Preview
JESSICA RIGGIN (SBN 281712)
1
jriggin@rukinhyland.com
2 RUKIN HYLAND & RIGGIN LLP
1939 Harrison Street, Suite 925
3 Oakland, CA 94612
Telephone: (415) 421-1800
4 Facsimile: (415) 421-1700
5 MATTHEW C. HELLAND (SBN 250451)
6 helland@nka.com
DANIEL BROME (SBN 278915)
7 dbrome@nka.com
NICHOLS KASTER, LLP
8 235 Montgomery Street, Suite 810
San Francisco, CA 94104
9 Telephone: (415) 277-7235
Facsimile: (415) 277-7238
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Attorneys for Plaintiff
11
(Additional Counsel on next page)
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13 SUPERIOR COURT OF THE STATE OF CALIFORNIA
14 COUNTY OF SAN MATEO
15
ALIDA MAZARIEGOS, PAULA CASE NO.: 20-CIV-04267
16 GONZALEZ, JAIME AMAYA,
ADRIANA TELLO, and RYNE BASS JOINT STATUS CONFERENCE
17 STATEMENT
Plaintiffs, on behalf of themselves
18 Date: August 7, 2023
and all others similarly situated,
Time: 9:30 a.m.
19 v. Judge: Hon. Nancy L. Fineman
20 Dept.: 04
VANGUARD CLEANING SYSTEMS,
INC.; RR FRANCHISING, INC., D/B/A
21 VANGUARD CLEANING SYSTEMS
22 OF SOUTHERN CALIFORNIA AND
D/B/A VANGUARD CLEANING
23 SYSTEMS OF NORTHERN
CALIFORNIA; BUDDHA CAPITAL
24 CORPORATION, D/B/A VANGUARD
CLEANING SYSTEMS OF
25 SACRAMENTO, D/B/A VANGUARD
26 CLEANING SYSTEMS OF THE
CENTRAL VALLEY, AND D/B/A
27 VANGUARD CLEANING SYSTEMS
OF THE CENTRAL COAST; AND
28 WINE COUNTRY VENTURES, INC.
JOINT STATUS CONFERENCE STATEMENT
1 D/B/A VANGUARD CLEANING
SYSTEMS OF THE NORTH BAY,
2 AND DOES 1 THROUGH 10,
INCLUSIVE,
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Defendants.
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JOINT STATUS CONFERENCE STATEMENT
DAMON M. OTT, Bar No. 215392
1
dott@littler.com
2 ROBERT M. GEIGER, Bar No. 322914
rgeiger@littler.com
3 LITTLER MENDELSON, P.C.
333 Bush Street
4 34th Floor
5 San Francisco, CA 94104
Telephone: 415.433.1940
6 Facsimile: 415.399.8490
Email: dott@litter.com
7
Attorneys for Defendant
8 Vanguard Cleaning Systems, Inc.
9
10 Michael A. Hood
JACKSON LEWIS P.C.
11 200 Spectrum Center Dr., Suite 500
Irvine, California 92618
12 Telephone: (949) 885-1374
13 Facsimile: (949) 885-1360
E-Mail: Michael.Hood@jacksonlewis.com
14
Paige Taylor Bennett, Bar No. 288009
15 JACKSON LEWIS PC
160 W. Santa Clara Street, Suite 400
16
San Jose, CA 95113
17 Telephone: (408) 579-0404
Facsimile: (408) 454-0290
18 E-Mail: Paige.Bennett@jacksonlewis.com
19 Adam L. Lounsbury (pro hac vice)
JACKSON LEWIS PC
20
701 E. Byrd Street, 17th Floor
21 Richmond, VA 23219
Telephone: (804) 212-2863
22 E-Mail: adam.lounsbury@jacksonlewis.com
23 Attorneys for Defendants
RR Franchising, Inc., Buddha Capital Corporation and Wine Country Ventures, Inc.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 Plaintiffs Alida Mazariegos, Paula Gonzalez, and Jaime Amaya (collectively “Plaintiffs”)
2 and Defendants Vanguard Cleaning Systems, Inc. (“VCS”); RR Franchising, Inc., d/b/a
3 Vanguard Cleaning Systems of Southern California and d/b/a Vanguard Cleaning Systems of
4 Northern California (“RR Franchising”); Buddha Capital Corporation, d/b/a/ Vanguard Cleaning
5 Systems of Sacramento, d/b/a Vanguard Cleaning Systems of the Central Valley, and d/b/a/
6 Vanguard Cleaning Systems of the Central Coast (“Buddha Capital”); and Wine Country
7 Ventures, Inc. d/b/a Vanguard Cleaning Systems of the North Bay (“Wine Country”)
8 (collectively, “Defendants”) jointly submit this statement in preparation for the parties’ case
9 management conference on August 7, 2023.
10 Since the Parties’ class certification hearing on March 28, 2023, as discussed at the
11 hearing, Plaintiffs filed a motion for leave to file an amended complaint to add plaintiffs who
12 were subject to arbitration agreements, after which the parties met and conferred and ultimately
13 stipulated to the filing of the now-operative Third Amended Complaint.
14 Given the addition of the new named plaintiffs but before Defendants filed their
15 responsive pleading, Plaintiffs requested a hearing date on their renewed motion for class
16 certification, which the Court proposed as follows: Plaintiffs will file their motion on October 10,
17 2023, Defendants’ opposition shall be filed on or before October 31, 2023, Plaintiffs’ reply shall
18 be filed on or before November 14, 2023, and the motion will be heard on December 5, 2023.
19 Defendants intend to move to compel arbitration of the new named plaintiffs and
20 anticipate doing so before this Case Management Conference. No hearing has yet been
21 scheduled. Defendants assert that their motion to compel arbitration should be heard prior to
22 Plaintiffs’ renewed class certification motion.
23 I. STATEMENT OF THE CASE
24 A. Plaintiffs’ Statement
25 Vanguard provides janitorial services to commercial offices, car dealerships, gyms,
26 warehouses, and many other businesses throughout the United States, including in California.
27 Vanguard Cleaning Systems, Inc. has structured its company as a three-tiered franchise system
28 where Vanguard sells Regional Franchises to companies like Defendants Buddha Capital Corp
1
JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 d/b/a Vanguard Cleaning Systems of Sacramento, the Central Valley, and the Central Coast, RR
2 Franchising d/b/a Vanguard Cleaning Systems of Southern California and Northern California,
3 and Wine Country Ventures, Inc. d/b/a Vanguard Cleaning Systems of the North Bay (referred to
4 collectively as “Regional Franchises”). These Regional Franchises in turn sell “unit franchises”
5 to Plaintiffs and Class Members.
6 Plaintiffs and Class Members perform janitorial cleaning services for Vanguard’s
7 customers. Plaintiffs claim that they and other unit franchises are not true independent contractor
8 franchisees, but rather Vanguard’s and Regional Franchises’ employees under the ABC test for
9 employment status. See Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, 964
10 (describing the ABC test); see also Cal. Labor Code § 2750.3 (codifying the ABC test as of
11 January 1, 2020), repealed and replaced by Cal. Labor Code § 2775 et seq. In a similar case in
12 Massachusetts, the trial court found that Vanguard could not satisfy two of the three prongs of
13 the ABC test. Da Costa v. Vanguard Cleaning Sys., Inc., No. CV 15-04743, 2017 WL 4817349,
14 at *6 (Mass. Super. Sept. 29, 2017) (finding that Vanguard failed prong B of the ABC test in part
15 because it touted that it was “a leader in the commercial cleaning industry.”).
16 Plaintiffs bring this case as a class action under California Code of Civil Procedure § 382
17 and a representative action under the California Labor Code Private Attorneys’ General Act,
18 Labor Code Section 2698, et seq. for damages and civil penalties as a result of their
19 misclassification.
