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1 Michael A. Hood (State Bar No. 71258)
JACKSON LEWIS P.C.
2 200 Spectrum Center Drive, Suite 500
Irvine, California 92618-5005
3 Telephone: (949) 885-1374
Facsimile: (949) 885-1380
4 Email: Michael.Hood@jacksonlewis.com
5 Adam L. Lounsbury, Admitted Pro Hac Vice
JACKSON LEWIS P.C.
6 701 East Byrd Street - 17th Floor
Richmond, Virginia 23219-4500
7 Telephone: (804) 649-0404
Facsimile: (804) 649-0403
8 Email: Adam.Lounsbury@jacksonlewis.com
9 Attorneys for Defendants
RR FRANCHISING, INC., BUDDHA
10 CAPITAL CORPORATION and WINE
COUNTRY VENTURES, INC.
11
SUPERIOR COURT OF THE STATE OF CALIFORNIA
12
COUNTY OF SAN MATEO
13
14
ALIDA MAZARIEGOS, PAULA Case No. 20-CIV-04267
15 GONZALEZ, and JAIME AMAYA
Class Action - Complex Designation
16 Plaintiffs, on behalf of themselves and
all others similarly situated, Assigned for All Purposes to
17 Hon. Nancy L. Fineman, Dept. 4
v.
18 REGIONAL FRANCHISOR
VANGUARD CLEANING SYSTEMS, INC.; DEFENDANTS’ CONSOLIDATED
19 RR FRANCHISING, INC., D/B/A OPPOSITION TO PLAINTIFFS’
VANGUARD CLEANING SYSTEMS OF RENEWED MOTION FOR CLASS
20 SOUTHERN CALIFORNIA AND D/B/A CERTIFICATION
VANGUARD CLEANING SYSTEMS OF
21 NORTHERN CALIFORNIA; BUDDHA Date: March 23, 2023
CAPITAL CORPORATION, D/B/A Time: 2:00 p.m.
22 VANGUARD CLEANING SYSTEMS OF Dept.: 4; Ctrm. N
SACRAMENTO, D/B/A VANGUARD Judge: Hon. Nancy L. Fineman
23 CLEANING SYSTEMS OF THE CENTRAL
VALLEY, AND D/B/A VANGUARD
24 CLEANING SYSTEMS OF THE CENTRAL Complaint Filed: 10/01/2020
COAST; AND WINE COUNTRY First Amended Complaint: 02/05/2021
25 VENTURES, INC. D/B/A VANGUARD Trial Date: Not Set
CLEANING SYSTEMS OF THE NORTH
26 BAY, AND DOES 1 THROUGH 10,
INCLUSIVE,
27
Defendants.
28
1
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 TABLE OF CONTENTS
2 Page
3
I. INTRODUCTION .................................................................................................. 1
4
II. PROCEDURAL HISTORY .................................................................................... 2
5 III. BACKGROUND FACTS ....................................................................................... 2
6 a. The Regional Franchisors. .......................................................................... 2
7 b. The Franchisees. .......................................................................................... 4
8 i. The Franchise Agreements.............................................................. 4
9 ii. The Payment Structure. ................................................................... 9
10 iii. The Cleaning Businesses............................................................... 11
11 iv. The Accounts and Cleaning Services. ........................................... 12
12 v. Terminations and Releases. ........................................................... 14
13 vi. The Plaintiffs. ................................................................................ 14
14 IV. LEGAL AND FACTUAL COMPLEXITIES PREVENT CLASS TREATMENT.
............................................................................................................................... 16
15
a. Legal Standard .......................................................................................... 16
16
b. Individual Questions Outweigh Those Common to the Employment Status
17 and Substantive Claims. ............................................................................ 17
18 i. Employment Status is Governed by Three Tests with Many
Elements That Require Individualized Inquiry. ............................ 17
19
ii. The Substantive Wage and Expense Claims Involve Many Elements
20 That Require Individualized Inquiry. ............................................ 25
21 c. Plaintiffs Do Not Share Defenses Typical of Other Putative Class Members.
................................................................................................................... 27
22
d. Plaintiffs Have Not Proved Numerosity. .................................................. 28
23
e. The Class Mechanism Is Not Superior Here. ............................................ 28
24
f. Plaintiffs Are Not Adequate Class Representatives. ................................. 30
25
V. CONCLUSION ..................................................................................................... 30
26
27
28
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Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 TABLE OF AUTHORITIES
2 Page(s)
3 Federal Cases
4
Albert v. Postmates, Inc.,
5 2019 WL 1045785 (N.D. Cal. Mar. 5, 2019) .......................................................................... 27
6 Apex Zhao v. Bebe Stores, Inc.,
247 F. Supp. 2d 1154 (C.D. Cal. 2003)................................................................................... 23
7
Bailey v. Patterson
8 369 U.S. 31.............................................................................................................................. 30
9
Bowerman v. Field Asset Servs., Inc.,
10 39 F.4th 652 (9th Cir. 2022).................................................................................................... 29
11 Bowerman v. Field Asset Servs., Inc. (Bowerman I),
2014 U.S. Dist. LEXIS 131998, 2014 WL 4676611 (N.D. Cal. Sept. 17, 2014) ............. 25, 29
12
Casey v. Home Depot,
13 2016 U.S. Dist. LEXIS 192441 (C.D. Cal. Sep. 15, 2016) ..................................................... 27
14 Conde v. Open Door Mktg., LLC,
15 223 F. Supp. 3d 949 (N.D. Cal. 2017) .................................................................................... 30
16 Guifu Li v. A Perfect Day Franchise, Inc.,
2011 U.S. Dist. LEXIS 114821 (N.D. Cal. Oct. 5, 2011) ....................................................... 27
17
James v. Uber Techs. Inc.,
18 338 F.R.D. 123 (N.D. Cal. 2021) ............................................................................................ 25
19 Morales-Garcia v. Higuera Farms, Inc.,
No. 2021 U.S. Dist. LEXIS 200527 (C.D. Cal. Oct. 15, 2021) .............................................. 23
20
21 Vazquez v. Jan-Pro Franchising Int’l, Inc.,
986 F.3d 1106 (9th Cir. 2021)................................................................................................. 25
22
California Cases
23
Ali v. U.S.A. Cab Ltd. (2009)
24 176 Cal. App. 4th 1333 ........................................................................................................... 29
25 Ayala v. Antelope Valley Newspapers, Inc. (2014)
26 59 Cal. 4th 522 ........................................................................................................................ 23
27 Bradley v. Networkers Internat., LLC (2012)
211 Cal. App. 4th 1129 ........................................................................................................... 24
28
3
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 Brinker Rest. Corp. v. Superior Court (2012)
53 Cal. 4th 1004 ................................................................................................................ 16, 24
2
Cislaw v. Southland Corp.,
3
4 Cal. App. 4th 1284 (1992).................................................................................................... 23
4
Cochran v. Schwan’s Home Serv., Inc. (2014)
5 228 Cal. App. 4th 1137 ........................................................................................................... 27
6 Curry v. Equillon Enters., LLC (2018)
23 Cal. App. 5th 289 ............................................................................................................... 25
7
Duran v. U.S. Bank Nat’l Ass’n (2014)
8
59 Cal. 4th 1 ............................................................................................................................ 17
9
Dynamex Operations W. v. Superior Court (2018)
10 4 Cal. 5th 903 ................................................................................................................... passim
11 Espejo v. The Copley Press, Inc. (2017)
13 Cal. App. 5th 329 ............................................................................................................... 24
12
Estrada v. FedEx Ground Package Sys., Inc. (2007)
13 154 Cal. App. 4th 1 ................................................................................................................. 24
14
Fireside Bank v. Superior Court (2007)
15 40 Cal.4th 1069 ....................................................................................................................... 30
16 Furry v. E. Bay Publ’g, LLC,
30 Cal.App.5th 1072 (Cal. Ct. App. 2018) ............................................................................. 21
17
Garcia v. Border Transportation Group, LLC (2018)
18 28 Cal.App.5th 558 ................................................................................................................. 18
19 Gonzales v. San Gabriel Transit, Inc. (2019)
20 40 Cal.App.5th 1131 ............................................................................................................... 18
21 Hall v. Time, Inc. (2008)
158 Cal.App.4th 847 ............................................................................................................... 30
22
Hendershot v. Ready to Roll Transp., Inc. (2014)
23 228 Cal. App. 4th 1213 ........................................................................................................... 24
