 94104
Telephone: 415.433.1940
7 Facsimile: 415.399.8490
Email: dott@litter.com
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9 Attorneys for Defendant
Vanguard Cleaning Systems, Inc.
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11 Adam V. Truong (State Bar No. 318896)
JACKSON LEWIS P.C.
12 50 California Street, 9th Floor
13 San Francisco, California 94111-4615
Telephone: (415) 394-9400
14 Facsimile: (415) 394-9401
E-mail: Adam.Truong@jacksonlewis.com
15
Michael A. Hood
16
JACKSON LEWIS P.C.
17 200 Spectrum Center Dr., Suite 500
Irvine, California 92618
18 Telephone: (949) 885-1374
Facsimile: (949) 885-1360
19 E-Mail: Michael.Hood@jacksonlewis.com
20
Adam L. Lounsbury (pro hac vice)
21 JACKSON LEWIS PC
701 E. Byrd Street, 17th Floor
22 Richmond, VA 23219
Telephone: (804) 212-2863
23 E-Mail: adam.lounsbury@jacksonlewis.com
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Attorneys for Defendants
25 RR Franchising, Inc., Buddha Capital Corporation and Wine Country Ventures, Inc.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 Plaintiffs Alida Mazariegos, Paula Gonzalez, and Jaime Amaya (collectively “Plaintiffs”)
2 and Defendants Vanguard Cleaning Systems, Inc. (“VCS”); RR Franchising, Inc., d/b/a
3 Vanguard Cleaning Systems of Southern California and d/b/a Vanguard Cleaning Systems of
4 Northern California (“RR Franchising”); Buddha Capital Corporation, d/b/a/ Vanguard Cleaning
5 Systems of Sacramento, d/b/a Vanguard Cleaning Systems of the Central Valley, and d/b/a/
6 Vanguard Cleaning Systems of the Central Coast (“Buddha Capital”); and Wine Country
7 Ventures, Inc. d/b/a Vanguard Cleaning Systems of the North Bay (“Wine Country”)
8 (collectively, “Defendants”) jointly submit this statement in preparation for the parties’ case
9 management conference on November 9, 2021.
10 Since the Parties’ previous case management conference statement, submitted June 29,
11 2021, the Parties have been actively engaged in discovery in preparation for Plaintiffs’
12 forthcoming motion for class certification. Plaintiffs have taken person most knowledgeable
13 depositions of all four Defendants; Defendants commenced depositions of two Named Plaintiffs.
14 All Parties have responded to written discovery, with some document production continuing.
15 Plaintiffs will file their motion for class certification on November 12, 2021, Defendants’
16 opposition shall be filed on or before February 11, 2022, Plaintiffs’ reply shall be filed on or
17 before February 25, 2022, and the motion will be heard March 22, 2022.
18 I. STATEMENT OF THE CASE
19 A. Plaintiffs’ Statement
20 Vanguard provides janitorial services to commercial offices, car dealerships, gyms,
21 warehouses, and many other businesses throughout the United States, including in California.
22 Vanguard Cleaning Systems, Inc. has structured its company as a three-tiered franchise system
23 where Vanguard sells Master Franchises to companies like Defendants Buddha Capital Corp
24 d/b/a Vanguard Cleaning Systems of Sacramento, the Central Valley, and the Central Coast, RR
25 Franchising d/b/a Vanguard Cleaning Systems of Southern California and Northern California,
26 and Wine Country Ventures, Inc. d/b/a Vanguard Cleaning Systems of the North Bay (referred to
27 collectively as “Master Franchises”). These Master Franchises in turn sell “unit franchises” to
28 Plaintiffs and Class Members.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 Plaintiffs and Class Members perform janitorial cleaning services for Vanguard’s
2 customers. Plaintiffs claim that they and other unit franchises are not true independent contractor
3 franchisees, but rather Vanguard’s and Master Franchises’ employees under the ABC test for
4 employment status. See Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, 964
5 (describing the ABC test); see also Cal. Labor Code § 2750.3 (codifying the ABC test as of
6 January 1, 2020), repealed and replaced by Cal. Labor Code § 2775 et seq. In a similar case in
7 Massachusetts, the trial court found that Vanguard could not satisfy two of the three prongs of
8 the ABC test. Da Costa v. Vanguard Cleaning Sys., Inc., No. CV 15-04743, 2017 WL 4817349,
9 at *6 (Mass. Super. Sept. 29, 2017) (finding that Vanguard failed prong B of the ABC test in part
10 because it touted that it was “a leader in the commercial cleaning industry.”).
11 Plaintiffs bring this case as a class action under California Code of Civil Procedure § 382
12 and a representative action under the California Labor Code Private Attorneys’ General Act,
13 Labor Code Section 2698, et seq. for damages and civil penalties as a result of their
14 misclassification.
15 B. Defendant VCS’s Statement
16 Plaintiffs mischaracterize VCS and its business through purposeful and negligent
17 misrepresentations and improper conflation of multiple separate businesses that legitimately
18 operate different businesses. Contrary to Plaintiffs’ contentions, VCS is in the legally
19 recognized business of franchising; specifically, the franchising of the Vanguard Cleaning
20 System (sometimes “the Cleaning System”), which is a commercial cleaning business system
21 that VCS developed, licensed, and sells to separately established companies known as master
22 franchises that sub-franchise the Vanguard Cleaning System to Unit Franchises and provide
23 administrative and support services for the Unit Franchises to which they have sub-franchised
24 the Cleaning System. VCS’s business is limited to franchising the Cleaning System, which
25 involves maintaining and improving the licensed Vanguard Cleaning System, promoting the
26 Cleaning System through marketing and advertising, and selling regional franchises to Master
27 Franchisees. VCS is a separately established and operated company with arm’s length
28 relationships with all Master Franchisees to which it has sold regional franchises. VCS has no
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 direct business or other relationship with the Unit Franchisees to which Master Franchisees have
2 sold – i.e., sub-franchised – unit franchises. Certainly VCS never employed Plaintiffs or any
3 other Unit Franchisees, and generally has little to no information about Unit Franchises or the
4 commercial cleaning businesses they operate using the Vanguard Cleaning System. Neither
5 VCS nor any of its employees or agents provide commercial cleaning services.
6 Franchising has “existed in this country in one form or another for over 150 years”
7 (Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 489 (2014)), and, has “become a
8 ubiquitous” and “thriving business model.” Id. at 477. Under this business model, the franchisor,
9 “sells the right to use its trademark and comprehensive business plan” to franchisees who
10 “independently own[], run[], and staff[] the retail outlet that sells goods under the franchisor's
11 name.” Id.
