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1 Paige Taylor Bennett, Bar No. 288009
JACKSON LEWIS PC
2 160 W. Santa Clara Street, Suite 400
San Jose, CA 95113
3 Telephone: (408) 579-0404
Facsimile: (408) 454-0290
4 E-Mail: Paige.Bennett@jacksonlewis.com
5 Attorneys for Defendants
RR FRANCHISING, INC.; BUDDHA CAPITAL
6 CORPORATION; AND WINE COUNTRY VENTURES,
INC.,
7
8 SEE ADDITIONAL COUNSEL ON THE NEXT PAGE
9 THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
10 IN AND FOR THE COUNTY OF SAN MATEO
11 ALIDA MAZARIEGOS, PAULA GONZALEZ, Case No. 20-CIV-04267
JAIME AMAYA, ADRIANA TELLO, and
12 RYNE BASS COMPLEX ACTION
13 Plaintiffs, on behalf of themselves and ASSIGNED FOR ALL PURPOSES TO
all others similarly situated, HONORABLE NANCY L. FINEMAN,
14 DEPT. 4
v.
15 MEMORANDUM OF POINTS AND
VANGUARD CLEANING SYSTEMS, INC.; AUTHORITIES IN SUPPORT OF
16 RR FRANCHISING, INC., D/B/A DEFENDANTS R. R. FRANCHISING,
VANGUARD CLEANING SYSTEMS OF INC. AND VANGUARD CLEANING
17 SOUTHERN CALIFORNIA AND D/B/A SYSTEMS, INC.’S JOINT MOTION
VANGUARD CLEANING SYSTEMS OF TO COMPEL ARBITRATION OF
18 NORTHERN CALIFORNIA; BUDDHA RYNE BASS
CAPITAL CORPORATION, D/B/A
19 VANGUARD CLEANING SYSTEMS OF
SACRAMENTO, D/B/A VANGUARD Date: December 5, 2023
20 CLEANING SYSTEMS OF THECENTRAL Time: 2:00 p.m.
VALLEY, AND D/B/A VANGUARD Dept: 4
21 CLEANING SYSTEMS OF THE CENTRAL Courtroom: G
COAST; AND WINE COUNTRY VENTURES,
22 INC. D/B/A VANGUARD CLEANING
SYSTEMS OF THE NORTH BAY, AND Complaint Filed: 10/01/2020
23 DOES 1 THROUGH 10, INCLUSIVE, Third Amd. Complaint: 06/02/2023
Trial Date: Not Set
24 Defendants.
25
26
27
28
CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 Adam L. Lounsbury, Admitted Pro Hac Vice
JACKSON LEWIS P.C.
2 701 East Byrd Street - 17th Floor
Richmond, Virginia 23219-4500
3 Telephone: (804) 649-0404
Facsimile: (804) 649-0403
4 E-mail: Adam.Lounsbury@jacksonlewis.com
5 Lisa Xu, Bar No. 328700
JACKSON LEWIS P.C.
6 225 Broadway, Ste 1800
San Diego, CA 92101
7 Telephone: (619) 573-4910
E-Mail: Lisa.Xu@jacksonlewis.com
8
Attorneys for Defendants
9 RR FRANCHISING, INC.; BUDDHA CAPITAL
10 CORPORATION; AND WINE COUNTRY VENTURES,
INC.,
11
12 DAMON M. OTT, Bar No. 215392
LITTLER MENDELSON, P.C.
13 333 Bush Street, 34th Floor
San Francisco, CA 94104
14 Telephone: 415.433.1940
Fax No.: 415.399.8490
15 E-Mail: dott@littler.com
16 SARAH R. BOXER, Bar No. 322393
ROBERT GEIGER, Bar No. 322914
17 LITTLER MENDELSON, P.C.
501 W. Broadway, Suite 900
18 San Diego, California 92101
Telephone: 619.232.0441
19 Fax No.: 619.232.4302
E-mail: sboxer@littler.com
20 rgeiger@littler.com
21 Attorneys for Defendant
VANGUARD CLEANING SYSTEMS INC.
22
23
24
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26
27
28
CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 TABLE OF CONTENTS
2 I. INTRODUCTION ................................................................................................................. 1
3
II. STATEMENT OF FACTS .................................................................................................... 2
4
5 A. The Franchise Agreement and Agreement to Arbitrate. ........................................................ 3
6
B. Plaintiff Bass’s Individual Execution of “Owner’s Guaranty” Agreement. .......................... 5
7
8 C. Franchise Purchase and Contracting Process. ........................................................................ 6
9
D. Plaintiff Bass’s Refusal to Arbitrate....................................................................................... 7
10
11 III. ARGUMENT ......................................................................................................................... 8
12
A. The Arbitration Provision is a Valid Agreement to Arbitrate Under the FAA, Which
13 Governs. ................................................................................................................................. 8
14
B. The Arbitration Provision Between RNL LLC and RRF is Valid, Enforceable, and
15 Encompasses the Present Dispute. ....................................................................................... 10
16
1. The Arbitration Agreement is not Unconscionable. ............................................................ 12
17
18 C. Plaintiff Bass is Personally Bound by the Arbitration Provision and Should Be Compelled
to Arbitrate His Claims. ....................................................................................................... 15
19
20 1. Plaintiff Bass is Bound to Arbitrate His Disputes Based on Incorporation by Reference. .. 15
21
2. Plaintiff Bass is Bound to Arbitrate His Disputes Based on the Doctrine of Estoppel. ...... 17
22
23 D. The Class Action Waiver is Valid and Enforceable. ............................................................ 19
24
E. Defendant VCS is a Third-Party Beneficiary of the Arbitration Provision, and Plaintiff is
25 Estopped from Refusing to Arbitrate His Claims Against VCS. ......................................... 20
26
IV. CONCLUSION .................................................................................................................... 22
27
28
i CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4
Allied-Bruce Terminix Cos. v. Dobson,
5 513 U.S. 265 (1995) .........................................................................................................................9
6 Armendariz v. Foundation Health Psychare Servs.,
24 Cal. 4th 83 (2000) .........................................................................................................10, 12, 14
7
AT&T Mobility LLC v. Concepcion,
8 563 U.S. 333 (2011) .......................................................................................................................14
9 Benaroya v. Willis,
10 23 Cal. App. 5th 462 (2018) ....................................................................................................15, 16
11 Boucher v. Alliance Title Co., Inc.,
127 Cal. App. 4th 262 (2005) ........................................................................................................21
12
Boys Club of San Fernando Valley, Inc. v. Fid. & Deposit Co.,
13 6 Cal. App. 4th 1266 (1992) ..........................................................................................................16
14 Brookwood v. Bank of America,
15 45 Cal. App. 4th 1667 (1996) ........................................................................................................15
16 Buckeye Check Cashing, Inc. v. Cardegna,
546 U.S. 440 (2006) ...................................................................................................................9, 11
17
Citizens Bank v. Alafabco, Inc.,
18 539 U.S. 52 (2003) ...........................................................................................................................9
19 Cohen v. TNP 2008 Participating Notes Program, LLC,
31 Cal. App. 5th 840 (2019) ..........................................................................................................20
20
21 Dwyer v. Dynetech Corp.,
No. C07-02309, 2007 WL 2726699 (N.D. Cal. Sept. 17, 2007) ...................................................13
22
Epic Systems Corp. v. Lewis,
23 138 S. Ct. 1612 (2018) ...............................................................................................................8, 19
24 Felisilda v. FCA US LLC,
53 Cal. App. 5th 486 (2020) ..........................................................................................................21
25
First Options of Chicago, Inc. v. Kaplan,
26
514 U.S. 938 (1995) .......................................................................................................................10
27
Garcia v. Pexco, LLC,
28 11 Cal. App. 5th 782 (2017) ..........................................................................................................21
ii. CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 Harper v. Wasau Ins. Co.,
56 Cal. App. 4th 1079 (1997) ........................................................................................................20
2
Jenks v. DLA Piper Rudnick Gray Cary US LLP,
3
243 Cal. App. 4th 1 (2015) ............................................................................................................21
4
Jensen v. U-Haul Co. of California,
5 18 Cal. App. 5th 295 (2017) ..........................................................................................................17
6 JSM, LLC v. Sup. Ct.,
193 Cal. App. 4th 1222 (2011) ................................................................................................17, 22
7
Marenco v. DirecTV LLC,
8 233 Cal. App. 4th 1409 (2015) ......................................................................................................16
9
Meadows v. Dickey’s Barbecue Restaurants Inc.,
10 144 F.Supp.3d 1069 (N.D. Cal. 2015) .............................................................................................9
11 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614 (1985) .......................................................................................................................10
12
Molecular Analytical Systems v. Ciphergen Biosystems, Inc.,
13 186 Cal. App. 4th 696 (2010) ........................................................................................................19
14
Moncharsh v. Heily & Blasé,
15 3 Cal. 4th 1 (1992) ...........................................................................................................................9
16 Nelsen v. Legacy Partners Residential, Inc.,
207 Cal. App. 4th 1115 (2012) ......................................................................................................14
17
Pinnacle Museum Tower Assn. v. Pinnacle Market Development,
18 55 Cal. 4th 223 (2012) .........................................................................................................8, 12, 14
19 Rodriguez v. Am. Techs, Inc.,
20 136 Cal. App. 4th 1110 (2006) ........................................................................................................9
21 Ronay Fam. Ltd. P’ship v. Tweed,
216 Cal. App. 4th 830 (2013) ........................................................................................................20
22
Rosenthal v. Great W. Fin. Sec. Corp.,
23 14 Cal. 4th 394 (1996) ...................................................................................................................10
24 Rowe v. Exline,
153 Cal. App. 4th 1276 (2007) ......................................................................................................21
25
26 Sanchez v. Valencia Holding Co., LLC,
61 Cal. 4th 899 (2015) ...................................................................................................................13
27
Stewart v. Preston Pipeline Inc.,
