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DAMON M. OTT, Bar No. 215392
1 dott@littler.com
ROBERT M. GEIGER, Bar No. 322914
2 rgeiger@littler.com
LITTLER MENDELSON, P.C.
3 333 Bush Street, 34th Floor
San Francisco, California 94104
4 Telephone: 415.433.1940
Fax No.: 415.399.8490
5
Attorneys for Defendant
6 VANGUARD CLEANING SYSTEMS, INC.
7
SUPERIOR COURT OF THE STATE OF CALIFORNIA
8
COUNTY OF SAN MATEO
9
10
ALIDA MAZARIEGOS, PAULA GONZALEZ, Case No. 20-CIV-04267
11 and JAIME AMAYA,
COMPLEX ACTION
12 Plaintiffs,
ASSIGNED FOR ALL PURPOSES TO
13 v. THE HONORABLE NANCY L.
FINEMAN, DEPT 4
14 VANGUARD CLEANING SYSTEMS, INC.;
RR FRANCHISING, INC., D/B/A DEFENDANT VANGUARD
15 VANGUARD CLEANING SYSTEMS OF CLEANING SYSTEM, INC.’S
SOUTHERN CALIFORNIA AND D/B/A OPPOSITION TO PLAINTIFFS’
16 VANGUARD CLEANING SYSTEMS OF RENEWED MOTION FOR CLASS
NORTHERN CALIFORNIA; BUDDHA CERTIFICATION
17 CAPITAL CORPORATION, D/B/A
VANGUARD CLEANING SYSTEMS OF Date: March 28, 2023
18 SACRAMENTO, D/B/A VANGUARD Time: 2:00 p.m.
CLEANING SYSTEMS OF THECENTRAL Dept.: 4; Ctrm. N
19 VALLEY, AND D/B/AVANGUARD
CLEANING SYSTEMS OF THE CENTRAL
20 COAST; AND WINE COUNTRY
VENTURES, INC. D/B/A VANGUARD
21 CLEANING SYSTEMS OF THE NORTH
BAY, AND DOES 1 THROUGH 10,
22 INCLUSIVE,
23 Defendants.
24
25
26
27
28
LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 TABLE OF CONTENTS
2 Page
3 I. INTRODUCTION .............................................................................................................. 9
4 II. FACTUAL AND LEGAL BACKGROUND ................................................................... 10
A. Overview Of Pertinent Franchise Laws ................................................................ 10
5
B. VCS And The Vanguard Cleaning Systems® Franchise Business System .......... 13
6 C. The Regional Franchisor Defendants .................................................................... 15
7 D. Unit Franchise Owners Run Their Businesses How They Want And Do So
In Vastly Different Ways ...................................................................................... 16
8 1. Declarations Submitted By Unit Franchise Owners Demonstrate
Their Businesses Run The Gamut In Terms Of Size And Scope ............. 16
9
2. Evidence From The Regional Franchisors Demonstrate Unit
10 Franchise Revenue Varies Widely ............................................................ 18
3. The Credible Evidence Provided By Plaintiffs Also Offer Useful
11 Examples Of The Freedom Unit Franchise Owners Have Over
Their Businesses ....................................................................................... 19
12
4. Arbitration And Release Agreements ....................................................... 21
13 III. LEGAL ANALYSIS ......................................................................................................... 22
14 A. Plaintiffs’ Renewed Motion– Like The Original – Is Wholly Based On A
False Factual Façade Insufficient To Support Class Certification ........................ 22
15 B. Determining The Proper Legal Standard(s) For Determining A Unit
Franchisee’s IC/EE Status Alone Requires An Individualized Analysis So
16 Burdensome That It Alone Makes Class Treatment Inappropriate ....................... 23
17 C. Common Issues Do Not Predominate Under Borello Standard ............................ 25
D. Common Issues Do Not Predominate Under the ABC Test ................................. 28
18
E. Assessing Liability for The Actual Legal Claims Would Entail Highly
19 Individualized Issues ............................................................................................. 29
1. Determining Whether Unit Franchise Owners Were Exempt
20 Employees Would Be Unmanageable and Involve Many
Individualized Issues ................................................................................. 29
21
2. Common Issues Do Not Predominate for the Expense-
22 Reimbursement Claim and Deduction Claim ........................................... 30
3. Common Issues Do Not Predominate for the Wage-Statement
23 Claim ......................................................................................................... 33
24 F. A Class Action Would not be Manageable or Superior to Individual
Actions .................................................................................................................. 34
25 1. Plaintiffs’ Class Definition, Alone, Renders this Action
Unmanageable ........................................................................................... 34
26
2. The Existence of Hundreds of Arbitration And Release Agreements
27 Renders This Action Unmanageable ......................................................... 35
28
2
LITTLER MEND ELSO N, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
415.433.1940
RENEWED MOTION FOR CLASS CERTIFICATION
1 TABLE OF CONTENTS
(continued)
2 Page
3 3. For Additional Reasons, a Class Action Is Not Superior to
Individual Actions ..................................................................................... 36
4
G. Plaintiffs Fail to Meet the Typicality and Adequacy Standards ........................... 37
5 IV. CONCLUSION ................................................................................................................. 38
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LITTLER MEND ELSO N, P.C.