24 Jaimez v. Daiohs USA, Inc. (2010)
25 181 Cal.App.4th 1286 ............................................................................................................. 30
26 Lawson v. Staples Contract & Commer., Inc.,
2017 Cal. Super. LEXIS 8694 .......................................................................................... 16, 29
27
Linton v. Desoto Cab Co.,
28 15 Cal. App. 5th 1208 (2017).................................................................................................. 23
4
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 Lockheed Martin Corp. v. Sup. Ct. (2003)
29 Cal.4th 1096 ....................................................................................................................... 16
2
Lopez v. 7 Eleven Corp.,
3
2021 Cal. Super. LEXIS 130741 ............................................................................................ 23
4
Lopez v. Buffalo Wild Wings Int’l, Inc.,
5 2020 Cal. Super. LEXIS 5275 ................................................................................................ 29
6 McCleery v. Allstate Ins. Co. (2019)
37 Cal. App. 5th 434 ............................................................................................................... 29
7
Noel v. Thrifty Payless, Inc.,
8
7 Cal. 5th 955 .......................................................................................................................... 28
9
Payton v. CSI Elec. Contractors, Inc. (2018)
10 27 Cal.App.5th 832 ........................................................................................................... 17, 30
11 Reichardt v. Hoffman (1997)
52 Cal. App. 4th 754 ............................................................................................................... 25
12
S.G. Borello & Sons, Inc. v. Dept. of Indus. Relations (1989)
13 48 Cal.3d 341 ................................................................................................................... passim
14
Sav-On Drug Stores, Inc. v. Sup. Ct. (Rocher) (2004)
15 34 Cal.4th 319 ....................................................................................................... 16, 17, 23, 24
16 Sky Sports, Inc. v. Superior Court (2011)
201 Cal. App. 4th 1363 ........................................................................................................... 27
17
Soderstedt v. CBIZ S. Cal., LLC (2011)
18 197 Cal. App. 4th 133 ............................................................................................................. 27
19 Sotelo v. Medianews Group, Inc. (2012)
20 207 Cal. App. 4th 639 ............................................................................................................. 25
21 Vazquez v. Jan-Pro Franchising Intl. (2021)
10 Cal. 5th 944 ........................................................................................................................ 19
22
Watkins v. Wachovia Corp. (2009)
23 172 CA4th 1576, 1592 ............................................................................................................ 30
24 Wilson v. The La Jolla Grp. (2021)
25 61 Cal. App. 5th 897 ................................................................................................... 17, 26, 27
26 California Statutes
27 Bus. & Prof. Code
§§ 17200 et seq. ........................................................................................................................ 2
28
Business and Professions Code Division 3 ................................................................................... 20
5
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 Cal. Lab. Code
§ 2775 ...................................................................................................................................... 19
2 § 2776 ...................................................................................................................................... 20
3
Code of Civ. Proc.
4 § 382 ........................................................................................................................................ 16
5 Labor Code 226 ............................................................................................................................. 26
6 Labor Code 2775 .................................................................................................................... passim
7 Labor Code 2776 ........................................................................................................................... 19
8 Labor Code
9 § 200(a) ................................................................................................................................... 26
§§ 221, 223 .......................................................................................................................... 2, 26
10 § 226, 226.3 ............................................................................................................................... 2
§ 2775(b)(1)(B) ....................................................................................................................... 22
11 § 2802 ........................................................................................................................................ 2
12 Other Authorities
13 Wage Order 5 .................................................................................................................................. 2
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
6
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 Defendants RR Franchising, Inc. (“RRF”), Buddha Capital Corporation (“BCC”), and
2 Wine Country Ventures, Inc. (“WCV”) (and collectively “Regional Franchisors”) submit this
3 consolidated memorandum of points and authorities in lieu of three individual memoranda.
4 I. INTRODUCTION
5 Plaintiffs have abandoned their position that this case can be resolved in a “single stroke,”
6 and seek class certification on narrowed claims and sub-classes. Plaintiffs have not done enough
7 to overcome the impediments this Court acknowledged when it first denied class certification.
8 Plaintiffs’ revisions to the definition and claims does not resolve the problems that prevent
9 treating this group of franchisees as a class. Every part of Plaintiffs’ theory of recovery hinges on
10 personal performance, including the employment status and “wage”-related claims. There is
11 absolutely no evidence that anyone other than the Plaintiffs personally performed, and the evidence
12 shows that Plaintiffs themselves did not perform some of the cleaning services at issue. Plaintiffs
13 have not proven that the personal performance is capable of class-wide resolution. Likewise,
14 Plaintiffs have not proven ascertainability or numerosity because the parties lack evidence about
15 who personally performed.
16 Plaintiffs have not proven how the 31-plus articulable elements that make up the Borello,
17 Dynamex, Labor Code 2775, and business-to-business exception, can be resolved on a class basis
18 or that the proof Plaintiffs did submit tips the scale away from individualized issues toward those
19 that can be resolved for the class. The materials Plaintiffs rely on do not prove what Plaintiffs
20 suggest and are legally irrelevant. Certifying a class on Plaintiffs’ flimsy and unsupported
21 inferences will deprive Regional Franchisors of their right to try the affirmative defenses available
22 to them (including, for example, employment status, arbitration, releases), and position this case
23 for decertification when the record is more developed.
24 Plaintiffs have not proven that their claims are typical because the arbitration and release
25 defenses are pervasive among class members, and Plaintiffs cannot adequately represent those
26 class members because they have no interest in the defenses.
27 It is evident from these problems that the class mechanism is superior to resolve the issues
28 present here. Plaintiffs have not proven the case or individualized issues will be manageable or
1
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 that the unlawful effects they claim were experienced by the class they propose. What’s more, the
2 class members here were operating cleaning business, many of which received significant benefits
3 from becoming a franchisee and have developed a vested interest in prosecuting their own claims,
4 which could be large and valuable. Plaintiffs are different from other franchisees, and they should
5 not be allowed to challenge the viability of a business structure that benefited the putative class.
6 The Plaintiffs’ renewed motion to certify the sub-classes should be denied.
7 II. PROCEDURAL HISTORY
8 Plaintiffs sued for themselves and on behalf of a putative class. Plaintiffs assert that they,
9 and the class they seek to represent, were treated as independent contractors but were legally
10 employees and asserted seven causes of action. The Court previously denied class certification
11 without prejudice to Plaintiffs’ seeking to certify more focused classes and claims. See August 23,
12 2022 Minute Order. Plaintiffs’ new definition is indistinguishable from the last, except to the
13 extent it carves up the class into a master class (against VCS) and three sub-classes that tie
14 “personal performance” to the named Regional Franchisors. See Plaintiffs’ Renewed Not. of Mot.