12 On information and belief, many of the Unit Franchisees that Plaintiffs seek to represent
13 – and which Plaintiffs consider “employees” – operate sophisticated businesses with workers of
14 their own. Unit Franchisees are business owners of commercial cleaning businesses – the unit
15 franchises – that they operate using the Vanguard Cleaning System. As such, Plaintiff – and
16 other Unit Franchisees -- are not VCS’s employees, nor employees of the Master Franchisees. If
17 anything, Plaintiffs are employees of their own businesses: the unit franchises.
18 Franchising is a statutorily recognized and permissible method of doing business at both
19 the federal and California level. The statutes that regulate franchising recognize that the
20 relationship between a franchisor and its franchisees is a commercial relationship, not an
21 employment relationship. The Federal Trade Commission (“FTC”), which authorizes and
22 regulates the sale of franchises in the United States, defines a “franchise” in part as “any
23 continuing commercial relationship or arrangement” whereby the franchisor promises that the
24 franchisee “will obtain the right to operate a business that is identified or associated with the
25 franchisor’s trademark ....” 16 C.F.R. § 436.1(h)(1). (16 C.F.R. § 436 et seq.).
26 The California Legislature has enacted two statutes to regulate franchise relationships in
27 this State (the California Franchise Investment Law [the “CFIL”] and the California Franchise
28 Relations Act [the “CFRA”]). These statutes have co-existed with the federal Lanham Act for
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 almost 50 years because they contain similar definitions of the “franchise” relationship and, thus,
2 are legally compatible. Like the FTC’s Franchise Rule, these enactments repeatedly characterize
3 franchises as “businesses” and describe the relationship created between a franchisor and a
4 franchisee as a “business relationship.” See, e.g., Cal. Corp. Code §31001 (disclosures are
5 designed to give a better understanding of the parties “business relationship”); §31005(a)(2)
6 (“[t]he operation of the franchisee’s business” must be substantially associated with the
7 franchisor’s trademark); §31011 (franchise fee is the amount paid “for the right to enter into a
8 business under a franchise agreement”).
9 Simply put, the ABC employment test cannot be applied to a relationship, if any,
10 between Plaintiffs (and the Unit Franchisees they seek to represent) and VCS. Beyond being
11 inapplicable under its own terms, any interpretation of the ABC test that would allow the ABC
12 test to be applied to VCS by Unit Franchisees is preempted for one of several reasons, discussed
13 in part below. A pending lawsuit filed in the Southern District of California, entitled
14 International Franchise Association et al. v. State of California et al., 3:20-cv-02243-BAS-DEB
15 (November 17, 2020) has requested declaratory and injunctive relief to prohibit the application
16 of the ABC test as between franchisees and franchisors in California, on the grounds of
17 preemption. That lawsuit could result in a preemption ruling that will have a direct and
18 substantial impact on this litigation.
19 Leaving aside the fact that the Unit Franchisees are not VCS’s employees, this case is
20 entirely inappropriate for class and representative treatment. On information and belief, Unit
21 Franchisees operate their businesses in widely different ways. Some are believed to have smaller
22 operations, while some have larger operations with many workers of their own. Some Unit
23 Franchisees are believed to have owners who perform no work for the business or perform only
24 business management functions, never performing any of the cleaning services their businesses
25 provide for their customers. Other owners, it is believed, only perform cleaning services when
26 needed (e.g., due to worker unavailability or business demands), while some owners regularly
27 perform cleaning functions in addition to their business management responsibilities. It is
28 believed that at least one Plaintiff in this case had workers of her own and personally performed
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 no cleaning services for at least a large portion of the relevant period (during which her duties
2 were limited to running her business, including managing the workers she retained). If this case
3 were to go to a trial, the employment status of the Unit Franchisees would be a mere threshold
4 issue. Plaintiffs’ actual claims include (i) nonpayment of wages, including overtime, (ii)
5 unreimbursed expenses, (iii) noncompliant rest breaks, and (iv) noncompliant meal breaks,
6 among others. There would be far too many individualized issues to resolve this case on a class
7 or representative basis, and any such “class” or representative case would be highly
8 unmanageable and a logistical nightmare for the Court.
9 C. Master Franchises’ Statement
10 The Master Franchises create business-to-business relationships that should be analyzed
11 in the context of franchise law, not employment or independent contractor law. Indeed, each
12 Master Franchise operates its business independently, using unique methods and means for
13 operating their businesses. Each of the Master Franchises has unique defenses based on the
14 circumstances arising from its relationships with the unit franchises---defenses and facts too
15 numerous to include here. For example, however, Plaintiff Mazariegos released her claims
16 against Wine Country Ventures, and it has a complete defense to this matter on that basis alone.
17 Another example is that Buddha Capital has implemented arbitration provisions that apply to the
18 putative class claims raised here. And, in yet another example, RR Franchising contracts with
19 unit franchisees owned and operated by putative class members that operate sophisticated
20 businesses offering an array of services beyond cleaning. This list is in no way exhaustive or
21 complete for any of these three defendants but is intended merely to highlight the numerous and
22 individualized issues arising out of the unique circumstances surrounding the Master Franchises
23 businesses and their relationships with putative class members. Furthermore, each of the Unit
24 Franchises and putative class members are independent businesses with the authority to conduct
25 business operations wholly independent from their relationship with the Master Franchises.
26 Indeed, some Unit Franchises perform services for competitors of the Master Franchises, and all
27 have the authority to do so. The Unit Franchises vary considerably from one another in terms of
28 the overall nature of their business activities, and other characteristics which demonstrate that
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 these franchise-franchisee relationships are not employer-employee relationships.
2 II. STATUS OF PLEADINGS
3 All parties have been served, and all parties have answered the initial complaint.
4 Plaintiffs filed their First Amended Complaint on February 5, 2021. Defendant Vanguard
5 Cleaning Systems, Inc. (“VCS”) filed its Answer to the Amended Complaint on March 9, 2021.
6 III. APPEARANCE OF ALL NAMED PARTIES AND COUNSEL
7 Counsel for Plaintiffs Alida Mazariegos, Paula Gonzalez, and Jaime Amaya and the
8 proposed class:
9 Rukin Hyland & Riggin LLP: Jessica Riggin, jriggin@rukinhyland.com; Valerie
10 Brender, vbrender@rukinhyland.com; Contact information: 1939 Harrison Street, Ste. 290;
11 Oakland, California 94612; Telephone: (415) 421-1800; Fax: (415) 421-1700.
12 Nichols Kaster LLP: Matthew Helland, helland@nka.com; Daniel Brome,
13 dbrome@nka.com; Contact information: 235 Montgomery Street, Suite 810; San Francisco, CA
14 94104; Telephone: (415) 277-7235; Fax: (415) 277-7238.