333 Bush Street
3
34th Floor
San Francisco, CA 94104
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4 Albert v. Postmates Inc.,
2019 WL 1045785 (N.D. Cal. Mar. 5, 2019) ...........................................................................30
5
6 Ayala v. Antelope Valley Newspapers, Inc.,
59 Cal.4th 522 (2014) ........................................................................................................23, 25
7
Basurco v. 21st Century Ins.,
8 108 Cal. App. 4th 110 (2003) ..................................................................................................36
9 Beaumon-Jacques v. Farmers Grp., Inc.,
217 Cal.App.4th 1137 (2013) ..................................................................................................25
10
Berman v. Freedom Fin. Network, LLC,
11
400 F. Supp. 3d 964 (N.D. Cal. 2019) ...............................................................................35, 37
12
Block v. Major League Baseball,
13 65 Cal. App. 4th 538 (1998) ....................................................................................................22
14 Bowerman v. Field Asset Services, Inc.,
39 F.4th 652 (9th Cir. 2022) ..............................................................................................25, 30
15
Bowman v. CMG Mortg. Inc.,
16
2008 WL 3200662 (N.D. Cal. Aug. 4, 2008) ..........................................................................32
17
Brinker Restaurant Corp. v. Superior Court,
18 53 Cal. 4th 1004 (2012) ...........................................................................................................22
19 Chavez v. Lumber Liquidators,
2012 WL 1004850 (N.D. Cal. Mar. 26, 2012) .........................................................................33
20
Chris Pyara v. Sysco Corp.,
21 2017 WL 928715 (E.D. Cal. Mar. 9, 2017) .............................................................................33
22
Cislaw v. Southland Corp.,
23 4 Cal. App. 4th 1284 (1992) ....................................................................................................25
24 Cochran v. Schwan's Home Serv., Inc.,
228 Cal. App. 4th 1137 (2014) ..........................................................................................30, 32
25
Curry v. Equilon Enters., LLC,
26 23 Cal. App. 5th 289 (2018) ..............................................................................................24, 29
27 Dalton v. Lee Publications, Inc.,
28 2011 WL 1045107 (S.D. Cal. 2011) ........................................................................................33
LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
4
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 Dilts v. Penske Logistics, LLC,
2014 WL 866954 (S.D. Cal. Feb. 19, 2014) ............................................................................33
2
Dryer v. Los Angeles Rams,
3 40 Cal. 3d 406 (1985) ..............................................................................................................36
4 In re FedEx Ground Package Sys., Inc., Employment Practices Litig.,
5 273 F.R.D. 516 (N.D.Ind.2010) ...............................................................................................28
6 Fireside Bank v. Superior Court,
40 Cal. 4th 1069 (2007) ...........................................................................................................37
7
Garcia v. Pexco, LLC,
8 11 Cal. App. 5th 782 (2017) ....................................................................................................36
9 Grissom v. Vons Co.,
1 Cal. App. 4th 52 (1991) ........................................................................................................31
10
11 Haitayan v. 7-Eleven,
2021 WL 4078727 (C.D. Cal. 2021)................................................................................ passim
12
Harris v. Vector Marketing Corp.,
13 753 F.Supp.2d 996 (N.D. Cal. 2010) .......................................................................................33
14 Henderson v. Equilon Enters., LLC,
40 Cal. App. 5th 1111 (2019) ..................................................................................................24
15
16 Howard v. Gap,
2009 WL 3571984 (N.D. Cal. Oct. 29, 2009)..........................................................................32
17
Juarez v. Jani-King of California, Inc.,
18 273 F.R.D. 571 (N.D. Cal. 2011) .............................................................................................37
19 La Sala v. American Sav. & Loan Assoc.,
5 Cal. 3d 864 (1971) ................................................................................................................37
20
Linton v. Desoto Cab Co.,
21
15 Cal. App. 5th 1208 (2017) ............................................................................................10, 25
22
Madrigal v. Tommy Bahama Grp., Inc.,
23 2011 WL 10511339 (C.D. Cal. June 27, 2011) .......................................................................33
24 Martinez v. Combs,
49 Cal. 4th 35 (2010) .........................................................................................................24, 30
25
Martinez-Sanchez v. Anthony Vineyards, Inc.,
26 2021 WL 5371425 (E.D. Cal. Nov. 18, 2021) .........................................................................33
27
Millsap v. Fed. Express Corp.,
28 227 Cal.App.3d 425 (1991) .....................................................................................................25
LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
5
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 Moreno v. Castlerock Farming and Transport, Inc.,
2022 WL 902597 (E.D. Cal. March 28, 2022) ........................................................................37
2
Morgan v. Wet Seal, Inc.,
3 210 Cal. App. 4th 1341 (2012) ................................................................................................33
4 Naranjo v. Spectrum Sec. Servs., Inc.,
5 40 Cal. App. 5th 444 (2019) ....................................................................................................37
6 Narayan v. EGL, Inc.,
285 F.R.D. 473 (N.D. Cal. 2012) .................................................................................26, 29, 35
7
Patterson v. Domino’s Pizza, LLC,
8 60 Cal. 4th 474 (2014) .......................................................................................................10, 12
9 Peabody v. Time Warner Cable, Inc.,
59 Cal. 4th 662 (2014) .............................................................................................................30
10
11 People v. Pac. Landmark, LLC,
129 Cal. App. 4th 1203 (2005) ................................................................................................32
12
Reyes v. San Diego County Bd. of Supervisors,
13 196 Cal. App. 3d 1263 (1987) .................................................................................................34
14 S.G. Borello & Sons, Inc. v. Department of Industrial Relations,
48 Cal. 3d 341 (1989) ...................................................................................................... passim
15
16 Sanchez v. Hearst Communications, Inc.,
2022 WL 1400853 (N.D. Cal. May 4, 2022) ...........................................................................26
17
Sav-On Drug Stores, Inc. v. Superior Court,
18 34 Cal.4th 319 (2004) ..............................................................................................................23
19 Schwann v. FedEx Ground Package Sys., Inc.,
2013 WL 1292432 (D. Mass. Apr. 1, 2013) ......................................................................28, 29
20
Soares v. Flower Foods, Inc.,
21
320 F.R.D. 464 (N.D. Cal. 2017) ..................................................................................... passim
22
Spencer v. Beavex, Inc.,
23 2006 WL 6500597 (S.D. Cal. Dec. 15, 2006)....................................................................26, 35
24 Sportsman v. A Place for Rover, Inc.,
537 F. Supp. 3d 1081 (N.D. Cal. 2021) ...................................................................................29
25
Tokoshima v. Pep BoysManny Moe & Jack of California,
26 2014 WL 1677979 (N.D. Cal. Apr. 28, 2014) .........................................................................31
27
Urena v. Earthgrains Distribution, LLC,
28 2017 WL 4786106 (C.D. Cal. July 19, 2017) ..............................................................27, 35, 36
LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
6
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 Vazquez v. Jan-Pro Franchising International, Inc.,
986 F.3d 1106 (2021) .........................................................................................................12, 13
2
Villalpando v. Exel Direct, Inc.,
3 2015 WL 5179486 (N.D. Cal. 2015) .......................................................................................33
4 Wilson v. La Jolla Group,
5 61 Cal. App. 5th 897 (2021) ..............................................................................................31, 36