15 and Mem. of Points and Auth. in Support of Motion for Class Certification and Appointment as
16 Class Counsel, dated October 7, 2022 (“Pls. Mem.”). Plaintiffs seek to certify as to Regional
17 Franchisors only claims of (1) unreimbursed business expenses (Labor Code § 2802), (2) unlawful
18 deductions from wages (Labor Code §§ 221, 223, Wage Order 5), (3) failure to furnish proper
19 wage statements (Labor Code § 226, 226.3; Wage Order 5) (asserted against RRF and BCC only),
20 and unfair competition (Bus. & Prof. Code §§17200 et seq.). Id. at 3-4.
21 III. BACKGROUND FACTS
22 The Vanguard® cleaning system offers its franchisees—qualified cleaning businesses—
23 with commercial cleaning business opportunities generated by Vanguard Cleaning Systems, Inc.’s
24 (“VCS”) Regional Franchisors. In exchange for the revenue generated by those business
25 opportunities, franchisees compensate the Regional Franchisors. The next sections summarize the
26 business relationship.
27 a. The Regional Franchisors.
28 Under VCS’s franchising structure, the Regional Franchisors were awarded territories in
2
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 which they sell Vanguard® franchises to commercial cleaning businesses and obtaining
2 commercial cleaning accounts for those franchisees. Declaration of Adam Lounsbury dated Dec.
3 6, 2022, Ex. A, Declaration of Rob Dusthimer dated June 9, 2022 (hereinafter “Dusthimer Decl.”)
4 ¶5; Ex. B, Declaration of Ed Gong dated June 9, 2022 (hereinafter “Gong Decl.”) ¶6; Ex. C,
5 Declaration of John Newman dated June 9, 2022 (hereinafter “Newman Decl.”) ¶7. The Regional
6 Franchisors’ obligations to sell franchises within their territories and develop cleaning accounts
7 for those franchisees is in their Master Franchise Agreements with VCS, as well as the Franchise
8 Agreement (“FA”) with each cleaning franchisee. See MFA §§ 1.1 of Dusthimer Decl., Ex. 1;
9 Gong Decl., Ex. 1; Newman Decl., Ex. 1.
10 The business of franchising is highly regulated at the federal and state level. Dusthimer
11 Decl. ¶¶6, 7; Gong Decl. ¶¶8, 9; Newman Decl. ¶¶5, 6. Indeed, the FAs that Regional Franchisors
12 enter into with franchisees, along with the associated disclosures about the franchised cleaning
13 business is vetted and approved by the state of California before the Regional Franchisor can offer
14 a franchise for sale. Dusthimer Decl. ¶6; Gong Decl. ¶10; Newman Decl. ¶5. For that reason, the
15 Regional Franchisors usually prepare and file a franchise disclosure document (“FDD”) only in
16 those years the Regional Franchisor intends to contract with new franchisees. See Dusthimer Decl.
17 ¶7; Gong Decl. ¶9; Newman Decl. ¶5.
18 RRF completed FDDs in 2016-2021, BCC (or its predecessor) completed FDDs in 2012-
19 2015, 2017, 2018, and 2020, and WCV completed FDDs in 2012, 2014, 2016, 2018, and 2019.
20 Dusthimer Decl. ¶7; Gong Decl. ¶9; Newman Decl. ¶6. The prototype of each FDD is generally
21 supplied by VCS, however, each Regional Franchisor obtained its own franchise counsel and
22 adjusted the form to meet its unique business needs in any given year. Dusthimer Decl. ¶6; Gong
23 Decl. ¶8; Newman Decl. ¶ 5. Among other things, the form of FDD was adjusted to list each active
24 franchisee associated with the filing Regional Franchisor. Dusthimer Decl. Exs. 2a-2f; Gong Decl.
25 Exs. 2a-2h; Newman Decl. Exs. 3a-3e. Notably, however, this list of active franchisees does not
26 identify which of those franchisees’ owners or operators personally performed cleaning services
27 or whether the franchisee chose to substitute the labor of others in order to perform the commercial
28 cleaning services requested by the cleaning accounts that the franchisees service. Dusthimer Decl.
3
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 ¶13; Gong Decl. ¶30; Newman Decl. ¶24.
2 RRF’s territory encompasses counties in Northern and Southern California. Dusthimer
3 Decl. ¶4. RRF entered into or assumed 295 unique FAs with commercial cleaning businesses that
4 serviced accounts during the relevant period. Lounsbury Decl., Ex. A attaching Dusthimer Decl.
5 Supp. ¶6. BCC’s territory encompasses the Central Coast, Central Valley, and Sacramento. Gong
6 Decl. ¶3. BCC entered into or assumed 111 unique FAs with commercial cleaning businesses that
7 serviced cleaning accounts during the relevant period. Gong ¶ 19. WCV’s territory encompasses
8 the North Bay of California. Newman Decl. ¶1. WCV entered into or assumed 58 unique FAs with
9 commercial cleaning businesses that provided cleaning to accounts during the relevant period.
10 Newman Decl. ¶ 16.
11 b. The Franchisees.
12 i. The Franchise Agreements.
13 Generally, franchisees obtain cleaning accounts (the businesses that request cleaning
14 services or “Accounts”) from the Regional Franchisors by signing an FA. The FA establishes the
15 contractual terms governing who does what within the Vanguard® system. See Dusthimer Decl.
16 Exs. 3a-3f; Gong Decl. Exs. 3a-3h; Newman Decl. Exs. 2a-2e. In short, franchisees agree to pay a
17 sum of money to the Regional Franchisor with which they contract in exchange for receiving
18 Accounts that generate revenue for the franchisee. See, e.g., Dusthimer Decl., Ex. 3e, 2020 FA, §
19 1; Gong Decl., Ex. 3e, 2016 FA §1; Newman Decl., Ex. 2b, 2014 FA § 1. The Regional Franchisors
20 are also contractually obligated to provide back-office services and generate Accounts for
21 franchisees. Dusthimer ¶9; Gong ¶16; Newman ¶9. The Regional Franchisors do not provide
22 cleaning services (nor have they). Dusthimer Decl. ¶11; Gong Decl. ¶14; Newman Decl. ¶14.
23 Before executing a FA, the owners of potential franchisees met at least once with a
24 representative from a Regional Franchisor. Amaya Tr. 20:4-21; Amaya Tr. at 21:8-15; Gonzalez
25 Decl. ¶ 7; Mazariegos Tr. 56:3-9. During that meeting the Regional Franchisor’s representative
26 shared the applicable FDD and explained the franchising relationship. See Newman Tr. At 153:24-
27 154:1 (explaining that WCV provides their operative FDD to new prospective franchisees). As
28 Plaintiffs’ testimony revealed, different franchisees understood the relationship differently, even
4
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 though all executed an Independent Contractor Acknowledgement, which explains the parties’
2 intent to create an independent relationship between two businesses. Compare Dusthimer Decl.,
3 Ex. 15, Newman Decl. Ex. 6, Independent Contractor Acknowledgements with Amaya Tr. at
4 187:4-188:17; Mazariegos Tr. At 254:10-21.
5 Each Plaintiff signed a different version of the FA. Amaya executed the 2003 version of
6 the FA. Gong Decl. Ex. 8. Gonzalez executed the 2010 version of the FA. Dusthimer Decl. Ex. 13.