20 B. Defendant VCS’s Statement
21 Plaintiffs mischaracterize VCS and its business through purposeful and negligent
22 misrepresentations and improper conflation of multiple separate businesses that legitimately
23 operate different businesses. Contrary to Plaintiffs’ contentions, VCS is in the legally
24 recognized business of franchising; specifically, the franchising of the Vanguard Cleaning
25 System (sometimes “the Cleaning System”), which is a commercial cleaning business system
26 that VCS developed, licensed, and sells to separately established companies known as Regional
27 franchises that sub-franchise the Vanguard Cleaning System to Unit Franchises and provide
28 administrative and support services for the Unit Franchises to which they have sub-franchised
2
JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 the Cleaning System. VCS’s business is limited to franchising the Cleaning System, which
2 involves maintaining and improving the licensed Vanguard Cleaning System, promoting the
3 Cleaning System through marketing and advertising, and selling regional franchises to Regional
4 Franchisees. VCS is a separately established and operated company with arm’s length
5 relationships with all Regional Franchisees to which it has sold regional franchises. VCS has no
6 direct business or other relationship with the Unit Franchisees to which Regional Franchisees
7 have sold – i.e., sub-franchised – unit franchises. Certainly VCS never employed Plaintiffs or
8 any other Unit Franchisees, and generally has little to no information about Unit Franchises or
9 the commercial cleaning businesses they operate using the Vanguard Cleaning System. Neither
10 VCS nor any of its employees or agents provide commercial cleaning services.
11 Franchising has “existed in this country in one form or another for over 150 years”
12 (Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 489 (2014)), and, has “become a
13 ubiquitous” and “thriving business model.” Id. at 477. Under this business model, the franchisor,
14 “sells the right to use its trademark and comprehensive business plan” to franchisees who
15 “independently own[], run[], and staff[] the retail outlet that sells goods under the franchisor's
16 name.” Id.
17 On information and belief, many of the Unit Franchisees that Plaintiffs seek to represent
18 – and which Plaintiffs consider “employees” – operate sophisticated businesses with workers of
19 their own. Unit Franchisees are business owners of commercial cleaning businesses – the unit
20 franchises – that they operate using the Vanguard Cleaning System. As such, Plaintiff – and
21 other Unit Franchisees -- are not VCS’s employees, nor employees of the Regional Franchisees.
22 If anything, Plaintiffs are employees of their own businesses: the unit franchises.
23 Franchising is a statutorily recognized and permissible method of doing business at both
24 the federal and California level. The statutes that regulate franchising recognize that the
25 relationship between a franchisor and its franchisees is a commercial relationship, not an
26 employment relationship. The Federal Trade Commission (“FTC”), which authorizes and
27 regulates the sale of franchises in the United States, defines a “franchise” in part as “any
28 continuing commercial relationship or arrangement” whereby the franchisor promises that the
3
JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 franchisee “will obtain the right to operate a business that is identified or associated with the
2 franchisor’s trademark ....” 16 C.F.R. § 436.1(h)(1). (16 C.F.R. § 436 et seq.).
3 The California Legislature has enacted two statutes to regulate franchise relationships in
4 this State (the California Franchise Investment Law [the “CFIL”] and the California Franchise
5 Relations Act [the “CFRA”]). These statutes have co-existed with the federal Lanham Act for
6 almost 50 years because they contain similar definitions of the “franchise” relationship and, thus,
7 are legally compatible. Like the FTC’s Franchise Rule, these enactments repeatedly characterize
8 franchises as “businesses” and describe the relationship created between a franchisor and a
9 franchisee as a “business relationship.” See, e.g., Cal. Corp. Code §31001 (disclosures are
10 designed to give a better understanding of the parties “business relationship”); §31005(a)(2)
11 (“[t]he operation of the franchisee’s business” must be substantially associated with the
12 franchisor’s trademark); §31011 (franchise fee is the amount paid “for the right to enter into a
13 business under a franchise agreement”).
14 Simply put, the ABC employment test cannot be applied to a relationship, if any,
15 between Plaintiffs (and the Unit Franchisees they seek to represent) and VCS. Beyond being
16 inapplicable under its own terms, any interpretation of the ABC test that would allow the ABC
17 test to be applied to VCS by Unit Franchisees is preempted for one of several reasons, discussed
18 in part below. A pending lawsuit filed in the Southern District of California, entitled
19 International Franchise Association et al. v. State of California et al., 3:20-cv-02243-BAS-DEB
20 (November 17, 2020) has requested declaratory and injunctive relief to prohibit the application
21 of the ABC test as between franchisees and franchisors in California, on the grounds of
22 preemption. That lawsuit could result in a preemption ruling that will have a direct and
23 substantial impact on this litigation.
24 Leaving aside the fact that the Unit Franchisees are not VCS’s employees, this case is
25 entirely inappropriate for class and representative treatment. On information and belief, Unit
26 Franchisees operate their businesses in widely different ways. Some are believed to have smaller
27 operations, while some have larger operations with many workers of their own. Some Unit
28 Franchisees are believed to have owners who perform no work for the business or perform only
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 business management functions, never performing any of the cleaning services their businesses
2 provide for their customers. Other owners, it is believed, only perform cleaning services when
3 needed (e.g., due to worker unavailability or business demands), while some owners regularly
4 perform cleaning functions in addition to their business management responsibilities. It is
5 believed that at least one Plaintiff in this case had workers of her own and personally performed
6 no cleaning services for at least a large portion of the relevant period (during which her duties
7 were limited to running her business, including managing the workers she retained). If this case
8 were to go to a trial, the employment status of the Unit Franchisees would be a mere threshold
9 issue. Plaintiffs’ actual claims include (i) nonpayment of wages, including overtime, (ii)
10 unreimbursed expenses, (iii) noncompliant rest breaks, and (iv) noncompliant meal breaks,
11 among others. There would be far too many individualized issues to resolve this case on a class
12 or representative basis, and any such “class” or representative case would be highly
13 unmanageable and a logistical nightmare for the Court.
14 C. Regional Franchises’ Statement
15 The Regional Franchises create business-to-business relationships that should be
16 analyzed in the context of franchise law, not employment or independent contractor law. Indeed,
17 each Regional Franchise operates its business independently, using unique methods and means
18 for operating their businesses. Each of the Regional Franchises has unique defenses based on the
19 circumstances arising from its relationships with the unit franchises---defenses and facts too
20 numerous to include here. For example, however, Plaintiff Mazariegos released her claims
21 against Wine Country Ventures, and it has a complete defense to this matter on that basis alone.
22 Another example is that Buddha Capital has implemented arbitration provisions that apply to the
23 putative class claims raised here. And, in yet another example, RR Franchising contracts with
24 unit franchisees owned and operated by putative class members that operate sophisticated
25 businesses offering an array of services beyond cleaning. This list is in no way exhaustive or
26 complete for any of these three defendants but is intended merely to highlight the numerous and
27 individualized issues arising out of the unique circumstances surrounding the Regional
28 Franchises businesses and their relationships with putative class members. Furthermore, each of
5
JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 the Unit Franchises and putative class members are independent businesses with the authority to
2 conduct business operations wholly independent from their relationship with the Regional
3 Franchises. Indeed, some Unit Franchises perform services for competitors of the Regional
4 Franchises (including Plaintiff Amaya), and all have the authority to do so. The Unit Franchises
5 vary considerably from one another in terms of the overall nature of their business activities, and
6 other characteristics which demonstrate that these franchise-franchisee relationships are not
7 employer-employee relationships.
8 II. STATUS OF PLEADINGS
9 All parties have been served, and all parties have answered the initial complaint.
10 Plaintiffs filed their First Amended Complaint on February 5, 2021. Defendant Vanguard
11 Cleaning Systems, Inc. (“VCS”) filed its Answer to the Amended Complaint on March 9, 2021.
12 Plaintiffs filed a Second Amended Complaint on May 18, 2023, and the now-operative Third
13 Amended Complaint on June 13, 2023. Defendants answered the Third Amended Complaint on
14 July 17, 2023.
15 III. APPEARANCE OF ALL NAMED PARTIES AND COUNSEL
16 Counsel for Plaintiffs Alida Mazariegos, Paula Gonzalez, and Jaime Amaya and the
17 proposed class:
18 Rukin Hyland & Riggin LLP: Jessica Riggin, jriggin@rukinhyland.com;; Contact
19 information: 1939 Harrison Street, Ste. 925; Oakland, California 94612; Telephone: (415) 421-
20 1800; Fax: (415) 421-1700.