28 134 Cal. App. 4th 1565 (2005) ......................................................................................................11
iii CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 Turner v. Thorworks Indus., Inc.,
No. CIVS05-02653WBS KJM, 2006 WL 829142 (E.D. Cal. Mar. 28, 2006) ..............................21
2
United States v. Costanzo,
3
956 F.3d 1088 (9th Cir. 2020) .........................................................................................................9
4
Vianna v. Doctors’ Management Co.,
5 27 Cal. App. 4th 1186 (1994) ........................................................................................................10
6 Viking River Cruises, Inc. v. Moriana,
142 S. Ct. 1906 (2022) ...................................................................................................................20
7
Yu v. Liberty Surplus Ins. Corp.,
8 30 Cal. App. 5th 1024 (2018) ........................................................................................................16
9
Statutes
10
9 U.S.C. § 2 ........................................................................................................................................8, 9
11
Cal. Corp. Code §31005(a) ..................................................................................................................12
12
California Code of Civil Procedure sections 1281.2 and 1281.4...........................................................2
13
Civ. Code § 1550 .................................................................................................................................10
14
Civ. Code § 1556 .................................................................................................................................11
15
16 Civ. Code § 1589 .................................................................................................................................16
17 Civ. Code, § 1643 ................................................................................................................................10
18 Civ. Code § 3541 .................................................................................................................................10
19 FAA.............................................................................................................................................. passim
20 Federal Arbitration Act, 9 U.S.C. § 1, et seq. ....................................................................................2, 9
21 Other Authorities
22 16 C.F.R. § 436. 1 (h) ..........................................................................................................................12
23
24
25
26
27
28
iv CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 I. INTRODUCTION
2 Among other changes it makes years into this action, Plaintiffs’ Third Amended Complaint
3 (“TAC”) adds Ryne Bass as a named plaintiff and proposed class representative, and seeks to
4 introduce claims he asserts on behalf of himself (as well as others) against Defendants Vanguard
5 Cleaning Systems, Inc. (“VCS”), RR Franchising, Inc., Buddha Capital Corporation, and Wine
6 Country Ventures, Inc. (together, “Defendants”).1 Plaintiff Bass’s claims, however, are subject to an
7 enforceable agreement to arbitrate and, therefore, must be compelled to arbitration and dismissed—
8 along with Plaintiff Bass—from this case. Specifically, Mr. Bass’s claims are subject to the
9 agreement to arbitrate contained in the Franchise Agreement entered into by and between Defendant
10 RRF Franchising, Inc. (“RRF”) and RNL LLC, a company that Plaintiff Bass owned and managed
11 with his wife. Although Plaintiff Bass signed the Franchise Agreement on behalf of RN, LLC, he
12 did so as a representative of the company in his capacity as a “Member” of the LLC, not in his
13 individual capacity. Regardless, despite being a “nonsignatory” of the Franchise Agreement,
14 Plaintiff Bass is bound by and can be compelled to arbitrate under the arbitration provision contained
15 in the Agreement because he, in his individual capacity, entered into a separate agreement with RRF
16 in which he agreed to be personally bound by “each and every term, condition, covenant and
17 provision in the [Franchise] Agreement.” This separate agreement, the “Owner’s Guaranty and
18 Assumption of Franchisee’s Obligations” attached as Exhibit C to the Franchise Agreement,
19 incorporated the arbitration provision by reference, thereby making it personally binding on Plaintiff
20 pursuant to the doctrine of incorporation by reference. Plaintiff Bass is additionally bound by the
21 arbitration provision pursuant to the doctrine of estoppel because his claims are inextricably
22 intertwined with the underlying contractual obligations of the Franchise Agreement containing the
23 arbitration clause.
24 ///
25
1
On behalf of himself, Plaintiff Bass alleges claims for unpaid minimum and overtime wages, meal
26 and rest period violations, failure to reimburse business expenses, unlawful wage deductions, wage
statement violations, waiting time penalties, unfair competition, and PAGA penalties, all of which
27 are premised on his contention that the work he performed in connection with RNL, LLC and the
“Vanguard” commercial cleaning franchise it purchased from RRFRRF makes him an employee of
28 RRF and its licensor, Defendant Vanguard Cleaning Systems, Inc.
1. CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 The arbitration provision in the Franchise Agreement is governed by the Federal Arbitration
2 Act, 9 U.S.C. § 1, et seq. (“FAA”), and enforceable under California contract law, both as to RRF
3 pursuant to Plaintiff Bass’s personal agreement (Exhibit C), and to VCS as a third-party beneficiary,
4 and Plaintiff Bass is estopped from arguing the contrary.2 For these reasons and the reasons set forth
5 below, Defendants RRF and VCS respectfully request that the Court enforce the arbitration
6 provision in RN LLC’s Franchise Agreement by ordering Plaintiff Bass to arbitrate his claims
7 against Defendants RRF and VCS on an individual basis, and dismissing Plaintiff Bass and his
8 claims from this action.
9 II. STATEMENT OF FACTS
10 RRF is a franchising business that sells and supports Vanguard Cleaning Systems®
11 franchises to parties interested in operating a franchised cleaning business under the Vanguard
12 Cleaning Systems® brand. (Declaration of Robert Dusthimer ISO Joint Motion to Compel
13 (“Dusthimer Decl.”) ¶ 2.) RRF sells these franchises (known as “Unit Franchises”) pursuant to a
14 licensing agreement with VCS, the company that developed, owns, and maintains the Vanguard
15 Cleaning Systems® intellectual property, and which promotes the Vanguard Cleaning Systems®
16 brand. Consistent with applicable federal and state law regulating the sale of franchises, RRF sells
17 Unit Franchises to purchasers (known as “Unit Franchisees”) pursuant to a written franchise
18 agreement in a form that must first be reviewed and approved by the State of California before RRF
19 is legally permitted to present it to a prospective Unit Franchisee. (Dusthimer Decl. ¶ 3.) VCS is
20 not a party to the franchise agreement RRF enters into with the Unit Franchisee, nor does the
21 agreement establish or contemplate any business relationship directly between the Unit Franchisee
22 and VCS. (Id.) Some of the franchise agreements RRF has entered into with Unit Franchisees
23 identify VCS as an intended third-party beneficiary of the agreement, including RRF’s agreement
24 with RNL LLC. (Id.)
25 ///
26 ///
27
2
To the extent necessary and not inconsistent with the FAA, this Motion is also being brought
28 pursuant to California Code of Civil Procedure sections 1281.2 and 1281.4.
2 CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 A. The Franchise Agreement and Agreement to Arbitrate.
2 On August 17, 2017, RNL LLC3 entered into the Franchise Agreement with R.R to purchase
3 a Unit Franchise, thereby gaining the right to operate a commercial janitorial services business under
4 the “Vanguard Cleaning Systems” trade name and related VCS marks in connection with its
5 operation of a Vanguard Cleaning Systems®-branded commercial cleaning business. (Dusthimer
6 Decl. ¶¶ 6-10, Ex. 2, Franchise Agreement.) On behalf of RRF (the “Franchisor”), Rob Dusthimer
7 signed the Franchise Agreement in his capacity of President of the company. On behalf of RNL,
8 LLC (the “Franchisee”), the Agreement was signed by Ryne Bass in his capacity as a “Member” of
9 the LLC.
10 In addition to establishing the terms applicable to RNL LLC’s operation of a Vanguard-
11 branded janitorial business, section 34 of the Franchise Agreement (entitled Dispute Resolution)
12 contains an express arbitration agreement (the “Arbitration Provision”) requiring that the Franchisor
13 and Franchisee submit all covered claims to binding arbitration (Dusthimer Decl., Ex. 2, Franchise
14 Agreement4 at Sec. 34.B.) In pertinent part, the Arbitration Provision states:
15 If the parties are unable to settle a dispute through mediation, the parties
agree that except with respect to matters for which a party believes that it
16
is necessary to seek equitable relief in court, all controversies, disputes, or
17 claims between the parties (including their subsidiaries, affiliates,
shareholders, owners, officers, directors, managers, representatives, and
18 employees) arising out of or related to:
19 (1) This Agreement or any other agreement between them or
any provision of any agreement between them or the validity of any such
20
agreement or provision; or
21
(2) Any standard, specification, or operating procedure relating
22 to the establishment of the Franchised Business; or
23 (3) The relationship of the parties (including their subsidiaries,
24 affiliates, shareholders, owners, officers, directors, managers,
25 3
Although the signature page of the Franchise Agreement identifies the Franchisee as “RNL, LLC”
(with a comma preceding LLC), the Franchisee is accurately identified as “RNL LLC” (with no
26 comma) in the first paragraph of the Agreement, as confirmed by an online search of the California
Secretary of State’s records, which indicate that Plaintiff Bass is a Managing Member of “RNL
27 LLC” (no comma preceding LLC). (See Dusthimer Decl., Ex 2.)”
4
For citations to supporting declaration, references to the Franchise Agreement shall be abbreviated
28 as “FA.”
3 CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 representatives, and employees),
2 (each, a “Claim”) will be submitted to and for binding arbitration
3 conducted in accordance with the then-current AAA Commercial
Arbitration Rules.
4
....
5
All matters relating to arbitration will be governed by the Federal
6 Arbitration Act (9 U.S.C. §§ 1 et. seq.) and not by any state arbitration
7 law.