7 Mazariegos executed the 2011 version of the FA. Newman Decl. Ex. 5. The putative class
8 members signed FAs in the various years that they agreed to become a Vanguard® franchise and
9 were disclosed in the FDDs that the Regional Franchisors submitted periodically. Dusthimer Decl.,
10 Ex 2a, Gong Decl., Ex. 2e, Newman Decl., Ex. 3e.
11 Contrary to Plaintiffs’ assertions, each of the Plaintiffs’ agreements state that the Plaintiff
12 has established and operates an independent business free from the supervision, management, and
13 control of the Regional Franchisor. Gong Ex. 7, Amaya FA § 14 (dated 2003), Dusthimer Ex. 13,
14 Gonzalez FA § 14 (dated 2010), Newman Ex. 5, Mazariegos FA § 14. Later versions of the FA
15 contain similar provisions vesting control over the day-to-day operations in the franchisee and
16 divesting the Regional Franchisors of control over those operations, but the language evolved. See,
17 e.g., 2012-2014 FAs § 7 (provisions disclaiming control); 2015 FA § 7 (disclaiming control and
18 adding language about the franchisee’s obligation to operate the franchise with a corporation or
19 limited liability company); 2016 FA § 7 (adding language about separateness of the franchisees’
20 businesses and adding to the specifically enumerated requirement to comply with employment
21 laws; 2017 FA (minor revisions); 2018 FA § 7 (adding language disclaiming any relationship
22 between the Regional Franchisors and employees maintained by the franchisees); 2019 FA § 7
23 (adding language disclaiming benefits entitlement and obligation to maintain workers
24 compensation, occupational and health insurances); 2020 FA § 7 (minor revisions); 2021 FA § 7
25 (adding language permitting franchisees to submit “pending absent member claims” to arbitration).
26 All FAs implemented during the relevant period explain that a franchisee may operate and
27 develop its business as it sees fit, may develop leads and bid on new Accounts on its own, and that
28 all Accounts accepted by and transferred to a franchisee are its own, reverting to the Regional
5
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 Franchisor only if the franchisee relinquishes the Account or otherwise stops providing cleaning
2 services to an Account, in which case the Regional Franchisor may offer the account to another
3 franchisee for servicing. Dusthimer Decl. Ex. 3f, 2021 FA §§ 6.F, 21.B, Gong Decl. Ex. 3b, 2013
4 FA §§ 6.B, 21.B; Newman Decl. Ex. 2d, 2018 FA § 6.F.2, 19.B. Many franchisees developed
5 significant commercial cleaning businesses by servicing Accounts from the Vanguard® system
6 and serviced other commercial cleaning accounts from their business efforts made outside the
7 Vanguard® system. Dusthimer Decl. ¶23; Gong Decl. ¶32; Newman Decl. ¶28; see generally
8 franchisee declarations attached to Declaration of Robert M. Geiger, Exs. A-H.
9 Moreover, all versions of the FAs during the relevant period establish that the franchisees
10 were responsible for supplying the labor and equipment necessary to complete the cleaning
11 services that a franchisee agreed to provide to its Accounts. See, e.g., Amaya FA § 9, Gonzalez
12 FA § 9, Mazariegos FA § 9; and compare 2016-2020 FAs, § 7; 2016-2020 FAs Independent
13 Contractor Acknowledgement. In any event, none of the franchise owners that signed a franchise
14 agreement were obligated personally to perform the cleaning services. Dusthimer Decl. ¶27; Gong
15 Decl. ¶27; Newman Decl. ¶19. Plaintiff Gonzalez, for example, has not personally serviced any
16 Accounts since December 2019. Infra §III.vi.
17 The FAs also address how a Vanguard® branded cleaning business should operate. The
18 relevant provisions differed depending on which version of the FA a given franchisee may have
19 signed. For example, Amaya’s franchise agreement stated that the regional franchise (at that time,
20 Woohoo, a non-party to this case) would provide a training program. Amaya FA § 1.a; see also
21 Gong Decl. ¶28. BCC did not provide that training, nor could it have done so, because BCC had
22 not yet purchased the Sacramento territory. Gong Decl. ¶28. Mazariegos’ and Gonzalez’s FAs
23 contained similar promises to provide training about how to operate a Vanguard® branded
24 cleaning business. Gonzalez FA §1.a, Mazariegos FA §1.a. The 2012 FA created a pre-operating
25 commitment for the franchisee to obtain a certificate of completion of the “VCS Business System
26 Program.” 2012 FA §2.A. That provision was amended in 2013, at which time the language was
27 modified to require any such certificate only upon specific request and within the discretion of the
28 Regional Franchisor. 2013 FA §2.A. This certification requirement was removed in 2013 and from
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Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 all later versions of the FA. Dusthimer Decl. ¶29; Gong Decl. ¶29; Newman Decl. ¶21. While
2 training about the Vanguard® cleaning system and business operations was made available as a
3 resource to interested franchisees, it was optional during the relevant period. Dusthimer Decl. ¶27;
4 Gong Decl. ¶27; Newman Decl. ¶19. Newman of WCV summarized it well, “to characterize it as
5 training for the franchisees is misleading. The Franchisees, almost without exception, including
6 [Mazariegos], had been in business for years as cleaners. They had their own companies. Many of
7 them have their own t-shirts and business cards. They have their own accounts. And what they
8 wanted to know [when the purchased a Vanguard® franchise] is how to get oriented to how we
9 bid jobs and how they can get accurately paid on the 28th of every month. And so the manuals were
10 provided to them with, I would say, an overview, gauging their level of interest in the material,
11 which – which in every case was – was – minimal. Itwas really more of an orientation than a
12 training.” Newman Tr. at 217, 306:3-25, 307:10-25; Gong Tr. at 103:2-21 (“I wouldn’t say it was
13 a formal training session, but it was more of a...conversation that...there are certain things that
14 successful franchise owners do”).
15 Plaintiffs assert that the cleaning and business manuals established VCS’ and the Regional
16 Franchisors’ control over Plaintiffs’, and the putative class members’ work. The record does not
17 support that assertion. The parties agree that VCS prepared “manuals” about the operation and
18 growth of their businesses and how to perform certain cleaning work but disagree about how they
19 were used. See, e.g., Newman Tr. 155 (“we regarded the franchise[d] business as having two key
20 components. One was cleaning, doing the cleaning, and two was managing their and growing their
21 franchise[d] business.”). Wine Country offered these “manuals” only as needed or requested by a
22 franchisee and did not distribute new or updated versions unless requested by a franchisee. See
23 Newman Tr. 217-218 (noting updates beyond provision of materials upon purchasing franchise
24 not provided unless requested by franchisee); but see Gong Tr. at 228 (estimating that Buddha
25 stopped circulating the cleaning-related manual sometime around 2016), 231 (testifying that it is
26 not part of Buddha’s practice to distribute the business-related manual to franchisees); Amaya Tr.
27 at 130:20-131:2 (noting that he looked at the manual “very little”); Mazariegos Tr. 247:14-17
28 (stating that she never read the manual provided to her). RRF did not require franchisees to train
7
Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267
1 or review the manuals, and generally only made a copy of the manuals available to those
2 franchisees that expressed an interest in these materials. Dusthimer Decl. ¶¶ 30-31.