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16 Counsel for Defendant Vanguard Cleaning Systems, Inc.:
17 Damon Ott, DOtt@littler.com; Philip Baldwin, PBaldwin@littler.com; Robert Geiger,
18 RGeiger@littler.com; 333 Bush Street, 34th Floor, San Francisco, CA 94104; Telephone: (415)
19 433-1940; Fax: (415) 399-8490.
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21 Counsel for Defendants RR Franchising, Inc., Buddha Capital Corporation and Wine
22 County Ventures, Inc:
23 Jackson Lewis PC, Michael A. Hood, Michael.Hood@jacksonlewis.com; 200 Spectrum
24 Center Drive, Ste 500, Irvine, Ca 92618, Telephone: (949) 885-1360; Fax: (949) 885-1380;
25 Jackson Lewis, PC, Adam Truong, adam.truong@jacksonlewis.com; Lynsey Johnson,
26 lynsey.johnson@jacksonlewis.com, 50 California Street, 9th Floor, San Francisco, CA 94111,
27 Telephone: (415) 394-9400; Fax: (415) 394-9401.
28 Jackson Lewis PC, Adam L. Lounsbury (pro hac vice); 701 E. Byrd Street, 17th Floor,
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 Richmond, VA 23102, Telephone: (804)212-2863.
2 IV. STATUS OF DISCOVERY
3 All Parties are participating in discovery in preparation for Plaintiffs’ forthcoming motion
4 for class certification. All Parties have served written discovery responses and produced
5 documents. Plaintiffs have taken person most knowledgeable depositions of all four Defendants;
6 Defendants commenced depositions of two Named Plaintiffs; those depositions are continuing.
7 All Parties have responded to written discovery, with some document production continuing.
8 V. STATUS OF SETTLEMENT OR MEDIATION
9 There is currently no mediation scheduled.
10 VI. PENDING MOTIONS AND PROPOSED NEW HEARING DATE:
11 There are currently no motions pending.
12 VII. LEGAL ISSUES TO BE DECIDED
13 A. Plaintiffs’ Statement
14 The core legal issue is whether Plaintiffs and the putative class are Defendants’
15 employees for purposes of California wage and hour laws. Plaintiffs allege that they are
16 employees under both the “ABC test” for employment status, and the Borello, right-to-control
17 analysis.
18 Under the ABC test, a worker is an employee of the entity for whom he performs labor
19 unless the putative employer proves all three of the following: (A) that the worker is free from
20 the control and direction of the hiring entity in connection with the performance of the work,
21 both under the contract for the performance of the work and in fact; (B) that the worker performs
22 work that is outside the usual course of the hiring entity’s business; and (C) that the worker is
23 customarily engaged in an independently established trade, occupation, or business of the same
24 nature as the work performed. Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903,
25 964; see also Da Costa, 2017 WL 4817349, at *5 (Vanguard Cleaning Systems, Inc. was liable
26 in a three-tier franchising structure because the top-level franchise was “directly dependent on
27 commercial cleaning work of the ... unit franchisees”); Vazquez v. Jan-Pro Franchising
28 International, Inc. (9th Cir. 2019) 923 F.3d 575, 596, reh'g granted, opinion withdrawn (9th Cir.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 2019) 930 F.3d 1107, and on reh'g (9th Cir. 2019) 939 F.3d 1045, and opinion reinstated in part
2 on reh'g (9th Cir. 2019) 939 F.3d 1050 (“Thus, as a doctrinal matter, [a top-tier franchise] could
3 be Plaintiffs’ employer under the ABC test even though it is not a party to any contract with
4 Plaintiffs.”).
5 Plaintiffs also allege that they are Defendants’ employees under the traditional “statutory
6 purpose” test for employment status as set forth in S.G. Borello & Sons, Inc. v. Department of
7 Industrial Relations (1989) 48 Cal.3d 341, 350. See Dynamex, 4 Cal.4th at 929. Under Borello,
8 the principal test of an employment relationship is whether the person to whom service is
9 rendered “retains all necessary control” over the operations. 48 Cal.3d at 357. Secondary factors
10 evidencing employee status under Borello include (a) whether the one performing services is
11 engaged in a distinct occupation or business; (b) the kind of occupation, with reference to
12 whether, in the locality, the work is usually done under the direction of the principal or by a
13 specialist without supervision; (c) the skill required in the particular occupation; (d) whether the
14 principal or the worker supplies the instrumentalities, tools, and the place of work for the person
15 doing the work; (e) the length of time for which the services are to be performed; (f) the method
16 of payment, whether by the time or by the job; and (g) whether or not the work is a part of the
17 regular business of the principal. Id. at 351.
18 Plaintiffs allege that as a result of their misclassification, Defendants failed to comply
19 with California wage and hour laws. As a result, Plaintiffs seek damages for Defendants’ failure
20 to provide reimbursement for necessary expenses, unlawful withholding and receipt of earned
21 waged, failure to provide meal and rest breaks, failure to pay California overtime compensation,
22 failure to furnish accurate wage statements, failure to pay earned wages upon discharge, among
23 other claims.
24 Plaintiffs seek to certify a class on behalf of all California owner-operator franchisee
25 cleaners who signed a franchise agreement with Vanguard Cleaning Systems, Inc., or any of its
26 master franchisors, and who personally performed cleaning work during the period commencing
27 four years prior to April 6, 2020. Plaintiffs amended their complaint to add Private Attorneys’
28 General Act (PAGA) claims for Vanguard’s Labor Code violations under California Labor Code
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1 §§ 201-203, 204, 221, 226, 226.3, 226.7, 226.8, 400-410, 432.5, 450, 510, 512, 558, 1174, 1194,
2 1194.2, 1197, 1197.1, 1174.5, 2802, 2810.3, 2750.3, and IWC Wage Order No. 5.