6 Statutes
7 15 U.S.C. §1127 (2000) .................................................................................................................11
8 Cal. Corp. Code §31001...........................................................................................................11, 13
9 Cal. Corp. Code § 31005(a)(1)-(3) ..........................................................................................12, 15
10 California Franchise Investment Law ............................................................................................11
11 California Franchise Relations Act ................................................................................................11
12
California Franchise Relations Act ................................................................................................27
13
Labor Code section 226 and 203 ...................................................................................................33
14
Labor Code section 2776 .........................................................................................................24, 28
15
Labor Code section 2802 .......................................................................................30, 31, 32, 33, 36
16
Lanham Act ....................................................................................................................................11
17
Other Authorities
18
19 16 C.F.R. § 436.1(h)(1) ..................................................................................................................11
20 Wage Order 5 .................................................................................................................................33
21
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27
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LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
7
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 I. INTRODUCTION
Defendant Vanguard Cleaning Systems, Inc. (“VCS”) submits this brief in opposition to
2
Plaintiffs’ Renewed Motion for Class Certification., which only makes the inappropriateness of class
3
certification even more clear. Rather than seek to redress the problems expressly identified by the
4
Court, Plaintiffs once again rely on the same the faulty evidence and cookie-cutter declarations
5
submitted in support of the original motion. The only significant change Plaintiffs made was to
6
eliminate certain class claims, while continuing to pursue these claims individually. While this may
7
have eliminated an additional basis on which to deny class certification, on the whole, it does nothing
8
to make the case more suitable for class treatment, and, in fact, adds a new reason class certification
9
should be denied. That being the obvious conflict between the Plaintiffs’ interest in their own claims
10
and in bring this action as a class, and the putative class members’ interest in their own fate. It is hard
11
to imagine how Plaintiffs can now contend that they are better positioned to represent the interests of
12
the putative class members when, in order to achieve their goal of a class case, they sacrifice four of
13
the putative class members’ claims, leaving them with only three claims, all while preserving all of
14
their own individual claims. Given the limited scope of the claims Plaintiffs now propose to pursue
15
on behalf of the putative class members, Plaintiffs have made it obvious that any putative class member
16
interested in pursuing their claims would be far better doing so in their own case than by being dragged
17
into the b-rate, subpar class action Plaintiffs propose for them.
18
The Renewed Motion also stillfails for the same reasons as the original. Any trial in this
19
matter would be riddled with manageability problems caused by individualized issues on multiple
20
levels. Even just determining the legal test governing a Unit Franchise owner’s status as an
21
independent contractor or employee requires an individualized analysis, not to mention whether the
22
tests could be susceptible to common prove, which is made impossible by the fact-specific analysis
23
necessary under the Borello standard, the joint employer standards, the business to business exception
24
of the ABC test, and even the ABC test itself. All of which are undoubtedly applicable to some portion
25
of some claims held by some of the putative class members.
26
Finally, Plaintiffs’ Renewed Motion fails for lack of any meaningful evidence supporting class
27
certification, let alone the substantial evidence required. This lack of evidence is no better
28
LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
8
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 demonstrated than by Plaintiffs’ surprise move of now seeking class certification covering Unit
2 Franchises related to Prestige Worldwide, a company that no Plaintiff every had any connection with
3 and about which no discovery has been conducted.
4 Plaintiffs’ claims are not remotely appropriate for class treatment. And given their clear
5 conflict of interest and other deficiencies, none of the named Plaintiffs are adequate or typical
6 representative of the Unit Franchise owners they seek to represent.
7 We detail the incredible legal and factual complexity that makes this case inappropriate for
8 class treatment further below, but offer the following chart to help visualize just how complicated this
9 matter is solely from an employment status analysis alone, which requires individual examination of
10 the year, the nature of Unit Franchise owner’s business structure, and the individual’s working
11 practices, just to determine the legal standard to be applied.
12
Entity Class Rep Joint Employer ABC Test B2B Exemption Borello Factors
13 VCS All Yes Alternatively Alternatively Alternatively
RR Gonzalez Franchise owners Claims post-2020 Yes Claims pre-2020
14 who are not sole
15 proprietors.
WCV Mazariegos No – Claims No – Claims No – Claims No – Claims
16 released released released released
Buddha Amaya Franchise owners Claims post-2020 Yes Claims pre-2020
17 who are not sole
proprietors,
18 including himself
for a period.
19
Prestige N/A N/A N/A N/A N/A
20
Plaintiffs’ claims are, by their own admission, not suitable for class treatment. The Court
21
should deny their Renewed Motion.
22
II. FACTUAL AND LEGAL BACKGROUND
23
A. Overview Of Pertinent Franchise Laws
24
Franchising has “existed in this country in one form or another for over 150 years” (Patterson
25
v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 489 (2014)), and, in the words of the California Supreme
26
Court, has “become a ubiquitous, lucrative, and thriving business model.” Id. at 477. And a putative
27
employer does not exercise any degree of control merely by imposing requirements mandated by
28
government regulation.” Linton v. Desoto Cab Co., 15 Cal. App. 5th 1208, 1223 (2017). California
LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
9
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 franchisors are heavily regulated by both the state and federal government. At the federal level, the
2 Federal Trade Commission defines a “franchise” in part as “any continuing commercial relationship
3 or arrangement” whereby the franchisor promises that the franchisee “will obtain the right to operate
4 a business that is identified or associated with the franchisor’s trademark ....” 16 C.F.R. § 436.1(h)(1).
5 Further, the Lanham Act mandates that trademark licensors maintain control over the use of their
6 trademarks. See 15 U.S.C. §1127 (2000). In pertinent part, 16 C.F.R. § 436.1(h)(l)-(3) provides:
7 (h) Franchise means any continuing commercial relationship or arrangement,
whatever it may be called, in which the terms of the offer or contract specify, or the
8 franchise seller promises or represents, orally or in writing, that:
9
(1) The franchisee will obtain the right to operate a business that is
10 identified or associated with the franchisor’s trademark, or to offer, sell, or distribute
goods, services, or commodities that are identified or associated with the franchisor’s
11 trademark;
12 (2) The franchisor will exert or has authority to exert a significant
13 degree of control over the franchisee’s method of operation, or provide significant
assistance in the franchisee’s method of operation, and;
14
(3) As a condition of obtaining or commencing operation of the
15 franchise, the franchisee makes a required payment or commits to make a required
payment to the franchisor or its affiliate.
16
17 See 16 C.F.R. § 436. 1 (h)(l)-(3)(emphasis added).
The California Legislature enacted two statutes to regulate franchise relationships (the
18
California Franchise Investment Law [the “CFIL”] and the California Franchise Relations Act [the
19
“CFRA”]). These statutes repeatedly characterize franchises as “businesses” and describe the
20
relationship created between a franchisor and a franchisee as a “business relationship.” See, e.g., Cal.