3 Finally, it is undisputed that none of Plaintiffs’ franchise agreements contain an arbitration
4 provision. Amaya FA § 26, Gonzalez FA § 26, Mazariegos FA § 26. Beginning in 2012, however,
5 each version of the franchise agreement contains an arbitration provision. Compare 2012-2022
6 FAs, §§ 32, 34 (depending on year). These FAs also contain class and collective action waivers.
7 Id. The arbitration provisions state:
8
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1 Michael A. Hood (State Bar No. 71258) JACKSON LEWIS P.C. 2 200 Spectrum Center Drive, Suite 500 Irvine, California 92618-5005 3 Telephone: (949) 885-1374 Facsimile: (949) 885-1380 4 Email: Michael.Hood@jacksonlewis.com 5 Adam L. Lounsbury, Admitted Pro Hac Vice JACKSON LEWIS P.C. 6 701 East Byrd Street - 17th Floor Richmond, Virginia 23219-4500 7 Telephone: (804) 649-0404 Facsimile: (804) 649-0403 8 Email: Adam.Lounsbury@jacksonlewis.com 9 Attorneys for Defendants RR FRANCHISING, INC., BUDDHA 10 CAPITAL CORPORATION and WINE COUNTRY VENTURES, INC. 11 SUPERIOR COURT OF THE STATE OF CALIFORNIA 12 COUNTY OF SAN MATEO 13 14 ALIDA MAZARIEGOS, PAULA Case No. 20-CIV-04267 15 GONZALEZ, and JAIME AMAYA Class Action - Complex Designation 16 Plaintiffs, on behalf of themselves and all others similarly situated, Assigned for All Purposes to 17 Hon. Nancy L. Fineman, Dept. 4 v. 18 REGIONAL FRANCHISOR VANGUARD CLEANING SYSTEMS, INC.; DEFENDANTS’ CONSOLIDATED 19 RR FRANCHISING, INC., D/B/A OPPOSITION TO PLAINTIFFS’ VANGUARD CLEANING SYSTEMS OF RENEWED MOTION FOR CLASS 20 SOUTHERN CALIFORNIA AND D/B/A CERTIFICATION VANGUARD CLEANING SYSTEMS OF 21 NORTHERN CALIFORNIA; BUDDHA Date: March 23, 2023 CAPITAL CORPORATION, D/B/A Time: 2:00 p.m. 22 VANGUARD CLEANING SYSTEMS OF Dept.: 4; Ctrm. N SACRAMENTO, D/B/A VANGUARD Judge: Hon. Nancy L. Fineman 23 CLEANING SYSTEMS OF THE CENTRAL VALLEY, AND D/B/A VANGUARD 24 CLEANING SYSTEMS OF THE CENTRAL Complaint Filed: 10/01/2020 COAST; AND WINE COUNTRY First Amended Complaint: 02/05/2021 25 VENTURES, INC. D/B/A VANGUARD Trial Date: Not Set CLEANING SYSTEMS OF THE NORTH 26 BAY, AND DOES 1 THROUGH 10, INCLUSIVE, 27 Defendants. 28 1 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 TABLE OF CONTENTS 2 Page 3 I. INTRODUCTION .................................................................................................. 1 4 II. PROCEDURAL HISTORY .................................................................................... 2 5 III. BACKGROUND FACTS ....................................................................................... 2 6 a. The Regional Franchisors. .......................................................................... 2 7 b. The Franchisees. .......................................................................................... 4 8 i. The Franchise Agreements.............................................................. 4 9 ii. The Payment Structure. ................................................................... 9 10 iii. The Cleaning Businesses............................................................... 11 11 iv. The Accounts and Cleaning Services. ........................................... 12 12 v. Terminations and Releases. ........................................................... 14 13 vi. The Plaintiffs. ................................................................................ 14 14 IV. LEGAL AND FACTUAL COMPLEXITIES PREVENT CLASS TREATMENT. ............................................................................................................................... 16 15 a. Legal Standard .......................................................................................... 16 16 b. Individual Questions Outweigh Those Common to the Employment Status 17 and Substantive Claims. ............................................................................ 17 18 i. Employment Status is Governed by Three Tests with Many Elements That Require Individualized Inquiry. ............................ 17 19 ii. The Substantive Wage and Expense Claims Involve Many Elements 20 That Require Individualized Inquiry. ............................................ 25 21 c. Plaintiffs Do Not Share Defenses Typical of Other Putative Class Members. ................................................................................................................... 27 22 d. Plaintiffs Have Not Proved Numerosity. .................................................. 28 23 e. The Class Mechanism Is Not Superior Here. ............................................ 28 24 f. Plaintiffs Are Not Adequate Class Representatives. ................................. 30 25 V. CONCLUSION ..................................................................................................... 30 26 27 28 2 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 TABLE OF AUTHORITIES 2 Page(s) 3 Federal Cases 4 Albert v. Postmates, Inc., 5 2019 WL 1045785 (N.D. Cal. Mar. 5, 2019) .......................................................................... 27 6 Apex Zhao v. Bebe Stores, Inc., 247 F. Supp. 2d 1154 (C.D. Cal. 2003)................................................................................... 23 7 Bailey v. Patterson 8 369 U.S. 31.............................................................................................................................. 30 9 Bowerman v. Field Asset Servs., Inc., 10 39 F.4th 652 (9th Cir. 2022).................................................................................................... 29 11 Bowerman v. Field Asset Servs., Inc. (Bowerman I), 2014 U.S. Dist. LEXIS 131998, 2014 WL 4676611 (N.D. Cal. Sept. 17, 2014) ............. 25, 29 12 Casey v. Home Depot, 13 2016 U.S. Dist. LEXIS 192441 (C.D. Cal. Sep. 15, 2016) ..................................................... 27 14 Conde v. Open Door Mktg., LLC, 15 223 F. Supp. 3d 949 (N.D. Cal. 2017) .................................................................................... 30 16 Guifu Li v. A Perfect Day Franchise, Inc., 2011 U.S. Dist. LEXIS 114821 (N.D. Cal. Oct. 5, 2011) ....................................................... 27 17 James v. Uber Techs. Inc., 18 338 F.R.D. 123 (N.D. Cal. 2021) ............................................................................................ 25 19 Morales-Garcia v. Higuera Farms, Inc., No. 2021 U.S. Dist. LEXIS 200527 (C.D. Cal. Oct. 15, 2021) .............................................. 23 20 21 Vazquez v. Jan-Pro Franchising Int’l, Inc., 986 F.3d 1106 (9th Cir. 2021)................................................................................................. 25 22 California Cases 23 Ali v. U.S.A. Cab Ltd. (2009) 24 176 Cal. App. 4th 1333 ........................................................................................................... 29 25 Ayala v. Antelope Valley Newspapers, Inc. (2014) 26 59 Cal. 4th 522 ........................................................................................................................ 23 27 Bradley v. Networkers Internat., LLC (2012) 211 Cal. App. 4th 1129 ........................................................................................................... 24 28 3 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 Brinker Rest. Corp. v. Superior Court (2012) 53 Cal. 4th 1004 ................................................................................................................ 16, 24 2 Cislaw v. Southland Corp., 3 4 Cal. App. 4th 1284 (1992).................................................................................................... 23 4 Cochran v. Schwan’s Home Serv., Inc. (2014) 5 228 Cal. App. 4th 1137 ........................................................................................................... 27 6 Curry v. Equillon Enters., LLC (2018) 23 Cal. App. 5th 289 ............................................................................................................... 25 7 Duran v. U.S. Bank Nat’l Ass’n (2014) 8 59 Cal. 4th 1 ............................................................................................................................ 17 9 Dynamex Operations W. v. Superior Court (2018) 10 4 Cal. 5th 903 ................................................................................................................... passim 11 Espejo v. The Copley Press, Inc. (2017) 13 Cal. App. 5th 329 ............................................................................................................... 