8 (Dusthimer Decl., Ex. 2 at Sec. 34.B.)5
9 The Arbitration Provision also includes the following class action waiver:
10 THE PARTIES AGREE THAT ARBITRATION WILL BE
CONDUCTED ON AN INDIVIDUAL, NOT A CLASS-WIDE BASIS,
11
AND THAT AN ARBITRATION PROCEEDING BETWEEN THE
12 PARTIES MAY NOT BE CONSOLIDATED WITH ANY OTHER
ARBITRATION PROCEEDING BETWEEN THEM AND ANY OTHER
13 PERSON OR LEGAL ENTITY.
14 (Id. ¶ 34.F. (Bold and capitalization in original.))
15 Section 32, subsection E of the Franchise Agreement defines “Franchisee” to include, among
16 other things, “all members or managers of the Business Entity that executes this Agreement (if it is a
17 limited liability company).” (Id. Sec. 32.E (emphasis added). Section 32 also contains a separate
18 provision entitled “Individual Undertakings” explicitly providing that all members and managers of
19 a Franchisee LLC who sign the Franchise Agreement agree to be personally bound by the duties and
20 obligations imposed on the Franchisee:
21 Individual Undertakings. All current and future shareholders,
members, managers and directors of any Business Entity that signs this
22
Agreement as Franchisee personally and individually acknowledge
23 and accept the duties and obligations imposed on Franchisee by the
terms of this Agreement.
24
(Dusthimer Decl., Ex. 2 at Sec. 32.F.)
25
5
The version of the Arbitration Provision contained in RN LLC’s Franchise Agreement was
26 included in Franchise Agreements RRF offered in 2017 and 2018. RRF first included an arbitration
provision in its Franchise Agreements beginning in2012. Since that year, RRF has modified or
27 replaced the arbitration agreement in the Franchise Agreements its offered six times. Specifically,
RRF has changed or replaced the language of the arbitration provision in its Franchise Agreements
28 in the following years: 2013, 2014, 2017, 2019, 2021 and 2022.
4 CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 In addition to defining the parties as franchisor and franchisee, the Franchise Agreement
2 specifies that the Franchisee is an independent contractor and not an employee of the Franchisor, and
3 further states that any disputes between the Franchisor and Franchisee (or their respective agents),
4 including disputes regarding Franchisee’s independent contractor status, are subject to the
5 Arbitration Provision:
6 Franchisee is Independent Contractor.
7 Franchisee is and shall remain at all times a completely independent
contractor in business for itself, and will hold itself out as an
8
independent business in all dealings and communications with
9 Accounts and the public, including, but not limited to, suppliers,
lessors, government agencies, employees, contractors, and others.
10 Franchisee and Franchisor are not, and shall not hold themselves out
as, an agent, representative, employee, officer, director, partner,
11 owner or Affiliate of the other, and neither has the authority to bind
12 the other to any agreement or obligation. Franchisee’s VCS Business
is, and shall be kept, totally separate from any business that
13 Franchisor or Licensor operates. Nothing in this Agreement or in the
parties’ course of conduct is intended or shall be construed to create,
14 state or imply an employer-employee, co-employer or joint employer
relationship, partnership, joint venture, agency or any fiduciary or
15 special relationship between Franchisor and Franchisee, or between
16 Licensor and Franchisee.
17 ....
18 Franchisee further acknowledges that Franchisee is and shall remain
at all times a completely independent contractor in business for itself,
19 and that there is not an employer-employee, co-employer relationship,
partnership, joint venture, agency or any fiduciary or special
20
relationship between Franchisor and Franchisee or between Licensor
21 and Franchisee.
22 (Dusthimer Decl., Ex. 2 at Secs. A.1, 38.F).)
23 B. Plaintiff Bass’s Individual Execution of “Owner’s Guaranty” Agreement.
24 At the time Plaintiff Bass executed the Franchise Agreement on behalf of RNL LLC, he and
25 his wife Leondra Quiñones (the co-owners and members of RNL LLC) signed the “Owner’s
26 Guaranty and Assumption of Franchisee’s Obligations” (“Owner’s Guaranty Agreement”) attached
27
28
5 CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 as Exhibit C to the Franchise Agreement.6 (Dusthimer Decl., Ex. 2 at Exhibit C.) By signing the
2 Owner’s Guaranty Agreement, which he did in his individual capacity, Plaintiff expressly agreed “to
3 be personally bound by, and personally liable for the breach of, each and every term, condition,
4 covenant and provision in the [Franchise] Agreement.” (Id.) By signing the Owner’s Guarantee
5 Agreement, Plaintiff Bass (and his wife) also affirmed the provision whereby he “expressly
6 represents and acknowledges that he has read the [Owner’s Guaranty] Agreement and has had the
7 opportunity to review [it] with counsel.”
8 C. Franchise Purchase and Contracting Process.
9 RNL LLC, through its owners, was the party that initiated contact with RRF to discuss the
10 potential purchase of a Unit Franchise, including by submission of a “Unit Franchise Request for
11 Consideration” form. (Dusthimer Decl. ¶¶ 3-5, Ex. 1.)
12 As required by California franchising law, RRF notified RNL LLC in writing that it had a
13 minimum of 14 calendar-days to review the Franchise Agreement (including the Owner’s Guaranty
14 Agreement). Before offering RNL LLC its Franchise Agreement, RRF discussed and negotiated with
15 RNL LLC’s owners, including Plaintiff Bass, the terms to be included in the Franchise Agreement.
16 (Id. at ¶ 7.) The Franchise Agreement offered to RNL LLC contained the terms negotiated by the
17 parties, as reflected by, among other things, the terms specifying the geographic “Area” in which
18 RNL LLC was licensed to operate (FA, Sec. 1.A), the accounts to be included in the purchase price
19 (expressed as anticipated gross revenue generated per month) (FA, Sec. 3.B.1), and the amount to be
20 paid and terms of payment for the Unit Franchise (FA, Sec. 11). (Id., Ex. 1) RRF imposed no limit
21 on the amount of time RNL LLC had to review and consider the offered Franchise Agreement or the
22 Owner’s Guaranty Agreement attached as Exhibit C. (Id.)
23 ///
24
6
Although Ms. Quiñones would also be subject to binding arbitration based on her signature on the
25 Owner’s Guarantee, Ms. Quiñones does not fall within the class of individuals Plaintiffs seek to
represent in the TAC because she did not sign a franchise or transfer agreement. (See TAC ¶ 6,
26 defining class as “[a]ll California unit franchisee cleaners who signed a franchise agreement or
transfer agreement with Vanguard Cleaning Systems, Inc., or any of its master franchisors, and who
27 personally performed cleaning work during the period commencing four years prior to April 6, 2020
(individually referred to as ‘Class Members’ and collectively as the ‘Class’)” because Ms. Quiñones
28 did not sign a franchise or transfer agreement.)
6 CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 RRF advised RNL LLC of its right to have the contracting documents reviewed by counsel.
2 (Id.) These points were also reiterated in Section 38 (“Franchisee Acknowledgments”), subsections
3 A and B of the Franchise Agreement, whereby Franchisee expressly represents and acknowledges
4 that:
5 Franchisee has received, read and understands this Agreement and
6 Franchisor’s Franchise Disclosure Document and that Franchisor has
given Franchisee ample time and opportunity to consult with advisors
7 of its own choosing about the potential benefits and risks of entering
into this Agreement. Franchisee represents and acknowledges that
8 Franchisee has received, at least fourteen (14) calendar-days prior to
the date on which this Agreement was signed, the Franchisor’s
9
Franchise Disclosure Document required by law, as modified by any
10 applicable state addenda attached to it.
11 (Dusthimer Decl., Ex. 1 at Sec. 38.A.) And:
12 Consultation by Franchisee. Franchisee represents that it has been
urged to consult with its own advisors with respect to the legal,
13
financial and other aspects of this Agreement, the VCS Business and
14 the prospects for that business. Franchisee represents that Franchisee
has either consulted with such advisors or has purposefully declined
15 to do so.
16
17 (Id., Ex. 1 at Sec. 38.B.) In total, from the date RNL LLC submitted its Request for
18 Consideration (July 13, 2017) through the date RRF and RNL LLC entered into the Franchise
19 Agreement (August 17, 2017), the process took approximately 35 days. (Id. at ¶ 9.)
20 D. Plaintiff Bass’s Refusal to Arbitrate.
21 On June 26, 2023, after Plaintiffs filed the TAC, counsel for Defendant VCS notified counsel
22 for Plaintiff Bass that RNL LLC’s Franchise Agreement contains a valid Arbitration Provision
23 covering Plaintiff Bass and the claims asserted in the TAC, and requested that Plaintiff Bass stipulate
24 to arbitrate his claims. (See Declaration of Damon Ott in Support of Motion to Compel Arbitration
25 (“Ott Decl.”), Ex. A.) VCS’s counsel further informed Plaintiff’s counsel that RRF and VCS
26 interpret the Arbitration Provision’s mediation prerequisite to have been satisfied by the two
27 mediations already conducted in this action (clearing the way for Plaintiff to initiate arbitration), and
28 also offered to participate in a further mediation with Plaintiff Bass should he so desire prior to
7 CASE NO. 20-CIV-04267
MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 proceeding to arbitration. (Id.) Plaintiff Bass refused Defendants RRF and VCS’s requests that he
2 arbitrate his claims, necessitating the filing of this motion. (Id.)
3 III. ARGUMENT
4 The Court must compel Plaintiff Bass’s claims to binding arbitration consistent with the
5 terms of the Arbitration Provision because it is a valid and enforceable agreement to arbitrate, and
6 despite being a “nonsignatory” of the Franchise Agreement, the Arbitration Provision is personally
7 binding on Plaintiff Bass because of its incorporation by reference into the Owner’s Guaranty
8 Agreement that Plaintiff entered into with RRF in his individual capacity, and as underscored by
9 Sections 32E. and F. of the Franchise Agreement. The Arbitration Provision is also separately
10 binding on Plaintiff Bass under the doctrine of estoppel, because his claims are inextricably
11 intertwined with the underlying contractual obligations of the Franchise Agreement containing the
12 arbitration clause. RRF, as a signatory and party to the Arbitration Provision, as well as to the
13 Owner’s Guaranty Agreement in which it is incorporated, therefore, has the right to directly enforce
14 the Arbitration Provision to require Plaintiff Bass to resolve his claims in binding arbitration.