21 Nichols Kaster LLP: Matthew Helland, helland@nka.com; Daniel Brome,
22 dbrome@nka.com; Contact information: 235 Montgomery Street, Suite 810; San Francisco, CA
23 94104; Telephone: (415) 277-7235; Fax: (415) 277-7238.
24
25 Counsel for Defendant Vanguard Cleaning Systems, Inc.:
26 Damon Ott, DOtt@littler.com; Robert Geiger, , Sarah Boxer, Sboxer@littler.com; 333
27 Bush Street, 34th Floor, San Francisco, CA 94104; Telephone: (415) 433-1940; Fax: (415) 399-
28 8490.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1
2 Counsel for Defendants RR Franchising, Inc., Buddha Capital Corporation and Wine
3 County Ventures, Inc:
4 Jackson Lewis PC, Michael A. Hood, Michael.Hood@jacksonlewis.com; 200 Spectrum
5 Center Drive, Ste 500, Irvine, Ca 92618, Telephone: (949) 885-1360; Fax: (949) 885-1380;
6 [Paige Taylor Bennett, Paige.Bennett@jacksonlewis.com, 160 W. Santa Clara Street,
7 Suite 400, San Jose, CA 95113, Telephone: (408) 579-0404, Facsimile: (408) 454-0290.
8 Jackson Lewis PC, Adam L. Lounsbury (pro hac vice); 701 E. Byrd Street, 17th Floor,
9 Richmond, VA 23102, Telephone: (804)212-2863.
10 IV. STATUS OF DISCOVERY
11 All Parties have participated in in discovery. All Parties have served written discovery
12 responses and produced documents. Plaintiffs have taken person most knowledgeable
13 depositions of all four Defendants; Defendants took the depositions of the three original Named
14 Plaintiffs. All Parties have responded to written discovery. Additional discovery of the newly
15 added Plaintiffs is anticipated.
16 V. STATUS OF SETTLEMENT OR MEDIATION
17 The Parties participated in two unsuccessful mediations. There is currently no mediation
18 scheduled.
19 VI. PENDING MOTIONS AND PROPOSED NEW HEARING DATE
20 There are currently no motions pending at the time of filing this Case Management
21 Statement. Defendants anticipate that the motions to compel arbitration will be set for hearing by
22 the time of the Case Management Conference.
23 VII. LEGAL ISSUES TO BE DECIDED
24 A. Plaintiffs’ Statement
25 The core legal issue is whether Plaintiffs and the putative class are Defendants’
26 employees for purposes of California wage and hour laws. Plaintiffs allege that they are
27 employees under both the “ABC test” for employment status, and the Borello, right-to-control
28 analysis.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 Under the ABC test, a worker is an employee of the entity for whom he performs labor
2 unless the putative employer proves all three of the following: (A) that the worker is free from
3 the control and direction of the hiring entity in connection with the performance of the work,
4 both under the contract for the performance of the work and in fact; (B) that the worker performs
5 work that is outside the usual course of the hiring entity’s business; and (C) that the worker is
6 customarily engaged in an independently established trade, occupation, or business of the same
7 nature as the work performed. Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903,
8 964; see also Da Costa, 2017 WL 4817349, at *5 (Vanguard Cleaning Systems, Inc. was liable
9 in a three-tier franchising structure because the top-level franchise was “directly dependent on
10 commercial cleaning work of the ... unit franchisees”); Vazquez v. Jan-Pro Franchising
11 International, Inc. (9th Cir. 2019) 923 F.3d 575, 596, reh'g granted, opinion withdrawn (9th Cir.
12 2019) 930 F.3d 1107, and on reh'g (9th Cir. 2019) 939 F.3d 1045, and opinion reinstated in part
13 on reh'g (9th Cir. 2019) 939 F.3d 1050 (“Thus, as a doctrinal matter, [a top-tier franchise] could
14 be Plaintiffs’ employer under the ABC test even though it is not a party to any contract with
15 Plaintiffs.”).
16 Plaintiffs also allege that they are Defendants’ employees under the traditional “statutory
17 purpose” test for employment status as set forth in S.G. Borello & Sons, Inc. v. Department of
18 Industrial Relations (1989) 48 Cal.3d 341, 350. See Dynamex, 4 Cal.4th at 929. Under Borello,
19 the principal test of an employment relationship is whether the person to whom service is
20 rendered “retains all necessary control” over the operations. 48 Cal.3d at 357. Secondary factors
21 evidencing employee status under Borello include (a) whether the one performing services is
22 engaged in a distinct occupation or business; (b) the kind of occupation, with reference to
23 whether, in the locality, the work is usually done under the direction of the principal or by a
24 specialist without supervision; (c) the skill required in the particular occupation; (d) whether the
25 principal or the worker supplies the instrumentalities, tools, and the place of work for the person
26 doing the work; (e) the length of time for which the services are to be performed; (f) the method
27 of payment, whether by the time or by the job; and (g) whether or not the work is a part of the
28 regular business of the principal. Id. at 351.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 Plaintiffs allege that as a result of their misclassification, Defendants failed to comply
2 with California wage and hour laws. As a result, Plaintiffs seek damages for Defendants’ failure
3 to provide reimbursement for necessary expenses, unlawful withholding and receipt of earned
4 waged, failure to provide meal and rest breaks, failure to pay California overtime compensation,
5 failure to furnish accurate wage statements, failure to pay earned wages upon discharge, among
6 other claims.
7 Plaintiffs seek to certify a class on behalf of all California unit franchisee cleaners who
8 signed a franchise agreement or transfer agreement with Vanguard Cleaning Systems, Inc., or
9 any of its regional franchisors, and who personally performed cleaning work during the period
10 commencing four years prior to April 6, 2020. Plaintiffs also assert Private Attorneys’ General
11 Act (PAGA) claims for Vanguard’s Labor Code violations under California Labor Code §§ 201-
12 203, 204, 221, 226, 226.3, 226.7, 226.8, 400-410, 432.5, 450, 510, 512, 558, 1174, 1194, 1194.2,
13 1197, 1197.1, 1174.5, 2802, 2810.3, 2750.3, and IWC Wage Order No. 5.
14 B. Regional Franchises’ Statement
15 Because the business-to-business relationship between the Regional Franchises and the
16 Unit Franchises are not employment relationships, the Labor Code Sections cited by plaintiffs do
17 not apply. Further, the Regional Franchises Defendant assert that Plaintiffs’ claims are barred on
18 the grounds of preemption; specifically, preemption of California’s “ABC” worker-classification
19 test by the Federal Trade Commission’s Franchise Rule, 16 C.F.R. §§ 436.1-437.3, the Federal
20 Trade Commission’s Franchise Rule Guide, and the Lanham Act. There is an inherent,
21 irreconcilable conflict between the Federal law that regulates franchising and the trademark
22 license underlying all franchised businesses and California’s ABC test. The ABC Test
23 impermissibly impinges on the essential feature of the franchise model—control over brand-
24 specific systems and business models. The ABC Test, if interpreted to apply to a franchisor
25 franchisee relationship, would have the perverse effect of converting all franchise relationships,
26 which necessarily require some element of control as defined by the FTC Franchise Rule, into
27 employment relationships despite those relationships being arms’ length and governed by
28 contract. Further, by definition all franchisees are granted the right to operate a business that is
9
JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 identified or associated with the franchisor’s trademark.” 16 C.F.R. 436.1(h). If operating a
2 business identified or associated with the franchisor’s trademark (or offering, selling, or
3 distributing goods, services, or commodities that are identified or associated with the franchisor’s
4 trademark) is considered performing work that is within the usual course of the franchisor’s
5 business, and the ABC test otherwise applies to franchisees, then franchisees (under federal law)
6 would be employees in California under the ABC Test. As such those laws governing franchise
7 relationships preempt the application of the ABC test to the relationship between Defendant and
8 each Plaintiff (and putative class member) and, therefore, prohibit use of the ABC test to
9 determine the nature of these relationships. To the extent Plaintiffs’ claims are based on an
10 alleged employment relationship between Plaintiffs and Defendant arising from application of
11 California’s ABC test, Plaintiffs’ claims fail as a matter of law.
12 Furthermore, this case is not suitable for class treatment given the multitude of
13 individualized issues concerning the application of the ABC Test, and the specific claims at
14 issue, which are highly dependent upon the individual experiences of the putative class members.