24 12 Estrada v. FedEx Ground Package Sys., Inc. (2007) 13 154 Cal. App. 4th 1 ................................................................................................................. 24 14 Fireside Bank v. Superior Court (2007) 15 40 Cal.4th 1069 ....................................................................................................................... 30 16 Furry v. E. Bay Publ’g, LLC, 30 Cal.App.5th 1072 (Cal. Ct. App. 2018) ............................................................................. 21 17 Garcia v. Border Transportation Group, LLC (2018) 18 28 Cal.App.5th 558 ................................................................................................................. 18 19 Gonzales v. San Gabriel Transit, Inc. (2019) 20 40 Cal.App.5th 1131 ............................................................................................................... 18 21 Hall v. Time, Inc. (2008) 158 Cal.App.4th 847 ............................................................................................................... 30 22 Hendershot v. Ready to Roll Transp., Inc. (2014) 23 228 Cal. App. 4th 1213 ........................................................................................................... 24 24 Jaimez v. Daiohs USA, Inc. (2010) 25 181 Cal.App.4th 1286 ............................................................................................................. 30 26 Lawson v. Staples Contract & Commer., Inc., 2017 Cal. Super. LEXIS 8694 .......................................................................................... 16, 29 27 Linton v. Desoto Cab Co., 28 15 Cal. App. 5th 1208 (2017).................................................................................................. 23 4 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 Lockheed Martin Corp. v. Sup. Ct. (2003) 29 Cal.4th 1096 ....................................................................................................................... 16 2 Lopez v. 7 Eleven Corp., 3 2021 Cal. Super. LEXIS 130741 ............................................................................................ 23 4 Lopez v. Buffalo Wild Wings Int’l, Inc., 5 2020 Cal. Super. LEXIS 5275 ................................................................................................ 29 6 McCleery v. Allstate Ins. Co. (2019) 37 Cal. App. 5th 434 ............................................................................................................... 29 7 Noel v. Thrifty Payless, Inc., 8 7 Cal. 5th 955 .......................................................................................................................... 28 9 Payton v. CSI Elec. Contractors, Inc. (2018) 10 27 Cal.App.5th 832 ........................................................................................................... 17, 30 11 Reichardt v. Hoffman (1997) 52 Cal. App. 4th 754 ............................................................................................................... 25 12 S.G. Borello & Sons, Inc. v. Dept. of Indus. Relations (1989) 13 48 Cal.3d 341 ................................................................................................................... passim 14 Sav-On Drug Stores, Inc. v. Sup. Ct. (Rocher) (2004) 15 34 Cal.4th 319 ....................................................................................................... 16, 17, 23, 24 16 Sky Sports, Inc. v. Superior Court (2011) 201 Cal. App. 4th 1363 ........................................................................................................... 27 17 Soderstedt v. CBIZ S. Cal., LLC (2011) 18 197 Cal. App. 4th 133 ............................................................................................................. 27 19 Sotelo v. Medianews Group, Inc. (2012) 20 207 Cal. App. 4th 639 ............................................................................................................. 25 21 Vazquez v. Jan-Pro Franchising Intl. (2021) 10 Cal. 5th 944 ........................................................................................................................ 19 22 Watkins v. Wachovia Corp. (2009) 23 172 CA4th 1576, 1592 ............................................................................................................ 30 24 Wilson v. The La Jolla Grp. (2021) 25 61 Cal. App. 5th 897 ................................................................................................... 17, 26, 27 26 California Statutes 27 Bus. & Prof. Code §§ 17200 et seq. ........................................................................................................................ 2 28 Business and Professions Code Division 3 ................................................................................... 20 5 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 Cal. Lab. Code § 2775 ...................................................................................................................................... 19 2 § 2776 ...................................................................................................................................... 20 3 Code of Civ. Proc. 4 § 382 ........................................................................................................................................ 16 5 Labor Code 226 ............................................................................................................................. 26 6 Labor Code 2775 .................................................................................................................... passim 7 Labor Code 2776 ........................................................................................................................... 19 8 Labor Code 9 § 200(a) ................................................................................................................................... 26 §§ 221, 223 .......................................................................................................................... 2, 26 10 § 226, 226.3 ............................................................................................................................... 2 § 2775(b)(1)(B) ....................................................................................................................... 22 11 § 2802 ........................................................................................................................................ 2 12 Other Authorities 13 Wage Order 5 .................................................................................................................................. 2 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 Defendants RR Franchising, Inc. (“RRF”), Buddha Capital Corporation (“BCC”), and 2 Wine Country Ventures, Inc. (“WCV”) (and collectively “Regional Franchisors”) submit this 3 consolidated memorandum of points and authorities in lieu of three individual memoranda. 4 I. INTRODUCTION 5 Plaintiffs have abandoned their position that this case can be resolved in a “single stroke,” 6 and seek class certification on narrowed claims and sub-classes. Plaintiffs have not done enough 7 to overcome the impediments this Court acknowledged when it first denied class certification. 8 Plaintiffs’ revisions to the definition and claims does not resolve the problems that prevent 9 treating this group of franchisees as a class. Every part of Plaintiffs’ theory of recovery hinges on 10 personal performance, including the employment status and “wage”-related claims. There is 11 absolutely no evidence that anyone other than the Plaintiffs personally performed, and the evidence 12 shows that Plaintiffs themselves did not perform some of the cleaning services at issue. Plaintiffs 13 have not proven that the personal performance is capable of class-wide resolution. Likewise, 14 Plaintiffs have not proven ascertainability or numerosity because the parties lack evidence about 15 who personally performed. 16 Plaintiffs have not proven how the 31-plus articulable elements that make up the Borello, 17 Dynamex, Labor Code 2775, and business-to-business exception, can be resolved on a class basis 18 or that the proof Plaintiffs did submit tips the scale away from individualized issues toward those 19 that can be resolved for the class. The materials Plaintiffs rely on do not prove what Plaintiffs 20 suggest and are legally irrelevant. Certifying a class on Plaintiffs’ flimsy and unsupported 21 inferences will deprive Regional Franchisors of their right to try the affirmative defenses available 22 to them (including, for example, employment status, arbitration, releases), and position this case 23 for decertification when the record is more developed. 