15 Defendant VCS is likewise entitled to seek enforcement as a third-party beneficiary of the
16 Arbitration Provision.
17
A. The Arbitration Provision is a Valid Agreement to Arbitrate Under the FAA,
18 Which Governs.
19 The FAA declares a liberal policy favoring the enforcement of arbitration agreements. Epic
20 Systems Corp. v. Lewis, 138 S. Ct. 1612, 1623 (2018) (the FAA is “a congressional command
21 requiring us to enforce, not override, the terms of the arbitration agreements before us”); Pinnacle
22 Museum Tower Assn. v. Pinnacle Market Development, 55 Cal. 4th 223, 235 (2012). Under the
23 FAA, “[a] written provision in . . . a contract evidencing a transaction involving commerce to settle
24 by arbitration a controversy . . . shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. The
25 Arbitration Provision contained in RNL, LLC’s Franchise Agreement satisfies all of these
26 requirements and is, therefore, governed by the FAA.
27 First, the Arbitration Provision expressly states that it is governed by the FAA, which is itself
28 sufficient to bring it within the purview of the FAA. (Dusheimer Decl., Ex. 2 (stating, “All matters
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MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 relating to arbitration will be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.) and not
2 by any state arbitration law”).) See also Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440,
3 442-43 (2006) (where the arbitration agreement provided that the FAA governed the agreement,
4 FAA preempted application of state law and question of contract’s validity was left to the arbitrator);
5 Rodriguez v. Am. Techs, Inc., 136 Cal. App. 4th 1110, 1122 (2006) (“there is no ambiguity regarding
6 the parties’ intent. They adopted the FAA—all of it—to govern their arbitration”).
7 Second, the Arbitration Provision “involves commerce” because the Franchise Agreement
8 within which it is contained “involves commerce,” as defined under section 2 of the FAA. Citizens
9 Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (the term “involving commerce” is interpreted
10 broadly under section 2 of the FAA). In Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995),
11 the U.S. Supreme Court held that, in passing the FAA, Congress meant to exercise its power under
12 the Commerce Clause to the fullest limits. Id. at 273-74, 277. The Court found that the term
13 “involving commerce” is synonymous with the term “affecting commerce,” signifying Congress’s
14 intent to “exercise [its] commerce power to the full.” Id. RNL, LLC’s Franchise Agreement grants it
15 a license to use the VCS Business System and Marks to operate a commercial cleaning business in
16 exchange for the specified fees. (Dusthimer Decl., Ex. 2.) The Franchise Agreement further permits
17 RNL, LLC to use the Marks to solicit further business, including through online and other marketing
18 efforts. (Id.) Thus, the Franchise Agreement by its own nature affects commerce. See, e.g.,
19 Meadows v. Dickey’s Barbecue Restaurants Inc., 144 F.Supp.3d 1069, 1075 (N.D. Cal. 2015)
20 (applying the FAA to analyze arbitration agreements found within franchise agreements in suit
21 brought by California franchisees against franchisor); United States v. Costanzo, 956 F.3d 1088,
22 1092 (9th Cir. 2020) (“We have long recognized that the Internet and the nation’s vast network of
23 telephone lines are instrumentalities of and intimately related to interstate commerce”). The
24 Arbitration Provision contained in RNL, LLC’s Franchise Agreement, therefore, clearly “involves
25 commerce” and, thus, satisfies both requirements for application of the FAA.7
26
7
Even assuming arguendo that the Court concludes that California law, and not the FAA, governs,
27 the Arbitration Provision is nonetheless enforceable. California maintains a “strong public policy in
favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.” Moncharsh
28 v. Heily & Blasé, 3 Cal. 4th 1, 9 (1992). Moreover, it is a fundamental tenet of law that whenever
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1 B. The Arbitration Provision Between RNL LLC and RRF is Valid, Enforceable,
and Encompasses the Present Dispute.
2
3 The federal presumption for arbitrability applies “to any arbitration agreement within the
4 coverage of the [FAA]” and requires that questions of arbitrability be addressed “with a healthy
5 regard for the federal policy favoring arbitration,” and “any doubts concerning the scope of
6 arbitrable issues…be resolved in favor of arbitration, whether the problem at hand is the
7 construction of the contract language itself or…[a] defense to arbitrability.” Mitsubishi Motors
8 Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985) (citations omitted; emphasis
9 added). The moving party’s burden is light. A defendant need only show by a preponderance of
10 evidence that an agreement to arbitrate exists. See Rosenthal v. Great W. Fin. Sec. Corp., 14 Cal. 4th
11 394, 413 (1996).8
12 General contract law principles apply to the interpretation and enforcement of arbitration
13 agreements. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Under California
14 law, a valid contract exists when: (1) the parties are capable of contracting; (2) there was mutual
15 consent; (3) the contract had a lawful objective; and (4) the contract was supported by sufficient
16 cause or consideration. Civ. Code § 1550. As between RRF and RNL LLC, the Arbitration
17 Provision satisfies all four criteria and qualifies as a valid contract under California law. The
18 Owner’s Guaranty Agreement likewise satisfies all four criteria and constitutes a valid contract
19 between RRF and Plaintiff Bass. First, the evidence makes clear that the parties to the agreements
20 were capable of contracting. In both instances, Plaintiff Bass was the individual who executed both
21 agreements (albeit in his capacity a representative of RNL LLC for the Franchise Agreement, and in
22
possible, a contract should be read in a way to render it enforceable and valid. (Civ. Code, § 1643
23 (contract should be interpreted to make it “lawful, operative, definite, reasonable, and capable of
being carried into effect”); Civ. Code § 3541 (“[a]n interpretation which gives effect [to an
24 agreement] is preferred to one which makes [it] void”). Any “[d]oubts as to whether an arbitration
clause applies to a particular dispute are to be resolved in favor of … arbitration.” Vianna v.
25 Doctors’ Management Co., 27 Cal. App. 4th 1186, 1189 (1994).
8
As the FAA preempts conflicting California law, no heightened burden such as the requirements in
26 Armendariz v. Foundation Health Psychare Servs., 24 Cal. 4th 83, 114 (2000) may be required for
enforcement. Regardless, the Arbitration Provision satisfies these requirements. (See e.g., Dusthimer
27 Decl., Ex. 2 at pp. 23-26 (providing that arbitration shall be in accordance with the AAA
Commercial Arbitration Rules and containing a severability clause should any language of the
28 Arbitration Provision be unenforceable).)
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1 his individual capacity for the Owner’s Guaranty Agreement), and there is no basis to conclude that
2 he was unfit to contract at the time he signed the agreements. See Civ. Code § 1556 (“All persons
3 are capable of contracting, except minors, persons of unsound mind, and persons deprived of civil
4 rights.”). As a managing member of RNL LLC, Plaintiff Bass had authority to execute the Franchise
5 Agreement on its behalf.
6 Second, the mutual assent of Plaintiff Bass and RRF to arbitrate is clear because the
7 Arbitration Provision expressly states that all parties and their agents mutually agree to resolve all
8 disputes by binding arbitration. Plaintiff Bass, as the representative of RNL LLC responsible for
9 executing the Franchise Agreement, was familiar with its terms, including the Arbitration Provision.
10 Accordingly, by executing the Owner’s Guaranty Agreement, wherein he expressly agreed to be
11 personally bound by all of the Franchise Agreement’s provisions, Plaintiff Bass understood this
12 included the Arbitration Provision.
13 Third, the Arbitration Provision has the lawful objective of resolution of disputes through
14 arbitration. See, e.g., Buckeye Check Cashing, 546 U.S. at 443 (the FAA “embodies the national
15 policy favoring arbitration”); Stewart v. Preston Pipeline Inc., 134 Cal. App. 4th 1565, 1586 (2005)
16 (finding a valid contract formation where the contract “had a lawful object of resolving litigation.”).
17 Fourth, the Arbitration Provision was supported by sufficient consideration, including the 10
18 year franchise license RRF granted RNL LLC pursuant to the Franchise Agreement. The franchise
19 license granted RNL LLC was also consideration for the Owner’s Guaranty Agreement, because
20 RRF’s agreement to enter into the Franchise Agreement was, in part, based on RNL LLC’s owners’
21 agreement to enter individually into the Owner’s Guaranty Agreement. (See Dusthimer Decl., Ex. 2.
22 At Exhibit C (stating the Owner’s Guaranty Agreement is “[i]n consideration of, and as an
23 inducement to” RRF entering into the Franchise Agreement with RNL LLC).)
24 Accordingly, the Arbitration Provision contained in the Franchise Agreement qualifies as a
25 valid agreement to arbitrate between RNL LLC and RRF The Owner’s Guaranty Agreement is also
26 a valid agreement and, therefore, it is binding on Plaintiff Bass as an individual. As discussed
27 further in Section 1 below, this includes the terms incorporated into the Agreement by reference, in
28 particular the Arbitration Provision. Thus, Plaintiff Bass has personally agreed to arbitrate “all
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1 disputes,” including disputes between members and managers of the Franchisee and the
2 Franchisor. (See Dusthimer Decl., Ex. 2 at Sec. 34.).) Accordingly, there exists a valid agreement
3 to arbitrate here governing the present dispute.
4 1. The Arbitration Agreement is not Unconscionable.