15 C. Defendant VCS’s Statement
16 As a preliminary matter, VCS believes that the two newly named Plaintiffs Adriana Tello
17 and Ryne Bass are not appropriate plaintiffs in this case because they are subject to binding
18 arbitration agreements.
19 VCS shares the Regional Franchisees’ belief that Plaintiffs’ reliance on the ABC Test is
20 both misguided and preempted. See also International Franchise Association et al. v. State of
21 California et al., 3:20-cv-02243-BAS-DEB (S.D. Cal. November 17, 2020) (seeking declaratory
22 and injunctive relief to preclude application of ABC Test between franchisors and franchisees).
23 California statutory law recognizes that the ABC test cannot be applied in all situations, in which
24 case the Borello test must be applied. See Labor Code § 2750.3(a)(3) (“If a court of law rules
25 that the three-part test… cannot be applied to a particular context based on grounds other than an
26 express exception to employment status [e.g., on the grounds of preemption]…, then the
27 determination of employee or independent contractor status in that context shall instead be
28 governed by the California Supreme Court’s decision in S.G. Borello & Sons, Inc. v. Department
10
JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 of Industrial Relations (1989) 48 Cal.3d 341.”) (Brackets added). Unit Franchisees are clearly
2 not VCS’s employees under Borello. Indeed, VCS has had no relationship with Unit Franchisees
3 during the relevant time period. This fact-intensive issue will be briefed in full at the appropriate
4 time.
5 As VCS notes above, this case is also inappropriate for class or representative treatment,
6 including because of the presence of highly individualized issues that would need to be resolved
7 for each of Plaintiffs’ claims, which would result in an unmanageable litigation process. This
8 should become clear as the litigation progresses.
9 VIII. PROPOSED BREIFING SCHEDULE FOR MOTIONS
10 On June 22, 2023, Plaintiffs requested the earliest possible hearing date on their renewed
11 motion for class certification, which the Court proposed as follows: Plaintiffs will file their
12 motion on October 10, 2023, Defendants’ opposition shall be filed on or before October 31,
13 2023, Plaintiffs’ reply shall be filed on or before November 14, 2023, and the motion will be
14 heard on December 5, 2023. The Court suggested that the parties stipulate to an earlier briefing
15 schedule, in which case the Court may be able to hear the motion earlier. Defendant declined to
16 so stipulate.
17 IX. LISTING OF ALL PREVIOUSLY SET PRETRIAL DATES AND DEADLINES
18 A. Plaintiffs’ Statement
19 No trial date has been set. Plaintiffs propose that a trial date be set after a decision on
20 their motion for class certification and that the date be set no later than December 1, 2024.
21 Plaintiffs have requested a jury trial and anticipate that a class trial will take two to three weeks.
22 B. Regional Franchises’ Statement
23 The Regional Franchises agree that the trial date should be set after a decision on class
24 certification. The Regional Franchises currently estimate that a class trial, if appropriate, would
25 require five to six weeks, especially if conducted remotely.
26 C. Defendant VCS’s Statement
27 VCS joins Plaintiffs and the Regional Franchises in proposing that the trial date be set after
28 the Court rules on Plaintiffs Mazariegos, Gonzalez, and Amaya’s motion for class certification.
11
JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 VCS believes it is too early to assess how much time would be needed for trial and when the Parties
2 would be ready for a trial (and answers to these questions will vary greatly depending on the
3 Court’s ruling on class certification).
4 X. FURTHER CASE MANAGEMENT AND TRIAL SETTING CONFERENCE
5 A. Plaintiffs’ Statement
6 Plaintiffs propose a further case management conference be set 30 days after the hearing
7 on Plaintiffs’ class certification motion.
8 B. Regional Franchises’ Statement
9 The Regional Franchises believe that another case management conference will be
10 necessary following the hearing on Defendants motion to compel arbitration of Plaintiffs Adriana
11 Tello and Ryne Bass.
12 C. Defendant VCS’s Statement
13 VCS requests that a further case management conference be set approximately 30 days
14 after the hearing on Defendants’ upcoming motions to compel arbitration of Plaintiffs Adriana
15 Tello and Ryne Bass.
16 XI. OTHER MATTERS
17 No other matters at this time.
18 Dated: July 31, 2023 NICHOLS KASTER, LLP
19
By: s/ Daniel Brome
20 Daniel Brome
Matthew Helland
21 Attorneys for Plaintiffs
22
23 Dated: July 31, 2023 LITTLER MENDELSON P.C.
24
By: s/Robert Geiger
25 Robert Geiger
Attorneys for Defendant Vanguard Cleaning Systems, Inc.
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Dated: July 31, 2023 JACKSON LEWIS P.C.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
1 By: s/ Adam L. Lounsbury
2 Adam L. Lounsbury
Attorneys for Defendants RR Franchising, Inc., Wine
3 Country Ventures, Inc., and Buddha Capital Corp.
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JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT
PROOF OF SERVICE
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I am employed in the County of Alameda, State of California; I am over the age of 18
2 years and not a party to the within entitled action; my business address is 1939 Harrison Street,
Suite 290, Oakland, California 94612.
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4 On July 31, 2023, I served the foregoing document(s), described as: JOINT STATUS
CONFERENCE STATEMENT on the interested parties to said action by the following means:
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(By Electronic Service) By electronically transmitting the document(s) listed above,
6 addressed as set forth below.
7 Damon Ott, Esq. Paige Taylor Bennett, Esq.
Robert Geiger, Esq. Lynsey D. Johnson, Esq.
8 LITTLER MENDELSON P.C. JACKSON LEWIS PC
333 Bush Street, 34th Floor 160 W. Santa Clara Street, Suite 400
9 San Francisco, CA 94104 San Jose, CA 95113
Telephone: (415) 677-3173 Telephone: (408) 579-0404
10 Facsimile: (415) 707-2072 Facsimile: (408) 454-0290
Email: DOtt@littler.com E-Mail: Paige.Bennett@jacksonlewis.com
11 Email: rgeiger@littler.com Email: Lynsey.Johnson@jacksonlewis.com
12 Attorneys for VANGUARD CLEANING Attorneys for RR FRANCHISING, INC.;
SYSTEMS, INC. BUDDHA CAPITAL CORPORATION;
13 AND WINE COUNTRY VENTURES, INC.
14 Michael A. Hood, Esq. Adam L. Lounsbury, Esq.
JACKSON LEWIS P.C. JACKSON LEWIS P.C.
15 200 Spectrum Center Drive, Suite 500 701 E. Byrd Street, 17th Floor
Irvine, CA 92618-5005 Richmond, VA 23102
16 Telephone: (949) 885-1374 Telephone: (804)212-2863
Facsimile: (949) 885-1380 Email: adam.lounsbury@jacksonlewis.com
17 Email: Michael.Hood@jacksonlewis.com
Attorneys for RR FRANCHISING, INC.;
18 Attorneys for RR FRANCHISING, INC.; BUDDHA CAPITAL CORPORATION;
BUDDHA CAPITAL CORPORATION; AND WINE COUNTRY VENTURES, INC.
19 AND WINE COUNTRY VENTURES,
INC.
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(State) I declare under penalty of perjury under the laws of the State of California
21 that the above is true and correct.
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23 Executed on July 31, 2023at Corona del Mar, California.