21
Corp. Code §31001; §31005(a)(2); §31011.
22
Under the CFIL, a “franchise” is a contract or agreement characterized by three elements:
23
24 (1) A franchisee is granted the right to engage in the business of
offering, selling or distributing goods or services under a marketing plan or system
25 prescribed in substantial part by a franchisor; and
26 (2) The operation of the franchisee’s business pursuant to such plan or
system is substantially associated with the franchisor’s trademark, service mark,
27
trade name, logotype, advertising or other commercial symbol designating the
28 franchisor or its affiliate; and
LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
10
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 (3) The franchisee is required to pay, directly or indirectly, a franchise
fee.
2
Cal. Corp. Code § 31005(a)(1)-(3) (emphasis added).
3
The California Supreme Court repeatedly praised franchising as a business model in the 2014
4
decision Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, writing:
5
This contractual arrangement benefits both parties. The franchisor, which sells the
6 right to use its trademark and comprehensive business plan, can expand its enterprise
while avoiding the risk and cost of running its own stores... By following the standards
7
used by all stores in the same chain, the self-motivated franchisee profits from the
8 expertise, goodwill, and reputation of the franchisor.
9 Id. at 477. The Court further noted that franchisors must
10 [I]mpose[] comprehensive and meticulous standards for marketing its trademarked
brand and operating its franchises in a uniform way. To this extent, the franchisor
11 controls the enterprise. However, the franchisee retains autonomy as a manager and
employer. It is the franchisee who implements the operational standards on a day-to-
12 day basis, hires and fires store employees, and regulates workplace behavior.
13 Id. at 478 (emphasis added). On this subject, the Court added:
14
Under the business format model, the franchisee pays royalties and fees for the right
15 to sell products or services under the franchisor's name and trademark. In the process,
the franchisee also acquires a business plan, which the franchisor has crafted…This
16 business plan requires the franchisee to follow a system of standards and procedures.
A long list of marketing, production, operational, and administrative areas is
17 typically involved…The franchisor's system can take the form of printed manuals1,
18 training programs, advertising services, and managerial support, among other
things… [S]ystemwide standards and controls provide a means of protecting the
19 trademarked brand at great distances…
20 The goal—which benefits both parties to the contract—is to build and keep customer
trust by ensuring consistency and uniformity in the quality of goods and services[.]
21
Id. at 489-90 (internal citations omitted; emphasis added).
22
Patterson is controlling law that has never been reversed or superseded.2
23
1
24 VCS has distributed eleven different manuals in effect during the Class Period (April 6, 2016 to
present). (Lee Dec., ¶ 12, Exhs. 3-11.)
2
25 VCS is aware that the 9th Circuit, in Vazquez v. Jan-Pro Franchising International, Inc., 986 F.3d
1106 (2021), held that the ABC test could be applied to a top-level franchisor; but that case is
26 distinguishable for at least a few reasons. First, the plaintiffs in Vazquez were suing the top-level
franchisor directly; the regional franchisees were not parties in the action, and the plaintiffs argued
27 that the top-level franchisor was the hiring entity. Id. at n. 3 (“The regional master franchisees were
not named as defendants[.]”) The same is not true here, as Plaintiffs have sued the regional franchisees
28 in this action, and the evidence clearly establishes that the plaintiffs and other putative class members
purchased
LITTLER MEND ELSON, P.C. Unit Franchises from and were subject to franchise agreements entered into with the
333 Bush Street
34th Floor
San Francisco, CA 94104
11
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 B. VCS And The Vanguard Cleaning Systems® Franchise Business System
2 With a single office in San Mateo, California, VCS is a regional-franchising business that
3 owns, promotes and licenses for franchising the Vanguard Cleaning Systems® brand (a service mark),
4 related marks, and the Vanguard Cleaning Systems® franchise business system. The Vanguard
5 Cleaning Systems® franchise business system includes a comprehensive business plan VCS
6 developed for franchising to parties interested in operating a franchised cleaning business under the
7 Vanguard Cleaning Systems® brand (or “Vanguard”). Rather than offer and sell individual franchises
8 to interested parties, VCS uses a three-tier franchise system to allow it to focus its business exclusively
9 on the development, maintenance and promotion of the Vanguard Cleaning Systems® brand and the
10 Vanguard franchise business system. VCS monetizes its Vanguard Cleaning Systems® brand and
11 related franchise business system by authorizing their use by separate companies (referred to herein
12 as Regional Franchisors) like the co-Defendants. VCS grants this authorization by entering into a
13 Master Franchise Agreement with the Regional Franchisor giving it the right and obligation to sell
14 Vanguard franchises in a designated geographic region for independently owned and operated
15 commercial cleaning businesses. (technically, and hereafter, “Unit Franchises”). These Unit
16 Franchises make use of the Vanguard Cleaning Systems® franchise business system subfranchised to
17 them by the applicable Regional Franchisor. (Lee Dec., ¶¶ 2-4.)
18 The Vanguard Cleaning Systems® franchise business system consists of a variety of
19 components, including processes, know-how, and other proprietary information and procedures (the
20 “System”) for establishing and operating an independent commercial cleaning business in a manner
21 that preserves the quality and goodwill associated with the Vanguard Cleaning Systems® trademarks,
22 service marks, logos, and other identifiers (the “Marks”). (Brome Decl., Exh. 20 (Business
23 Information Manual), VCS0000363.) The details of the System, which has evolved over time, are
24
Regional franchisees – not VCS – during the covered period. More importantly, however, the Vazquez
25 decision was wrongly decided by a federal court in a non-binding decision that strayed far afield from
California’s jurisprudence and regulatory law, which expressly recognizes the franchisor-to-franchisee
26 relationship to be a legitimate business-to-business relationship, not one in which an employer is hiring
an individual to perform services for it. See, e.g., Cal. Corp. Code §31001 (describing the parties
27 “business relationship”); §31011 (franchise fee is the amount paid “for the right to enter into a business
under a franchise agreement”). This case is in state court, not federal court (and in any event, the 9th
28 Circuit did not make any findings of fact, but merely stated its opinion that the ABC test needed to be
applied by the trial judge on remand, with respect to a completely different franchisor (Jan-Pro)).
LITTLER MEND ELSON, P.C.