5 To establish a defense to enforcement of the Arbitration Provision based on
6 unconscionability, Plaintiff Bass bears the burden of proving that the agreement is both procedurally
7 and substantively unconscionable. Pinnacle Museum, 55 Cal. 4th at 247; Armendariz, 24 Cal. 4th at
8 114 (no matter how heavily one side of the
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1 Paige Taylor Bennett, Bar No. 288009 JACKSON LEWIS PC 2 160 W. Santa Clara Street, Suite 400 San Jose, CA 95113 3 Telephone: (408) 579-0404 Facsimile: (408) 454-0290 4 E-Mail: Paige.Bennett@jacksonlewis.com 5 Attorneys for Defendants RR FRANCHISING, INC.; BUDDHA CAPITAL 6 CORPORATION; AND WINE COUNTRY VENTURES, INC., 7 8 SEE ADDITIONAL COUNSEL ON THE NEXT PAGE 9 THE SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 IN AND FOR THE COUNTY OF SAN MATEO 11 ALIDA MAZARIEGOS, PAULA GONZALEZ, Case No. 20-CIV-04267 JAIME AMAYA, ADRIANA TELLO, and 12 RYNE BASS COMPLEX ACTION 13 Plaintiffs, on behalf of themselves and ASSIGNED FOR ALL PURPOSES TO all others similarly situated, HONORABLE NANCY L. FINEMAN, 14 DEPT. 4 v. 15 MEMORANDUM OF POINTS AND VANGUARD CLEANING SYSTEMS, INC.; AUTHORITIES IN SUPPORT OF 16 RR FRANCHISING, INC., D/B/A DEFENDANTS R. R. FRANCHISING, VANGUARD CLEANING SYSTEMS OF INC. AND VANGUARD CLEANING 17 SOUTHERN CALIFORNIA AND D/B/A SYSTEMS, INC.’S JOINT MOTION VANGUARD CLEANING SYSTEMS OF TO COMPEL ARBITRATION OF 18 NORTHERN CALIFORNIA; BUDDHA RYNE BASS CAPITAL CORPORATION, D/B/A 19 VANGUARD CLEANING SYSTEMS OF SACRAMENTO, D/B/A VANGUARD Date: December 5, 2023 20 CLEANING SYSTEMS OF THECENTRAL Time: 2:00 p.m. VALLEY, AND D/B/A VANGUARD Dept: 4 21 CLEANING SYSTEMS OF THE CENTRAL Courtroom: G COAST; AND WINE COUNTRY VENTURES, 22 INC. D/B/A VANGUARD CLEANING SYSTEMS OF THE NORTH BAY, AND Complaint Filed: 10/01/2020 23 DOES 1 THROUGH 10, INCLUSIVE, Third Amd. Complaint: 06/02/2023 Trial Date: Not Set 24 Defendants. 25 26 27 28 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 Adam L. Lounsbury, Admitted Pro Hac Vice JACKSON LEWIS P.C. 2 701 East Byrd Street - 17th Floor Richmond, Virginia 23219-4500 3 Telephone: (804) 649-0404 Facsimile: (804) 649-0403 4 E-mail: Adam.Lounsbury@jacksonlewis.com 5 Lisa Xu, Bar No. 328700 JACKSON LEWIS P.C. 6 225 Broadway, Ste 1800 San Diego, CA 92101 7 Telephone: (619) 573-4910 E-Mail: Lisa.Xu@jacksonlewis.com 8 Attorneys for Defendants 9 RR FRANCHISING, INC.; BUDDHA CAPITAL 10 CORPORATION; AND WINE COUNTRY VENTURES, INC., 11 12 DAMON M. OTT, Bar No. 215392 LITTLER MENDELSON, P.C. 13 333 Bush Street, 34th Floor San Francisco, CA 94104 14 Telephone: 415.433.1940 Fax No.: 415.399.8490 15 E-Mail: dott@littler.com 16 SARAH R. BOXER, Bar No. 322393 ROBERT GEIGER, Bar No. 322914 17 LITTLER MENDELSON, P.C. 501 W. Broadway, Suite 900 18 San Diego, California 92101 Telephone: 619.232.0441 19 Fax No.: 619.232.4302 E-mail: sboxer@littler.com 20 rgeiger@littler.com 21 Attorneys for Defendant VANGUARD CLEANING SYSTEMS INC. 22 23 24 25 26 27 28 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 TABLE OF CONTENTS 2 I. INTRODUCTION ................................................................................................................. 1 3 II. STATEMENT OF FACTS .................................................................................................... 2 4 5 A. The Franchise Agreement and Agreement to Arbitrate. ........................................................ 3 6 B. Plaintiff Bass’s Individual Execution of “Owner’s Guaranty” Agreement. .......................... 5 7 8 C. Franchise Purchase and Contracting Process. ........................................................................ 6 9 D. Plaintiff Bass’s Refusal to Arbitrate....................................................................................... 7 10 11 III. ARGUMENT ......................................................................................................................... 8 12 A. The Arbitration Provision is a Valid Agreement to Arbitrate Under the FAA, Which 13 Governs. ................................................................................................................................. 8 14 B. The Arbitration Provision Between RNL LLC and RRF is Valid, Enforceable, and 15 Encompasses the Present Dispute. ....................................................................................... 10 16 1. The Arbitration Agreement is not Unconscionable. ............................................................ 12 17 18 C. Plaintiff Bass is Personally Bound by the Arbitration Provision and Should Be Compelled to Arbitrate His Claims. ....................................................................................................... 15 19 20 1. Plaintiff Bass is Bound to Arbitrate His Disputes Based on Incorporation by Reference. .. 15 21 2. Plaintiff Bass is Bound to Arbitrate His Disputes Based on the Doctrine of Estoppel. ...... 17 22 23 D. The Class Action Waiver is Valid and Enforceable. ............................................................ 19 24 E. Defendant VCS is a Third-Party Beneficiary of the Arbitration Provision, and Plaintiff is 25 Estopped from Refusing to Arbitrate His Claims Against VCS. ......................................... 20 26 IV. CONCLUSION .................................................................................................................... 22 27 28 i CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Allied-Bruce Terminix Cos. v. Dobson, 5 513 U.S. 265 (1995) .........................................................................................................................9 6 Armendariz v. Foundation Health Psychare Servs., 24 Cal. 4th 83 (2000) .........................................................................................................10, 12, 14 7 AT&T Mobility LLC v. Concepcion, 8 563 U.S. 333 (2011) .......................................................................................................................14 9 Benaroya v. Willis, 10 23 Cal. App. 5th 462 (2018) ....................................................................................................15, 16 11 Boucher v. Alliance Title Co., Inc., 127 Cal. App. 4th 262 (2005) ........................................................................................................21 12 Boys Club of San Fernando Valley, Inc. v. Fid. & Deposit Co., 13 6 Cal. App. 4th 1266 (1992) ..........................................................................................................16 14 Brookwood v. Bank of America, 15 45 Cal. App. 4th 1667 (1996) ........................................................................................................15 16 Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) ...................................................................................................................9, 11 17 Citizens Bank v. Alafabco, Inc., 18 539 U.S. 52 (2003) ...........................................................................................................................9 19 Cohen v. TNP 2008 Participating Notes Program, LLC, 31 Cal. App. 5th 840 (2019) ..........................................................................................................20 20 21 Dwyer v. Dynetech Corp., No. C07-02309, 2007 WL 2726699 (N.D. Cal. Sept. 17, 2007) ...................................................13 22 Epic Systems Corp. v. Lewis, 23 138 S. Ct. 1612 (2018) ...............................................................................................................8, 19 24 Felisilda v. FCA US LLC, 53 Cal. App. 5th 486 (2020) ..........................................................................................................21 25 First Options of Chicago, Inc. v. Kaplan, 26 514 U.S. 938 (1995) .......................................................................................................................10 27 Garcia v. Pexco, LLC, 28 11 Cal. App. 5th 782 (2017) ..........................................................................................................21 ii. CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 Harper v. Wasau Ins. Co., 56 Cal. App. 4th 1079 (1997) ........................................................................................................20 2 Jenks v. DLA Piper Rudnick Gray Cary US LLP, 3 243 Cal. App. 4th 1 (2015) ............................................................................................................21 4 Jensen v. U-Haul Co. of California, 5 18 Cal. App. 5th 295 (2017) ..........................................................................................................17 6 JSM, LLC v. Sup. Ct., 193 Cal. App. 4th 1222 (2011) ................................................................................................17, 22 7 Marenco v. DirecTV LLC, 8 233 Cal. App. 4th 1409 (2015) ......................................................................................................16 9 Meadows v. Dickey’s Barbecue Restaurants Inc., 10 144 F.Supp.3d 1069 (N.D. Cal. 2015) .............................................................................................9 11 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) .......................................................................................................................10 12 Molecular Analytical Systems v. Ciphergen Biosystems, Inc., 13 186 Cal. App. 4th 696 (2010) ........................................................................................................19 14 Moncharsh v. Heily & Blasé, 15 3 Cal. 4th 1 (1992) ...........................................................................................................................9 16 Nelsen v. Legacy Partners Residential, Inc., 207 Cal. App. 4th 1115 (2012) ......................................................................................................14 17 Pinnacle Museum Tower Assn. v. Pinnacle Market Development, 18 55 Cal. 4th 223 (2012) .........................................................................................................8, 12, 14 19 Rodriguez v. Am. Techs, Inc., 20 136 Cal. App. 4th 1110 (2006) ........................................................................................................9 21 Ronay Fam. Ltd. P’ship v. Tweed, 216 Cal. App. 4th 830 (2013) ........................................................................................................20 22 Rosenthal v. Great W. Fin. Sec. Corp., 23 14 Cal. 4th 394 (1996) ...................................................................................................................10 24 Rowe v. Exline, 153 Cal. App. 4th 1276 (2007) ......................................................................................................21 25 26 Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899 (2015) ...................................................................................................................13 27 Stewart v. Preston Pipeline Inc., 28 134 Cal. App. 4th 1565 (2005) ......................................................................................................11 iii CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 Turner v. Thorworks Indus., Inc., No. CIVS05-02653WBS KJM, 2006 WL 829142 (E.D. Cal. Mar. 28, 2006) ..............................21 2 United States v. Costanzo, 3 956 F.3d 1088 (9th Cir. 2020) .........................................................................................................9 4 Vianna v. Doctors’ Management Co., 5 27 Cal. App. 4th 1186 (1994) ........................................................................................................10 6 Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (2022) ...................................................................................................................20 7 Yu v. Liberty Surplus Ins. Corp., 8 30 Cal. App. 5th 1024 (2018) ........................................................................................................16 9 Statutes 10 9 U.S.C. § 2 ........................................................................................................................................8, 9 11 Cal. Corp. Code §31005(a) ..................................................................................................................12 12 California Code of Civil Procedure sections 1281.2 and 1281.4...........................................................2 13 Civ. Code § 1550 .................................................................................................................................10 14 Civ. Code § 1556 .................................................................................................................................11 15 16 Civ. Code § 1589 .................................................................................................................................16 17 Civ. Code, § 1643 ................................................................................................................................10 18 Civ. Code § 3541 .................................................................................................................................10 19 FAA.............................................................................................................................................. passim 20 Federal Arbitration Act, 9 U.S.C. § 1, et seq. ....................................................................................2, 9 21 Other Authorities 22 16 C.F.R. § 436. 1 (h) ..........................................................................................................................12 23 24 25 26 27 28 iv CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 I. INTRODUCTION 2 Among other changes it makes years into this action, Plaintiffs’ Third Amended Complaint 3 (“TAC”) adds Ryne Bass as a named plaintiff and proposed class representative, and seeks to 4 introduce claims he asserts on behalf of himself (as well as others) against Defendants Vanguard 5 Cleaning Systems, Inc. (“VCS”), RR Franchising, Inc., Buddha Capital Corporation, and Wine 6 Country Ventures, Inc. (together, “Defendants”).1 Plaintiff Bass’s claims, however, are subject to an 7 enforceable agreement to arbitrate and, therefore, must be compelled to arbitration and dismissed— 8 along with Plaintiff Bass—from this case. Specifically, Mr. Bass’s claims are subject to the 9 agreement to arbitrate contained in the Franchise Agreement entered into by and between Defendant 10 RRF Franchising, Inc. (“RRF”) and RNL LLC, a company that Plaintiff Bass owned and managed 11 with his wife. Although Plaintiff Bass signed the Franchise Agreement on behalf of RN, LLC, he 12 did so as a representative of the company in his capacity as a “Member” of the LLC, not in his 13 individual capacity. Regardless, despite being a “nonsignatory” of the Franchise Agreement, 14 Plaintiff Bass is bound by and can be compelled to arbitrate under the arbitration provision contained 15 in the Agreement because he, in his individual capacity, entered into a separate agreement with RRF 16 in which he agreed to be personally bound by “each and every term, condition, covenant and 17 provision in the [Franchise] Agreement.” This separate agreement, the “Owner’s Guaranty and 18 Assumption of Franchisee’s Obligations” attached as Exhibit C to the Franchise Agreement, 19 incorporated the arbitration provision by reference, thereby making it personally binding on Plaintiff 20 pursuant to the doctrine of incorporation by reference. Plaintiff Bass is additionally bound by the 21 arbitration provision pursuant to the doctrine of estoppel because his claims are inextricably 22 intertwined with the underlying contractual obligations of the Franchise Agreement containing the 23 arbitration clause. 24 /// 25 1 On behalf of himself, Plaintiff Bass alleges claims for unpaid minimum and overtime wages, meal 26 and rest period violations, failure to reimburse business expenses, unlawful wage deductions, wage statement violations, waiting time penalties, unfair competition, and PAGA penalties, all of which 27 are premised on his contention that the work he performed in connection with RNL, LLC and the “Vanguard” commercial cleaning franchise it purchased from RRFRRF makes him an employee of 28 RRF and its licensor, Defendant Vanguard Cleaning Systems, Inc. 1. CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 The arbitration provision in the Franchise Agreement is governed by the Federal Arbitration 2 Act, 9 U.S.C. § 1, et seq. (“FAA”), and enforceable under California contract law, both as to RRF 3 pursuant to Plaintiff Bass’s personal agreement (Exhibit C), and to VCS as a third-party beneficiary, 4 and Plaintiff Bass is estopped from arguing the contrary.2 For these reasons and the reasons set forth 5 below, Defendants RRF and VCS respectfully request that the Court enforce the arbitration 6 provision in RN LLC’s Franchise Agreement by ordering Plaintiff Bass to arbitrate his claims 7 against Defendants RRF and VCS on an individual basis, and dismissing Plaintiff Bass and his 8 claims from this action. 9 II. STATEMENT OF FACTS 10 RRF is a franchising business that sells and supports Vanguard Cleaning Systems® 11 franchises to parties interested in operating a franchised cleaning business under the Vanguard 12 Cleaning Systems® brand. (Declaration of Robert Dusthimer ISO Joint Motion to Compel 13 (“Dusthimer Decl.”) ¶ 2.) RRF sells these franchises (known as “Unit Franchises”) pursuant to a 14 licensing agreement with VCS, the company that developed, owns, and maintains the Vanguard 15 Cleaning Systems® intellectual property, and which promotes the Vanguard Cleaning Systems® 16 brand. Consistent with applicable federal and state law regulating the sale of franchises, RRF sells 17 Unit Franchises to purchasers (known as “Unit Franchisees”) pursuant to a written franchise 18 agreement in a form that must first be reviewed and approved by the State of California before RRF 19 is legally permitted to present it to a prospective Unit Franchisee. (Dusthimer Decl. ¶ 3.) VCS is 20 not a party to the franchise agreement RRF enters into with the Unit Franchisee, nor does the 21 agreement establish or contemplate any business relationship directly between the Unit Franchisee 22 and VCS. (Id.) Some of the franchise agreements RRF has entered into with Unit Franchisees 23 identify VCS as an intended third-party beneficiary of the agreement, including RRF’s agreement 24 with RNL LLC. (Id.) 25 /// 26 /// 27 2 To the extent necessary and not inconsistent with the FAA, this Motion is also being brought 28 pursuant to California Code of Civil Procedure sections 1281.2 and 1281.4. 2 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 A. The Franchise Agreement and Agreement to Arbitrate. 2 On August 17, 2017, RNL LLC3 entered into the Franchise Agreement with R.R to purchase 3 a Unit Franchise, thereby gaining the right to operate a commercial janitorial services business under 4 the “Vanguard Cleaning Systems” trade name and related VCS marks in connection with its 5 operation of a Vanguard Cleaning Systems®-branded commercial cleaning business. (Dusthimer 6 Decl. ¶¶ 6-10, Ex. 2, Franchise Agreement.) On behalf of RRF (the “Franchisor”), Rob Dusthimer 7 signed the Franchise Agreement in his capacity of President of the company. On behalf of RNL, 8 LLC (the “Franchisee”), the Agreement was signed by Ryne Bass in his capacity as a “Member” of 9 the LLC. 10 In addition to establishing the terms applicable to RNL LLC’s operation of a Vanguard- 11 branded janitorial business, section 34 of the Franchise Agreement (entitled Dispute Resolution) 12 contains an express arbitration agreement (the “Arbitration Provision”) requiring that the Franchisor 13 and Franchisee submit all covered claims to binding arbitration (Dusthimer Decl., Ex. 2, Franchise 14 Agreement4 at Sec. 34.B.) In pertinent part, the Arbitration Provision states: 15 If the parties are unable to settle a dispute through mediation, the parties agree that except with respect to matters for which a party believes that it 16 is necessary to seek equitable relief in court, all controversies, disputes, or 17 claims between the parties (including their subsidiaries, affiliates, shareholders, owners, officers, directors, managers, representatives, and 18 employees) arising out of or related to: 19 (1) This Agreement or any other agreement between them or any provision of any agreement between them or the validity of any such 20 agreement or provision; or 21 (2) Any standard, specification, or operating procedure relating 22 to the establishment of the Franchised Business; or 23 (3) The relationship of the parties (including their subsidiaries, 24 affiliates, shareholders, owners, officers, directors, managers, 25 3 Although the signature page of the Franchise Agreement identifies the Franchisee as “RNL, LLC” (with a comma preceding LLC), the Franchisee is accurately identified as “RNL LLC” (with no 26 comma) in the first paragraph of the Agreement, as confirmed by an online search of the California Secretary of State’s records, which indicate that Plaintiff Bass is a Managing Member of “RNL 27 LLC” (no comma preceding LLC). (See Dusthimer Decl., Ex 2.)” 