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25 Brigitte A. Butler
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PROOF OF SERVICE
Preview
JESSICA RIGGIN (SBN 281712) 1 jriggin@rukinhyland.com 2 RUKIN HYLAND & RIGGIN LLP 1939 Harrison Street, Suite 925 3 Oakland, CA 94612 Telephone: (415) 421-1800 4 Facsimile: (415) 421-1700 5 MATTHEW C. HELLAND (SBN 250451) 6 helland@nka.com DANIEL BROME (SBN 278915) 7 dbrome@nka.com NICHOLS KASTER, LLP 8 235 Montgomery Street, Suite 810 San Francisco, CA 94104 9 Telephone: (415) 277-7235 Facsimile: (415) 277-7238 10 Attorneys for Plaintiff 11 (Additional Counsel on next page) 12 13 SUPERIOR COURT OF THE STATE OF CALIFORNIA 14 COUNTY OF SAN MATEO 15 ALIDA MAZARIEGOS, PAULA CASE NO.: 20-CIV-04267 16 GONZALEZ, JAIME AMAYA, ADRIANA TELLO, and RYNE BASS JOINT STATUS CONFERENCE 17 STATEMENT Plaintiffs, on behalf of themselves 18 Date: August 7, 2023 and all others similarly situated, Time: 9:30 a.m. 19 v. Judge: Hon. Nancy L. Fineman 20 Dept.: 04 VANGUARD CLEANING SYSTEMS, INC.; RR FRANCHISING, INC., D/B/A 21 VANGUARD CLEANING SYSTEMS 22 OF SOUTHERN CALIFORNIA AND D/B/A VANGUARD CLEANING 23 SYSTEMS OF NORTHERN CALIFORNIA; BUDDHA CAPITAL 24 CORPORATION, D/B/A VANGUARD CLEANING SYSTEMS OF 25 SACRAMENTO, D/B/A VANGUARD 26 CLEANING SYSTEMS OF THE CENTRAL VALLEY, AND D/B/A 27 VANGUARD CLEANING SYSTEMS OF THE CENTRAL COAST; AND 28 WINE COUNTRY VENTURES, INC. JOINT STATUS CONFERENCE STATEMENT 1 D/B/A VANGUARD CLEANING SYSTEMS OF THE NORTH BAY, 2 AND DOES 1 THROUGH 10, INCLUSIVE, 3 Defendants. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JOINT STATUS CONFERENCE STATEMENT DAMON M. OTT, Bar No. 215392 1 dott@littler.com 2 ROBERT M. GEIGER, Bar No. 322914 rgeiger@littler.com 3 LITTLER MENDELSON, P.C. 333 Bush Street 4 34th Floor 5 San Francisco, CA 94104 Telephone: 415.433.1940 6 Facsimile: 415.399.8490 Email: dott@litter.com 7 Attorneys for Defendant 8 Vanguard Cleaning Systems, Inc. 9 10 Michael A. Hood JACKSON LEWIS P.C. 11 200 Spectrum Center Dr., Suite 500 Irvine, California 92618 12 Telephone: (949) 885-1374 13 Facsimile: (949) 885-1360 E-Mail: Michael.Hood@jacksonlewis.com 14 Paige Taylor Bennett, Bar No. 288009 15 JACKSON LEWIS PC 160 W. Santa Clara Street, Suite 400 16 San Jose, CA 95113 17 Telephone: (408) 579-0404 Facsimile: (408) 454-0290 18 E-Mail: Paige.Bennett@jacksonlewis.com 19 Adam L. Lounsbury (pro hac vice) JACKSON LEWIS PC 20 701 E. Byrd Street, 17th Floor 21 Richmond, VA 23219 Telephone: (804) 212-2863 22 E-Mail: adam.lounsbury@jacksonlewis.com 23 Attorneys for Defendants RR Franchising, Inc., Buddha Capital Corporation and Wine Country Ventures, Inc. 24 25 26 27 28 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 Plaintiffs Alida Mazariegos, Paula Gonzalez, and Jaime Amaya (collectively “Plaintiffs”) 2 and Defendants Vanguard Cleaning Systems, Inc. (“VCS”); RR Franchising, Inc., d/b/a 3 Vanguard Cleaning Systems of Southern California and d/b/a Vanguard Cleaning Systems of 4 Northern California (“RR Franchising”); Buddha Capital Corporation, d/b/a/ Vanguard Cleaning 5 Systems of Sacramento, d/b/a Vanguard Cleaning Systems of the Central Valley, and d/b/a/ 6 Vanguard Cleaning Systems of the Central Coast (“Buddha Capital”); and Wine Country 7 Ventures, Inc. d/b/a Vanguard Cleaning Systems of the North Bay (“Wine Country”) 8 (collectively, “Defendants”) jointly submit this statement in preparation for the parties’ case 9 management conference on August 7, 2023. 10 Since the Parties’ class certification hearing on March 28, 2023, as discussed at the 11 hearing, Plaintiffs filed a motion for leave to file an amended complaint to add plaintiffs who 12 were subject to arbitration agreements, after which the parties met and conferred and ultimately 13 stipulated to the filing of the now-operative Third Amended Complaint. 14 Given the addition of the new named plaintiffs but before Defendants filed their 15 responsive pleading, Plaintiffs requested a hearing date on their renewed motion for class 16 certification, which the Court proposed as follows: Plaintiffs will file their motion on October 10, 17 2023, Defendants’ opposition shall be filed on or before October 31, 2023, Plaintiffs’ reply shall 18 be filed on or before November 14, 2023, and the motion will be heard on December 5, 2023. 19 Defendants intend to move to compel arbitration of the new named plaintiffs and 20 anticipate doing so before this Case Management Conference. No hearing has yet been 21 scheduled. Defendants assert that their motion to compel arbitration should be heard prior to 22 Plaintiffs’ renewed class certification motion. 23 I. STATEMENT OF THE CASE 24 A. Plaintiffs’ Statement 25 Vanguard provides janitorial services to commercial offices, car dealerships, gyms, 26 warehouses, and many other businesses throughout the United States, including in California. 27 Vanguard Cleaning Systems, Inc. has structured its company as a three-tiered franchise system 28 where Vanguard sells Regional Franchises to companies like Defendants Buddha Capital Corp 1 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 d/b/a Vanguard Cleaning Systems of Sacramento, the Central Valley, and the Central Coast, RR 2 Franchising d/b/a Vanguard Cleaning Systems of Southern California and Northern California, 3 and Wine Country Ventures, Inc. d/b/a Vanguard Cleaning Systems of the North Bay (referred to 4 collectively as “Regional Franchises”). These Regional Franchises in turn sell “unit franchises” 5 to Plaintiffs and Class Members. 6 Plaintiffs and Class Members perform janitorial cleaning services for Vanguard’s 7 customers. Plaintiffs claim that they and other unit franchises are not true independent contractor 8 franchisees, but rather Vanguard’s and Regional Franchises’ employees under the ABC test for 9 employment status. See Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, 964 10 (describing the ABC test); see also Cal. Labor Code § 2750.3 (codifying the ABC test as of 11 January 1, 2020), repealed and replaced by Cal. Labor Code § 2775 et seq. In a similar case in 12 Massachusetts, the trial court found that Vanguard could not satisfy two of the three prongs of 13 the ABC test. Da Costa v. Vanguard Cleaning Sys., Inc., No. CV 15-04743, 2017 WL 4817349, 14 at *6 (Mass. Super. Sept. 29, 2017) (finding that Vanguard failed prong B of the ABC test in part 15 because it touted that it was “a leader in the commercial cleaning industry.”). 16 Plaintiffs bring this case as a class action under California Code of Civil Procedure § 382 17 and a representative action under the California Labor Code Private Attorneys’ General Act, 18 Labor Code Section 2698, et seq. for damages and civil penalties as a result of their 19 misclassification. 20 B. Defendant VCS’s Statement 21 Plaintiffs mischaracterize VCS and its business through purposeful and negligent 22 misrepresentations and improper conflation of multiple separate businesses that legitimately 23 operate different businesses. Contrary to Plaintiffs’ contentions, VCS is in the legally 24 recognized business of franchising; specifically, the franchising of the Vanguard Cleaning 25 System (sometimes “the Cleaning System”), which is a commercial cleaning business system 26 that VCS developed, licensed, and sells to separately established companies known as Regional 27 franchises that sub-franchise the Vanguard Cleaning System to Unit Franchises and provide 28 administrative and support services for the Unit Franchises to which they have sub-franchised 2 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 the Cleaning System. VCS’s business is limited to franchising the Cleaning System, which 2 involves maintaining and improving the licensed Vanguard Cleaning System, promoting the 3 Cleaning System through marketing and advertising, and selling regional franchises to Regional 4 Franchisees. VCS is a separately established and operated company with arm’s length 5 relationships with all Regional Franchisees to which it has sold regional franchises. VCS has no 6 direct business or other relationship with the Unit Franchisees to which Regional Franchisees 7 have sold – i.e., sub-franchised – unit franchises. Certainly VCS never employed Plaintiffs or 8 any other Unit Franchisees, and generally has little to no information about Unit Franchises or 9 the commercial cleaning businesses they operate using the Vanguard Cleaning System. Neither 10 VCS nor any of its employees or agents provide commercial cleaning services. 