3 B. Master Franchises’ Statement
4 Because the business-to-business relationship between the Master Franchises and the
5 Unit Franchises are not employment relationships, the Labor Code Sections cited by plaintiffs do
6 not apply. Further, the Master Franchises Defendant assert that Plaintiffs’ claims are barred on
7 the grounds of preemption; specifically, preemption of California’s “ABC” worker-classification
8 test by the Federal Trade Commission’s Franchise Rule, 16 C.F.R. §§ 436.1-437.3, the Federal
9 Trade Commission’s Franchise Rule Guide, and the Lanham Act. There is an inherent,
10 irreconcilable conflict between the Federal law that regulates franchising and the trademark
11 license underlying all franchised businesses and California’s ABC test. The ABC Test
12 impermissibly impinges on the essential feature of the franchise model—control over brand-
13 specific systems and business models. The ABC Test, if interpreted to apply to a franchisor
14 franchisee relationship, would have the perverse effect of converting all franchise relationships,
15 which necessarily require some element of control as defined by the FTC Franchise Rule, into
16 employment relationships despite those relationships being arms’ length and governed by
17 contract. Further, by definition all franchisees are granted the right to operate a business that is
18 identified or associated with the franchisor’s trademark.” 16 C.F.R. 436.1(h). If operating a
19 business identified or associated with the franchisor’s trademark (or offering, selling, or
20 distributing goods, services, or commodities that are identified or associated with the franchisor’s
21 trademark) is considered performing work that is within the usual course of the franchisor’s
22 business, and the ABC test otherwise applies to franchisees, then franchisees (under federal law)
23 would be employees in California under the ABC Test. As such those laws governing franchise
24 relationships preempt the application of the ABC test to the relationship between Defendant and
25 each Plaintiff (and putative class member) and, therefore, prohibit use of the ABC test to
26 determine the nature of these relationships. To the extent Plaintiffs’ claims are based on an
27 alleged employment relationship between Plaintiffs and Defendant arising from application of
28 California’s ABC test, Plaintiffs’ claims fail as a matter of law.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 Furthermore, this case is not suitable for class treatment given the multitude of
2 individualized issues concerning the application of the ABC Test, and the specific claims at
3 issue, which are highly dependent upon the individual experiences of the putative class members.
4 C. Defendant VCS’s Statement
5 VCS shares the Master Franchisees’ belief that Plaintiffs’ reliance on the ABC Test is
6 both misguided and preempted. See also International Franchise Association et al. v. State of
7 California et al., 3:20-cv-02243-BAS-DEB (S.D. Cal. November 17, 2020) (seeking declaratory
8 and injunctive relief to preclude application of ABC Test between franchisors and franchisees).
9 California statutory law recognizes that the ABC test cannot be applied in all situations, in which
10 case the Borello test must be applied. See Labor Code § 2750.3(a)(3) (“If a court of law rules
11 that the three-part test… cannot be applied to a particular context based on grounds other than an
12 express exception to employment status [e.g., on the grounds of preemption]…, then the
13 determination of employee or independent contractor status in that context shall instead be
14 governed by the California Supreme Court’s decision in S.G. Borello & Sons, Inc. v. Department
15 of Industrial Relations (1989) 48 Cal.3d 341.”) (Brackets added). Unit Franchisees are clearly
16 not VCS’s employees under Borello. Indeed, VCS has had no relationship with Unit Franchisees
17 during the relevant time period. This fact-intensive issue will be briefed in full at the appropriate
18 time.
19 As VCS notes above, this case is also inappropriate for class or representative treatment,
20 including because of the presence of highly individualized issues that would need to be resolved
21 for each of Plaintiffs’ claims, which would result in an unmanageable litigation process. This
22 should become clear as the litigation progresses.
23 VIII. PROPOSED BREIFING SCHEDULE FOR MOTIONS
24 The Court recently approved the Parties’ stipulated briefing and hearing schedule for
25 Plaintiffs’ forthcoming class certification motion. (Order dated October 13, 2021.) No other
26 motions are pending, and setting a briefing schedule on future motions is premature at this time.
27 IX. LISTING OF ALL PREVIOUSLY SET PRETRIAL DATES AND DEADLINES
28 A. Plaintiffs’ Statement
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 No trial date has been set. Plaintiffs propose that a trial date be set after a decision on their
2 motion for class certification. Plaintiffs have requested a jury trial and anticipate that a class trial
3 will take two to three weeks.
4 B. Master Franchises’ Statement
5 The Master Franchises agree that the trial date should be set after a decision on class
6 certification. The Master Franchises currently estimate that a class trial, if appropriate, would
7 require five to six weeks, especially if conducted remotely.
8 C. Defendant VCS’s Statement
9 VCS joins Plaintiffs and the Master Franchises in proposing that the trial date be set after
10 the Court rules on Plaintiffs' motion for class certification. VCS believes it is too early to assess
11 how much time would be needed for trial and when the Parties would be ready for a trial (and
12 answers to these questions will vary greatly depending on the Court’s ruling on class certification).
13 X. FURTHER CASE MANAGEMENT AND TRIAL SETTING CONFERENCE
14 A. Plaintiffs’ Statement
15 Plaintiffs propose a further case management conference be set 30 days after the hearing
16 on Plaintiffs’ class certification motion.
17 B. Master Franchises’ Statement
18 The Master Franchises agree with Plaintiffs’ proposal for a further case management
19 conference approximately thirty days after the hearing on Plaintiff’s class certification motion.
20 C. Defendant VCS’s Statement
21 VCS does not oppose the request for a further conference approximately thirty days after
22 the hearing on Plaintiff’s class certification motion.
23 XI. OTHER MATTERS
24 No other matters at this time.
25 Dated: November 2, 2021 NICHOLS KASTER, LLP
26
By: s/ Daniel Brome
27 Daniel Brome
Matthew Helland
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
Attorneys for Plaintiffs
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Dated: November 2, 2021 LITTLER MENDELSON P.C.
3
4 By: s/ Philip Baldwin
Philip Baldwin
5 Damon Ott
Attorneys for Defendant Vanguard Cleaning Systems, Inc.
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8 Dated: November 2, 2021 JACKSON LEWIS P.C.