333 Bush Street
34th Floor
San Francisco, CA 94104
12
415.433.1940
DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’
RENEWED MOTION FOR CLASS CERTIFICATION
1 largely contained in the Commercial Cleaning Information Manuals VCS has developed to convey
2 these details to the parties licensed to u
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DAMON M. OTT, Bar No. 215392 1 dott@littler.com ROBERT M. GEIGER, Bar No. 322914 2 rgeiger@littler.com LITTLER MENDELSON, P.C. 3 333 Bush Street, 34th Floor San Francisco, California 94104 4 Telephone: 415.433.1940 Fax No.: 415.399.8490 5 Attorneys for Defendant 6 VANGUARD CLEANING SYSTEMS, INC. 7 SUPERIOR COURT OF THE STATE OF CALIFORNIA 8 COUNTY OF SAN MATEO 9 10 ALIDA MAZARIEGOS, PAULA GONZALEZ, Case No. 20-CIV-04267 11 and JAIME AMAYA, COMPLEX ACTION 12 Plaintiffs, ASSIGNED FOR ALL PURPOSES TO 13 v. THE HONORABLE NANCY L. FINEMAN, DEPT 4 14 VANGUARD CLEANING SYSTEMS, INC.; RR FRANCHISING, INC., D/B/A DEFENDANT VANGUARD 15 VANGUARD CLEANING SYSTEMS OF CLEANING SYSTEM, INC.’S SOUTHERN CALIFORNIA AND D/B/A OPPOSITION TO PLAINTIFFS’ 16 VANGUARD CLEANING SYSTEMS OF RENEWED MOTION FOR CLASS NORTHERN CALIFORNIA; BUDDHA CERTIFICATION 17 CAPITAL CORPORATION, D/B/A VANGUARD CLEANING SYSTEMS OF Date: March 28, 2023 18 SACRAMENTO, D/B/A VANGUARD Time: 2:00 p.m. CLEANING SYSTEMS OF THECENTRAL Dept.: 4; Ctrm. N 19 VALLEY, AND D/B/AVANGUARD CLEANING SYSTEMS OF THE CENTRAL 20 COAST; AND WINE COUNTRY VENTURES, INC. D/B/A VANGUARD 21 CLEANING SYSTEMS OF THE NORTH BAY, AND DOES 1 THROUGH 10, 22 INCLUSIVE, 23 Defendants. 24 25 26 27 28 LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 TABLE OF CONTENTS 2 Page 3 I. INTRODUCTION .............................................................................................................. 9 4 II. FACTUAL AND LEGAL BACKGROUND ................................................................... 10 A. Overview Of Pertinent Franchise Laws ................................................................ 10 5 B. VCS And The Vanguard Cleaning Systems® Franchise Business System .......... 13 6 C. The Regional Franchisor Defendants .................................................................... 15 7 D. Unit Franchise Owners Run Their Businesses How They Want And Do So In Vastly Different Ways ...................................................................................... 16 8 1. Declarations Submitted By Unit Franchise Owners Demonstrate Their Businesses Run The Gamut In Terms Of Size And Scope ............. 16 9 2. Evidence From The Regional Franchisors Demonstrate Unit 10 Franchise Revenue Varies Widely ............................................................ 18 3. The Credible Evidence Provided By Plaintiffs Also Offer Useful 11 Examples Of The Freedom Unit Franchise Owners Have Over Their Businesses ....................................................................................... 19 12 4. Arbitration And Release Agreements ....................................................... 21 13 III. LEGAL ANALYSIS ......................................................................................................... 22 14 A. Plaintiffs’ Renewed Motion– Like The Original – Is Wholly Based On A False Factual Façade Insufficient To Support Class Certification ........................ 22 15 B. Determining The Proper Legal Standard(s) For Determining A Unit Franchisee’s IC/EE Status Alone Requires An Individualized Analysis So 16 Burdensome That It Alone Makes Class Treatment Inappropriate ....................... 23 17 C. Common Issues Do Not Predominate Under Borello Standard ............................ 25 D. Common Issues Do Not Predominate Under the ABC Test ................................. 28 18 E. Assessing Liability for The Actual Legal Claims Would Entail Highly 19 Individualized Issues ............................................................................................. 29 1. Determining Whether Unit Franchise Owners Were Exempt 20 Employees Would Be Unmanageable and Involve Many Individualized Issues ................................................................................. 29 21 2. Common Issues Do Not Predominate for the Expense- 22 Reimbursement Claim and Deduction Claim ........................................... 30 3. Common Issues Do Not Predominate for the Wage-Statement 23 Claim ......................................................................................................... 33 24 F. A Class Action Would not be Manageable or Superior to Individual Actions .................................................................................................................. 34 25 1. Plaintiffs’ Class Definition, Alone, Renders this Action Unmanageable ........................................................................................... 34 26 2. The Existence of Hundreds of Arbitration And Release Agreements 27 Renders This Action Unmanageable ......................................................... 35 28 2 LITTLER MEND ELSO N, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ 415.433.1940 RENEWED MOTION FOR CLASS CERTIFICATION 1 TABLE OF CONTENTS (continued) 2 Page 3 3. For Additional Reasons, a Class Action Is Not Superior to Individual Actions ..................................................................................... 36 4 G. Plaintiffs Fail to Meet the Typicality and Adequacy Standards ........................... 37 5 IV. CONCLUSION ................................................................................................................. 38 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MEND ELSO N, P.C. 333 Bush Street 3 34th Floor San Francisco, CA 94104 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Albert v. Postmates Inc., 2019 WL 1045785 (N.D. Cal. Mar. 5, 2019) ...........................................................................30 5 6 Ayala v. Antelope Valley Newspapers, Inc., 59 Cal.4th 522 (2014) ........................................................................................................23, 25 7 Basurco v. 21st Century Ins., 8 108 Cal. App. 4th 110 (2003) ..................................................................................................36 9 Beaumon-Jacques v. Farmers Grp., Inc., 217 Cal.App.4th 1137 (2013) ..................................................................................................25 10 Berman v. Freedom Fin. Network, LLC, 11 400 F. Supp. 3d 964 (N.D. Cal. 2019) ...............................................................................35, 37 12 Block v. Major League Baseball, 13 65 Cal. App. 4th 538 (1998) ....................................................................................................22 14 Bowerman v. Field Asset Services, Inc., 39 F.4th 652 (9th Cir. 2022) ..............................................................................................25, 30 15 Bowman v. CMG Mortg. Inc., 16 2008 WL 3200662 (N.D. Cal. Aug. 4, 2008) ..........................................................................32 17 Brinker Restaurant Corp. v. Superior Court, 18 53 Cal. 4th 1004 (2012) ...........................................................................................................22 19 Chavez v. Lumber Liquidators, 2012 WL 1004850 (N.D. Cal. Mar. 26, 2012) .........................................................................33 20 Chris Pyara v. Sysco Corp., 21 2017 WL 928715 (E.D. Cal. Mar. 9, 2017) .............................................................................33 22 Cislaw v. Southland Corp., 23 4 Cal. App. 4th 1284 (1992) ....................................................................................................25 24 Cochran v. Schwan's Home