11 Franchising has “existed in this country in one form or another for over 150 years” 12 (Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 489 (2014)), and, has “become a 13 ubiquitous” and “thriving business model.” Id. at 477. Under this business model, the franchisor, 14 “sells the right to use its trademark and comprehensive business plan” to franchisees who 15 “independently own[], run[], and staff[] the retail outlet that sells goods under the franchisor's 16 name.” Id. 17 On information and belief, many of the Unit Franchisees that Plaintiffs seek to represent 18 – and which Plaintiffs consider “employees” – operate sophisticated businesses with workers of 19 their own. Unit Franchisees are business owners of commercial cleaning businesses – the unit 20 franchises – that they operate using the Vanguard Cleaning System. As such, Plaintiff – and 21 other Unit Franchisees -- are not VCS’s employees, nor employees of the Regional Franchisees. 22 If anything, Plaintiffs are employees of their own businesses: the unit franchises. 23 Franchising is a statutorily recognized and permissible method of doing business at both 24 the federal and California level. The statutes that regulate franchising recognize that the 25 relationship between a franchisor and its franchisees is a commercial relationship, not an 26 employment relationship. The Federal Trade Commission (“FTC”), which authorizes and 27 regulates the sale of franchises in the United States, defines a “franchise” in part as “any 28 continuing commercial relationship or arrangement” whereby the franchisor promises that the 3 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 franchisee “will obtain the right to operate a business that is identified or associated with the 2 franchisor’s trademark ....” 16 C.F.R. § 436.1(h)(1). (16 C.F.R. § 436 et seq.). 3 The California Legislature has enacted two statutes to regulate franchise relationships in 4 this State (the California Franchise Investment Law [the “CFIL”] and the California Franchise 5 Relations Act [the “CFRA”]). These statutes have co-existed with the federal Lanham Act for 6 almost 50 years because they contain similar definitions of the “franchise” relationship and, thus, 7 are legally compatible. Like the FTC’s Franchise Rule, these enactments repeatedly characterize 8 franchises as “businesses” and describe the relationship created between a franchisor and a 9 franchisee as a “business relationship.” See, e.g., Cal. Corp. Code §31001 (disclosures are 10 designed to give a better understanding of the parties “business relationship”); §31005(a)(2) 11 (“[t]he operation of the franchisee’s business” must be substantially associated with the 12 franchisor’s trademark); §31011 (franchise fee is the amount paid “for the right to enter into a 13 business under a franchise agreement”). 14 Simply put, the ABC employment test cannot be applied to a relationship, if any, 15 between Plaintiffs (and the Unit Franchisees they seek to represent) and VCS. Beyond being 16 inapplicable under its own terms, any interpretation of the ABC test that would allow the ABC 17 test to be applied to VCS by Unit Franchisees is preempted for one of several reasons, discussed 18 in part below. A pending lawsuit filed in the Southern District of California, entitled 19 International Franchise Association et al. v. State of California et al., 3:20-cv-02243-BAS-DEB 20 (November 17, 2020) has requested declaratory and injunctive relief to prohibit the application 21 of the ABC test as between franchisees and franchisors in California, on the grounds of 22 preemption. That lawsuit could result in a preemption ruling that will have a direct and 23 substantial impact on this litigation. 24 Leaving aside the fact that the Unit Franchisees are not VCS’s employees, this case is 25 entirely inappropriate for class and representative treatment. On information and belief, Unit 26 Franchisees operate their businesses in widely different ways. Some are believed to have smaller 27 operations, while some have larger operations with many workers of their own. Some Unit 28 Franchisees are believed to have owners who perform no work for the business or perform only 4 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 business management functions, never performing any of the cleaning services their businesses 2 provide for their customers. Other owners, it is believed, only perform cleaning services when 3 needed (e.g., due to worker unavailability or business demands), while some owners regularly 4 perform cleaning functions in addition to their business management responsibilities. It is 5 believed that at least one Plaintiff in this case had workers of her own and personally performed 6 no cleaning services for at least a large portion of the relevant period (during which her duties 7 were limited to running her business, including managing the workers she retained). If this case 8 were to go to a trial, the employment status of the Unit Franchisees would be a mere threshold 9 issue. Plaintiffs’ actual claims include (i) nonpayment of wages, including overtime, (ii) 10 unreimbursed expenses, (iii) noncompliant rest breaks, and (iv) noncompliant meal breaks, 11 among others. There would be far too many individualized issues to resolve this case on a class 12 or representative basis, and any such “class” or representative case would be highly 13 unmanageable and a logistical nightmare for the Court. 14 C. Regional Franchises’ Statement 15 The Regional Franchises create business-to-business relationships that should be 16 analyzed in the context of franchise law, not employment or independent contractor law. Indeed, 17 each Regional Franchise operates its business independently, using unique methods and means 18 for operating their businesses. Each of the Regional Franchises has unique defenses based on the 19 circumstances arising from its relationships with the unit franchises---defenses and facts too 20 numerous to include here. For example, however, Plaintiff Mazariegos released her claims 21 against Wine Country Ventures, and it has a complete defense to this matter on that basis alone. 22 Another example is that Buddha Capital has implemented arbitration provisions that apply to the 23 putative class claims raised here. And, in yet another example, RR Franchising contracts with 24 unit franchisees owned and operated by putative class members that operate sophisticated 25 businesses offering an array of services beyond cleaning. This list is in no way exhaustive or 26 complete for any of these three defendants but is intended merely to highlight the numerous and 27 individualized issues arising out of the unique circumstances surrounding the Regional 28 Franchises businesses and their relationships with putative class members. Furthermore, each of 5 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 the Unit Franchises and putative class members are independent businesses with the authority to 2 conduct business operations wholly independent from their relationship with the Regional 3 Franchises. Indeed, some Unit Franchises perform services for competitors of the Regional 4 Franchises (including Plaintiff Amaya), and all have the authority to do so. The Unit Franchises 5 vary considerably from one another in terms of the overall nature of their business activities, and 6 other characteristics which demonstrate that these franchise-franchisee relationships are not 7 employer-employee relationships. 8 II. STATUS OF PLEADINGS 9 All parties have been served, and all parties have answered the initial complaint. 10 Plaintiffs filed their First Amended Complaint on February 5, 2021. Defendant Vanguard 11 Cleaning Systems, Inc. (“VCS”) filed its Answer to the Amended Complaint on March 9, 2021. 12 Plaintiffs filed a Second Amended Complaint on May 18, 2023, and the now-operative Third 13 Amended Complaint on June 13, 2023. Defendants answered the Third Amended Complaint on 14 July 17, 2023. 