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By: s/ Michael A. Hood
10 Michael A. Hood
Adam V. Truong
11 Attorneys for Defendants RR Franchising, Inc., Wine
Country Ventures, Inc., and Buddha Capital Corp.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
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JESSICA RIGGIN (SBN 281712) 1 jriggin@rukinhyland.com VALERIE BRENDER (SBN 298224) 11/2/2021 2 vbrender@rukinhyland.com 3 RUKIN HYLAND & RIGGIN LLP 1939 Harrison Street, Suite 290 4 Oakland, CA 94612 5 Telephone: (415) 421-1800 Facsimile: (415) 421-1700 6 MATTHEW C. HELLAND (SBN 250451) 7 helland@nka.com DANIEL BROME (SBN 278915) 8 dbrome@nka.com NICHOLS KASTER, LLP 9 235 Montgomery Street, Suite 810 San Francisco, CA 94104 10 Telephone: (415) 277-7235 Facsimile: (415) 277-7238 11 Attorneys for Plaintiff 12 (Additional Counsel on next page) 13 14 SUPERIOR COURT OF THE STATE OF CALIFORNIA 15 COUNTY OF SAN MATEO 16 ALIDA MAZARIEGOS, PAULA CASE NO.: 20-CIV-04267 17 GONZALEZ, and JAIME AMAYA JOINT STATUS CONFERENCE 18 STATEMENT Plaintiffs, on behalf of themselves 19 and all others similarly situated, Date: November 9, 2021 v. Time: 8:30 a.m. 20 Judge: Hon. Nancy L. Fineman VANGUARD CLEANING SYSTEMS, 21 Dept.: 04 INC.; RR FRANCHISING, INC., D/B/A 22 VANGUARD CLEANING SYSTEMS OF SOUTHERN CALIFORNIA AND 23 D/B/A VANGUARD CLEANING SYSTEMS OF NORTHERN 24 CALIFORNIA; BUDDHA CAPITAL CORPORATION, D/B/A VANGUARD 25 CLEANING SYSTEMS OF 26 SACRAMENTO, D/B/A VANGUARD CLEANING SYSTEMS OF THE 27 CENTRAL VALLEY, AND D/B/A VANGUARD CLEANING SYSTEMS 28 OF THE CENTRAL COAST; AND JOINT STATUS CONFERENCE STATEMENT 1 WINE COUNTRY VENTURES, INC. D/B/A VANGUARD CLEANING 2 SYSTEMS OF THE NORTH BAY, AND DOES 1 THROUGH 10, 3 INCLUSIVE, 4 Defendants. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JOINT STATUS CONFERENCE STATEMENT DAMON M. OTT, Bar No. 215392 1 dott@littler.com 2 PHILIP B. BALDWIN, Bar No. 307920 pbaldwin@littler.com 3 ROBERT M. GEIGER, Bar No. 322914 rgeiger@littler.com 4 LITTLER MENDELSON, P.C. 5 333 Bush Street 34th Floor 6 San Francisco, CA 94104 Telephone: 415.433.1940 7 Facsimile: 415.399.8490 Email: dott@litter.com 8 9 Attorneys for Defendant Vanguard Cleaning Systems, Inc. 10 11 Adam V. Truong (State Bar No. 318896) JACKSON LEWIS P.C. 12 50 California Street, 9th Floor 13 San Francisco, California 94111-4615 Telephone: (415) 394-9400 14 Facsimile: (415) 394-9401 E-mail: Adam.Truong@jacksonlewis.com 15 Michael A. Hood 16 JACKSON LEWIS P.C. 17 200 Spectrum Center Dr., Suite 500 Irvine, California 92618 18 Telephone: (949) 885-1374 Facsimile: (949) 885-1360 19 E-Mail: Michael.Hood@jacksonlewis.com 20 Adam L. Lounsbury (pro hac vice) 21 JACKSON LEWIS PC 701 E. Byrd Street, 17th Floor 22 Richmond, VA 23219 Telephone: (804) 212-2863 23 E-Mail: adam.lounsbury@jacksonlewis.com 24 Attorneys for Defendants 25 RR Franchising, Inc., Buddha Capital Corporation and Wine Country Ventures, Inc. 26 27 28 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 Plaintiffs Alida Mazariegos, Paula Gonzalez, and Jaime Amaya (collectively “Plaintiffs”) 2 and Defendants Vanguard Cleaning Systems, Inc. (“VCS”); RR Franchising, Inc., d/b/a 3 Vanguard Cleaning Systems of Southern California and d/b/a Vanguard Cleaning Systems of 4 Northern California (“RR Franchising”); Buddha Capital Corporation, d/b/a/ Vanguard Cleaning 5 Systems of Sacramento, d/b/a Vanguard Cleaning Systems of the Central Valley, and d/b/a/ 6 Vanguard Cleaning Systems of the Central Coast (“Buddha Capital”); and Wine Country 7 Ventures, Inc. d/b/a Vanguard Cleaning Systems of the North Bay (“Wine Country”) 8 (collectively, “Defendants”) jointly submit this statement in preparation for the parties’ case 9 management conference on November 9, 2021. 10 Since the Parties’ previous case management conference statement, submitted June 29, 11 2021, the Parties have been actively engaged in discovery in preparation for Plaintiffs’ 12 forthcoming motion for class certification. Plaintiffs have taken person most knowledgeable 13 depositions of all four Defendants; Defendants commenced depositions of two Named Plaintiffs. 14 All Parties have responded to written discovery, with some document production continuing. 15 Plaintiffs will file their motion for class certification on November 12, 2021, Defendants’ 16 opposition shall be filed on or before February 11, 2022, Plaintiffs’ reply shall be filed on or 17 before February 25, 2022, and the motion will be heard March 22, 2022. 18 I. STATEMENT OF THE CASE 19 A. Plaintiffs’ Statement 20 Vanguard provides janitorial services to commercial offices, car dealerships, gyms, 21 warehouses, and many other businesses throughout the United States, including in California. 22 Vanguard Cleaning Systems, Inc. has structured its company as a three-tiered franchise system 23 where Vanguard sells Master Franchises to companies like Defendants Buddha Capital Corp 24 d/b/a Vanguard Cleaning Systems of Sacramento, the Central Valley, and the Central Coast, RR 25 Franchising d/b/a Vanguard Cleaning Systems of Southern California and Northern California, 26 and Wine Country Ventures, Inc. d/b/a Vanguard Cleaning Systems of the North Bay (referred to 27 collectively as “Master Franchises”). These Master Franchises in turn sell “unit franchises” to 28 Plaintiffs and Class Members. 1 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 Plaintiffs and Class Members perform janitorial cleaning services for Vanguard’s 2 customers. Plaintiffs claim that they and other unit franchises are not true independent contractor 3 franchisees, but rather Vanguard’s and Master Franchises’ employees under the ABC test for 4 employment status. See Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, 964 5 (describing the ABC test); see also Cal. Labor Code § 2750.3 (codifying the ABC test as of 6 January 1, 2020), repealed and replaced by Cal. Labor Code § 2775 et seq. In a similar case in 7 Massachusetts, the trial court found that Vanguard could not satisfy two of the three prongs of 8 the ABC test. Da Costa v. Vanguard Cleaning Sys., Inc., No. CV 15-04743, 2017 WL 4817349, 9 at *6 (Mass. Super. Sept. 29, 2017) (finding that Vanguard failed prong B of the ABC test in part 10 because it touted that it was “a leader in the commercial cleaning industry.”). 11 Plaintiffs bring this case as a class action under California Code of Civil Procedure § 382 12 and a representative action under the California Labor Code Private Attorneys’ General Act, 13 Labor Code Section 2698, et seq. for damages and civil penalties as a result of their 14 misclassification. 