24 Plaintiffs have not proven that their claims are typical because the arbitration and release 25 defenses are pervasive among class members, and Plaintiffs cannot adequately represent those 26 class members because they have no interest in the defenses. 27 It is evident from these problems that the class mechanism is superior to resolve the issues 28 present here. Plaintiffs have not proven the case or individualized issues will be manageable or 1 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 that the unlawful effects they claim were experienced by the class they propose. What’s more, the 2 class members here were operating cleaning business, many of which received significant benefits 3 from becoming a franchisee and have developed a vested interest in prosecuting their own claims, 4 which could be large and valuable. Plaintiffs are different from other franchisees, and they should 5 not be allowed to challenge the viability of a business structure that benefited the putative class. 6 The Plaintiffs’ renewed motion to certify the sub-classes should be denied. 7 II. PROCEDURAL HISTORY 8 Plaintiffs sued for themselves and on behalf of a putative class. Plaintiffs assert that they, 9 and the class they seek to represent, were treated as independent contractors but were legally 10 employees and asserted seven causes of action. The Court previously denied class certification 11 without prejudice to Plaintiffs’ seeking to certify more focused classes and claims. See August 23, 12 2022 Minute Order. Plaintiffs’ new definition is indistinguishable from the last, except to the 13 extent it carves up the class into a master class (against VCS) and three sub-classes that tie 14 “personal performance” to the named Regional Franchisors. See Plaintiffs’ Renewed Not. of Mot. 15 and Mem. of Points and Auth. in Support of Motion for Class Certification and Appointment as 16 Class Counsel, dated October 7, 2022 (“Pls. Mem.”). Plaintiffs seek to certify as to Regional 17 Franchisors only claims of (1) unreimbursed business expenses (Labor Code § 2802), (2) unlawful 18 deductions from wages (Labor Code §§ 221, 223, Wage Order 5), (3) failure to furnish proper 19 wage statements (Labor Code § 226, 226.3; Wage Order 5) (asserted against RRF and BCC only), 20 and unfair competition (Bus. & Prof. Code §§17200 et seq.). Id. at 3-4. 21 III. BACKGROUND FACTS 22 The Vanguard® cleaning system offers its franchisees—qualified cleaning businesses— 23 with commercial cleaning business opportunities generated by Vanguard Cleaning Systems, Inc.’s 24 (“VCS”) Regional Franchisors. In exchange for the revenue generated by those business 25 opportunities, franchisees compensate the Regional Franchisors. The next sections summarize the 26 business relationship. 27 a. The Regional Franchisors. 28 Under VCS’s franchising structure, the Regional Franchisors were awarded territories in 2 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 which they sell Vanguard® franchises to commercial cleaning businesses and obtaining 2 commercial cleaning accounts for those franchisees. Declaration of Adam Lounsbury dated Dec. 3 6, 2022, Ex. A, Declaration of Rob Dusthimer dated June 9, 2022 (hereinafter “Dusthimer Decl.”) 4 ¶5; Ex. B, Declaration of Ed Gong dated June 9, 2022 (hereinafter “Gong Decl.”) ¶6; Ex. C, 5 Declaration of John Newman dated June 9, 2022 (hereinafter “Newman Decl.”) ¶7. The Regional 6 Franchisors’ obligations to sell franchises within their territories and develop cleaning accounts 7 for those franchisees is in their Master Franchise Agreements with VCS, as well as the Franchise 8 Agreement (“FA”) with each cleaning franchisee. See MFA §§ 1.1 of Dusthimer Decl., Ex. 1; 9 Gong Decl., Ex. 1; Newman Decl., Ex. 1. 10 The business of franchising is highly regulated at the federal and state level. Dusthimer 11 Decl. ¶¶6, 7; Gong Decl. ¶¶8, 9; Newman Decl. ¶¶5, 6. Indeed, the FAs that Regional Franchisors 12 enter into with franchisees, along with the associated disclosures about the franchised cleaning 13 business is vetted and approved by the state of California before the Regional Franchisor can offer 14 a franchise for sale. Dusthimer Decl. ¶6; Gong Decl. ¶10; Newman Decl. ¶5. For that reason, the 15 Regional Franchisors usually prepare and file a franchise disclosure document (“FDD”) only in 16 those years the Regional Franchisor intends to contract with new franchisees. See Dusthimer Decl. 17 ¶7; Gong Decl. ¶9; Newman Decl. ¶5. 18 RRF completed FDDs in 2016-2021, BCC (or its predecessor) completed FDDs in 2012- 19 2015, 2017, 2018, and 2020, and WCV completed FDDs in 2012, 2014, 2016, 2018, and 2019. 20 Dusthimer Decl. ¶7; Gong Decl. ¶9; Newman Decl. ¶6. The prototype of each FDD is generally 21 supplied by VCS, however, each Regional Franchisor obtained its own franchise counsel and 22 adjusted the form to meet its unique business needs in any given year. Dusthimer Decl. ¶6; Gong 23 Decl. ¶8; Newman Decl. ¶ 5. Among other things, the form of FDD was adjusted to list each active 24 franchisee associated with the filing Regional Franchisor. Dusthimer Decl. Exs. 2a-2f; Gong Decl. 25 Exs. 2a-2h; Newman Decl. Exs. 3a-3e. Notably, however, this list of active franchisees does not 26 identify which of those franchisees’ owners or operators personally performed cleaning services 27 or whether the franchisee chose to substitute the labor of others in order to perform the commercial 28 cleaning services requested by the cleaning accounts that the franchisees service. Dusthimer Decl. 3 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 ¶13; Gong Decl. ¶30; Newman Decl. ¶24. 2 RRF’s territory encompasses counties in Northern and Southern California. Dusthimer 3 Decl. ¶4. RRF entered into or assumed 295 unique FAs with commercial cleaning businesses that 4 serviced accounts during the relevant period. Lounsbury Decl., Ex. A attaching Dusthimer Decl. 5 Supp. ¶6. BCC’s territory encompasses the Central Coast, Central Valley, and Sacramento. Gong 6 Decl. ¶3. BCC entered into or assumed 111 unique FAs with commercial cleaning businesses that 7 serviced cleaning accounts during the relevant period. Gong ¶ 19. WCV’s territory encompasses 8 the North Bay of California. Newman Decl. ¶1. WCV entered into or assumed 58 unique FAs with 9 commercial cleaning businesses that provided cleaning to accounts during the relevant period. 10 Newman Decl. ¶ 16. 11 b. The Franchisees. 12 i. The Franchise Agreements. 13 Generally, franchisees obtain cleaning accounts (the businesses that request cleaning 14 services or “Accounts”) from the Regional Franchisors by signing an FA. The FA establishes the 15 contractual terms governing who does what within the Vanguard® system. See Dusthimer Decl. 16 Exs. 3a-3f; Gong Decl. Exs. 3a-3h; Newman Decl. Exs. 2a-2e. In short, franchisees agree to pay a 17 sum of money to the Regional Franchisor with which they contract in exchange for receiving 18 Accounts that generate revenue for the franchisee. See, e.g., Dusthimer Decl., Ex. 3e, 2020 FA, § 19 1; Gong Decl., Ex. 3e, 2016 FA §1; Newman Decl., Ex. 2b, 2014 FA § 1. The Regional Franchisors 20 are also contractually obligated to provide back-office services and generate Accounts for 21 franchisees. Dusthimer ¶9; Gong ¶16; Newman ¶9. The Regional Franchisors do not provide 22 cleaning services (nor have they). Dusthimer Decl. ¶11; Gong Decl. ¶14; Newman Decl. ¶14. 23 Before executing a FA, the owners of potential franchisees met at least once with a 24 representative from a Regional Franchisor. Amaya Tr. 20:4-21; Amaya Tr. at 21:8-15; Gonzalez 25 Decl. ¶ 7; Mazariegos Tr. 56:3-9. During that meeting the Regional Franchisor’s representative 26 shared the applicable FDD and explained the franchising relationship. See Newman Tr. At 153:24- 27 154:1 (explaining that WCV provides their operative FDD to new prospective franchisees). As 28 Plaintiffs’ testimony revealed, different franchisees understood the relationship differently, even 4 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 though all executed an Independent Contractor Acknowledgement, which explains the parties’ 2 intent to create an independent relationship between two businesses. Compare Dusthimer Decl., 3 Ex. 15, Newman Decl. Ex. 6, Independent Contractor Acknowledgements with Amaya Tr. at 4 187:4-188:17; Mazariegos Tr. At 254:10-21. 