4 For citations to supporting declaration, references to the Franchise Agreement shall be abbreviated 28 as “FA.” 3 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 representatives, and employees), 2 (each, a “Claim”) will be submitted to and for binding arbitration 3 conducted in accordance with the then-current AAA Commercial Arbitration Rules. 4 .... 5 All matters relating to arbitration will be governed by the Federal 6 Arbitration Act (9 U.S.C. §§ 1 et. seq.) and not by any state arbitration 7 law. 8 (Dusthimer Decl., Ex. 2 at Sec. 34.B.)5 9 The Arbitration Provision also includes the following class action waiver: 10 THE PARTIES AGREE THAT ARBITRATION WILL BE CONDUCTED ON AN INDIVIDUAL, NOT A CLASS-WIDE BASIS, 11 AND THAT AN ARBITRATION PROCEEDING BETWEEN THE 12 PARTIES MAY NOT BE CONSOLIDATED WITH ANY OTHER ARBITRATION PROCEEDING BETWEEN THEM AND ANY OTHER 13 PERSON OR LEGAL ENTITY. 14 (Id. ¶ 34.F. (Bold and capitalization in original.)) 15 Section 32, subsection E of the Franchise Agreement defines “Franchisee” to include, among 16 other things, “all members or managers of the Business Entity that executes this Agreement (if it is a 17 limited liability company).” (Id. Sec. 32.E (emphasis added). Section 32 also contains a separate 18 provision entitled “Individual Undertakings” explicitly providing that all members and managers of 19 a Franchisee LLC who sign the Franchise Agreement agree to be personally bound by the duties and 20 obligations imposed on the Franchisee: 21 Individual Undertakings. All current and future shareholders, members, managers and directors of any Business Entity that signs this 22 Agreement as Franchisee personally and individually acknowledge 23 and accept the duties and obligations imposed on Franchisee by the terms of this Agreement. 24 (Dusthimer Decl., Ex. 2 at Sec. 32.F.) 25 5 The version of the Arbitration Provision contained in RN LLC’s Franchise Agreement was 26 included in Franchise Agreements RRF offered in 2017 and 2018. RRF first included an arbitration provision in its Franchise Agreements beginning in2012. Since that year, RRF has modified or 27 replaced the arbitration agreement in the Franchise Agreements its offered six times. Specifically, RRF has changed or replaced the language of the arbitration provision in its Franchise Agreements 28 in the following years: 2013, 2014, 2017, 2019, 2021 and 2022. 4 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 In addition to defining the parties as franchisor and franchisee, the Franchise Agreement 2 specifies that the Franchisee is an independent contractor and not an employee of the Franchisor, and 3 further states that any disputes between the Franchisor and Franchisee (or their respective agents), 4 including disputes regarding Franchisee’s independent contractor status, are subject to the 5 Arbitration Provision: 6 Franchisee is Independent Contractor. 7 Franchisee is and shall remain at all times a completely independent contractor in business for itself, and will hold itself out as an 8 independent business in all dealings and communications with 9 Accounts and the public, including, but not limited to, suppliers, lessors, government agencies, employees, contractors, and others. 10 Franchisee and Franchisor are not, and shall not hold themselves out as, an agent, representative, employee, officer, director, partner, 11 owner or Affiliate of the other, and neither has the authority to bind 12 the other to any agreement or obligation. Franchisee’s VCS Business is, and shall be kept, totally separate from any business that 13 Franchisor or Licensor operates. Nothing in this Agreement or in the parties’ course of conduct is intended or shall be construed to create, 14 state or imply an employer-employee, co-employer or joint employer relationship, partnership, joint venture, agency or any fiduciary or 15 special relationship between Franchisor and Franchisee, or between 16 Licensor and Franchisee. 17 .... 18 Franchisee further acknowledges that Franchisee is and shall remain at all times a completely independent contractor in business for itself, 19 and that there is not an employer-employee, co-employer relationship, partnership, joint venture, agency or any fiduciary or special 20 relationship between Franchisor and Franchisee or between Licensor 21 and Franchisee. 22 (Dusthimer Decl., Ex. 2 at Secs. A.1, 38.F).) 23 B. Plaintiff Bass’s Individual Execution of “Owner’s Guaranty” Agreement. 24 At the time Plaintiff Bass executed the Franchise Agreement on behalf of RNL LLC, he and 25 his wife Leondra Quiñones (the co-owners and members of RNL LLC) signed the “Owner’s 26 Guaranty and Assumption of Franchisee’s Obligations” (“Owner’s Guaranty Agreement”) attached 27 28 5 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 as Exhibit C to the Franchise Agreement.6 (Dusthimer Decl., Ex. 2 at Exhibit C.) By signing the 2 Owner’s Guaranty Agreement, which he did in his individual capacity, Plaintiff expressly agreed “to 3 be personally bound by, and personally liable for the breach of, each and every term, condition, 4 covenant and provision in the [Franchise] Agreement.” (Id.) By signing the Owner’s Guarantee 5 Agreement, Plaintiff Bass (and his wife) also affirmed the provision whereby he “expressly 6 represents and acknowledges that he has read the [Owner’s Guaranty] Agreement and has had the 7 opportunity to review [it] with counsel.” 8 C. Franchise Purchase and Contracting Process. 9 RNL LLC, through its owners, was the party that initiated contact with RRF to discuss the 10 potential purchase of a Unit Franchise, including by submission of a “Unit Franchise Request for 11 Consideration” form. (Dusthimer Decl. ¶¶ 3-5, Ex. 1.) 12 As required by California franchising law, RRF notified RNL LLC in writing that it had a 13 minimum of 14 calendar-days to review the Franchise Agreement (including the Owner’s Guaranty 14 Agreement). Before offering RNL LLC its Franchise Agreement, RRF discussed and negotiated with 15 RNL LLC’s owners, including Plaintiff Bass, the terms to be included in the Franchise Agreement. 16 (Id. at ¶ 7.) The Franchise Agreement offered to RNL LLC contained the terms negotiated by the 17 parties, as reflected by, among other things, the terms specifying the geographic “Area” in which 18 RNL LLC was licensed to operate (FA, Sec. 1.A), the accounts to be included in the purchase price 19 (expressed as anticipated gross revenue generated per month) (FA, Sec. 3.B.1), and the amount to be 20 paid and terms of payment for the Unit Franchise (FA, Sec. 11). (Id., Ex. 1) RRF imposed no limit 21 on the amount of time RNL LLC had to review and consider the offered Franchise Agreement or the 22 Owner’s Guaranty Agreement attached as Exhibit C. (Id.) 23 /// 24 6 Although Ms. Quiñones would also be subject to binding arbitration based on her signature on the 25 Owner’s Guarantee, Ms. Quiñones does not fall within the class of individuals Plaintiffs seek to represent in the TAC because she did not sign a franchise or transfer agreement. (See TAC ¶ 6, 26 defining class as “[a]ll California unit franchisee cleaners who signed a franchise agreement or transfer agreement with Vanguard Cleaning Systems, Inc., or any of its master franchisors, and who 27 personally performed cleaning work during the period commencing four years prior to April 6, 2020 (individually referred to as ‘Class Members’ and collectively as the ‘Class’)” because Ms. Quiñones 28 did not sign a franchise or transfer agreement.) 6 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 RRF advised RNL LLC of its right to have the contracting documents reviewed by counsel. 2 (Id.) These points were also reiterated in Section 38 (“Franchisee Acknowledgments”), subsections 3 A and B of the Franchise Agreement, whereby Franchisee expressly represents and acknowledges 4 that: 5 Franchisee has received, read and understands this Agreement and 6 Franchisor’s Franchise Disclosure Document and that Franchisor has given Franchisee ample time and opportunity to consult with advisors 7 of its own choosing about the potential benefits and risks of entering into this Agreement. Franchisee represents and acknowledges that 8 Franchisee has received, at least fourteen (14) calendar-days prior to the date on which this Agreement was signed, the Franchisor’s 9 Franchise Disclosure Document required by law, as modified by any 10 applicable state addenda attached to it. 11 (Dusthimer Decl., Ex. 1 at Sec. 38.A.) And: 12 Consultation by Franchisee. Franchisee represents that it has been urged to consult with its own advisors with respect to the legal, 13 financial and other aspects of this Agreement, the VCS Business and 14 the prospects for that business. Franchisee represents that Franchisee has either consulted with such advisors or has purposefully declined 15 to do so. 16 17 (Id., Ex. 1 at Sec. 38.B.) In total, from the date RNL LLC submitted its Request for 18 Consideration (July 13, 2017) through the date RRF and RNL LLC entered into the Franchise 19 Agreement (August 17, 2017), the process took approximately 35 days. (Id. at ¶ 9.) 20 D. Plaintiff Bass’s Refusal to Arbitrate. 21 On June 26, 2023, after Plaintiffs filed the TAC, counsel for Defendant VCS notified counsel 22 for Plaintiff Bass that RNL LLC’s Franchise Agreement contains a valid Arbitration Provision 23 covering Plaintiff Bass and the claims asserted in the TAC, and requested that Plaintiff Bass stipulate 24 to arbitrate his claims. (See Declaration of Damon Ott in Support of Motion to Compel Arbitration 25 (“Ott Decl.”), Ex. A.) VCS’s counsel further informed Plaintiff’s counsel that RRF and VCS 26 interpret the Arbitration Provision’s mediation prerequisite to have been satisfied by the two 27 mediations already conducted in this action (clearing the way for Plaintiff to initiate arbitration), and 28 also offered to participate in a further mediation with Plaintiff Bass should he so desire prior to 7 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 proceeding to arbitration. (Id.) Plaintiff Bass refused Defendants RRF and VCS’s requests that he 2 arbitrate his claims, necessitating the filing of this motion. (Id.) 3 III. ARGUMENT 4 The Court must compel Plaintiff Bass’s claims to binding arbitration consistent with the 5 terms of the Arbitration Provision because it is a valid and enforceable agreement to arbitrate, and 6 despite being a “nonsignatory” of the Franchise Agreement, the Arbitration Provision is personally 7 binding on Plaintiff Bass because of its incorporation by reference into the Owner’s Guaranty 8 Agreement that Plaintiff entered into with RRF in his individual capacity, and as underscored by 9 Sections 32E. and F. of the Franchise Agreement. The Arbitration Provision is also separately 10 binding on Plaintiff Bass under the doctrine of estoppel, because his claims are inextricably 11 intertwined with the underlying contractual obligations of the Franchise Agreement containing the 12 arbitration clause. RRF, as a signatory and party to the Arbitration Provision, as well as to the 13 Owner’s Guaranty Agreement in which it is incorporated, therefore, has the right to directly enforce 14 the Arbitration Provision to require Plaintiff Bass to resolve his claims in binding arbitration. 