15 III. APPEARANCE OF ALL NAMED PARTIES AND COUNSEL 16 Counsel for Plaintiffs Alida Mazariegos, Paula Gonzalez, and Jaime Amaya and the 17 proposed class: 18 Rukin Hyland & Riggin LLP: Jessica Riggin, jriggin@rukinhyland.com;; Contact 19 information: 1939 Harrison Street, Ste. 925; Oakland, California 94612; Telephone: (415) 421- 20 1800; Fax: (415) 421-1700. 21 Nichols Kaster LLP: Matthew Helland, helland@nka.com; Daniel Brome, 22 dbrome@nka.com; Contact information: 235 Montgomery Street, Suite 810; San Francisco, CA 23 94104; Telephone: (415) 277-7235; Fax: (415) 277-7238. 24 25 Counsel for Defendant Vanguard Cleaning Systems, Inc.: 26 Damon Ott, DOtt@littler.com; Robert Geiger, , Sarah Boxer, Sboxer@littler.com; 333 27 Bush Street, 34th Floor, San Francisco, CA 94104; Telephone: (415) 433-1940; Fax: (415) 399- 28 8490. 6 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 2 Counsel for Defendants RR Franchising, Inc., Buddha Capital Corporation and Wine 3 County Ventures, Inc: 4 Jackson Lewis PC, Michael A. Hood, Michael.Hood@jacksonlewis.com; 200 Spectrum 5 Center Drive, Ste 500, Irvine, Ca 92618, Telephone: (949) 885-1360; Fax: (949) 885-1380; 6 [Paige Taylor Bennett, Paige.Bennett@jacksonlewis.com, 160 W. Santa Clara Street, 7 Suite 400, San Jose, CA 95113, Telephone: (408) 579-0404, Facsimile: (408) 454-0290. 8 Jackson Lewis PC, Adam L. Lounsbury (pro hac vice); 701 E. Byrd Street, 17th Floor, 9 Richmond, VA 23102, Telephone: (804)212-2863. 10 IV. STATUS OF DISCOVERY 11 All Parties have participated in in discovery. All Parties have served written discovery 12 responses and produced documents. Plaintiffs have taken person most knowledgeable 13 depositions of all four Defendants; Defendants took the depositions of the three original Named 14 Plaintiffs. All Parties have responded to written discovery. Additional discovery of the newly 15 added Plaintiffs is anticipated. 16 V. STATUS OF SETTLEMENT OR MEDIATION 17 The Parties participated in two unsuccessful mediations. There is currently no mediation 18 scheduled. 19 VI. PENDING MOTIONS AND PROPOSED NEW HEARING DATE 20 There are currently no motions pending at the time of filing this Case Management 21 Statement. Defendants anticipate that the motions to compel arbitration will be set for hearing by 22 the time of the Case Management Conference. 23 VII. LEGAL ISSUES TO BE DECIDED 24 A. Plaintiffs’ Statement 25 The core legal issue is whether Plaintiffs and the putative class are Defendants’ 26 employees for purposes of California wage and hour laws. Plaintiffs allege that they are 27 employees under both the “ABC test” for employment status, and the Borello, right-to-control 28 analysis. 7 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 Under the ABC test, a worker is an employee of the entity for whom he performs labor 2 unless the putative employer proves all three of the following: (A) that the worker is free from 3 the control and direction of the hiring entity in connection with the performance of the work, 4 both under the contract for the performance of the work and in fact; (B) that the worker performs 5 work that is outside the usual course of the hiring entity’s business; and (C) that the worker is 6 customarily engaged in an independently established trade, occupation, or business of the same 7 nature as the work performed. Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, 8 964; see also Da Costa, 2017 WL 4817349, at *5 (Vanguard Cleaning Systems, Inc. was liable 9 in a three-tier franchising structure because the top-level franchise was “directly dependent on 10 commercial cleaning work of the ... unit franchisees”); Vazquez v. Jan-Pro Franchising 11 International, Inc. (9th Cir. 2019) 923 F.3d 575, 596, reh'g granted, opinion withdrawn (9th Cir. 12 2019) 930 F.3d 1107, and on reh'g (9th Cir. 2019) 939 F.3d 1045, and opinion reinstated in part 13 on reh'g (9th Cir. 2019) 939 F.3d 1050 (“Thus, as a doctrinal matter, [a top-tier franchise] could 14 be Plaintiffs’ employer under the ABC test even though it is not a party to any contract with 15 Plaintiffs.”). 16 Plaintiffs also allege that they are Defendants’ employees under the traditional “statutory 17 purpose” test for employment status as set forth in S.G. Borello & Sons, Inc. v. Department of 18 Industrial Relations (1989) 48 Cal.3d 341, 350. See Dynamex, 4 Cal.4th at 929. Under Borello, 19 the principal test of an employment relationship is whether the person to whom service is 20 rendered “retains all necessary control” over the operations. 48 Cal.3d at 357. Secondary factors 21 evidencing employee status under Borello include (a) whether the one performing services is 22 engaged in a distinct occupation or business; (b) the kind of occupation, with reference to 23 whether, in the locality, the work is usually done under the direction of the principal or by a 24 specialist without supervision; (c) the skill required in the particular occupation; (d) whether the 25 principal or the worker supplies the instrumentalities, tools, and the place of work for the person 26 doing the work; (e) the length of time for which the services are to be performed; (f) the method 27 of payment, whether by the time or by the job; and (g) whether or not the work is a part of the 28 regular business of the principal. Id. at 351. 8 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 Plaintiffs allege that as a result of their misclassification, Defendants failed to comply 2 with California wage and hour laws. As a result, Plaintiffs seek damages for Defendants’ failure 3 to provide reimbursement for necessary expenses, unlawful withholding and receipt of earned 4 waged, failure to provide meal and rest breaks, failure to pay California overtime compensation, 5 failure to furnish accurate wage statements, failure to pay earned wages upon discharge, among 6 other claims. 7 Plaintiffs seek to certify a class on behalf of all California unit franchisee cleaners who 8 signed a franchise agreement or transfer agreement with Vanguard Cleaning Systems, Inc., or 9 any of its regional franchisors, and who personally performed cleaning work during the period 10 commencing four years prior to April 6, 2020. Plaintiffs also assert Private Attorneys’ General 11 Act (PAGA) claims for Vanguard’s Labor Code violations under California Labor Code §§ 201- 12 203, 204, 221, 226, 226.3, 226.7, 226.8, 400-410, 432.5, 450, 510, 512, 558, 1174, 1194, 1194.2, 13 1197, 1197.1, 1174.5, 2802, 2810.3, 2750.3, and IWC Wage Order No. 5. 14 B. Regional Franchises’ Statement 15 Because the business-to-business relationship between the Regional Franchises and the 16 Unit Franchises are not employment relationships, the Labor Code Sections cited by plaintiffs do 17 not apply. Further, the Regional Franchises Defendant assert that Plaintiffs’ claims are barred on 18 the grounds of preemption; specifically, preemption of California’s “ABC” worker-classification 19 test by the Federal Trade Commission’s Franchise Rule, 16 C.F.R. §§ 436.1-437.3, the Federal 20 Trade Commission’s Franchise Rule Guide, and the Lanham Act. There is an inherent, 21 irreconcilable conflict between the Federal law that regulates franchising and the trademark 22 license underlying all franchised businesses and California’s ABC test. The ABC Test 23 impermissibly impinges on the essential feature of the franchise model—control over brand- 24 specific systems and business models. The ABC Test, if interpreted to apply to a franchisor 25 franchisee relationship, would have the perverse effect of converting all franchise relationships, 26 which necessarily require some element of control as defined by the FTC Franchise Rule, into 27 employment relationships despite those relationships being arms’ length and governed by 28 contract. Further, by definition all franchisees are granted the right to operate a business that is 9 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 identified or associated with the franchisor’s trademark.” 