Serv., Inc., 228 Cal. App. 4th 1137 (2014) ..........................................................................................30, 32 25 Curry v. Equilon Enters., LLC, 26 23 Cal. App. 5th 289 (2018) ..............................................................................................24, 29 27 Dalton v. Lee Publications, Inc., 28 2011 WL 1045107 (S.D. Cal. 2011) ........................................................................................33 LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 4 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 Dilts v. Penske Logistics, LLC, 2014 WL 866954 (S.D. Cal. Feb. 19, 2014) ............................................................................33 2 Dryer v. Los Angeles Rams, 3 40 Cal. 3d 406 (1985) ..............................................................................................................36 4 In re FedEx Ground Package Sys., Inc., Employment Practices Litig., 5 273 F.R.D. 516 (N.D.Ind.2010) ...............................................................................................28 6 Fireside Bank v. Superior Court, 40 Cal. 4th 1069 (2007) ...........................................................................................................37 7 Garcia v. Pexco, LLC, 8 11 Cal. App. 5th 782 (2017) ....................................................................................................36 9 Grissom v. Vons Co., 1 Cal. App. 4th 52 (1991) ........................................................................................................31 10 11 Haitayan v. 7-Eleven, 2021 WL 4078727 (C.D. Cal. 2021)................................................................................ passim 12 Harris v. Vector Marketing Corp., 13 753 F.Supp.2d 996 (N.D. Cal. 2010) .......................................................................................33 14 Henderson v. Equilon Enters., LLC, 40 Cal. App. 5th 1111 (2019) ..................................................................................................24 15 16 Howard v. Gap, 2009 WL 3571984 (N.D. Cal. Oct. 29, 2009)..........................................................................32 17 Juarez v. Jani-King of California, Inc., 18 273 F.R.D. 571 (N.D. Cal. 2011) .............................................................................................37 19 La Sala v. American Sav. & Loan Assoc., 5 Cal. 3d 864 (1971) ................................................................................................................37 20 Linton v. Desoto Cab Co., 21 15 Cal. App. 5th 1208 (2017) ............................................................................................10, 25 22 Madrigal v. Tommy Bahama Grp., Inc., 23 2011 WL 10511339 (C.D. Cal. June 27, 2011) .......................................................................33 24 Martinez v. Combs, 49 Cal. 4th 35 (2010) .........................................................................................................24, 30 25 Martinez-Sanchez v. Anthony Vineyards, Inc., 26 2021 WL 5371425 (E.D. Cal. Nov. 18, 2021) .........................................................................33 27 Millsap v. Fed. Express Corp., 28 227 Cal.App.3d 425 (1991) .....................................................................................................25 LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 5 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 Moreno v. Castlerock Farming and Transport, Inc., 2022 WL 902597 (E.D. Cal. March 28, 2022) ........................................................................37 2 Morgan v. Wet Seal, Inc., 3 210 Cal. App. 4th 1341 (2012) ................................................................................................33 4 Naranjo v. Spectrum Sec. Servs., Inc., 5 40 Cal. App. 5th 444 (2019) ....................................................................................................37 6 Narayan v. EGL, Inc., 285 F.R.D. 473 (N.D. Cal. 2012) .................................................................................26, 29, 35 7 Patterson v. Domino’s Pizza, LLC, 8 60 Cal. 4th 474 (2014) .......................................................................................................10, 12 9 Peabody v. Time Warner Cable, Inc., 59 Cal. 4th 662 (2014) .............................................................................................................30 10 11 People v. Pac. Landmark, LLC, 129 Cal. App. 4th 1203 (2005) ................................................................................................32 12 Reyes v. San Diego County Bd. of Supervisors, 13 196 Cal. App. 3d 1263 (1987) .................................................................................................34 14 S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989) ...................................................................................................... passim 15 16 Sanchez v. Hearst Communications, Inc., 2022 WL 1400853 (N.D. Cal. May 4, 2022) ...........................................................................26 17 Sav-On Drug Stores, Inc. v. Superior Court, 18 34 Cal.4th 319 (2004) ..............................................................................................................23 19 Schwann v. FedEx Ground Package Sys., Inc., 2013 WL 1292432 (D. Mass. Apr. 1, 2013) ......................................................................28, 29 20 Soares v. Flower Foods, Inc., 21 320 F.R.D. 464 (N.D. Cal. 2017) ..................................................................................... passim 22 Spencer v. Beavex, Inc., 23 2006 WL 6500597 (S.D. Cal. Dec. 15, 2006)....................................................................26, 35 24 Sportsman v. A Place for Rover, Inc., 537 F. Supp. 3d 1081 (N.D. Cal. 2021) ...................................................................................29 25 Tokoshima v. Pep BoysManny Moe & Jack of California, 26 2014 WL 1677979 (N.D. Cal. Apr. 28, 2014) .........................................................................31 27 Urena v. Earthgrains Distribution, LLC, 28 2017 WL 4786106 (C.D. Cal. July 19, 2017) ..............................................................27, 35, 36 LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 6 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 Vazquez v. Jan-Pro Franchising International, Inc., 986 F.3d 1106 (2021) .........................................................................................................12, 13 2 Villalpando v. Exel Direct, Inc., 3 2015 WL 5179486 (N.D. Cal. 2015) .......................................................................................33 4 Wilson v. La Jolla Group, 5 61 Cal. App. 5th 897 (2021) ..............................................................................................31, 36 6 Statutes 7 15 U.S.C. §1127 (2000) .................................................................................................................11 8 Cal. Corp. Code §31001...........................................................................................................11, 13 9 Cal. Corp. Code § 31005(a)(1)-(3) ..........................................................................................12, 15 10 California Franchise Investment Law ............................................................................................11 11 California Franchise Relations Act ................................................................................................11 12 California Franchise Relations Act ................................................................................................27 13 Labor Code