15 B. Defendant VCS’s Statement 16 Plaintiffs mischaracterize VCS and its business through purposeful and negligent 17 misrepresentations and improper conflation of multiple separate businesses that legitimately 18 operate different businesses. Contrary to Plaintiffs’ contentions, VCS is in the legally 19 recognized business of franchising; specifically, the franchising of the Vanguard Cleaning 20 System (sometimes “the Cleaning System”), which is a commercial cleaning business system 21 that VCS developed, licensed, and sells to separately established companies known as master 22 franchises that sub-franchise the Vanguard Cleaning System to Unit Franchises and provide 23 administrative and support services for the Unit Franchises to which they have sub-franchised 24 the Cleaning System. VCS’s business is limited to franchising the Cleaning System, which 25 involves maintaining and improving the licensed Vanguard Cleaning System, promoting the 26 Cleaning System through marketing and advertising, and selling regional franchises to Master 27 Franchisees. VCS is a separately established and operated company with arm’s length 28 relationships with all Master Franchisees to which it has sold regional franchises. VCS has no 2 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 direct business or other relationship with the Unit Franchisees to which Master Franchisees have 2 sold – i.e., sub-franchised – unit franchises. Certainly VCS never employed Plaintiffs or any 3 other Unit Franchisees, and generally has little to no information about Unit Franchises or the 4 commercial cleaning businesses they operate using the Vanguard Cleaning System. Neither 5 VCS nor any of its employees or agents provide commercial cleaning services. 6 Franchising has “existed in this country in one form or another for over 150 years” 7 (Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 489 (2014)), and, has “become a 8 ubiquitous” and “thriving business model.” Id. at 477. Under this business model, the franchisor, 9 “sells the right to use its trademark and comprehensive business plan” to franchisees who 10 “independently own[], run[], and staff[] the retail outlet that sells goods under the franchisor's 11 name.” Id. 12 On information and belief, many of the Unit Franchisees that Plaintiffs seek to represent 13 – and which Plaintiffs consider “employees” – operate sophisticated businesses with workers of 14 their own. Unit Franchisees are business owners of commercial cleaning businesses – the unit 15 franchises – that they operate using the Vanguard Cleaning System. As such, Plaintiff – and 16 other Unit Franchisees -- are not VCS’s employees, nor employees of the Master Franchisees. If 17 anything, Plaintiffs are employees of their own businesses: the unit franchises. 18 Franchising is a statutorily recognized and permissible method of doing business at both 19 the federal and California level. The statutes that regulate franchising recognize that the 20 relationship between a franchisor and its franchisees is a commercial relationship, not an 21 employment relationship. The Federal Trade Commission (“FTC”), which authorizes and 22 regulates the sale of franchises in the United States, defines a “franchise” in part as “any 23 continuing commercial relationship or arrangement” whereby the franchisor promises that the 24 franchisee “will obtain the right to operate a business that is identified or associated with the 25 franchisor’s trademark ....” 16 C.F.R. § 436.1(h)(1). (16 C.F.R. § 436 et seq.). 26 The California Legislature has enacted two statutes to regulate franchise relationships in 27 this State (the California Franchise Investment Law [the “CFIL”] and the California Franchise 28 Relations Act [the “CFRA”]). These statutes have co-existed with the federal Lanham Act for 3 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 almost 50 years because they contain similar definitions of the “franchise” relationship and, thus, 2 are legally compatible. Like the FTC’s Franchise Rule, these enactments repeatedly characterize 3 franchises as “businesses” and describe the relationship created between a franchisor and a 4 franchisee as a “business relationship.” See, e.g., Cal. Corp. Code §31001 (disclosures are 5 designed to give a better understanding of the parties “business relationship”); §31005(a)(2) 6 (“[t]he operation of the franchisee’s business” must be substantially associated with the 7 franchisor’s trademark); §31011 (franchise fee is the amount paid “for the right to enter into a 8 business under a franchise agreement”). 9 Simply put, the ABC employment test cannot be applied to a relationship, if any, 10 between Plaintiffs (and the Unit Franchisees they seek to represent) and VCS. Beyond being 11 inapplicable under its own terms, any interpretation of the ABC test that would allow the ABC 12 test to be applied to VCS by Unit Franchisees is preempted for one of several reasons, discussed 13 in part below. A pending lawsuit filed in the Southern District of California, entitled 14 International Franchise Association et al. v. State of California et al., 3:20-cv-02243-BAS-DEB 15 (November 17, 2020) has requested declaratory and injunctive relief to prohibit the application 16 of the ABC test as between franchisees and franchisors in California, on the grounds of 17 preemption. That lawsuit could result in a preemption ruling that will have a direct and 18 substantial impact on this litigation. 19 Leaving aside the fact that the Unit Franchisees are not VCS’s employees, this case is 20 entirely inappropriate for class and representative treatment. On information and belief, Unit 21 Franchisees operate their businesses in widely different ways. Some are believed to have smaller 22 operations, while some have larger operations with many workers of their own. Some Unit 23 Franchisees are believed to have owners who perform no work for the business or perform only 24 business management functions, never performing any of the cleaning services their businesses 25 provide for their customers. Other owners, it is believed, only perform cleaning services when 26 needed (e.g., due to worker unavailability or business demands), while some owners regularly 27 perform cleaning functions in addition to their business management responsibilities. It is 28 believed that at least one Plaintiff in this case had workers of her own and personally performed 4 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 no cleaning services for at least a large portion of the relevant period (during which her duties 2 were limited to running her business, including managing the workers she retained). If this case 3 were to go to a trial, the employment status of the Unit Franchisees would be a mere threshold 4 issue. Plaintiffs’ actual claims include (i) nonpayment of wages, including overtime, (ii) 5 unreimbursed expenses, (iii) noncompliant rest breaks, and (iv) noncompliant meal breaks, 6 among others. There would be far too many individualized issues to resolve this case on a class 7 or representative basis, and any such “class” or representative case would be highly 8 unmanageable and a logistical nightmare for the Court. 9 C. Master Franchises’ Statement 10 The Master Franchises create business-to-business relationships that should be analyzed 11 in the context of franchise law, not employment or independent contractor law. Indeed, each 12 Master Franchise operates its business independently, using unique methods and means for 13 operating their businesses. Each of the Master Franchises has unique defenses based on the 14 circumstances arising from its relationships with the unit franchises---defenses and facts too 15 numerous to include here. For example, however, Plaintiff Mazariegos released her claims 16 against Wine Country Ventures, and it has a complete defense to this matter on that basis alone. 