5 Each Plaintiff signed a different version of the FA. Amaya executed the 2003 version of 6 the FA. Gong Decl. Ex. 8. Gonzalez executed the 2010 version of the FA. Dusthimer Decl. Ex. 13. 7 Mazariegos executed the 2011 version of the FA. Newman Decl. Ex. 5. The putative class 8 members signed FAs in the various years that they agreed to become a Vanguard® franchise and 9 were disclosed in the FDDs that the Regional Franchisors submitted periodically. Dusthimer Decl., 10 Ex 2a, Gong Decl., Ex. 2e, Newman Decl., Ex. 3e. 11 Contrary to Plaintiffs’ assertions, each of the Plaintiffs’ agreements state that the Plaintiff 12 has established and operates an independent business free from the supervision, management, and 13 control of the Regional Franchisor. Gong Ex. 7, Amaya FA § 14 (dated 2003), Dusthimer Ex. 13, 14 Gonzalez FA § 14 (dated 2010), Newman Ex. 5, Mazariegos FA § 14. Later versions of the FA 15 contain similar provisions vesting control over the day-to-day operations in the franchisee and 16 divesting the Regional Franchisors of control over those operations, but the language evolved. See, 17 e.g., 2012-2014 FAs § 7 (provisions disclaiming control); 2015 FA § 7 (disclaiming control and 18 adding language about the franchisee’s obligation to operate the franchise with a corporation or 19 limited liability company); 2016 FA § 7 (adding language about separateness of the franchisees’ 20 businesses and adding to the specifically enumerated requirement to comply with employment 21 laws; 2017 FA (minor revisions); 2018 FA § 7 (adding language disclaiming any relationship 22 between the Regional Franchisors and employees maintained by the franchisees); 2019 FA § 7 23 (adding language disclaiming benefits entitlement and obligation to maintain workers 24 compensation, occupational and health insurances); 2020 FA § 7 (minor revisions); 2021 FA § 7 25 (adding language permitting franchisees to submit “pending absent member claims” to arbitration). 26 All FAs implemented during the relevant period explain that a franchisee may operate and 27 develop its business as it sees fit, may develop leads and bid on new Accounts on its own, and that 28 all Accounts accepted by and transferred to a franchisee are its own, reverting to the Regional 5 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 Franchisor only if the franchisee relinquishes the Account or otherwise stops providing cleaning 2 services to an Account, in which case the Regional Franchisor may offer the account to another 3 franchisee for servicing. Dusthimer Decl. Ex. 3f, 2021 FA §§ 6.F, 21.B, Gong Decl. Ex. 3b, 2013 4 FA §§ 6.B, 21.B; Newman Decl. Ex. 2d, 2018 FA § 6.F.2, 19.B. Many franchisees developed 5 significant commercial cleaning businesses by servicing Accounts from the Vanguard® system 6 and serviced other commercial cleaning accounts from their business efforts made outside the 7 Vanguard® system. Dusthimer Decl. ¶23; Gong Decl. ¶32; Newman Decl. ¶28; see generally 8 franchisee declarations attached to Declaration of Robert M. Geiger, Exs. A-H. 9 Moreover, all versions of the FAs during the relevant period establish that the franchisees 10 were responsible for supplying the labor and equipment necessary to complete the cleaning 11 services that a franchisee agreed to provide to its Accounts. See, e.g., Amaya FA § 9, Gonzalez 12 FA § 9, Mazariegos FA § 9; and compare 2016-2020 FAs, § 7; 2016-2020 FAs Independent 13 Contractor Acknowledgement. In any event, none of the franchise owners that signed a franchise 14 agreement were obligated personally to perform the cleaning services. Dusthimer Decl. ¶27; Gong 15 Decl. ¶27; Newman Decl. ¶19. Plaintiff Gonzalez, for example, has not personally serviced any 16 Accounts since December 2019. Infra §III.vi. 17 The FAs also address how a Vanguard® branded cleaning business should operate. The 18 relevant provisions differed depending on which version of the FA a given franchisee may have 19 signed. For example, Amaya’s franchise agreement stated that the regional franchise (at that time, 20 Woohoo, a non-party to this case) would provide a training program. Amaya FA § 1.a; see also 21 Gong Decl. ¶28. BCC did not provide that training, nor could it have done so, because BCC had 22 not yet purchased the Sacramento territory. Gong Decl. ¶28. Mazariegos’ and Gonzalez’s FAs 23 contained similar promises to provide training about how to operate a Vanguard® branded 24 cleaning business. Gonzalez FA §1.a, Mazariegos FA §1.a. The 2012 FA created a pre-operating 25 commitment for the franchisee to obtain a certificate of completion of the “VCS Business System 26 Program.” 2012 FA §2.A. That provision was amended in 2013, at which time the language was 27 modified to require any such certificate only upon specific request and within the discretion of the 28 Regional Franchisor. 2013 FA §2.A. This certification requirement was removed in 2013 and from 6 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 all later versions of the FA. Dusthimer Decl. ¶29; Gong Decl. ¶29; Newman Decl. ¶21. While 2 training about the Vanguard® cleaning system and business operations was made available as a 3 resource to interested franchisees, it was optional during the relevant period. Dusthimer Decl. ¶27; 4 Gong Decl. ¶27; Newman Decl. ¶19. Newman of WCV summarized it well, “to characterize it as 5 training for the franchisees is misleading. The Franchisees, almost without exception, including 6 [Mazariegos], had been in business for years as cleaners. They had their own companies. Many of 7 them have their own t-shirts and business cards. They have their own accounts. And what they 8 wanted to know [when the purchased a Vanguard® franchise] is how to get oriented to how we 9 bid jobs and how they can get accurately paid on the 28th of every month. And so the manuals were 10 provided to them with, I would say, an overview, gauging their level of interest in the material, 11 which – which in every case was – was – minimal. Itwas really more of an orientation than a 12 training.” Newman Tr. at 217, 306:3-25, 307:10-25; Gong Tr. at 103:2-21 (“I wouldn’t say it was 13 a formal training session, but it was more of a...conversation that...there are certain things that 14 successful franchise owners do”). 15 Plaintiffs assert that the cleaning and business manuals established VCS’ and the Regional 16 Franchisors’ control over Plaintiffs’, and the putative class members’ work. The record does not 17 support that assertion. The parties agree that VCS prepared “manuals” about the operation and 18 growth of their businesses and how to perform certain cleaning work but disagree about how they 19 were used. See, e.g., Newman Tr. 155 (“we regarded the franchise[d] business as having two key 20 components. One was cleaning, doing the cleaning, and two was managing their and growing their 21 franchise[d] business.”). Wine Country offered these “manuals” only as needed or requested by a 22 franchisee and did not distribute new or updated versions unless requested by a franchisee. See 23 Newman Tr. 217-218 (noting updates beyond provision of materials upon purchasing franchise 24 not provided unless requested by franchisee); but see Gong Tr. at 228 (estimating that Buddha 25 stopped circulating the cleaning-related manual sometime around 2016), 231 (testifying that it is 26 not part of Buddha’s practice to distribute the business-related manual to franchisees); Amaya Tr. 27 at 130:20-131:2 (noting that he looked at the manual “very little”); Mazariegos Tr. 247:14-17 28 (stating that she never read the manual provided to her). RRF did not require franchisees to train 7 Regional Franchisors’ Opposition to Plaintiffs’ Renewed Motion for Class Certification Case No. 20-C1V-04267 1 or review the manuals, and generally only made a copy of the manuals available to those 2 franchisees that expressed an interest in these materials. Dusthimer Decl. ¶¶ 30-31. 3 Finally, it is undisputed that none of Plaintiffs’ franchise agreements contain an arbitration 4 provision. Amaya FA § 26, Gonzalez FA § 26, Mazariegos FA § 26. Beginning in 2012, however, 5 each version of the franchise agreement contains an arbitration provision. Compare 2012-2022 6 FAs, §§ 32, 34 (depending on year). These FAs also contain class and collective action waivers. 7 Id. The arbitration provisions state: 8