section 226 and 203 ...................................................................................................33 14 Labor Code section 2776 .........................................................................................................24, 28 15 Labor Code section 2802 .......................................................................................30, 31, 32, 33, 36 16 Lanham Act ....................................................................................................................................11 17 Other Authorities 18 19 16 C.F.R. § 436.1(h)(1) ..................................................................................................................11 20 Wage Order 5 .................................................................................................................................33 21 22 23 24 25 26 27 28 LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 7 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 I. INTRODUCTION Defendant Vanguard Cleaning Systems, Inc. (“VCS”) submits this brief in opposition to 2 Plaintiffs’ Renewed Motion for Class Certification., which only makes the inappropriateness of class 3 certification even more clear. Rather than seek to redress the problems expressly identified by the 4 Court, Plaintiffs once again rely on the same the faulty evidence and cookie-cutter declarations 5 submitted in support of the original motion. The only significant change Plaintiffs made was to 6 eliminate certain class claims, while continuing to pursue these claims individually. While this may 7 have eliminated an additional basis on which to deny class certification, on the whole, it does nothing 8 to make the case more suitable for class treatment, and, in fact, adds a new reason class certification 9 should be denied. That being the obvious conflict between the Plaintiffs’ interest in their own claims 10 and in bring this action as a class, and the putative class members’ interest in their own fate. It is hard 11 to imagine how Plaintiffs can now contend that they are better positioned to represent the interests of 12 the putative class members when, in order to achieve their goal of a class case, they sacrifice four of 13 the putative class members’ claims, leaving them with only three claims, all while preserving all of 14 their own individual claims. Given the limited scope of the claims Plaintiffs now propose to pursue 15 on behalf of the putative class members, Plaintiffs have made it obvious that any putative class member 16 interested in pursuing their claims would be far better doing so in their own case than by being dragged 17 into the b-rate, subpar class action Plaintiffs propose for them. 18 The Renewed Motion also stillfails for the same reasons as the original. Any trial in this 19 matter would be riddled with manageability problems caused by individualized issues on multiple 20 levels. Even just determining the legal test governing a Unit Franchise owner’s status as an 21 independent contractor or employee requires an individualized analysis, not to mention whether the 22 tests could be susceptible to common prove, which is made impossible by the fact-specific analysis 23 necessary under the Borello standard, the joint employer standards, the business to business exception 24 of the ABC test, and even the ABC test itself. All of which are undoubtedly applicable to some portion 25 of some claims held by some of the putative class members. 26 Finally, Plaintiffs’ Renewed Motion fails for lack of any meaningful evidence supporting class 27 certification, let alone the substantial evidence required. This lack of evidence is no better 28 LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 8 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 demonstrated than by Plaintiffs’ surprise move of now seeking class certification covering Unit 2 Franchises related to Prestige Worldwide, a company that no Plaintiff every had any connection with 3 and about which no discovery has been conducted. 4 Plaintiffs’ claims are not remotely appropriate for class treatment. And given their clear 5 conflict of interest and other deficiencies, none of the named Plaintiffs are adequate or typical 6 representative of the Unit Franchise owners they seek to represent. 7 We detail the incredible legal and factual complexity that makes this case inappropriate for 8 class treatment further below, but offer the following chart to help visualize just how complicated this 9 matter is solely from an employment status analysis alone, which requires individual examination of 10 the year, the nature of Unit Franchise owner’s business structure, and the individual’s working 11 practices, just to determine the legal standard to be applied. 12 Entity Class Rep Joint Employer ABC Test B2B Exemption Borello Factors 13 VCS All Yes Alternatively Alternatively Alternatively RR Gonzalez Franchise owners Claims post-2020 Yes Claims pre-2020 14 who are not sole 15 proprietors. WCV Mazariegos No – Claims No – Claims No – Claims No – Claims 16 released released released released Buddha Amaya Franchise owners Claims post-2020 Yes Claims pre-2020 17 who are not sole proprietors, 18 including himself for a period. 19 Prestige N/A N/A N/A N/A N/A 20 Plaintiffs’ claims are, by their own admission, not suitable for class treatment. The Court 21 should deny their Renewed Motion. 22 II. FACTUAL AND LEGAL BACKGROUND 23 A. Overview Of Pertinent Franchise Laws 24 Franchising has “existed in this country in one form or another for over 150 years” (Patterson 25 v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 489 (2014)), and, in the words of the California Supreme 26 Court, has “become a ubiquitous, lucrative, and thriving business model.” Id. at 477. And a putative 27 employer does not exercise any degree of control merely by imposing requirements mandated by 28 government regulation.” Linton v. Desoto Cab Co., 15 Cal. App. 5th 1208, 1223 (2017). California LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 9 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 franchisors are heavily regulated by both the state and federal government. At the federal level, the 2 Federal Trade Commission defines a “franchise” in part as “any continuing commercial relationship 3 or arrangement” whereby the franchisor promises that the franchisee “will obtain the right to operate 4 a business that is identified or associated with the franchisor’s trademark ....” 16 C.F.R. § 436.1(h)(1). 5 Further, the Lanham Act mandates that trademark licensors maintain control over the use of their 6 trademarks. See 15 U.S.C. §1127 (2000). In pertinent part, 16 C.F.R. § 436.1(h)(l)-(3) provides: 7 (h) Franchise means any continuing commercial relationship or arrangement, whatever it may be called, in which the terms of the offer or contract specify, or the 8 franchise seller promises or represents, orally or in writing, that: 9 (1) The franchisee will obtain the right to operate a business that is 10 identified or associated with the franchisor’s trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor’s 11 trademark; 12 (2) The franchisor will exert or has authority to exert a significant 13 degree of control over the franchisee’s method of operation, or provide significant assistance in the franchisee’s method of operation, and; 14 (3) As a condition of obtaining or commencing operation of the 15 franchise, the franchisee makes a required payment or commits to make a required payment to the franchisor or its affiliate. 16 17 See 16 C.F.R. § 436. 