17 Another example is that Buddha Capital has implemented arbitration provisions that apply to the 18 putative class claims raised here. And, in yet another example, RR Franchising contracts with 19 unit franchisees owned and operated by putative class members that operate sophisticated 20 businesses offering an array of services beyond cleaning. This list is in no way exhaustive or 21 complete for any of these three defendants but is intended merely to highlight the numerous and 22 individualized issues arising out of the unique circumstances surrounding the Master Franchises 23 businesses and their relationships with putative class members. Furthermore, each of the Unit 24 Franchises and putative class members are independent businesses with the authority to conduct 25 business operations wholly independent from their relationship with the Master Franchises. 26 Indeed, some Unit Franchises perform services for competitors of the Master Franchises, and all 27 have the authority to do so. The Unit Franchises vary considerably from one another in terms of 28 the overall nature of their business activities, and other characteristics which demonstrate that 5 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 these franchise-franchisee relationships are not employer-employee relationships. 2 II. STATUS OF PLEADINGS 3 All parties have been served, and all parties have answered the initial complaint. 4 Plaintiffs filed their First Amended Complaint on February 5, 2021. Defendant Vanguard 5 Cleaning Systems, Inc. (“VCS”) filed its Answer to the Amended Complaint on March 9, 2021. 6 III. APPEARANCE OF ALL NAMED PARTIES AND COUNSEL 7 Counsel for Plaintiffs Alida Mazariegos, Paula Gonzalez, and Jaime Amaya and the 8 proposed class: 9 Rukin Hyland & Riggin LLP: Jessica Riggin, jriggin@rukinhyland.com; Valerie 10 Brender, vbrender@rukinhyland.com; Contact information: 1939 Harrison Street, Ste. 290; 11 Oakland, California 94612; Telephone: (415) 421-1800; Fax: (415) 421-1700. 12 Nichols Kaster LLP: Matthew Helland, helland@nka.com; Daniel Brome, 13 dbrome@nka.com; Contact information: 235 Montgomery Street, Suite 810; San Francisco, CA 14 94104; Telephone: (415) 277-7235; Fax: (415) 277-7238. 15 16 Counsel for Defendant Vanguard Cleaning Systems, Inc.: 17 Damon Ott, DOtt@littler.com; Philip Baldwin, PBaldwin@littler.com; Robert Geiger, 18 RGeiger@littler.com; 333 Bush Street, 34th Floor, San Francisco, CA 94104; Telephone: (415) 19 433-1940; Fax: (415) 399-8490. 20 21 Counsel for Defendants RR Franchising, Inc., Buddha Capital Corporation and Wine 22 County Ventures, Inc: 23 Jackson Lewis PC, Michael A. Hood, Michael.Hood@jacksonlewis.com; 200 Spectrum 24 Center Drive, Ste 500, Irvine, Ca 92618, Telephone: (949) 885-1360; Fax: (949) 885-1380; 25 Jackson Lewis, PC, Adam Truong, adam.truong@jacksonlewis.com; Lynsey Johnson, 26 lynsey.johnson@jacksonlewis.com, 50 California Street, 9th Floor, San Francisco, CA 94111, 27 Telephone: (415) 394-9400; Fax: (415) 394-9401. 28 Jackson Lewis PC, Adam L. Lounsbury (pro hac vice); 701 E. Byrd Street, 17th Floor, 6 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 Richmond, VA 23102, Telephone: (804)212-2863. 2 IV. STATUS OF DISCOVERY 3 All Parties are participating in discovery in preparation for Plaintiffs’ forthcoming motion 4 for class certification. All Parties have served written discovery responses and produced 5 documents. Plaintiffs have taken person most knowledgeable depositions of all four Defendants; 6 Defendants commenced depositions of two Named Plaintiffs; those depositions are continuing. 7 All Parties have responded to written discovery, with some document production continuing. 8 V. STATUS OF SETTLEMENT OR MEDIATION 9 There is currently no mediation scheduled. 10 VI. PENDING MOTIONS AND PROPOSED NEW HEARING DATE: 11 There are currently no motions pending. 12 VII. LEGAL ISSUES TO BE DECIDED 13 A. Plaintiffs’ Statement 14 The core legal issue is whether Plaintiffs and the putative class are Defendants’ 15 employees for purposes of California wage and hour laws. Plaintiffs allege that they are 16 employees under both the “ABC test” for employment status, and the Borello, right-to-control 17 analysis. 18 Under the ABC test, a worker is an employee of the entity for whom he performs labor 19 unless the putative employer proves all three of the following: (A) that the worker is free from 20 the control and direction of the hiring entity in connection with the performance of the work, 21 both under the contract for the performance of the work and in fact; (B) that the worker performs 22 work that is outside the usual course of the hiring entity’s business; and (C) that the worker is 23 customarily engaged in an independently established trade, occupation, or business of the same 24 nature as the work performed. Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, 25 964; see also Da Costa, 2017 WL 4817349, at *5 (Vanguard Cleaning Systems, Inc. was liable 26 in a three-tier franchising structure because the top-level franchise was “directly dependent on 27 commercial cleaning work of the ... unit franchisees”); Vazquez v. Jan-Pro Franchising 28 International, Inc. (9th Cir. 2019) 923 F.3d 575, 596, reh'g granted, opinion withdrawn (9th Cir. 7 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 2019) 930 F.3d 1107, and on reh'g (9th Cir. 2019) 939 F.3d 1045, and opinion reinstated in part 2 on reh'g (9th Cir. 2019) 939 F.3d 1050 (“Thus, as a doctrinal matter, [a top-tier franchise] could 3 be Plaintiffs’ employer under the ABC test even though it is not a party to any contract with 4 Plaintiffs.”). 5 Plaintiffs also allege that they are Defendants’ employees under the traditional “statutory 6 purpose” test for employment status as set forth in S.G. Borello & Sons, Inc. v. Department of 7 Industrial Relations (1989) 48 Cal.3d 341, 350. See Dynamex, 4 Cal.4th at 929. Under Borello, 8 the principal test of an employment relationship is whether the person to whom service is 9 rendered “retains all necessary control” over the operations. 48 Cal.3d at 357. Secondary factors 10 evidencing employee status under Borello include (a) whether the one performing services is 11 engaged in a distinct occupation or business; (b) the kind of occupation, with reference to 12 whether, in the locality, the work is usually done under the direction of the principal or by a 13 specialist without supervision; (c) the skill required in the particular occupation; (d) whether the 14 principal or the worker supplies the instrumentalities, tools, and the place of work for the person 15 doing the work; (e) the length of time for which the services are to be performed; (f) the method 16 of payment, whether by the time or by the job; and (g) whether or not the work is a part of the 17 regular business of the principal. Id. at 351. 18 Plaintiffs allege that as a result of their misclassification, Defendants failed to comply 19 with California wage and hour laws. As a result, Plaintiffs seek damages for Defendants’ failure 20 to provide reimbursement for necessary expenses, unlawful withholding and receipt of earned 21 waged, failure to provide meal and rest breaks, failure to pay California overtime compensation, 22 failure to furnish accurate wage statements, failure to pay earned wages upon discharge, among 23 other claims. 24 Plaintiffs seek to certify a class on behalf of all California owner-operator franchisee 25 cleaners who signed a franchise agreement with Vanguard Cleaning Systems, Inc., or any of its 26 master franchisors, and who personally performed cleaning work during the period commencing 27 four years prior to April 6, 2020. Plaintiffs amended their complaint to add Private Attorneys’ 28 General Act (PAGA) claims for Vanguard’s Labor Code violations under California Labor Code 8 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 §§ 201-203, 204, 221, 226, 226.3, 226.7, 226.8, 400-410, 432.5, 450, 510, 512, 558, 1174, 1194, 2 1194.2, 1197, 1197.1, 1174.5, 2802, 2810.3, 2750.3, and IWC Wage Order No. 5. 