16 C.F.R. 436.1(h). If operating a 2 business identified or associated with the franchisor’s trademark (or offering, selling, or 3 distributing goods, services, or commodities that are identified or associated with the franchisor’s 4 trademark) is considered performing work that is within the usual course of the franchisor’s 5 business, and the ABC test otherwise applies to franchisees, then franchisees (under federal law) 6 would be employees in California under the ABC Test. As such those laws governing franchise 7 relationships preempt the application of the ABC test to the relationship between Defendant and 8 each Plaintiff (and putative class member) and, therefore, prohibit use of the ABC test to 9 determine the nature of these relationships. To the extent Plaintiffs’ claims are based on an 10 alleged employment relationship between Plaintiffs and Defendant arising from application of 11 California’s ABC test, Plaintiffs’ claims fail as a matter of law. 12 Furthermore, this case is not suitable for class treatment given the multitude of 13 individualized issues concerning the application of the ABC Test, and the specific claims at 14 issue, which are highly dependent upon the individual experiences of the putative class members. 15 C. Defendant VCS’s Statement 16 As a preliminary matter, VCS believes that the two newly named Plaintiffs Adriana Tello 17 and Ryne Bass are not appropriate plaintiffs in this case because they are subject to binding 18 arbitration agreements. 19 VCS shares the Regional Franchisees’ belief that Plaintiffs’ reliance on the ABC Test is 20 both misguided and preempted. See also International Franchise Association et al. v. State of 21 California et al., 3:20-cv-02243-BAS-DEB (S.D. Cal. November 17, 2020) (seeking declaratory 22 and injunctive relief to preclude application of ABC Test between franchisors and franchisees). 23 California statutory law recognizes that the ABC test cannot be applied in all situations, in which 24 case the Borello test must be applied. See Labor Code § 2750.3(a)(3) (“If a court of law rules 25 that the three-part test… cannot be applied to a particular context based on grounds other than an 26 express exception to employment status [e.g., on the grounds of preemption]…, then the 27 determination of employee or independent contractor status in that context shall instead be 28 governed by the California Supreme Court’s decision in S.G. Borello & Sons, Inc. v. Department 10 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 of Industrial Relations (1989) 48 Cal.3d 341.”) (Brackets added). Unit Franchisees are clearly 2 not VCS’s employees under Borello. Indeed, VCS has had no relationship with Unit Franchisees 3 during the relevant time period. This fact-intensive issue will be briefed in full at the appropriate 4 time. 5 As VCS notes above, this case is also inappropriate for class or representative treatment, 6 including because of the presence of highly individualized issues that would need to be resolved 7 for each of Plaintiffs’ claims, which would result in an unmanageable litigation process. This 8 should become clear as the litigation progresses. 9 VIII. PROPOSED BREIFING SCHEDULE FOR MOTIONS 10 On June 22, 2023, Plaintiffs requested the earliest possible hearing date on their renewed 11 motion for class certification, which the Court proposed as follows: Plaintiffs will file their 12 motion on October 10, 2023, Defendants’ opposition shall be filed on or before October 31, 13 2023, Plaintiffs’ reply shall be filed on or before November 14, 2023, and the motion will be 14 heard on December 5, 2023. The Court suggested that the parties stipulate to an earlier briefing 15 schedule, in which case the Court may be able to hear the motion earlier. Defendant declined to 16 so stipulate. 17 IX. LISTING OF ALL PREVIOUSLY SET PRETRIAL DATES AND DEADLINES 18 A. Plaintiffs’ Statement 19 No trial date has been set. Plaintiffs propose that a trial date be set after a decision on 20 their motion for class certification and that the date be set no later than December 1, 2024. 21 Plaintiffs have requested a jury trial and anticipate that a class trial will take two to three weeks. 22 B. Regional Franchises’ Statement 23 The Regional Franchises agree that the trial date should be set after a decision on class 24 certification. The Regional Franchises currently estimate that a class trial, if appropriate, would 25 require five to six weeks, especially if conducted remotely. 26 C. Defendant VCS’s Statement 27 VCS joins Plaintiffs and the Regional Franchises in proposing that the trial date be set after 28 the Court rules on Plaintiffs Mazariegos, Gonzalez, and Amaya’s motion for class certification. 11 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 VCS believes it is too early to assess how much time would be needed for trial and when the Parties 2 would be ready for a trial (and answers to these questions will vary greatly depending on the 3 Court’s ruling on class certification). 4 X. FURTHER CASE MANAGEMENT AND TRIAL SETTING CONFERENCE 5 A. Plaintiffs’ Statement 6 Plaintiffs propose a further case management conference be set 30 days after the hearing 7 on Plaintiffs’ class certification motion. 8 B. Regional Franchises’ Statement 9 The Regional Franchises believe that another case management conference will be 10 necessary following the hearing on Defendants motion to compel arbitration of Plaintiffs Adriana 11 Tello and Ryne Bass. 12 C. Defendant VCS’s Statement 13 VCS requests that a further case management conference be set approximately 30 days 14 after the hearing on Defendants’ upcoming motions to compel arbitration of Plaintiffs Adriana 15 Tello and Ryne Bass. 16 XI. OTHER MATTERS 17 No other matters at this time. 18 Dated: July 31, 2023 NICHOLS KASTER, LLP 19 By: s/ Daniel Brome 20 Daniel Brome Matthew Helland 21 Attorneys for Plaintiffs 22 23 Dated: July 31, 2023 LITTLER MENDELSON P.C. 24 By: s/Robert Geiger 25 Robert Geiger Attorneys for Defendant Vanguard Cleaning Systems, Inc. 26 27 Dated: July 31, 2023 JACKSON LEWIS P.C. 28 12 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT 1 By: s/ Adam L. Lounsbury 2 Adam L. Lounsbury Attorneys for Defendants RR Franchising, Inc., Wine 3 Country Ventures, Inc., and Buddha Capital Corp. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 JOINT CASE MANAGEMENT AND TRIAL SETTING CONFERENCE STATEMENT PROOF OF SERVICE 1 I am employed in the County of Alameda, State of California; I am over the age of 18 2 years and not a party to the within entitled action; my business address is 1939 Harrison Street, Suite 290, Oakland, California 94612. 3 4 On July 31, 2023, I served the foregoing document(s), described as: JOINT STATUS CONFERENCE STATEMENT on the interested parties to said action by the following means: 5 (By Electronic Service) By electronically transmitting the document(s) listed above, 6 addressed as set forth below. 7 Damon Ott, Esq. Paige Taylor Bennett, Esq. Robert Geiger, Esq. Lynsey D. Johnson, Esq. 8 LITTLER MENDELSON P.C. JACKSON LEWIS PC 333 Bush Street, 34th Floor 160 W. Santa Clara Street, Suite 400 9 San Francisco, CA 94104 San Jose, CA 95113 Telephone: (415) 677-3173 Telephone: (408) 579-0404 10 Facsimile: (415) 707-2072 Facsimile: (408) 454-0290 Email: DOtt@littler.com E-Mail: Paige.Bennett@jacksonlewis.com 11 Email: rgeiger@littler.com Email: Lynsey.Johnson@jacksonlewis.com 12 Attorneys for VANGUARD CLEANING Attorneys for RR FRANCHISING, INC.; SYSTEMS, INC. BUDDHA CAPITAL CORPORATION; 13 AND WINE COUNTRY VENTURES, INC. 14 Michael A. Hood, Esq. Adam L. Lounsbury, Esq. JACKSON LEWIS P.C. JACKSON LEWIS P.C. 15 200 Spectrum Center Drive, Suite 500 701 E. Byrd Street, 17th Floor Irvine, CA 92618-5005 Richmond, VA 23102 16 Telephone: (949) 885-1374 Telephone: (804)212-2863 Facsimile: (949) 885-1380 Email: adam.lounsbury@jacksonlewis.com 17 Email: Michael.Hood@jacksonlewis.com Attorneys for RR FRANCHISING, INC.; 18 Attorneys for RR FRANCHISING, INC.; BUDDHA CAPITAL CORPORATION; BUDDHA CAPITAL CORPORATION; AND WINE COUNTRY VENTURES, INC. 19 AND WINE COUNTRY VENTURES, INC. 20 (State) I declare under penalty of perjury under the laws of the State of California 21 that the above is true and correct. 22 23 Executed on July 31, 2023at Corona del Mar, California. 24 25 Brigitte A. Butler 26 27 28 1 PROOF OF SERVICE