1 (h)(l)-(3)(emphasis added). The California Legislature enacted two statutes to regulate franchise relationships (the 18 California Franchise Investment Law [the “CFIL”] and the California Franchise Relations Act [the 19 “CFRA”]). These statutes repeatedly characterize franchises as “businesses” and describe the 20 relationship created between a franchisor and a franchisee as a “business relationship.” See, e.g., Cal. 21 Corp. Code §31001; §31005(a)(2); §31011. 22 Under the CFIL, a “franchise” is a contract or agreement characterized by three elements: 23 24 (1) A franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system 25 prescribed in substantial part by a franchisor; and 26 (2) The operation of the franchisee’s business pursuant to such plan or system is substantially associated with the franchisor’s trademark, service mark, 27 trade name, logotype, advertising or other commercial symbol designating the 28 franchisor or its affiliate; and LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 10 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 (3) The franchisee is required to pay, directly or indirectly, a franchise fee. 2 Cal. Corp. Code § 31005(a)(1)-(3) (emphasis added). 3 The California Supreme Court repeatedly praised franchising as a business model in the 2014 4 decision Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, writing: 5 This contractual arrangement benefits both parties. The franchisor, which sells the 6 right to use its trademark and comprehensive business plan, can expand its enterprise while avoiding the risk and cost of running its own stores... By following the standards 7 used by all stores in the same chain, the self-motivated franchisee profits from the 8 expertise, goodwill, and reputation of the franchisor. 9 Id. at 477. The Court further noted that franchisors must 10 [I]mpose[] comprehensive and meticulous standards for marketing its trademarked brand and operating its franchises in a uniform way. To this extent, the franchisor 11 controls the enterprise. However, the franchisee retains autonomy as a manager and employer. It is the franchisee who implements the operational standards on a day-to- 12 day basis, hires and fires store employees, and regulates workplace behavior. 13 Id. at 478 (emphasis added). On this subject, the Court added: 14 Under the business format model, the franchisee pays royalties and fees for the right 15 to sell products or services under the franchisor's name and trademark. In the process, the franchisee also acquires a business plan, which the franchisor has crafted…This 16 business plan requires the franchisee to follow a system of standards and procedures. A long list of marketing, production, operational, and administrative areas is 17 typically involved…The franchisor's system can take the form of printed manuals1, 18 training programs, advertising services, and managerial support, among other things… [S]ystemwide standards and controls provide a means of protecting the 19 trademarked brand at great distances… 20 The goal—which benefits both parties to the contract—is to build and keep customer trust by ensuring consistency and uniformity in the quality of goods and services[.] 21 Id. at 489-90 (internal citations omitted; emphasis added). 22 Patterson is controlling law that has never been reversed or superseded.2 23 1 24 VCS has distributed eleven different manuals in effect during the Class Period (April 6, 2016 to present). (Lee Dec., ¶ 12, Exhs. 3-11.) 2 25 VCS is aware that the 9th Circuit, in Vazquez v. Jan-Pro Franchising International, Inc., 986 F.3d 1106 (2021), held that the ABC test could be applied to a top-level franchisor; but that case is 26 distinguishable for at least a few reasons. First, the plaintiffs in Vazquez were suing the top-level franchisor directly; the regional franchisees were not parties in the action, and the plaintiffs argued 27 that the top-level franchisor was the hiring entity. Id. at n. 3 (“The regional master franchisees were not named as defendants[.]”) The same is not true here, as Plaintiffs have sued the regional franchisees 28 in this action, and the evidence clearly establishes that the plaintiffs and other putative class members purchased LITTLER MEND ELSON, P.C. Unit Franchises from and were subject to franchise agreements entered into with the 333 Bush Street 34th Floor San Francisco, CA 94104 11 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 B. VCS And The Vanguard Cleaning Systems® Franchise Business System 2 With a single office in San Mateo, California, VCS is a regional-franchising business that 3 owns, promotes and licenses for franchising the Vanguard Cleaning Systems® brand (a service mark), 4 related marks, and the Vanguard Cleaning Systems® franchise business system. The Vanguard 5 Cleaning Systems® franchise business system includes a comprehensive business plan VCS 6 developed for franchising to parties interested in operating a franchised cleaning business under the 7 Vanguard Cleaning Systems® brand (or “Vanguard”). Rather than offer and sell individual franchises 8 to interested parties, VCS uses a three-tier franchise system to allow it to focus its business exclusively 9 on the development, maintenance and promotion of the Vanguard Cleaning Systems® brand and the 10 Vanguard franchise business system. VCS monetizes its Vanguard Cleaning Systems® brand and 11 related franchise business system by authorizing their use by separate companies (referred to herein 12 as Regional Franchisors) like the co-Defendants. VCS grants this authorization by entering into a 13 Master Franchise Agreement with the Regional Franchisor giving it the right and obligation to sell 14 Vanguard franchises in a designated geographic region for independently owned and operated 15 commercial cleaning businesses. (technically, and hereafter, “Unit Franchises”). These Unit 16 Franchises make use of the Vanguard Cleaning Systems® franchise business system subfranchised to 17 them by the applicable Regional Franchisor. (Lee Dec., ¶¶ 2-4.) 18 The Vanguard Cleaning Systems® franchise business system consists of a variety of 19 components, including processes, know-how, and other proprietary information and procedures (the 20 “System”) for establishing and operating an independent commercial cleaning business in a manner 21 that preserves the quality and goodwill associated with the Vanguard Cleaning Systems® trademarks, 22 service marks, logos, and other identifiers (the “Marks”). (Brome Decl., Exh. 20 (Business 23 Information Manual), VCS0000363.) The details of the System, which has evolved over time, are 24 Regional franchisees – not VCS – during the covered period. More importantly, however, the Vazquez 25 decision was wrongly decided by a federal court in a non-binding decision that strayed far afield from California’s jurisprudence and regulatory law, which expressly recognizes the franchisor-to-franchisee 26 relationship to be a legitimate business-to-business relationship, not one in which an employer is hiring an individual to perform services for it. See, e.g., Cal. Corp. Code §31001 (describing the parties 27 “business relationship”); §31011 (franchise fee is the amount paid “for the right to enter into a business under a franchise agreement”). This case is in state court, not federal court (and in any event, the 9th 28 Circuit did not make any findings of fact, but merely stated its opinion that the ABC test needed to be applied by the trial judge on remand, with respect to a completely different franchisor (Jan-Pro)). LITTLER MEND ELSON, P.C. 333 Bush Street 34th Floor San Francisco, CA 94104 12 415.433.1940 DEFENDANT VANGUARD CLEANING SYSTEM, INC.’S OPPOSITION TO PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION 1 largely contained in the Commercial Cleaning Information Manuals VCS has developed to convey 2 these details to the parties licensed to u