15 Defendant VCS is likewise entitled to seek enforcement as a third-party beneficiary of the 16 Arbitration Provision. 17 A. The Arbitration Provision is a Valid Agreement to Arbitrate Under the FAA, 18 Which Governs. 19 The FAA declares a liberal policy favoring the enforcement of arbitration agreements. Epic 20 Systems Corp. v. Lewis, 138 S. Ct. 1612, 1623 (2018) (the FAA is “a congressional command 21 requiring us to enforce, not override, the terms of the arbitration agreements before us”); Pinnacle 22 Museum Tower Assn. v. Pinnacle Market Development, 55 Cal. 4th 223, 235 (2012). Under the 23 FAA, “[a] written provision in . . . a contract evidencing a transaction involving commerce to settle 24 by arbitration a controversy . . . shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. The 25 Arbitration Provision contained in RNL, LLC’s Franchise Agreement satisfies all of these 26 requirements and is, therefore, governed by the FAA. 27 First, the Arbitration Provision expressly states that it is governed by the FAA, which is itself 28 sufficient to bring it within the purview of the FAA. (Dusheimer Decl., Ex. 2 (stating, “All matters 8 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 relating to arbitration will be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.) and not 2 by any state arbitration law”).) See also Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 3 442-43 (2006) (where the arbitration agreement provided that the FAA governed the agreement, 4 FAA preempted application of state law and question of contract’s validity was left to the arbitrator); 5 Rodriguez v. Am. Techs, Inc., 136 Cal. App. 4th 1110, 1122 (2006) (“there is no ambiguity regarding 6 the parties’ intent. They adopted the FAA—all of it—to govern their arbitration”). 7 Second, the Arbitration Provision “involves commerce” because the Franchise Agreement 8 within which it is contained “involves commerce,” as defined under section 2 of the FAA. Citizens 9 Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (the term “involving commerce” is interpreted 10 broadly under section 2 of the FAA). In Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995), 11 the U.S. Supreme Court held that, in passing the FAA, Congress meant to exercise its power under 12 the Commerce Clause to the fullest limits. Id. at 273-74, 277. The Court found that the term 13 “involving commerce” is synonymous with the term “affecting commerce,” signifying Congress’s 14 intent to “exercise [its] commerce power to the full.” Id. RNL, LLC’s Franchise Agreement grants it 15 a license to use the VCS Business System and Marks to operate a commercial cleaning business in 16 exchange for the specified fees. (Dusthimer Decl., Ex. 2.) The Franchise Agreement further permits 17 RNL, LLC to use the Marks to solicit further business, including through online and other marketing 18 efforts. (Id.) Thus, the Franchise Agreement by its own nature affects commerce. See, e.g., 19 Meadows v. Dickey’s Barbecue Restaurants Inc., 144 F.Supp.3d 1069, 1075 (N.D. Cal. 2015) 20 (applying the FAA to analyze arbitration agreements found within franchise agreements in suit 21 brought by California franchisees against franchisor); United States v. Costanzo, 956 F.3d 1088, 22 1092 (9th Cir. 2020) (“We have long recognized that the Internet and the nation’s vast network of 23 telephone lines are instrumentalities of and intimately related to interstate commerce”). The 24 Arbitration Provision contained in RNL, LLC’s Franchise Agreement, therefore, clearly “involves 25 commerce” and, thus, satisfies both requirements for application of the FAA.7 26 7 Even assuming arguendo that the Court concludes that California law, and not the FAA, governs, 27 the Arbitration Provision is nonetheless enforceable. California maintains a “strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.” Moncharsh 28 v. Heily & Blasé, 3 Cal. 4th 1, 9 (1992). Moreover, it is a fundamental tenet of law that whenever 9 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 B. The Arbitration Provision Between RNL LLC and RRF is Valid, Enforceable, and Encompasses the Present Dispute. 2 3 The federal presumption for arbitrability applies “to any arbitration agreement within the 4 coverage of the [FAA]” and requires that questions of arbitrability be addressed “with a healthy 5 regard for the federal policy favoring arbitration,” and “any doubts concerning the scope of 6 arbitrable issues…be resolved in favor of arbitration, whether the problem at hand is the 7 construction of the contract language itself or…[a] defense to arbitrability.” Mitsubishi Motors 8 Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985) (citations omitted; emphasis 9 added). The moving party’s burden is light. A defendant need only show by a preponderance of 10 evidence that an agreement to arbitrate exists. See Rosenthal v. Great W. Fin. Sec. Corp., 14 Cal. 4th 11 394, 413 (1996).8 12 General contract law principles apply to the interpretation and enforcement of arbitration 13 agreements. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Under California 14 law, a valid contract exists when: (1) the parties are capable of contracting; (2) there was mutual 15 consent; (3) the contract had a lawful objective; and (4) the contract was supported by sufficient 16 cause or consideration. Civ. Code § 1550. As between RRF and RNL LLC, the Arbitration 17 Provision satisfies all four criteria and qualifies as a valid contract under California law. The 18 Owner’s Guaranty Agreement likewise satisfies all four criteria and constitutes a valid contract 19 between RRF and Plaintiff Bass. First, the evidence makes clear that the parties to the agreements 20 were capable of contracting. In both instances, Plaintiff Bass was the individual who executed both 21 agreements (albeit in his capacity a representative of RNL LLC for the Franchise Agreement, and in 22 possible, a contract should be read in a way to render it enforceable and valid. (Civ. Code, § 1643 23 (contract should be interpreted to make it “lawful, operative, definite, reasonable, and capable of being carried into effect”); Civ. Code § 3541 (“[a]n interpretation which gives effect [to an 24 agreement] is preferred to one which makes [it] void”). Any “[d]oubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of … arbitration.” Vianna v. 25 Doctors’ Management Co., 27 Cal. App. 4th 1186, 1189 (1994). 8 As the FAA preempts conflicting California law, no heightened burden such as the requirements in 26 Armendariz v. Foundation Health Psychare Servs., 24 Cal. 4th 83, 114 (2000) may be required for enforcement. Regardless, the Arbitration Provision satisfies these requirements. (See e.g., Dusthimer 27 Decl., Ex. 2 at pp. 23-26 (providing that arbitration shall be in accordance with the AAA Commercial Arbitration Rules and containing a severability clause should any language of the 28 Arbitration Provision be unenforceable).) 10 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 his individual capacity for the Owner’s Guaranty Agreement), and there is no basis to conclude that 2 he was unfit to contract at the time he signed the agreements. See Civ. Code § 1556 (“All persons 3 are capable of contracting, except minors, persons of unsound mind, and persons deprived of civil 4 rights.”). As a managing member of RNL LLC, Plaintiff Bass had authority to execute the Franchise 5 Agreement on its behalf. 6 Second, the mutual assent of Plaintiff Bass and RRF to arbitrate is clear because the 7 Arbitration Provision expressly states that all parties and their agents mutually agree to resolve all 8 disputes by binding arbitration. Plaintiff Bass, as the representative of RNL LLC responsible for 9 executing the Franchise Agreement, was familiar with its terms, including the Arbitration Provision. 10 Accordingly, by executing the Owner’s Guaranty Agreement, wherein he expressly agreed to be 11 personally bound by all of the Franchise Agreement’s provisions, Plaintiff Bass understood this 12 included the Arbitration Provision. 13 Third, the Arbitration Provision has the lawful objective of resolution of disputes through 14 arbitration. See, e.g., Buckeye Check Cashing, 546 U.S. at 443 (the FAA “embodies the national 15 policy favoring arbitration”); Stewart v. Preston Pipeline Inc., 134 Cal. App. 4th 1565, 1586 (2005) 16 (finding a valid contract formation where the contract “had a lawful object of resolving litigation.”). 17 Fourth, the Arbitration Provision was supported by sufficient consideration, including the 10 18 year franchise license RRF granted RNL LLC pursuant to the Franchise Agreement. The franchise 19 license granted RNL LLC was also consideration for the Owner’s Guaranty Agreement, because 20 RRF’s agreement to enter into the Franchise Agreement was, in part, based on RNL LLC’s owners’ 21 agreement to enter individually into the Owner’s Guaranty Agreement. (See Dusthimer Decl., Ex. 2. 22 At Exhibit C (stating the Owner’s Guaranty Agreement is “[i]n consideration of, and as an 23 inducement to” RRF entering into the Franchise Agreement with RNL LLC).) 24 Accordingly, the Arbitration Provision contained in the Franchise Agreement qualifies as a 25 valid agreement to arbitrate between RNL LLC and RRF The Owner’s Guaranty Agreement is also 26 a valid agreement and, therefore, it is binding on Plaintiff Bass as an individual. As discussed 27 further in Section 1 below, this includes the terms incorporated into the Agreement by reference, in 28 particular the Arbitration Provision. Thus, Plaintiff Bass has personally agreed to arbitrate “all 11 CASE NO. 20-CIV-04267 MPA ISO JOINT MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 disputes,” including disputes between members and managers of the Franchisee and the 2 Franchisor. (See Dusthimer Decl., Ex. 2 at Sec. 34.).) Accordingly, there exists a valid agreement 3 to arbitrate here governing the present dispute. 4 1. The Arbitration Agreement is not Unconscionable. 5 To establish a defense to enforcement of the Arbitration Provision based on 6 unconscionability, Plaintiff Bass bears the burden of proving that the agreement is both procedurally 7 and substantively unconscionable. Pinnacle Museum, 55 Cal. 4th at 247; Armendariz, 24 Cal. 4th at 8 114 (no matter how heavily one side of the