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1 JESSICA RIGGIN (SBN 281712)
jriggin@rukinhyland.com
2 RUKIN HYLAND & RIGGIN LLP
1939 Harrison Street, Suite 925
3
Oakland, CA 94612
4 Telephone: (415) 421-1800
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 Plaintiffs
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12
SUPERIOR COURT OF THE STATE OF CALIFORNIA
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COUNTY OF SAN MATEO
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15 ALIDA MAZARIEGOS, PAULA CASE NO.: 20-CIV-04267
GONZALEZ, JAIME AMAYA, ADRIANA
16 PLAINTIFFS’ OPPOSITION TO
TELLO, and RYNE BASS
DEFENDANTS RR FRANCHISING,
17 INC. AND VANGUARD CLEANING
Plaintiffs, on behalf of themselves SYSTEMS, INC.’S JOINT MOTION
18 and all others similarly situated, TO COMPEL ARBITRATION OF
RYNE BASS
19 v.
VANGUARD CLEANING SYSTEMS, Judge: Hon. Nancy L. Fineman
20
INC.; RR FRANCHISING, INC., D/B/A Dept.: 04
21 VANGUARD CLEANING SYSTEMS OF Date: December 5, 2023
SOUTHERN CALIFORNIA AND D/B/A Time: 2:00 p.m.
22 VANGUARD CLEANING SYSTEMS OF
NORTHERN CALIFORNIA; BUDDHA
23 CAPITAL CORPORATION, D/B/A
24 VANGUARD CLEANING SYSTEMS OF
SACRAMENTO, D/B/A VANGUARD
25 CLEANING SYSTEMS OF THE
CENTRAL VALLEY, AND D/B/A
26 VANGUARD CLEANING SYSTEMS OF
THE CENTRAL COAST; AND WINE
27
COUNTRY VENTURES, INC. D/B/A
28 VANGUARD CLEANING SYSTEMS OF
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
THE NORTH BAY, AND DOES 1
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THROUGH 10, INCLUSIVE,
2 Defendants.
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PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
TABLE OF CONTENTS
1
2 I. INTRODUCTION ............................................................................................................... 1
3 II. STATEMENT OF FACTS.................................................................................................. 1
4 A. Defendants Created, and Required Plaintiffs to Sign, the Unconscionable
Contracts Containing the Arbitration Provisions .................................................... 1
5
B. Defendants Acted Inconsistently with Individual Arbitration ................................ 2
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1. Defendants Have Acted Inconsistently With Pursuing Arbitration ............ 2
7
8 2. Defendants Unreasonably Delayed In Seeking Arbitration ........................ 4
9 III. ARGUMENT ...................................................................................................................... 5
10 A. Defendants Have Waived Any Right to Compel Arbitration ................................. 5
11 B. RR Franchising Has No Right to Compel Arbitration ............................................ 6
12 1. The Arbitration Provision In The Franchise Agreement Is Procedurally
Unconscionable. .......................................................................................... 7
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2. The Arbitration Provision Is Substantively Unconscionable ...................... 8
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15 a. The Arbitration Policy Contains Unconscionable Pre-Filing
Requirements ................................................................................... 8
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b. The Arbitration Policy Contains Unconscionable Fees And Fee
17 Splitting Rules ................................................................................. 9
18 c. The Arbitration Policy Unconscionably Requires Additional
Payment For A Reasoned Award .................................................. 11
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d. The Arbitration Policy Is Unconscionable Because Its Coverage Is
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Non-Mutual ................................................................................... 12
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e. The Arbitration Policy Contains An Unconscionable Mandatory
22 Waiver Of Substantive Rights. ...................................................... 12
23 f. The Arbitration Policy Is Unconscionable Because It Shortens The
Statute Of Limitations ................................................................... 13
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g. The Arbitration Policy Contains an Implicit Waiver Of The Right
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To Bring Representative Paga Claims And Is Therefore
26 Unconscionable ............................................................................. 14
27 h. The Arbitration Policy Contains Numerous Other Terms That
Favor The Employer...................................................................... 14
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i
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
i. The Arbitration Provision’s Unconscionable Terms Cannot Be
1 Severed .......................................................................................... 15
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C. VCS Has No Right to Compel Arbitration............................................................ 16
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IV. CONCLUSION ................................................................................................................. 18
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PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
TABLE OF AUTHORITIES
1
2 Page(s)
3 Federal Cases
4 Benitez v. GMRI, Inc.,
(S.D. Cal. Aug. 24, 2023) 2023 WL 5490136 ................................................................ 9, 10, 15
5
Hill v. Xerox Bus. Servs., LLC,
6
(9th Cir. 2023) 59 F.4th 457 .................................................................................................... 5, 6
7
Ponkey v. LLR, Inc.,
8 (9th Cir. July 31, 2023) 2023 WL 4863296 .............................................................................. 15
9 Turner v. Thorworks Indus., Inc.,
(E.D. Cal. Mar. 28, 2006) No. CIVS05-02653WBS KJM, 2006 WL 829142 ......................... 18
10
11 State Cases
12 Adolph v. Uber Technologies, Inc.,
(2023) 14 Cal. 5th 1104............................................................................................................. 14
13
Ajamian v. CantorCO2e, L.P.,
14 (2012) 203 Cal. App. 4th 771 .............................................................................................. 11, 13
15
Armendariz v. Foundation Health Psychcare Servs., Inc.,
16 (2000) 24 Cal.4th 83........................................................................................................... passim
17 Boucher v. All. Title Co.,
(2005) 127 Cal. App. 4th 262, 25 Cal. Rptr. 3d 440 (2005) ..................................................... 18
18
19 Carbajal v. CWPSC, Inc.,
(2016) 245 Cal. App. 4th 227 ...................................................................................................... 7
20
De Leon v. Pinnacle Prop. Mgmt. Servs., LLC,
21 (2021) 72 Cal. App. 5th 476 ............................................................................................... passim
22 Felisilda v. FCA US LLC,
23 (2020) 53 Cal. App. 5th 486 ...................................................................................................... 17
24 Garcia v. Pexco, LLC,
(2017) 11 Cal. App. 5th 782 (2017) .......................................................................................... 18
25
Hernandez v. Meridian Mgmt. Servs., LLC,
26 (2023) 87 Cal. App. 5th 1214 .............................................................................................. 17, 18
27
Jarboe v. Hanlees Auto Grp.,
28 (2020) 53 Cal. App. 5th 539 ...................................................................................................... 17
iii
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 JSM Tuscany, LLC v. Superior Ct.,
2 (2011) 193 Cal. App. 4th 1222 .................................................................................................. 18
3 Lange v. Monster Energy Co.,
(2020) 46 Cal. App. 5th 436 ...................................................................................................... 13
4
Magno v. The Coll. Network, Inc.,
5
(2016) 1 Cal. App. 5th 277 ........................................................................................................ 16
6
Martinez v. Master Protection Corp.,
7 (2004) 118 Cal.App.4th 107 ............................................................................................... passim
8 Mills v. Facility Sols. Grp., Inc.,
(2022) 84 Cal. App. 5th 1035 .............................................................................................. 10, 16
9
10 Ramos v. Superior Ct.,
(2018) 28 Cal. App. 5th 1042 .................................................................................................... 10
11
Roman v. Superior Court,
12 (2009) 172 Cal.App.4th 1462 ...................................................................................................... 8
13
Rowe v. Exline,
14 (2007) 153 Cal. App. 4th 1276 .................................................................................................. 18
15 Samaniego v. Empire Today LLC,
(2012) 205 Cal.App.4th 1138 .............................................................................................. 13, 16
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PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 I. INTRODUCTION
2 After more than three years of litigating this case as to the claims of all Cleaners, despite
3 knowledge that some Cleaners had signed arbitration provisions, Defendants Vanguard Cleaning
4 Systems, Inc. (“VCS”) and Regional Franchise RR Franchising, Inc. (“RRF”) (collectively with
5 VCS, “Defendants”) now seek to compel Plaintiff Ryne Bass into arbitration, using an arbitration
6 agreement that is offensively one-sided. But, like other Cleaners, Plaintiff Bass was not given the
7 choice to arbitrate his statutory wage claims; the arbitration provisions on which Defendants rely
8 were buried within the lengthy franchise agreements that Plaintiffs were forced to sign when they
9 paid for their jobs as commercial Cleaners. The franchise agreements, prepared by Defendants,
10 were contracts of adhesion and violate California law in almost every way imaginable—by
11 shortening the statute of limitations, depriving Plaintiff of remedies he would get in Court, and
12 forcing him to bear costs he wouldn’t (and couldn’t) face in Court (among others). The
13 agreement is permeated with substantively unconscionable terms, and the Court should deny
14 Defendants’ motion to compel arbitration.
15 II. STATEMENT OF FACTS
16 A. Defendants Created, and Required Plaintiffs to Sign, the Unconscionable Contracts
Containing the Arbitration Provisions
17
Under Vanguard’s cleaning model, VCS sits at the top of a three-tier commercial
18
cleaning system: VCS signs Master Franchise Agreements with Regional Franchises (here,
19
Defendant RRF), and those Regional Franchises sign unit franchise agreements with Cleaners
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who perform the work that generates the vast majority of Defendants’ revenue. VCS creates the
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relevant documents, and the Regional Franchises use them without substantial modifications.
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Regional Franchises are required to enter into unit franchise agreement with the Cleaners based
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“upon [VCS’s] then-current form.” (See Brome Decl., Ex. 13 (Lee Dep.) 39:14-17; see also Ex.
24
12, § 4.4.) VCS sends these templates to the Regional Franchises each year, who “have no right to
25
modify or offer to modify any [unit franchise] Agreement without [VCS’s] prior written
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approval.” (Id. at § 4.6(c)). (See also Brome Decl., Ex. 13 (Lee Dep.) 159:20-162:5.)
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Unsurprisingly, the Regional Franchises generally adopt VCS’s form franchise agreement.
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1
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 (Brome Decl., Ex. 14 (Dusthimer Dep.) at 151:16-152:14; Ex. 13 (Lee Dep.) 164:19-166:20;
2 169:5-169:23.)
3 To begin working with Vanguard, Cleaners, including Plaintiff Bass, must sign a unit
4 franchise agreement—a standardized document based on a VCS template that (among other
5 terms, including defining them as independent contractors) contains an arbitration provision, or a
6 transfer agreement. (Declaration of Ryne Bass (“Bass Dec.”), ¶ 7.) Plaintiff Bass was not
7 permitted to negotiate the standardized terms of his franchise agreements. (Id.)
8 While Defendant argues that the franchise agreement was “negotiated,” the RRF
9 Declaration makes clear that the only terms negotiated were those to fill in two blanks contained
10 in the Franchise Agreement, as intended by VCS (the area to be serviced and payment). (See
11 Dusthimer Decl. ¶ 8 (“negotiated” area to be cleaned and price). According to Defendants, all
12 unit franchise agreements since 2012 have contained arbitration provisions. (Bass MTC, at p. 4,
13 fn 5.) Defendants do not assert that any Cleaners have been able to opt-out of the arbitration
14 provisions contained in every franchise agreement, or have negotiated any terms beyond the fill-
15 in-the-blanks spaces in the template agreements.
16 B. Defendants Acted Inconsistently with Individual Arbitration
17 All Defendants have been aware for years that some Cleaners have franchise agreements
18 that contain arbitration provisions—because they created the form franchise agreements
19 containing the arbitration provision. Yet despite this knowledge, Defendants have focused their
20 litigation efforts as to the entire group of Cleaners—not simply on enforcing any rights to have
21 certain claims heard in arbitration. And even when Defendants knew definitively which Cleaners
22 would be challenging the alleged arbitration agreements, Defendants waited for months to file a
23 motion to compel arbitration.
24 1. Defendants Have Acted Inconsistently with Pursuing Arbitration
25 Although aware at the outset of this case that certain Cleaners were subject to arbitration
26 provisions, rather than taking any steps to identify and exclude individuals who might be subject
27 to arbitration, Defendants have made clear that they were conducting this litigation with an intent
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2
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 to defeat or resolve claims of all Cleaners.
2 First, Defendant attempted to resolve the claims of all Cleaners at mediation. The parties
3 have participated in two global mediations: first on March 21, 2022, with Hon. Margaret Nagle
4 (ret.), and then on May 3, 2022 with Tripper Ortman. (Brome Dec. ¶ 2.) Defendants have stated
5 explicitly that they consider those class mediations as having included individuals subject to
6 arbitration policies: “It is RR Franchising’s and VCS’s position that this mediation requirement
7 [included in the unit franchise agreement] has been satisfied by the two mediations conducted in
8 the Mazariegos case, thereby clearing the way for Mr. Bass to proceed to arbitration without need
9 for an additional mediation (subject to his agreement to same).” (Ott Decl. ISO Bass MTC, Exh.
10 A.) In other words, Defendants attempted to reach a resolution that would have ended the claims
11 of all Cleaners—those without arbitration policies, like the original named Plaintiffs, and those
12 with arbitration policies, like Bass.
13 Second, Defendants never distinguished individuals with arbitration agreements in
14 discovery or provided support for any arbitration defenses. Plaintiffs served form interrogatories
15 on Defendants seeking information about the factual bases of any affirmative defenses. 1 But
16 Defendants provided no information that would indicate they intended to seek arbitration based
17 on the franchise agreements as to any putative class members. VCS responded, but only referred
18 to the “Dispute Resolution Agreements” that it sent directly to Cleaners, which offered no
19 consideration and are not the subject of this motion. (See Brome Dec. ¶ 3, Ex. 1.) RRF responded
20 but did not provide even a modicum of support for its affirmative defense: “RR Franchising did
21 not have an employment relationship with Paula Gonzalez. RR Franchising articulated its
22 affirmative defenses in its Answer to Plaintiffs’ Unverified Complaint and incorporates them here
23 by reference.” (Brome Dec. ¶ 4, Ex. 2.)
24 Likewise, in answering Plaintiffs’ Special Interrogatories asking for the identities of all
25 franchises, Defendant VCS objected, without raising any arbitration distinction; the Regional
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1
Both the Regional Franchises and VCS included stock language about arbitration in their
27 affirmative defenses, and asserting the defense as to Plaintiffs and Class Members, although they
now acknowledge that the original named Plaintiffs were not subject to any arbitration
28 requirements.
3
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 Franchise Defendants stated they would respond subject to a protective order, without raising the
2 arbitration distinction. (Brome Dec. ¶ 6, Exs. 4, 5.) Similarly, multiple Requests for Production
3 served on Defendants 2 sought information applicable to all Cleaners, and the Defendants never
4 distinguished their responses as to individuals subject to arbitration provisions. (Id., Exs. 7, 8.)
5 Similarly, Defendant VCS served Requests for Production that made no distinction between
6 putative class members with or without arbitration agreements. 3
7 2. Defendants Unreasonably Delayed in Seeking Arbitration
8 Defendants filed their motions to compel arbitration on October 5, 2023—more than six
9 months after they knew Plaintiffs intended to proceed to amend with new plaintiffs from the two
10 unit franchises now at issue.
11 In Plaintiffs’ reply brief in support of the renewed motion for class certification, filed on
12 January 6, 2023, Plaintiffs stated that if the Court found it “necessary for a named Plaintiff to be
13 a party to an arbitration agreement to represent unnamed class members who have signed such
14 agreements, Plaintiffs request leave to amend to add such a Plaintiff.” (Brome Dec. ¶ 8.) At the
15 hearing, on March 28, 2023, Plaintiffs reiterated their intent to amend to add new named
16 Plaintiffs. (Id.) Less than one week after the hearing, Plaintiffs identified two specific
17 individuals, Ryne Bass and Georgina Tello, as the new proposed class representatives. (Id.) The
18 Parties discussed stipulating to this amendment, including discussions about whether Georgina
19 Tello or her sister Adriana Tello was a more appropriate Plaintiff. (Id.) On May 10, 2023,
20 Plaintiffs’ Counsel made clear that if Defendants believed Adriana Tello was bound by an
21 arbitration agreement, that Plaintiffs would likely move forward with her as the named Plaintiff
22 instead of Georgina Tello; Plaintiffs sent a draft stipulation to amend and an updated amended
23 complaint with Adriana Tello on May 18, 2023. (Id.) The Parties filed a stipulation to amend on
24
2
25 See, e.g., Requests Nos. 3 (all versions of agreement in effect during covered period); 16 (all
versions of form contracts used with accounts during covered period); 60 (all communications
26 with VCS); 55 (each FDD during covered period); and 52 (all manuals).
3
Requests 9, 11, 16 include documents supporting allegations about cleaners; Requests 10, 12,
27 18, and 20 all include documents supporting allegations about Plaintiffs and class members;
Request 28 asks for witness statements “including any putative class members.” (Brome Dec.
28 Ex. 10.)
4
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 June 2, 2023, and filed the Third Amended Complaint on June 13, 2023. (Brome Dec. ¶ 9.)
2 On June 22, 2023, Defendants stated that they “intend to move to compel Adriana Tello
3 and Ryne Bass to arbitration;” then again on June 26, Defendants asked for Plaintiffs to arbitrate
4 these claims and asserted their “intent to move to compel their claims to arbitration.” (Brome
5 Dec. ¶ 10.) Defendants stated on June 26 that they intended to “file their motions to compel as
6 soon as practicable.” (Id.) At that time, Defendants represented that “the motions will be filed
7 before the next case management conference [scheduled for August 8].” On July 17, Defendants
8 filed Answers to the Third Amended Complaint. (Id.) On July 31, the Parties filed a joint case
9 management conference statement; Defendants’ portion stated: “Defendants intend to move to
10 compel arbitration of the new named plaintiffs and anticipate doing so before this Case
11 Management Conference.” (Id.)
12 Defendants did not file their motions to compel until October 5, 2023. 4
13 III. ARGUMENT
14 A. Defendants Have Waived Any Right to Compel Arbitration
15 Defendants have waived their right to arbitrate the claims at issue. As the Ninth Circuit
16 recently explained, party may waive a right to compel arbitration if they had “knowledge of an
17 existing right to compel arbitration” and took “intentional acts inconsistent with that existing
18 right.” Hill v. Xerox Bus. Servs., LLC (9th Cir. 2023) 59 F.4th 457, 468 (finding defendant
19 waived its right to compel arbitration as against unnamed putative class members by waiting until
20 after class notice has been issued, where named plaintiff had not signed arbitration agreement).
21 Importantly, a party may waive their right to arbitrate even if they file a motion to compel
22 arbitration at an early opportunity, since waiver “does not depend upon when the law requires or
23 authorizes such a right to be asserted.” Id. at 469. Thus, waiver can occur even without a “present
24 ability to move to enforce an arbitration agreement.” Id.
25 Here, Defendants prepared the franchise agreements at issue such that they were well
26 aware that the agreements contained arbitration policies. See Section II.A., supra.
27
28 4
Those filings were initially rejected, and the motions have since been re-filed.
5
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 And, as described above, Defendants acted inconsistently with a right to seek arbitration.
2 Defendants have known for over six months that Mr. Bass would be seeking to represent other
3 Cleaners with arbitration agreements, yet deferred filing any motion to compel. See Section II.B.,
4 supra. This delay is inconsistent with asserting a right to arbitration and demonstrates waiver.
5 Hill, 59 F.4th at 472 (explaining that “extended silence” and “much-delayed demand for
6 arbitration,” are choices revealing an “eschewal of the party’s arbitration right.”).
7 Moreover, Defendants have acted inconsistently—in their discovery conduct and
8 mediation efforts—with the alleged right to proceed in individual arbitration. As in Hill,
9 Defendants here actively participated in discovery as to individuals subject to the alleged
10 arbitration policies as well as those not subject to them, with no distinction between the groups of
11 Cleaners. See Hill, 59 F.4th at 474–75. And, Defendants asserted that Cleaners who they now
12 contend must go to arbitration were actually part of the two mediations conducted last year,
13 demonstrating that Defendants intended to resolve the claims of all Cleaners through this
14 litigation – those with and those without arbitration provisions. See id. at 476–78 (finding that
15 defendant’s efforts to obtain merits determinations of the claims for individuals covered by
16 arbitration policies was inconsistent with right to arbitrate). The Court should follow Hill and find
17 that Defendants here have deliberately delayed and acted inconsistently with arbitration, and have
18 waived any right to compel arbitration.
19 B. RR Franchising Has No Right to Compel Arbitration
20 As Defendants recognize, the Court can deny a motion to compel arbitration if the
21 asserted agreement is unconscionable. (See Bass MTC. at 12-15 (arguing that the arbitration
22 policies are not unconscionable).) “Both procedural and substantive unconscionability must be
23 present before an arbitration provision is rendered unenforceable on unconscionability grounds,
24 but they need not be present in the same degree.” De Leon v. Pinnacle Prop. Mgmt. Servs., LLC
25 (2021) 72 Cal. App. 5th 476, 484–85 (quotation and citation omitted). “Courts invoke a sliding
26 scale in which the more substantively oppressive the contract term, the less evidence of
27 procedural unconscionability is required to come to the conclusion that the term is unenforceable,
28 and vice versa.” Id.
6
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 Here, the contract is procedurally unconscionable because it was a contract of adhesion,
2 offered on a take it or leave it basis as a condition of employment, and it referred to arbitral rules
3 without providing a copy of those rules. The contract is substantively unconscionable because it
4 provides Vanguard one-sided rights not afforded to Plaintiff Bass. It requires him to waive any
5 claims to punitive, penal, or multiple damages. It forces him to limit his statute of limitations.
6 And it makes him bear costs that he would not have to bear in Court. All of these requirements
7 are contrary to California law and mean that the arbitration provision cannot be enforced.
8 1. The Arbitration Provision in the Franchise Agreement Is Procedurally
Unconscionable.
9
Vanguard’s unit franchise agreements are presented without any meaningful ability for
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prospective Cleaners to negotiate. While there may be some blanks to fill in (concerning how
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much they will pay Vanguard for the privilege of working, and what volume of work Vanguard
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will provide), no other terms are subject to negotiation. And the unit franchise agreement is
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mandatory for a Cleaner to begin working. As a result, the contracts are procedurally
14
unconscionable. De Leon, 72 Cal. App. 5th at 485 (“Procedural unconscionability may be proven
15
by showing oppression, which is present when a party has no meaningful opportunity to negotiate
16
terms or the contract is presented on a take-it-or-leave-it basis.”) Where, as here, the arbitration
17
agreement is “an essential part of a ‘take it or leave it’ employment condition,” then that
18
agreement is procedurally unconscionable. Id. (quoting Martinez v. Master Protection Corp.
19
(2004) 118 Cal.App.4th 107, 114).
20
The procedural unconscionability was compounded because the contract claims that
21
arbitration is subject to the AAA commercial arbitration rules, but it does not attach those rules.
22
Carbajal v. CWPSC, Inc., 245 Cal. App. 4th 227, 244–45 (2016) (collecting cases recognizing
23
“that the failure to provide a copy of the arbitration rules to which the employee would be bound,
24
supported a finding of procedural unconscionability.”) As Carbajal and the cases cited therein
25
explained, failing to provide the governing rules is oppressive “because the employee is forced to
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go to another source to find out the full import of what he or she is about to sign and must go to
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that effort prior to signing.” Id. Here, the arbitration policy refers to “the then-current AAA
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PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 Commercial Arbitration Rules,” but does not provide those rules (section 34.B.3.) This is
2 procedurally unconscionable.
3 Further, the arbitration provisions were contained within the lengthy unit franchise
4 agreements, and were not set out as separate, clear agreements. Cf. Roman v. Superior Court
5 (2009) 172 Cal.App.4th 1462 (finding procedural unconscionability limited because arbitration
6 provisions were “set forth in a separate, succinct (four-sentence) paragraph that [the employee]
7 initialed, affirming she had seen it”). Not so here, where the arbitration provisions span two-pages
8 of detailed text, beginning on page 24 of the unit franchise agreement. And while Defendants
9 assert that Cleaners had time to review the unit franchise agreement, that does not cure the
10 procedural unconscionability, since there was no ability to modify those terms. De Leon, 72 Cal.
11 App. 5th 476, 485–86 (procedural unconscionability still found where arbitration provisions not
12 buried and employee understood he had to sign it); Martinez, 118 Cal. App. 4th at 114 (“An
13 arbitration agreement that is an essential part of a ‘take it or leave it’ employment condition,
14 without more, is procedurally unconscionable.” (citing Armendariz v. Foundation Health
15 Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 113–115.))
16 Here, the arbitration provisions are adhesive and do not provide the applicable rules. The
17 arbitration agreement is procedurally unconscionable.
18 2. The Arbitration Provision is Substantively Unconscionable
19 Plaintiff Bass signed a franchise agreement containing an arbitration policy so permeated
20 with deeply unfair requirements other courts have found to be so substantively unconscionable
21 they cannot be severed to allow arbitration. This Court should reach the same conclusion.
22 a. The Arbitration Policy Contains Unconscionable Pre-Filing Requirements
23 Before a Cleaner may pursue arbitration under the unit franchise agreement, he must first
24 attempt to settle the dispute through non-binding mediation through AAA, with costs shared by
25 the parties, lasting at least 4 hours, within 60 days of notification. 5 (Section 34(A).) This
26 provision is unconscionable because it forces costs on a plaintiff that would not otherwise be
27
28 5
Plaintiff Tello’s arbitration policy contains a similar pre-filing requirement (Section 34(A)).
8
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 required in pursuing claims in court, or even under the AAA’s Employment Rules for mediation. 6
2 Further, this requirement risks eroding the employee’s claims with the statute of limitations
3 running on statutory claims while the parties exhaust non-binding mediation. See Benitez v.
4 GMRI, Inc. (S.D. Cal. Aug. 24, 2023) 2023 WL 5490136, at *4 (holding that an arbitration policy
5 that required arbitration to commence within 30 days after mediation was unconscionable because
6 of the practical effect of internal time limits to limit the applicable statute of limitations). This
7 provision is unconscionable.
8 b. The Arbitration Policy Contains Unconscionable Fees and Fee Splitting Rules
9 Plaintiff Bass’s franchise agreement does not directly state what it will cost to initiate
10 arbitration. Instead, the agreement provides that the parties will share the cost of pre-arbitration
11 mediation (section 34(A)), allows either party to advance the costs of mediation (section 30),
12 allows for fee shifting to any prevailing party (section 30), and states that the AAA’s Commercial
13 Arbitration Rules—and not the Employment Arbitration Rules—will apply (section 34(B)(3)),
14 and requires that the Cleaners indemnify the Regional Franchise for a huge range of costs and
15 expenses from any dispute about the cleaning business (section 16). Taken together, these
16 provisions mean that a Cleaner would need to pay substantially more up-front costs to bring an
17 arbitration than they would need to proceed in court, and would risk having to pay attorneys’ fees
18 to Vanguard if they were not successful on statutory employment law claims—a risk they would
19 not face in court. 7 As a result, the agreement improperly changes the substantive rights of a
20 worker bringing statutory claims, rendering the agreement substantively unconscionable.
21 “[W]hen an employer imposes mandatory arbitration as a condition of employment, the
22 arbitration agreement or arbitration process cannot generally require the employee to bear any
23 type of expense that the employee would not be required to bear if he or she were free to bring the
24 action in court.” Armendariz, 24 Cal.4th at 110–111. Here, the arbitration policy would require a
25 Cleaner to pay substantially more than she would pay in court, because the Commercial Rules
26
6
See Plaintiffs’ Request for Judicial Notice (“RJN”) Ex. A (AAA Employment Rules), Rule M-
27 17 (costs of mediation borne by the company); Ex. B (AAA Commercial Fee Schedule)
(requiring initial filing fee based on value of the claim, borne by the claimant).
28 7
Plaintiff Tello’s franchise agreement explicitly requires improper cost splitting (Section 34(G)).
9
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 require initial considerable initial payments 8 of $7,700 for “Undetermined Monetary Claims,”
2 such as those here, as compared to $350 under the Employment Rules. 9 Further, applying the
3 AAA’s Commercial Rules would lead to a Cleaner having to split the costs of arbitration. 10 Those
4 costs are considerably more than a plaintiff would pay to file in court. This is unconscionable.
5 Ramos v. Superior Ct. (2018) 28 Cal. App. 5th 1042, 1062, as modified (Nov. 28, 2018) (“Under
6 Armendariz, this provision [splitting costs] cannot stand.”); Martinez, 118 Cal. App. 4th at 116
7 (“the [cost splitting] provision in the arbitration agreement is inconsistent with Armendariz”).
8 Additionally, the agreement calls for the unit franchise to indemnify the Regional
9 Franchise for attorneys’ fees arising from, among other things, any dispute about “the ownership
10 or operation of [Plaintiff’s] VCS Business” (section 16), and allows for the prevailing party to
11 recover fees even on statutory employment claims that have one-way fee shifting (section 30). 11
12 These provisions are unconscionable under Armendariz and its progeny, because the Labor Code
13 claims at issue here authorize an award of attorneys’ fees to a prevailing employee, but not to an
14 employer. Under this agreement, there is considerable risk that would not exist in court.
15 First, should a claimant not prevail, an arbitrator could award attorneys’ fees to Vanguard
16 that Vanguard could not recover in court. This is inconsistent with the Labor Code. Mills v.
17 Facility Sols. Grp., Inc., 84 Cal. App. 5th 1035, 1055–57 (2022) (explaining public policy
18 underlying one-way fee shifting, in which a prevailing employer in a claim for unpaid wages may
19 only recover fees if the action was brought in bad faith); see also Benitez, 2023 WL 5490136, at
20 *5–6 (finding arbitration provision unconscionable that authorized but did not require fees for a
21 prevailing employee, because that created a risk that “would not exist but for Defendant’s
22 requirement as a condition of employment to submit disputes to the [arbitration] process”).
23 Second, regardless of the outcome of the underlying claims, an arbitrator could enforce
24 the indemnification provision and order the claimant to pay Vanguard’s attorneys’ fees. The risk
25 8
See Plaintiffs’ RJN, Ex. B (AAA Commercial Fee Schedule).
9
26 See Plaintiffs’ RJN, Ex. C (AAA Employment Fee Schedule).
10
See Plaintiffs’ RJN, Ex. D (AAA Commercial Rules), Rule 56 (all costs split equally);
27 Plaintiffs’ RJN, Ex.
11
Plaintiff Tello’s franchise agreement also contains an overly broad indemnification clause.
28 (section 16).
10
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 of these unjust outcomes renders the contract unconscionable. Ajamian v. CantorCO2e, L.P.
2 (2012) 203 Cal. App. 4th 771, 800 (a provision allowing fees only for the employer “is obviously
3 not mutual and, on that basis alone, is unconscionable and unenforceable. It arguably strips [the
4 plaintiff] of her right to recover attorney fees under her California statutory claims.”) The same is
5 true here: the unit franchise agreement allows for attorneys’ fees to a prevailing party, meaning an
6 unsuccessful Cleaner could be forced to pay Vanguard’s attorneys’ fees – but under the Labor
7 Code, the claims at issue here only allow fees for a prevailing employee. Thus, the arbitration
8 policy creates a risk that would not exist without it, rendering it unconscionable.
9 As with the pre-filing mediation requirement, Defendants appear to recognize that the
10 cost splitting provisions are unconscionable, and offered to advance the costs of arbitration. (See
11 Ott Dec., Exh. A.) But this belated offer does not cure the unconscionability of the arbitration
12 provision. Martinez, 118 Cal. App. 4th at 115–17 (rejecting employer’s argument that they could
13 simply agree, after the dispute, to pay the employer’s share of arbitration expenses, since “[t]he
14 mere inclusion of the costs provision in the arbitration agreement produces an unacceptable
15 chilling effect, notwithstanding [defendant’s] belated willingness to excise that portion of the
16 agreement.”).
17 Here, the arbitration provision is substantively unconscionable because it requires the
18 Cleaner to pay more than he would need to pay in court, and it exposes the Cleaner to a risk of
19 bearing attorneys’ fees that he would not face if he were free to proceed in court.
20 c. The Arbitration Policy Unconscionably Requires Additional Payment for a
Reasoned Award
21
The California Supreme Court held that to ensure the possibility of judicial review when
22
arbitrating statutory employment claims, an arbitrator “must issue a written arbitration decision
23
that will reveal, however briefly, the essential findings and conclusions on which the award is
24
based.” Armendariz, 24 Cal. 4th at 107. Here, the franchise agreement provides that the arbitrator
25
shall provide a written award, but that the arbitrator is only required to provide “a reasoned
26
award” upon request by either party, and “the party so requesting shall pay the fees and costs
27
28
11
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 resulting from such request.” (Section 34(B)(3).) 12
2 This is unconscionable because it forces the claimant to choose to risk having no
3 reasoned award, and no way to seek judicial review, or to pay the additional fees and costs
4 required for the arbitrator to prepare a reasoned award—fees and costs that a claimant would
5 never have to pay in court. Indeed, even the AAA’s Employment Rules provide that the award
6 “shall provide the written reasons for the award unless the parties agree otherwise.” (See
7 Plaintiffs’ RJN Ex. B (Employment Rules), Rule 39(c).
8 d. The Arbitration Policy Is Unconscionable Because its Coverage is Non-Mutual
9 Under Plaintiff Bass’s franchise agreement, claims for equitable relief—i.e., claims that a
10 Cleaner is improperly using Vanguard’s intellectual property—may be brought in court, as
11 opposed to in arbitration. (Section 34(B).) 13 That the arbitration provision here is worded
12 neutrally does not cure this unconscionability, since “[c]laims for unpaid wages, wrongful
13 termination, employment discrimination and the like invariably are brought by employees, while
14 claims involving trade secrets, misuse or disclosure of confidential information, and unfair
15 competition typically are asserted only by employers.” Martinez, 118 Cal. App. 4th at 114–15.
16 See Armendariz, 24 Cal. 4th at 115–121 (an arbitration agreement is substantively unconscionable
17 if it requires the employee but not the employer to arbitrate). As a result, the provision “requires
18 employees to arbitrate the claims they are most likely to assert against [the company], while
19 simultaneously permitting [the company] to litigate in court the claims it is most likely to assert
20 against its employees.” Id. The arbitration provision is non-mutual, and unconscionable.
21 e. The Arbitration Policy Contains an Unconscionable Mandatory Waiver of
22 Substantive Rights.
Plaintiff Bass’s franchise agreement states that each party waives “any right or claim to
23
any punitive, exemplary, penal, multiple, incidental, indirect, special, consequential or other
24
damages . . . agrees that the claiming party . . . shall be limited to the recovery of actual damages
25
26
27 12
Plaintiff Tello’s franchise agreement contains the same language (Section 34(A)).
13
Plaintiff Tello’s franchise agreement contains a similar carve-out for equitable relief (Section
28 34(D)).
12
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 sustained.” (Section 34(E).) 14 The wage and hour claims at issue here can include liquidated
2 damages for unpaid minimum wages, statutory penalties for insufficient wage statements,
3 penalties for failure to timely pay wages at separation, and civil penalties under PAGA for various
4 Labor Code violations. The franchise agreement thus purports to waive “penal” damages and
5 “multiple” damages—relief that would be available to Plaintiff in Court.
6 This provision is unconscionable and unenforceable. Lange v. Monster Energy Co., 46
7 Cal. App. 5th 436, 449 (2020) (waiver of punitive damages was unconscionable, even when
8 limited to non-statutory claims, and even when waiver was mutual); Ajamian, 203 Cal. App. 4th
9 at 799 (finding unconscionability where “the arbitration provision requires Ajamian to waive
10 California substantive law and the right to statutory and punitive damages and thus forces her to
11 waive her unwaivable statutory rights and remedies.”); Armendariz, 24 Cal. 4th at 103 (“The
12 principle that an arbitration agreement may not limit statutorily imposed remedies such as
13 punitive damages and attorney fees appears to be undisputed.”).
14 f. The Arbitration Policy is Unconscionable Because it Shortens the Statute of
Limitations
15
Plaintiff Bass’s franchise agreement attempts to limit the time within which a Cleaner
16
may bring a claim arising from their work with Vanguard. According to the agreement,
17
“notwithstanding any provision of law that provides for a longer limitations period,” the parties
18
must bring claims before the earlier of “one (1) year after the date of discovery of the facts”
19
underlying the claims, or “eighteen (18) months after date of the first act or omission giving rise
20
to” liability. (Section 34(E).) But Plaintiffs’ statutory wage and hour claims have considerably
21
longer statutes of limitations.
22
Such provisions are regularly found to be unconscionable. De Leon, 72 Cal. App. 5th at
23
486–87 (shortening statute to one-year was unconscionable); Samaniego v. Empire Today LLC
24
(2012) 205 Cal.App.4th 1138, 1147 (six-month statute of limitations provision was
25
unconscionable); Martinez, 118 Cal.App.4th at 117 – 18 (six-month statute of limitations
26
provision was unconscionable). The Court should reach the same conclusion here and hold this
27
28 14
Plaintiff Tello’s franchise agreement contains a similar damages waiver (Section 34(G)(iii)).
13
PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS
1 provision to be substantively unconscionable.
2 g. The Arbitration Policy Contains an Implicit Waiver of the Right to Bring
Representative PAGA Claims and is Therefore Unconscionable
3
Plaintiff Bass’s arbitration provisions provide that any arbitration may not be
4
consolidated with any other arbitration proceedings, and no “findings, conclusions, orders, or
5
awards” from an arbitration will have any effect of preclusion or collateral estoppel in any other
6
adjudication or arbitration; in fact, they cannot even be introduced. (Section 34(F).) 15 As a result,
7
if a Cleaner prevailed in an arbitration of statutory Labor Code claims, the finding that Vanguard
8
had violated the Labor Code would not be admissible in a subsequent PAGA action in court, and
9
so he could not pursue representative PAGA claims as contemplated by the California Supreme
10
Court. See Adolph v. Uber Technologies, Inc. (2023) 14 Cal. 5th 1104, 1123–24 (explaining that
11
an aggrieved representative PAGA plaintiff would not need to relitigate substantive claims
12
because the arbitrator’s award in an individual proceeding would bind the court). However,
13
arbitration agreements that waive a worker’s right to bring representative PAGA claims are
14
contrary to public policy and unconscionable. Id. at 1117–18. Here, the arbitration provision does
15
not explicitly address representative PAGA claims, but it is inconsistent with the unwaivable right
16
to bring such claims. As a result, the Court should find these provisions unconscionable.
17
18 h. The Arbitration Policy Contains Numerous Other Terms that Favor the Employer
The arbitration provisions here are shockingly one-sided. In addition to the oppressive
19
terms described above, the agreement contains other terms that are unreasonably tilted in
20
Defendants’ favor. For example, the agreement provides that all proceedings, awards, and related
21
discussion shall be confidential (Section 34(F)), which helps Defendants’ avoid other Cleaners
22
learning about successful claims and similarly asserting their rights. Cf. Plaintiffs’ RJN Ex. D
23
(AAA Empl
Preview
1 JESSICA RIGGIN (SBN 281712) jriggin@rukinhyland.com 2 RUKIN HYLAND & RIGGIN LLP 1939 Harrison Street, Suite 925 3 Oakland, CA 94612 4 Telephone: (415) 421-1800 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 Plaintiffs 11 12 SUPERIOR COURT OF THE STATE OF CALIFORNIA 13 COUNTY OF SAN MATEO 14 15 ALIDA MAZARIEGOS, PAULA CASE NO.: 20-CIV-04267 GONZALEZ, JAIME AMAYA, ADRIANA 16 PLAINTIFFS’ OPPOSITION TO TELLO, and RYNE BASS DEFENDANTS RR FRANCHISING, 17 INC. AND VANGUARD CLEANING Plaintiffs, on behalf of themselves SYSTEMS, INC.’S JOINT MOTION 18 and all others similarly situated, TO COMPEL ARBITRATION OF RYNE BASS 19 v. VANGUARD CLEANING SYSTEMS, Judge: Hon. Nancy L. Fineman 20 INC.; RR FRANCHISING, INC., D/B/A Dept.: 04 21 VANGUARD CLEANING SYSTEMS OF Date: December 5, 2023 SOUTHERN CALIFORNIA AND D/B/A Time: 2:00 p.m. 22 VANGUARD CLEANING SYSTEMS OF NORTHERN CALIFORNIA; BUDDHA 23 CAPITAL CORPORATION, D/B/A 24 VANGUARD CLEANING SYSTEMS OF SACRAMENTO, D/B/A VANGUARD 25 CLEANING SYSTEMS OF THE CENTRAL VALLEY, AND D/B/A 26 VANGUARD CLEANING SYSTEMS OF THE CENTRAL COAST; AND WINE 27 COUNTRY VENTURES, INC. D/B/A 28 VANGUARD CLEANING SYSTEMS OF PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS THE NORTH BAY, AND DOES 1 1 THROUGH 10, INCLUSIVE, 2 Defendants. 3 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 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS TABLE OF CONTENTS 1 2 I. INTRODUCTION ............................................................................................................... 1 3 II. STATEMENT OF FACTS.................................................................................................. 1 4 A. Defendants Created, and Required Plaintiffs to Sign, the Unconscionable Contracts Containing the Arbitration Provisions .................................................... 1 5 B. Defendants Acted Inconsistently with Individual Arbitration ................................ 2 6 1. Defendants Have Acted Inconsistently With Pursuing Arbitration ............ 2 7 8 2. Defendants Unreasonably Delayed In Seeking Arbitration ........................ 4 9 III. ARGUMENT ...................................................................................................................... 5 10 A. Defendants Have Waived Any Right to Compel Arbitration ................................. 5 11 B. RR Franchising Has No Right to Compel Arbitration ............................................ 6 12 1. The Arbitration Provision In The Franchise Agreement Is Procedurally Unconscionable. .......................................................................................... 7 13 2. The Arbitration Provision Is Substantively Unconscionable ...................... 8 14 15 a. The Arbitration Policy Contains Unconscionable Pre-Filing Requirements ................................................................................... 8 16 b. The Arbitration Policy Contains Unconscionable Fees And Fee 17 Splitting Rules ................................................................................. 9 18 c. The Arbitration Policy Unconscionably Requires Additional Payment For A Reasoned Award .................................................. 11 19 d. The Arbitration Policy Is Unconscionable Because Its Coverage Is 20 Non-Mutual ................................................................................... 12 21 e. The Arbitration Policy Contains An Unconscionable Mandatory 22 Waiver Of Substantive Rights. ...................................................... 12 23 f. The Arbitration Policy Is Unconscionable Because It Shortens The Statute Of Limitations ................................................................... 13 24 g. The Arbitration Policy Contains an Implicit Waiver Of The Right 25 To Bring Representative Paga Claims And Is Therefore 26 Unconscionable ............................................................................. 14 27 h. The Arbitration Policy Contains Numerous Other Terms That Favor The Employer...................................................................... 14 28 i PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS i. The Arbitration Provision’s Unconscionable Terms Cannot Be 1 Severed .......................................................................................... 15 2 C. VCS Has No Right to Compel Arbitration............................................................ 16 3 IV. CONCLUSION ................................................................................................................. 18 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 ii PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS TABLE OF AUTHORITIES 1 2 Page(s) 3 Federal Cases 4 Benitez v. GMRI, Inc., (S.D. Cal. Aug. 24, 2023) 2023 WL 5490136 ................................................................ 9, 10, 15 5 Hill v. Xerox Bus. Servs., LLC, 6 (9th Cir. 2023) 59 F.4th 457 .................................................................................................... 5, 6 7 Ponkey v. LLR, Inc., 8 (9th Cir. July 31, 2023) 2023 WL 4863296 .............................................................................. 15 9 Turner v. Thorworks Indus., Inc., (E.D. Cal. Mar. 28, 2006) No. CIVS05-02653WBS KJM, 2006 WL 829142 ......................... 18 10 11 State Cases 12 Adolph v. Uber Technologies, Inc., (2023) 14 Cal. 5th 1104............................................................................................................. 14 13 Ajamian v. CantorCO2e, L.P., 14 (2012) 203 Cal. App. 4th 771 .............................................................................................. 11, 13 15 Armendariz v. Foundation Health Psychcare Servs., Inc., 16 (2000) 24 Cal.4th 83........................................................................................................... passim 17 Boucher v. All. Title Co., (2005) 127 Cal. App. 4th 262, 25 Cal. Rptr. 3d 440 (2005) ..................................................... 18 18 19 Carbajal v. CWPSC, Inc., (2016) 245 Cal. App. 4th 227 ...................................................................................................... 7 20 De Leon v. Pinnacle Prop. Mgmt. Servs., LLC, 21 (2021) 72 Cal. App. 5th 476 ............................................................................................... passim 22 Felisilda v. FCA US LLC, 23 (2020) 53 Cal. App. 5th 486 ...................................................................................................... 17 24 Garcia v. Pexco, LLC, (2017) 11 Cal. App. 5th 782 (2017) .......................................................................................... 18 25 Hernandez v. Meridian Mgmt. Servs., LLC, 26 (2023) 87 Cal. App. 5th 1214 .............................................................................................. 17, 18 27 Jarboe v. Hanlees Auto Grp., 28 (2020) 53 Cal. App. 5th 539 ...................................................................................................... 17 iii PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 JSM Tuscany, LLC v. Superior Ct., 2 (2011) 193 Cal. App. 4th 1222 .................................................................................................. 18 3 Lange v. Monster Energy Co., (2020) 46 Cal. App. 5th 436 ...................................................................................................... 13 4 Magno v. The Coll. Network, Inc., 5 (2016) 1 Cal. App. 5th 277 ........................................................................................................ 16 6 Martinez v. Master Protection Corp., 7 (2004) 118 Cal.App.4th 107 ............................................................................................... passim 8 Mills v. Facility Sols. Grp., Inc., (2022) 84 Cal. App. 5th 1035 .............................................................................................. 10, 16 9 10 Ramos v. Superior Ct., (2018) 28 Cal. App. 5th 1042 .................................................................................................... 10 11 Roman v. Superior Court, 12 (2009) 172 Cal.App.4th 1462 ...................................................................................................... 8 13 Rowe v. Exline, 14 (2007) 153 Cal. App. 4th 1276 .................................................................................................. 18 15 Samaniego v. Empire Today LLC, (2012) 205 Cal.App.4th 1138 .............................................................................................. 13, 16 16 17 18 19 20 21 22 23 24 25 26 27 28 iv PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 I. INTRODUCTION 2 After more than three years of litigating this case as to the claims of all Cleaners, despite 3 knowledge that some Cleaners had signed arbitration provisions, Defendants Vanguard Cleaning 4 Systems, Inc. (“VCS”) and Regional Franchise RR Franchising, Inc. (“RRF”) (collectively with 5 VCS, “Defendants”) now seek to compel Plaintiff Ryne Bass into arbitration, using an arbitration 6 agreement that is offensively one-sided. But, like other Cleaners, Plaintiff Bass was not given the 7 choice to arbitrate his statutory wage claims; the arbitration provisions on which Defendants rely 8 were buried within the lengthy franchise agreements that Plaintiffs were forced to sign when they 9 paid for their jobs as commercial Cleaners. The franchise agreements, prepared by Defendants, 10 were contracts of adhesion and violate California law in almost every way imaginable—by 11 shortening the statute of limitations, depriving Plaintiff of remedies he would get in Court, and 12 forcing him to bear costs he wouldn’t (and couldn’t) face in Court (among others). The 13 agreement is permeated with substantively unconscionable terms, and the Court should deny 14 Defendants’ motion to compel arbitration. 15 II. STATEMENT OF FACTS 16 A. Defendants Created, and Required Plaintiffs to Sign, the Unconscionable Contracts Containing the Arbitration Provisions 17 Under Vanguard’s cleaning model, VCS sits at the top of a three-tier commercial 18 cleaning system: VCS signs Master Franchise Agreements with Regional Franchises (here, 19 Defendant RRF), and those Regional Franchises sign unit franchise agreements with Cleaners 20 who perform the work that generates the vast majority of Defendants’ revenue. VCS creates the 21 relevant documents, and the Regional Franchises use them without substantial modifications. 22 Regional Franchises are required to enter into unit franchise agreement with the Cleaners based 23 “upon [VCS’s] then-current form.” (See Brome Decl., Ex. 13 (Lee Dep.) 39:14-17; see also Ex. 24 12, § 4.4.) VCS sends these templates to the Regional Franchises each year, who “have no right to 25 modify or offer to modify any [unit franchise] Agreement without [VCS’s] prior written 26 approval.” (Id. at § 4.6(c)). (See also Brome Decl., Ex. 13 (Lee Dep.) 159:20-162:5.) 27 Unsurprisingly, the Regional Franchises generally adopt VCS’s form franchise agreement. 28 1 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 (Brome Decl., Ex. 14 (Dusthimer Dep.) at 151:16-152:14; Ex. 13 (Lee Dep.) 164:19-166:20; 2 169:5-169:23.) 3 To begin working with Vanguard, Cleaners, including Plaintiff Bass, must sign a unit 4 franchise agreement—a standardized document based on a VCS template that (among other 5 terms, including defining them as independent contractors) contains an arbitration provision, or a 6 transfer agreement. (Declaration of Ryne Bass (“Bass Dec.”), ¶ 7.) Plaintiff Bass was not 7 permitted to negotiate the standardized terms of his franchise agreements. (Id.) 8 While Defendant argues that the franchise agreement was “negotiated,” the RRF 9 Declaration makes clear that the only terms negotiated were those to fill in two blanks contained 10 in the Franchise Agreement, as intended by VCS (the area to be serviced and payment). (See 11 Dusthimer Decl. ¶ 8 (“negotiated” area to be cleaned and price). According to Defendants, all 12 unit franchise agreements since 2012 have contained arbitration provisions. (Bass MTC, at p. 4, 13 fn 5.) Defendants do not assert that any Cleaners have been able to opt-out of the arbitration 14 provisions contained in every franchise agreement, or have negotiated any terms beyond the fill- 15 in-the-blanks spaces in the template agreements. 16 B. Defendants Acted Inconsistently with Individual Arbitration 17 All Defendants have been aware for years that some Cleaners have franchise agreements 18 that contain arbitration provisions—because they created the form franchise agreements 19 containing the arbitration provision. Yet despite this knowledge, Defendants have focused their 20 litigation efforts as to the entire group of Cleaners—not simply on enforcing any rights to have 21 certain claims heard in arbitration. And even when Defendants knew definitively which Cleaners 22 would be challenging the alleged arbitration agreements, Defendants waited for months to file a 23 motion to compel arbitration. 24 1. Defendants Have Acted Inconsistently with Pursuing Arbitration 25 Although aware at the outset of this case that certain Cleaners were subject to arbitration 26 provisions, rather than taking any steps to identify and exclude individuals who might be subject 27 to arbitration, Defendants have made clear that they were conducting this litigation with an intent 28 2 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 to defeat or resolve claims of all Cleaners. 2 First, Defendant attempted to resolve the claims of all Cleaners at mediation. The parties 3 have participated in two global mediations: first on March 21, 2022, with Hon. Margaret Nagle 4 (ret.), and then on May 3, 2022 with Tripper Ortman. (Brome Dec. ¶ 2.) Defendants have stated 5 explicitly that they consider those class mediations as having included individuals subject to 6 arbitration policies: “It is RR Franchising’s and VCS’s position that this mediation requirement 7 [included in the unit franchise agreement] has been satisfied by the two mediations conducted in 8 the Mazariegos case, thereby clearing the way for Mr. Bass to proceed to arbitration without need 9 for an additional mediation (subject to his agreement to same).” (Ott Decl. ISO Bass MTC, Exh. 10 A.) In other words, Defendants attempted to reach a resolution that would have ended the claims 11 of all Cleaners—those without arbitration policies, like the original named Plaintiffs, and those 12 with arbitration policies, like Bass. 13 Second, Defendants never distinguished individuals with arbitration agreements in 14 discovery or provided support for any arbitration defenses. Plaintiffs served form interrogatories 15 on Defendants seeking information about the factual bases of any affirmative defenses. 1 But 16 Defendants provided no information that would indicate they intended to seek arbitration based 17 on the franchise agreements as to any putative class members. VCS responded, but only referred 18 to the “Dispute Resolution Agreements” that it sent directly to Cleaners, which offered no 19 consideration and are not the subject of this motion. (See Brome Dec. ¶ 3, Ex. 1.) RRF responded 20 but did not provide even a modicum of support for its affirmative defense: “RR Franchising did 21 not have an employment relationship with Paula Gonzalez. RR Franchising articulated its 22 affirmative defenses in its Answer to Plaintiffs’ Unverified Complaint and incorporates them here 23 by reference.” (Brome Dec. ¶ 4, Ex. 2.) 24 Likewise, in answering Plaintiffs’ Special Interrogatories asking for the identities of all 25 franchises, Defendant VCS objected, without raising any arbitration distinction; the Regional 26 1 Both the Regional Franchises and VCS included stock language about arbitration in their 27 affirmative defenses, and asserting the defense as to Plaintiffs and Class Members, although they now acknowledge that the original named Plaintiffs were not subject to any arbitration 28 requirements. 3 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 Franchise Defendants stated they would respond subject to a protective order, without raising the 2 arbitration distinction. (Brome Dec. ¶ 6, Exs. 4, 5.) Similarly, multiple Requests for Production 3 served on Defendants 2 sought information applicable to all Cleaners, and the Defendants never 4 distinguished their responses as to individuals subject to arbitration provisions. (Id., Exs. 7, 8.) 5 Similarly, Defendant VCS served Requests for Production that made no distinction between 6 putative class members with or without arbitration agreements. 3 7 2. Defendants Unreasonably Delayed in Seeking Arbitration 8 Defendants filed their motions to compel arbitration on October 5, 2023—more than six 9 months after they knew Plaintiffs intended to proceed to amend with new plaintiffs from the two 10 unit franchises now at issue. 11 In Plaintiffs’ reply brief in support of the renewed motion for class certification, filed on 12 January 6, 2023, Plaintiffs stated that if the Court found it “necessary for a named Plaintiff to be 13 a party to an arbitration agreement to represent unnamed class members who have signed such 14 agreements, Plaintiffs request leave to amend to add such a Plaintiff.” (Brome Dec. ¶ 8.) At the 15 hearing, on March 28, 2023, Plaintiffs reiterated their intent to amend to add new named 16 Plaintiffs. (Id.) Less than one week after the hearing, Plaintiffs identified two specific 17 individuals, Ryne Bass and Georgina Tello, as the new proposed class representatives. (Id.) The 18 Parties discussed stipulating to this amendment, including discussions about whether Georgina 19 Tello or her sister Adriana Tello was a more appropriate Plaintiff. (Id.) On May 10, 2023, 20 Plaintiffs’ Counsel made clear that if Defendants believed Adriana Tello was bound by an 21 arbitration agreement, that Plaintiffs would likely move forward with her as the named Plaintiff 22 instead of Georgina Tello; Plaintiffs sent a draft stipulation to amend and an updated amended 23 complaint with Adriana Tello on May 18, 2023. (Id.) The Parties filed a stipulation to amend on 24 2 25 See, e.g., Requests Nos. 3 (all versions of agreement in effect during covered period); 16 (all versions of form contracts used with accounts during covered period); 60 (all communications 26 with VCS); 55 (each FDD during covered period); and 52 (all manuals). 3 Requests 9, 11, 16 include documents supporting allegations about cleaners; Requests 10, 12, 27 18, and 20 all include documents supporting allegations about Plaintiffs and class members; Request 28 asks for witness statements “including any putative class members.” (Brome Dec. 28 Ex. 10.) 4 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 June 2, 2023, and filed the Third Amended Complaint on June 13, 2023. (Brome Dec. ¶ 9.) 2 On June 22, 2023, Defendants stated that they “intend to move to compel Adriana Tello 3 and Ryne Bass to arbitration;” then again on June 26, Defendants asked for Plaintiffs to arbitrate 4 these claims and asserted their “intent to move to compel their claims to arbitration.” (Brome 5 Dec. ¶ 10.) Defendants stated on June 26 that they intended to “file their motions to compel as 6 soon as practicable.” (Id.) At that time, Defendants represented that “the motions will be filed 7 before the next case management conference [scheduled for August 8].” On July 17, Defendants 8 filed Answers to the Third Amended Complaint. (Id.) On July 31, the Parties filed a joint case 9 management conference statement; Defendants’ portion stated: “Defendants intend to move to 10 compel arbitration of the new named plaintiffs and anticipate doing so before this Case 11 Management Conference.” (Id.) 12 Defendants did not file their motions to compel until October 5, 2023. 4 13 III. ARGUMENT 14 A. Defendants Have Waived Any Right to Compel Arbitration 15 Defendants have waived their right to arbitrate the claims at issue. As the Ninth Circuit 16 recently explained, party may waive a right to compel arbitration if they had “knowledge of an 17 existing right to compel arbitration” and took “intentional acts inconsistent with that existing 18 right.” Hill v. Xerox Bus. Servs., LLC (9th Cir. 2023) 59 F.4th 457, 468 (finding defendant 19 waived its right to compel arbitration as against unnamed putative class members by waiting until 20 after class notice has been issued, where named plaintiff had not signed arbitration agreement). 21 Importantly, a party may waive their right to arbitrate even if they file a motion to compel 22 arbitration at an early opportunity, since waiver “does not depend upon when the law requires or 23 authorizes such a right to be asserted.” Id. at 469. Thus, waiver can occur even without a “present 24 ability to move to enforce an arbitration agreement.” Id. 25 Here, Defendants prepared the franchise agreements at issue such that they were well 26 aware that the agreements contained arbitration policies. See Section II.A., supra. 27 28 4 Those filings were initially rejected, and the motions have since been re-filed. 5 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 And, as described above, Defendants acted inconsistently with a right to seek arbitration. 2 Defendants have known for over six months that Mr. Bass would be seeking to represent other 3 Cleaners with arbitration agreements, yet deferred filing any motion to compel. See Section II.B., 4 supra. This delay is inconsistent with asserting a right to arbitration and demonstrates waiver. 5 Hill, 59 F.4th at 472 (explaining that “extended silence” and “much-delayed demand for 6 arbitration,” are choices revealing an “eschewal of the party’s arbitration right.”). 7 Moreover, Defendants have acted inconsistently—in their discovery conduct and 8 mediation efforts—with the alleged right to proceed in individual arbitration. As in Hill, 9 Defendants here actively participated in discovery as to individuals subject to the alleged 10 arbitration policies as well as those not subject to them, with no distinction between the groups of 11 Cleaners. See Hill, 59 F.4th at 474–75. And, Defendants asserted that Cleaners who they now 12 contend must go to arbitration were actually part of the two mediations conducted last year, 13 demonstrating that Defendants intended to resolve the claims of all Cleaners through this 14 litigation – those with and those without arbitration provisions. See id. at 476–78 (finding that 15 defendant’s efforts to obtain merits determinations of the claims for individuals covered by 16 arbitration policies was inconsistent with right to arbitrate). The Court should follow Hill and find 17 that Defendants here have deliberately delayed and acted inconsistently with arbitration, and have 18 waived any right to compel arbitration. 19 B. RR Franchising Has No Right to Compel Arbitration 20 As Defendants recognize, the Court can deny a motion to compel arbitration if the 21 asserted agreement is unconscionable. (See Bass MTC. at 12-15 (arguing that the arbitration 22 policies are not unconscionable).) “Both procedural and substantive unconscionability must be 23 present before an arbitration provision is rendered unenforceable on unconscionability grounds, 24 but they need not be present in the same degree.” De Leon v. Pinnacle Prop. Mgmt. Servs., LLC 25 (2021) 72 Cal. App. 5th 476, 484–85 (quotation and citation omitted). “Courts invoke a sliding 26 scale in which the more substantively oppressive the contract term, the less evidence of 27 procedural unconscionability is required to come to the conclusion that the term is unenforceable, 28 and vice versa.” Id. 6 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 Here, the contract is procedurally unconscionable because it was a contract of adhesion, 2 offered on a take it or leave it basis as a condition of employment, and it referred to arbitral rules 3 without providing a copy of those rules. The contract is substantively unconscionable because it 4 provides Vanguard one-sided rights not afforded to Plaintiff Bass. It requires him to waive any 5 claims to punitive, penal, or multiple damages. It forces him to limit his statute of limitations. 6 And it makes him bear costs that he would not have to bear in Court. All of these requirements 7 are contrary to California law and mean that the arbitration provision cannot be enforced. 8 1. The Arbitration Provision in the Franchise Agreement Is Procedurally Unconscionable. 9 Vanguard’s unit franchise agreements are presented without any meaningful ability for 10 prospective Cleaners to negotiate. While there may be some blanks to fill in (concerning how 11 much they will pay Vanguard for the privilege of working, and what volume of work Vanguard 12 will provide), no other terms are subject to negotiation. And the unit franchise agreement is 13 mandatory for a Cleaner to begin working. As a result, the contracts are procedurally 14 unconscionable. De Leon, 72 Cal. App. 5th at 485 (“Procedural unconscionability may be proven 15 by showing oppression, which is present when a party has no meaningful opportunity to negotiate 16 terms or the contract is presented on a take-it-or-leave-it basis.”) Where, as here, the arbitration 17 agreement is “an essential part of a ‘take it or leave it’ employment condition,” then that 18 agreement is procedurally unconscionable. Id. (quoting Martinez v. Master Protection Corp. 19 (2004) 118 Cal.App.4th 107, 114). 20 The procedural unconscionability was compounded because the contract claims that 21 arbitration is subject to the AAA commercial arbitration rules, but it does not attach those rules. 22 Carbajal v. CWPSC, Inc., 245 Cal. App. 4th 227, 244–45 (2016) (collecting cases recognizing 23 “that the failure to provide a copy of the arbitration rules to which the employee would be bound, 24 supported a finding of procedural unconscionability.”) As Carbajal and the cases cited therein 25 explained, failing to provide the governing rules is oppressive “because the employee is forced to 26 go to another source to find out the full import of what he or she is about to sign and must go to 27 that effort prior to signing.” Id. Here, the arbitration policy refers to “the then-current AAA 28 7 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 Commercial Arbitration Rules,” but does not provide those rules (section 34.B.3.) This is 2 procedurally unconscionable. 3 Further, the arbitration provisions were contained within the lengthy unit franchise 4 agreements, and were not set out as separate, clear agreements. Cf. Roman v. Superior Court 5 (2009) 172 Cal.App.4th 1462 (finding procedural unconscionability limited because arbitration 6 provisions were “set forth in a separate, succinct (four-sentence) paragraph that [the employee] 7 initialed, affirming she had seen it”). Not so here, where the arbitration provisions span two-pages 8 of detailed text, beginning on page 24 of the unit franchise agreement. And while Defendants 9 assert that Cleaners had time to review the unit franchise agreement, that does not cure the 10 procedural unconscionability, since there was no ability to modify those terms. De Leon, 72 Cal. 11 App. 5th 476, 485–86 (procedural unconscionability still found where arbitration provisions not 12 buried and employee understood he had to sign it); Martinez, 118 Cal. App. 4th at 114 (“An 13 arbitration agreement that is an essential part of a ‘take it or leave it’ employment condition, 14 without more, is procedurally unconscionable.” (citing Armendariz v. Foundation Health 15 Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 113–115.)) 16 Here, the arbitration provisions are adhesive and do not provide the applicable rules. The 17 arbitration agreement is procedurally unconscionable. 18 2. The Arbitration Provision is Substantively Unconscionable 19 Plaintiff Bass signed a franchise agreement containing an arbitration policy so permeated 20 with deeply unfair requirements other courts have found to be so substantively unconscionable 21 they cannot be severed to allow arbitration. This Court should reach the same conclusion. 22 a. The Arbitration Policy Contains Unconscionable Pre-Filing Requirements 23 Before a Cleaner may pursue arbitration under the unit franchise agreement, he must first 24 attempt to settle the dispute through non-binding mediation through AAA, with costs shared by 25 the parties, lasting at least 4 hours, within 60 days of notification. 5 (Section 34(A).) This 26 provision is unconscionable because it forces costs on a plaintiff that would not otherwise be 27 28 5 Plaintiff Tello’s arbitration policy contains a similar pre-filing requirement (Section 34(A)). 8 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 required in pursuing claims in court, or even under the AAA’s Employment Rules for mediation. 6 2 Further, this requirement risks eroding the employee’s claims with the statute of limitations 3 running on statutory claims while the parties exhaust non-binding mediation. See Benitez v. 4 GMRI, Inc. (S.D. Cal. Aug. 24, 2023) 2023 WL 5490136, at *4 (holding that an arbitration policy 5 that required arbitration to commence within 30 days after mediation was unconscionable because 6 of the practical effect of internal time limits to limit the applicable statute of limitations). This 7 provision is unconscionable. 8 b. The Arbitration Policy Contains Unconscionable Fees and Fee Splitting Rules 9 Plaintiff Bass’s franchise agreement does not directly state what it will cost to initiate 10 arbitration. Instead, the agreement provides that the parties will share the cost of pre-arbitration 11 mediation (section 34(A)), allows either party to advance the costs of mediation (section 30), 12 allows for fee shifting to any prevailing party (section 30), and states that the AAA’s Commercial 13 Arbitration Rules—and not the Employment Arbitration Rules—will apply (section 34(B)(3)), 14 and requires that the Cleaners indemnify the Regional Franchise for a huge range of costs and 15 expenses from any dispute about the cleaning business (section 16). Taken together, these 16 provisions mean that a Cleaner would need to pay substantially more up-front costs to bring an 17 arbitration than they would need to proceed in court, and would risk having to pay attorneys’ fees 18 to Vanguard if they were not successful on statutory employment law claims—a risk they would 19 not face in court. 7 As a result, the agreement improperly changes the substantive rights of a 20 worker bringing statutory claims, rendering the agreement substantively unconscionable. 21 “[W]hen an employer imposes mandatory arbitration as a condition of employment, the 22 arbitration agreement or arbitration process cannot generally require the employee to bear any 23 type of expense that the employee would not be required to bear if he or she were free to bring the 24 action in court.” Armendariz, 24 Cal.4th at 110–111. Here, the arbitration policy would require a 25 Cleaner to pay substantially more than she would pay in court, because the Commercial Rules 26 6 See Plaintiffs’ Request for Judicial Notice (“RJN”) Ex. A (AAA Employment Rules), Rule M- 27 17 (costs of mediation borne by the company); Ex. B (AAA Commercial Fee Schedule) (requiring initial filing fee based on value of the claim, borne by the claimant). 28 7 Plaintiff Tello’s franchise agreement explicitly requires improper cost splitting (Section 34(G)). 9 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 require initial considerable initial payments 8 of $7,700 for “Undetermined Monetary Claims,” 2 such as those here, as compared to $350 under the Employment Rules. 9 Further, applying the 3 AAA’s Commercial Rules would lead to a Cleaner having to split the costs of arbitration. 10 Those 4 costs are considerably more than a plaintiff would pay to file in court. This is unconscionable. 5 Ramos v. Superior Ct. (2018) 28 Cal. App. 5th 1042, 1062, as modified (Nov. 28, 2018) (“Under 6 Armendariz, this provision [splitting costs] cannot stand.”); Martinez, 118 Cal. App. 4th at 116 7 (“the [cost splitting] provision in the arbitration agreement is inconsistent with Armendariz”). 8 Additionally, the agreement calls for the unit franchise to indemnify the Regional 9 Franchise for attorneys’ fees arising from, among other things, any dispute about “the ownership 10 or operation of [Plaintiff’s] VCS Business” (section 16), and allows for the prevailing party to 11 recover fees even on statutory employment claims that have one-way fee shifting (section 30). 11 12 These provisions are unconscionable under Armendariz and its progeny, because the Labor Code 13 claims at issue here authorize an award of attorneys’ fees to a prevailing employee, but not to an 14 employer. Under this agreement, there is considerable risk that would not exist in court. 15 First, should a claimant not prevail, an arbitrator could award attorneys’ fees to Vanguard 16 that Vanguard could not recover in court. This is inconsistent with the Labor Code. Mills v. 17 Facility Sols. Grp., Inc., 84 Cal. App. 5th 1035, 1055–57 (2022) (explaining public policy 18 underlying one-way fee shifting, in which a prevailing employer in a claim for unpaid wages may 19 only recover fees if the action was brought in bad faith); see also Benitez, 2023 WL 5490136, at 20 *5–6 (finding arbitration provision unconscionable that authorized but did not require fees for a 21 prevailing employee, because that created a risk that “would not exist but for Defendant’s 22 requirement as a condition of employment to submit disputes to the [arbitration] process”). 23 Second, regardless of the outcome of the underlying claims, an arbitrator could enforce 24 the indemnification provision and order the claimant to pay Vanguard’s attorneys’ fees. The risk 25 8 See Plaintiffs’ RJN, Ex. B (AAA Commercial Fee Schedule). 9 26 See Plaintiffs’ RJN, Ex. C (AAA Employment Fee Schedule). 10 See Plaintiffs’ RJN, Ex. D (AAA Commercial Rules), Rule 56 (all costs split equally); 27 Plaintiffs’ RJN, Ex. 11 Plaintiff Tello’s franchise agreement also contains an overly broad indemnification clause. 28 (section 16). 10 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 of these unjust outcomes renders the contract unconscionable. Ajamian v. CantorCO2e, L.P. 2 (2012) 203 Cal. App. 4th 771, 800 (a provision allowing fees only for the employer “is obviously 3 not mutual and, on that basis alone, is unconscionable and unenforceable. It arguably strips [the 4 plaintiff] of her right to recover attorney fees under her California statutory claims.”) The same is 5 true here: the unit franchise agreement allows for attorneys’ fees to a prevailing party, meaning an 6 unsuccessful Cleaner could be forced to pay Vanguard’s attorneys’ fees – but under the Labor 7 Code, the claims at issue here only allow fees for a prevailing employee. Thus, the arbitration 8 policy creates a risk that would not exist without it, rendering it unconscionable. 9 As with the pre-filing mediation requirement, Defendants appear to recognize that the 10 cost splitting provisions are unconscionable, and offered to advance the costs of arbitration. (See 11 Ott Dec., Exh. A.) But this belated offer does not cure the unconscionability of the arbitration 12 provision. Martinez, 118 Cal. App. 4th at 115–17 (rejecting employer’s argument that they could 13 simply agree, after the dispute, to pay the employer’s share of arbitration expenses, since “[t]he 14 mere inclusion of the costs provision in the arbitration agreement produces an unacceptable 15 chilling effect, notwithstanding [defendant’s] belated willingness to excise that portion of the 16 agreement.”). 17 Here, the arbitration provision is substantively unconscionable because it requires the 18 Cleaner to pay more than he would need to pay in court, and it exposes the Cleaner to a risk of 19 bearing attorneys’ fees that he would not face if he were free to proceed in court. 20 c. The Arbitration Policy Unconscionably Requires Additional Payment for a Reasoned Award 21 The California Supreme Court held that to ensure the possibility of judicial review when 22 arbitrating statutory employment claims, an arbitrator “must issue a written arbitration decision 23 that will reveal, however briefly, the essential findings and conclusions on which the award is 24 based.” Armendariz, 24 Cal. 4th at 107. Here, the franchise agreement provides that the arbitrator 25 shall provide a written award, but that the arbitrator is only required to provide “a reasoned 26 award” upon request by either party, and “the party so requesting shall pay the fees and costs 27 28 11 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 resulting from such request.” (Section 34(B)(3).) 12 2 This is unconscionable because it forces the claimant to choose to risk having no 3 reasoned award, and no way to seek judicial review, or to pay the additional fees and costs 4 required for the arbitrator to prepare a reasoned award—fees and costs that a claimant would 5 never have to pay in court. Indeed, even the AAA’s Employment Rules provide that the award 6 “shall provide the written reasons for the award unless the parties agree otherwise.” (See 7 Plaintiffs’ RJN Ex. B (Employment Rules), Rule 39(c). 8 d. The Arbitration Policy Is Unconscionable Because its Coverage is Non-Mutual 9 Under Plaintiff Bass’s franchise agreement, claims for equitable relief—i.e., claims that a 10 Cleaner is improperly using Vanguard’s intellectual property—may be brought in court, as 11 opposed to in arbitration. (Section 34(B).) 13 That the arbitration provision here is worded 12 neutrally does not cure this unconscionability, since “[c]laims for unpaid wages, wrongful 13 termination, employment discrimination and the like invariably are brought by employees, while 14 claims involving trade secrets, misuse or disclosure of confidential information, and unfair 15 competition typically are asserted only by employers.” Martinez, 118 Cal. App. 4th at 114–15. 16 See Armendariz, 24 Cal. 4th at 115–121 (an arbitration agreement is substantively unconscionable 17 if it requires the employee but not the employer to arbitrate). As a result, the provision “requires 18 employees to arbitrate the claims they are most likely to assert against [the company], while 19 simultaneously permitting [the company] to litigate in court the claims it is most likely to assert 20 against its employees.” Id. The arbitration provision is non-mutual, and unconscionable. 21 e. The Arbitration Policy Contains an Unconscionable Mandatory Waiver of 22 Substantive Rights. Plaintiff Bass’s franchise agreement states that each party waives “any right or claim to 23 any punitive, exemplary, penal, multiple, incidental, indirect, special, consequential or other 24 damages . . . agrees that the claiming party . . . shall be limited to the recovery of actual damages 25 26 27 12 Plaintiff Tello’s franchise agreement contains the same language (Section 34(A)). 13 Plaintiff Tello’s franchise agreement contains a similar carve-out for equitable relief (Section 28 34(D)). 12 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 sustained.” (Section 34(E).) 14 The wage and hour claims at issue here can include liquidated 2 damages for unpaid minimum wages, statutory penalties for insufficient wage statements, 3 penalties for failure to timely pay wages at separation, and civil penalties under PAGA for various 4 Labor Code violations. The franchise agreement thus purports to waive “penal” damages and 5 “multiple” damages—relief that would be available to Plaintiff in Court. 6 This provision is unconscionable and unenforceable. Lange v. Monster Energy Co., 46 7 Cal. App. 5th 436, 449 (2020) (waiver of punitive damages was unconscionable, even when 8 limited to non-statutory claims, and even when waiver was mutual); Ajamian, 203 Cal. App. 4th 9 at 799 (finding unconscionability where “the arbitration provision requires Ajamian to waive 10 California substantive law and the right to statutory and punitive damages and thus forces her to 11 waive her unwaivable statutory rights and remedies.”); Armendariz, 24 Cal. 4th at 103 (“The 12 principle that an arbitration agreement may not limit statutorily imposed remedies such as 13 punitive damages and attorney fees appears to be undisputed.”). 14 f. The Arbitration Policy is Unconscionable Because it Shortens the Statute of Limitations 15 Plaintiff Bass’s franchise agreement attempts to limit the time within which a Cleaner 16 may bring a claim arising from their work with Vanguard. According to the agreement, 17 “notwithstanding any provision of law that provides for a longer limitations period,” the parties 18 must bring claims before the earlier of “one (1) year after the date of discovery of the facts” 19 underlying the claims, or “eighteen (18) months after date of the first act or omission giving rise 20 to” liability. (Section 34(E).) But Plaintiffs’ statutory wage and hour claims have considerably 21 longer statutes of limitations. 22 Such provisions are regularly found to be unconscionable. De Leon, 72 Cal. App. 5th at 23 486–87 (shortening statute to one-year was unconscionable); Samaniego v. Empire Today LLC 24 (2012) 205 Cal.App.4th 1138, 1147 (six-month statute of limitations provision was 25 unconscionable); Martinez, 118 Cal.App.4th at 117 – 18 (six-month statute of limitations 26 provision was unconscionable). The Court should reach the same conclusion here and hold this 27 28 14 Plaintiff Tello’s franchise agreement contains a similar damages waiver (Section 34(G)(iii)). 13 PLAINTIFFS’ OPPOSITION TO MOTION TO COMPEL ARBITRATION OF RYNE BASS 1 provision to be substantively unconscionable. 2 g. The Arbitration Policy Contains an Implicit Waiver of the Right to Bring Representative PAGA Claims and is Therefore Unconscionable 3 Plaintiff Bass’s arbitration provisions provide that any arbitration may not be 4 consolidated with any other arbitration proceedings, and no “findings, conclusions, orders, or 5 awards” from an arbitration will have any effect of preclusion or collateral estoppel in any other 6 adjudication or arbitration; in fact, they cannot even be introduced. (Section 34(F).) 15 As a result, 7 if a Cleaner prevailed in an arbitration of statutory Labor Code claims, the finding that Vanguard 8 had violated the Labor Code would not be admissible in a subsequent PAGA action in court, and 9 so he could not pursue representative PAGA claims as contemplated by the California Supreme 10 Court. See Adolph v. Uber Technologies, Inc. (2023) 14 Cal. 5th 1104, 1123–24 (explaining that 11 an aggrieved representative PAGA plaintiff would not need to relitigate substantive claims 12 because the arbitrator’s award in an individual proceeding would bind the court). However, 13 arbitration agreements that waive a worker’s right to bring representative PAGA claims are 14 contrary to public policy and unconscionable. Id. at 1117–18. Here, the arbitration provision does 15 not explicitly address representative PAGA claims, but it is inconsistent with the unwaivable right 16 to bring such claims. As a result, the Court should find these provisions unconscionable. 17 18 h. The Arbitration Policy Contains Numerous Other Terms that Favor the Employer The arbitration provisions here are shockingly one-sided. In addition to the oppressive 19 terms described above, the agreement contains other terms that are unreasonably tilted in 20 Defendants’ favor. For example, the agreement provides that all proceedings, awards, and related 21 discussion shall be confidential (Section 34(F)), which helps Defendants’ avoid other Cleaners 22 learning about successful claims and similarly asserting their rights. Cf. Plaintiffs’ RJN Ex. D 23 (AAA Empl