3 B. Master Franchises’ Statement 4 Because the business-to-business relationship between the Master Franchises and the 5 Unit Franchises are not employment relationships, the Labor Code Sections cited by plaintiffs do 6 not apply. Further, the Master Franchises Defendant assert that Plaintiffs’ claims are barred on 7 the grounds of preemption; specifically, preemption of California’s “ABC” worker-classification 8 test by the Federal Trade Commission’s Franchise Rule, 16 C.F.R. §§ 436.1-437.3, the Federal 9 Trade Commission’s Franchise Rule Guide, and the Lanham Act. There is an inherent, 10 irreconcilable conflict between the Federal law that regulates franchising and the trademark 11 license underlying all franchised businesses and California’s ABC test. The ABC Test 12 impermissibly impinges on the essential feature of the franchise model—control over brand- 13 specific systems and business models. The ABC Test, if interpreted to apply to a franchisor 14 franchisee relationship, would have the perverse effect of converting all franchise relationships, 15 which necessarily require some element of control as defined by the FTC Franchise Rule, into 16 employment relationships despite those relationships being arms’ length and governed by 17 contract. Further, by definition all franchisees are granted the right to operate a business that is 18 identified or associated with the franchisor’s trademark.” 16 C.F.R. 436.1(h). If operating a 19 business identified or associated with the franchisor’s trademark (or offering, selling, or 20 distributing goods, services, or commodities that are identified or associated with the franchisor’s 21 trademark) is considered performing work that is within the usual course of the franchisor’s 22 business, and the ABC test otherwise applies to franchisees, then franchisees (under federal law) 23 would be employees in California under the ABC Test. As such those laws governing franchise 24 relationships preempt the application of the ABC test to the relationship between Defendant and 25 each Plaintiff (and putative class member) and, therefore, prohibit use of the ABC test to 26 determine the nature of these relationships. To the extent Plaintiffs’ claims are based on an 27 alleged employment relationship between Plaintiffs and Defendant arising from application of 28 California’s ABC test, Plaintiffs’ claims fail as a matter of law. 9 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 Furthermore, this case is not suitable for class treatment given the multitude of 2 individualized issues concerning the application of the ABC Test, and the specific claims at 3 issue, which are highly dependent upon the individual experiences of the putative class members. 4 C. Defendant VCS’s Statement 5 VCS shares the Master Franchisees’ belief that Plaintiffs’ reliance on the ABC Test is 6 both misguided and preempted. See also International Franchise Association et al. v. State of 7 California et al., 3:20-cv-02243-BAS-DEB (S.D. Cal. November 17, 2020) (seeking declaratory 8 and injunctive relief to preclude application of ABC Test between franchisors and franchisees). 9 California statutory law recognizes that the ABC test cannot be applied in all situations, in which 10 case the Borello test must be applied. See Labor Code § 2750.3(a)(3) (“If a court of law rules 11 that the three-part test… cannot be applied to a particular context based on grounds other than an 12 express exception to employment status [e.g., on the grounds of preemption]…, then the 13 determination of employee or independent contractor status in that context shall instead be 14 governed by the California Supreme Court’s decision in S.G. Borello & Sons, Inc. v. Department 15 of Industrial Relations (1989) 48 Cal.3d 341.”) (Brackets added). Unit Franchisees are clearly 16 not VCS’s employees under Borello. Indeed, VCS has had no relationship with Unit Franchisees 17 during the relevant time period. This fact-intensive issue will be briefed in full at the appropriate 18 time. 19 As VCS notes above, this case is also inappropriate for class or representative treatment, 20 including because of the presence of highly individualized issues that would need to be resolved 21 for each of Plaintiffs’ claims, which would result in an unmanageable litigation process. This 22 should become clear as the litigation progresses. 23 VIII. PROPOSED BREIFING SCHEDULE FOR MOTIONS 24 The Court recently approved the Parties’ stipulated briefing and hearing schedule for 25 Plaintiffs’ forthcoming class certification motion. (Order dated October 13, 2021.) No other 26 motions are pending, and setting a briefing schedule on future motions is premature at this time. 27 IX. LISTING OF ALL PREVIOUSLY SET PRETRIAL DATES AND DEADLINES 28 A. Plaintiffs’ Statement 10 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 No trial date has been set. Plaintiffs propose that a trial date be set after a decision on their 2 motion for class certification. Plaintiffs have requested a jury trial and anticipate that a class trial 3 will take two to three weeks. 4 B. Master Franchises’ Statement 5 The Master Franchises agree that the trial date should be set after a decision on class 6 certification. The Master Franchises currently estimate that a class trial, if appropriate, would 7 require five to six weeks, especially if conducted remotely. 8 C. Defendant VCS’s Statement 9 VCS joins Plaintiffs and the Master Franchises in proposing that the trial date be set after 10 the Court rules on Plaintiffs' motion for class certification. VCS believes it is too early to assess 11 how much time would be needed for trial and when the Parties would be ready for a trial (and 12 answers to these questions will vary greatly depending on the Court’s ruling on class certification). 13 X. FURTHER CASE MANAGEMENT AND TRIAL SETTING CONFERENCE 14 A. Plaintiffs’ Statement 15 Plaintiffs propose a further case management conference be set 30 days after the hearing 16 on Plaintiffs’ class certification motion. 17 B. Master Franchises’ Statement 18 The Master Franchises agree with Plaintiffs’ proposal for a further case management 19 conference approximately thirty days after the hearing on Plaintiff’s class certification motion. 20 C. Defendant VCS’s Statement 21 VCS does not oppose the request for a further conference approximately thirty days after 22 the hearing on Plaintiff’s class certification motion. 23 XI. OTHER MATTERS 24 No other matters at this time. 25 Dated: November 2, 2021 NICHOLS KASTER, LLP 26 By: s/ Daniel Brome 27 Daniel Brome Matthew Helland 28 11 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT Attorneys for Plaintiffs 1 2 Dated: November 2, 2021 LITTLER MENDELSON P.C. 3 4 By: s/ Philip Baldwin Philip Baldwin 5 Damon Ott Attorneys for Defendant Vanguard Cleaning Systems, Inc. 6 7 8 Dated: November 2, 2021 JACKSON LEWIS P.C. 9 By: s/ Michael A. Hood 10 Michael A. Hood Adam V. Truong 11 Attorneys for Defendants RR Franchising, Inc., Wine Country Ventures, Inc., and Buddha Capital Corp. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT