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DEFENDANT JAN-PRO FRANCHISING INTERNATIONAL, INC.’S NOTICE OF MOTION AND
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY
JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION
1
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
TO PLAINTIFFS AND THEIR ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE that on May 4, 2017, at 8 a.m., or as soon thereafter as the
matter may be heard, before the Honorable William Alsup, Courtroom 8, located at 450 Golden
Gate Avenue, 19th Floor, San Francisco, California 94102, Defendant Jan-Pro Franchising
International, Inc. (“Defendant”) will move, and hereby moves, pursuant to Rule 56 of the Federal
Rules of Civil Procedure, for summary judgment to be entered in Defendant’s favor on each and
every cause of action/count asserted against Defendant in Plaintiffs’ Second Amended Complaint.
Defendant brings this Motion on the grounds that: (1) Plaintiffs cannot establish facts
sufficient to support their First Cause of Action/Count for “Unfair and Deceptive Business
Practices” against Defendant; (2) Plaintiffs cannot establish facts sufficient to support their Second
PHILIP J. SMITH (SBN 232462)
psmith@constangy.com
JEFFREY M. ROSIN (admitted pro hac vice)
jrosin@constangy.com
CONSTANGY, BROOKS, SMITH & PROPHETE, LLP
50 California Street, Suite 1625
San Francisco, CA 94111
Telephone: 415-918-3000, Facsimile: 415-918-3005
Attorneys for Defendant
JAN-PRO FRANCHISING INTERNATIONAL, INC.
GLORIA ROMAN, GERARDO VASQUEZ,
JUAN AGUILAR,
Plaintiffs,
vs.
JAN-PRO FRANCHISING
INTERNATIONAL, INC.
Defendant.
Case No. 3:16-cv-05961-WHA
DEFENDANT JAN-PRO FRANCHISING
INTERNATIONAL, INC.’S NOTICE OF
MOTION AND MEMORANDUM OF POINTS
AND AUTHORITIES IN SUPPORT OF
MOTION FOR SUMMARY JUDGMENT OR,
IN THE ALTERNATIVE, SUMMARY
ADJUDICATION
The Honorable William Alsup
Date: May 4, 2017
Time: 8 a.m.
Location: Courtroom 8, 450 Golden Gate
Avenue, 19th Floor, San Francisco, CA 94102
Case 3:16-cv-05961-WHA Document 246 Filed 02/16/17 Page 1 of 25
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DEFENDANT JAN-PRO FRANCHISING INTERNATIONAL, INC.’S NOTICE OF MOTION AND
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY
JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION
2
Cause of Action/Count for “Misclassification as Independent Contractors” against Defendant; (3)
Plaintiffs cannot establish facts sufficient to support their Third Cause of Action/Count for “Wage
Law Violations” against Defendant; (4) Plaintiffs cannot establish facts sufficient to support their
Fourth Cause of Action/Count for “Quantum Meruit” against Defendant; and (5) Plaintiffs cannot
establish facts sufficient to establish their Fifth Cause of Action/Count for “Unjust Enrichment”
against Defendant.
This Motion shall be based upon this Notice of Motion and Motion, the accompanying
Memorandum of Points and Authorities, Defendant’s Statement of Material Facts with Plaintiffs’
Responses, the Declaration of Jeffrey M. Rosin and evidence presented therein, all papers and
pleadings filed in this action, and upon such other and further evidence and argument as may be
provided to the Court at the hearing on this Motion.
DATED: February 16, 2017 /s/Jeffrey M. Rosin
Philip J. Smith (SBN 232462)
Jeffrey M. Rosin (admitted pro hac vice)
CONSTANGY, BROOKS, SMITH & PROPHETE, LLP
Attorneys for Defendant
TABLE OF CONTENTS
TABLE OF AUTHORITIES .......................................................................................................... 3
STATEMENT OF THE ISSUES TO BE DECIDED..................................................................... 6
INTRODUCTION........................................................................................................................... 6
BACKGROUND FACTUAL SUMMARY.................................................................................... 7
LEGAL ARGUMENT .................................................................................................................. 10
I. This Court Should Grant Summary Judgment For JPI On Count I ...................... 10
A. Neither CNI Nor New Venture Were JPI’s Agent Under The
Standards Of Law That Apply In The Franchise Relationship ................. 10
B. Neither CNI Nor New Venture Engaged In Any Wrongful
Conduct, Let Alone Conduct That Rises To The Level Of A
Violation of Section 17200 ....................................................................... 13
C. Even If Any One Or More Plaintiff Had Proof Of A Wrong By
CNI And/Or New Venture Giving Rise To An Unfair Competition
Claim Under Section 17200, JPI Exercised No “Complete” Or
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DEFENDANT JAN-PRO FRANCHISING INTERNATIONAL, INC.’S NOTICE OF MOTION AND
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY
JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION
3
“Day-To-Day” Control Over The Wrong, As Patterson Requires
In Order To Hold JPI Liable .................................................................... 17
II. Plaintiffs Had No Employment Relationship With JPI And Judgment
Should Enter For JPI On Counts II and III............................................................ 18
III. Counts VI and VII (sic) For Quantum Meruit And Unjust Enrichment Fail
Because Plaintiffs Had (1) No Expectation Of Compensation From JPI Or
(2) Relationship With JPI Upon Which To Base These Theories of Recovery.... 22
CONCLUSION ............................................................................................................................. 25
TABLE OF AUTHORITIES
Cases
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ..................6
Arrison v. Information Resources, Inc., 1999 WL 551232 (N.D. Cal. July 16, 1999) ......................24
Banga v. First USA, NA, 29 F.Supp.3d 1270 (N.D. Cal. 2014) ..........................................................6
Baramerica Int’l USA Trust v. Tyfield Imps., Inc., 289 F.2d 589 (9th Cir. 2002) ............................11
California Bagel Co. v. America Bagel Co., 2000 WL 35798199 (C.D. Cal. June 7, 2000).............17
Cislaw v. Southland Corp., 4 Cal.App.4th 1284, 6 Cal.Rptr.2d 386 (Cal. Ct. App. 1992).................20
Comer v. Micor, Inc., 436 F.3d 1098 (9th Cir. 2006) .........................................................................23
Creager v. Yoshimoto et al., No. C 05-01985 JSW, 2007 WL 2938168 (N.D. Cal. Oct. 9, 2007) ...14
Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358 (2d Cir. 1959) ......................................11
Depianti v. Jan-Pro Franchising Int’l, Inc., 39 F. Supp. 3d 112 (D. Mass. 2014)..............................21
Depianti v. Jan-Pro Franchising Int’l, Inc., 465 Mass. 607, 990 N.E.2d 1054 (2013).......................12
Duncan v. McCaffrey Grp., Inc., 200 Cal. App. 4th 346 (Cal. Ct. App. 2011) ..................................17
Heller v. Adobe Systems Inc., 2016 WL 1213762 (N.D. Cal. Mar. 29, 2016) ............................24, 25
Helm v. Alderwoods Group, Inc., 696 F. Supp. 2d 1057 (N.D. Ca. 2009)........................................22
Jan-Pro Franchising Int’l, Inc. v. Depianti, 310 Ga. App. 265 (2011)...............................................20
Juarez v. Jani-King of California, Inc., 2012 WL 177564 (N.D. Cal. Jan. 23, 2012)..................14, 18
Kerl v. Dennis Rasmussen, Inc., 682 N.W.2d 328 (Wis. 2004).........................................................12
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DEFENDANT JAN-PRO FRANCHISING INTERNATIONAL, INC.’S NOTICE OF MOTION AND
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY
JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION
4
L.A. Gear, Inc. v. E.S. Originals, Inc., 859 F. Supp. 1294 (C.D. Cal. 1994).....................................11
Motorsport Engineering, Inc. v. Maserati SPA, 316 F.3d 26 (1st Cir. 2002) .....................................23
National Rural Telecomm. Coop. v. DirecTV, Inc., 319 F. Supp. 2d 1059 (C.D. Cal. 2003) ...........23
Noe v. Superior Court, 237 Cal.App.4th 316 (2015) ..........................................................................13
Oberlin v. Marlin Am. Corp., 596 F.2d 1322 (7th Cir. 1979)............................................................11
Parino v. BidRack, Inc. 838 F. Supp. 900 (N.D. Cal. 2011)..............................................................22
Patterson v. Domino’s Pizza, LLC, 60 Cal.4th 474, 333 P.3d 723 (Cal. 2014) ...10,11,12,13,18,19,20
Paulsen v. CNF Inc., 559 F.3d 1061 (9th Cir. 2009)...........................................................................23
Pineda v. Bank of America, N.A., 50 Cal.4th 1389 (2010) ................................................................13
Raisin Bargaining Ass’n v. Hartford Cas. Ins. Co., 715 F. Supp. 2d 1079 (E.D. Cal. 2010) ............25
Rissetto v. Plumbers and Steamfitters Local 343, 94 F.3d 597 (9th Cir. 1996).................................18
Singh v. 7-Eleven, Inc., 2007 WL 715488 (N.D. Cal. Mar. 8, 2007) ..................................................21
Strong v. Beydoun, 166 Cal. App. 4th 1398 (Cal. App. 3 Dist. 2008)..........................................24, 25
T-Bird Nevada LLC v. Outback Steakhouse, Inc., 2010 WL 1951145 (Cal. App. 2 Dist. 2010) .....23
Torres v. Goodyear Tire & Rubber Co., Inc., 867 F.2d 1234 (9th Cir. 1989) ...................................11
Statutes
15 U.S.C. § 1064 ................................................................................................................................11
CAL. BUS. & PROF. CODE § 14230 .....................................................................................................11
CAL. BUS. & PROF. CODE § 14272 ......................................................................................................11
CAL. BUS. & PROF. CODE § 17200 .........................................................................................10, 11, 13
CAL. BUS. & PROF. CODE § 17208 .....................................................................................................14
CAL. BUS. & PROF. CODE §§ 20000-20043...................................................................................13, 22
CAL. CORPS. CODE § 31005..........................................................................................................11, 21
CAL. CORPS. CODE § 31008..................................................................................................................7
CAL. CORPS. CODE § 31009..................................................................................................................7
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DEFENDANT JAN-PRO FRANCHISING INTERNATIONAL, INC.’S NOTICE OF MOTION AND
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY
JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION
5
CAL. CORPS. CODE §§ 31000-31516...................................................................................................13
CAL. CORPS. CODE § 31111................................................................................................................22
CAL. CORPS. CODE § 31113................................................................................................................12
Rules
Fed. R. Civ. P. 56 ...........................................................................................................................9, 10
Regulations
16 C.F.R. § 436.1 ...............................................................................................................7, 10, 21, 23
16 C.F.R. § 436.4................................................................................................................................12
Other Authorities
Andrew F. Perrin et al., Multi-Unit Franchising – The Risks and Benefits,
American Bar Association 28th Annual Forum on Franchising (Oct. 19-21, 2005) .....................8
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DEFENDANT’S NOTICE OF MOTION AND MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, IN THE
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MEMORANDUM OF POINTS AND AUTHORITIES
Defendant Jan-Pro Franchising International, Inc. (“JPI”) submits this memorandum of points
and authorities seeking judgment on all claims of all three plaintiffs, Gloria Roman (“Roman”),
Juan Aguilar (“Aguilar”) and Gerardo Vasquez (“Vasquez”) (collectively, “Plaintiffs”).
STATEMENT OF THE ISSUES TO BE DECIDED
(i) Whether Plaintiffs’ franchisors, Connor-Nolan, Inc. (“CNI”) and New Venture of San
Bernadino, LLC (“New Venture”) were agents of JPI; (ii) whether CNI or New Venture engaged
in any wrongdoing, and whether such wrongdoing rose to the level of an unfair business
practices for which JPI should be vicariously liable; (iii) whether Plaintiffs are misclassified
employees of JPI and JPI has committed Labor Code violations; and (iv) whether JPI can be held
liable to plaintiffs under a theory of unjust enrichment or quantum meruit.
I. INTRODUCTION
Before detailing why summary judgment is proper here, JPI calls this Court’s attention to the
fact that in their submissions, Plaintiffs have repeatedly used the term “Jan-Pro” to refer to JPI.
In so doing, they conflate JPI with its Regional Master Franchisees who use the trade name “Jan-
Pro.” Plaintiffs actually have no evidence of any wrongdoing by JPI or any evidence of any
interaction by JPI with them at all. To the contrary, there are more than 200 undisputed facts
submitted herewith that there is no such evidence.1 Thus, when the Plaintiffs claim wrongdoing
by “Jan-Pro” in this action, they are actually referring to alleged wrongdoing by JPI’s Regional
Master Franchisees; here, CNI and New Venture. However, piecing together the actual facts
from Plaintiffs’ franchise purchases and operations -- including more than 50 undisputed facts
for all Plaintiffs -- shows no wrongdoing on the part of CNI or New Venture at all.
1 The remaining alleged “disputed” facts are actually not “materially” or even “genuinely”
disputed when fully examined. See Banga v. First USA, NA, 29 F.Supp.3d 1270, 1275 (N.D.
Cal. 2014) (“A material fact is one that could affect the outcome of the suit under the governing
substantive law.” . . . “For a dispute to be ‘genuine,’ a reasonable jury must be able to return a
verdict for the nonmoving party.” (citing, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
106 S.Ct. 2505, 91 L.Ed2d 202 (1986)).
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DEFENDANT’S NOTICE OF MOTION AND MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, IN THE
ALTERNATIVE, SUMMARY ADJUDICATION
7
At its essence, Plaintiffs’ case amounts to nothing more than alleging that the Master
Franchise structure JPI has in place is, based on that structure alone, a direct employment
relationship with JPI. That is, Plaintiffs claim they are not subfranchisees (as California law
defines them), but truly misclassified employees directly employed by JPI. As set forth below,
such claim fails under established precedent and undisputed facts, including the fact that
Plaintiffs all have a legitimate franchise relationships with CNI and/or New Venture, which are
separate corporations from JPI, and Plaintiffs have no relationship at all with JPI.
II. BACKGROUND FACTUAL SUMMARY
JPI is a Master Franchisor and has trademarked the “Jan-Pro” logo which, broadly stated,
is associated with quality commercial cleaning. See Defendants’ Statement of Material Facts
With Plaintiffs’ Responses (“SOF”), filed herewith, ¶¶ 1, 3. For its business, JPI sells exclusive
regional rights to use that logo to entities known as regional master franchisees. Id. ¶¶ 4, 13.
When a master franchisee buys those rights – which it buys for substantial sums -- it becomes a
franchisor in its region (commonly called a “Master Owner,” but known specifically under
California law as a “subfranchisor”), must comply with Federal and California franchise laws as
a franchisor, and is licensed to use the “Jan-Pro” trademark/logo. Id. ¶¶ 5, 8, 9; see also
Declaration of Jeffrey M. Rosin, Exhibit 3, Compendium of Exhibits and Deposition Transcripts
Tab (referred to hereafter as “CE-Tab”) CE-Tab 8A at 20 (showing CNI paid $150,000 for its
regional rights). In turn, Master Owners sell what are known as “unit franchises” (known
specifically under California law as “subfranchisees”), and they seek to grow and promote the
“Jan-Pro” brand in their regions.2 Id. ¶ 10. JPI does not sell unit franchises. Id. ¶ 11.
JPI has only 15 of its own employees, and Master Owners are separate corporate entities
from JPI. Id. ¶¶ 2, 7. Among other things, they have their own corporate names, structures,
employees, operations, marketing and accounting, and they have no subsidiary or other family
corporate status with JPI. Id. Similarly, unit franchisees are separate entities (and often
2 The practice of subfranchising is recognized in the Code of Federal Regulation and the
California Corporations Code. See 16 C.F.R. § 436.1(k); CAL. CORPS. CODE §§ 31008.5, 31009.
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DEFENDANT’S NOTICE OF MOTION AND MEMORANDUM OF POINTS AND
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8
incorporated) from the Master Owners. Id. ¶¶ 19, 20. Among other things, unit franchisees have
their own business names, structures, employees, operations and accounting and they can (and
do) market and solicit their own cleaning accounts. Id. Both Master Owners and unit franchisees
can (and do) sell their businesses. Id. ¶¶ 5, 22; see also CE-Tabs 8A, 9A at Section 11.
Richard Kissane (“Kissane”), JPI’s President and CEO and Rule 30(b)(6) witness,
summarized the above:
Q. Tell me a little bit about more Jan-Pro International generally. What does Jan-Pro
International do?
A. What we do, we are a franchise company. So, you know, we sell master
franchises.
Q. What do the master franchises do?
A. They do – they also – they are also franchisers, and they sell unit franchises, and
they sell account cleaning contracts.
Q. What do the unit franchisees do?
A. They do the cleaning.
Id. ¶ 13. None of JPI’s acknowledged employees performs cleaning services. Id. ¶ 14.3
Master Owners perform three basic services for unit franchisees after giving them some
initial training:
(a) business development (i.e., finding cleaning accounts);
(b) billing and collecting from customers for the cleaning work performed; and
(c) distribution of revenue.
Id. ¶ 16. JPI does not perform any of those three services for unit franchisees. Id. ¶ 17.
JPI’s Master Franchise structure is a conventional option available when a company
chooses to franchise,4 different than where, for example, a franchisor sells franchises directly to
persons who operate a location (e.g., Money Mailer® franchises, Del Taco® franchises). At its
3 Plaintiffs claim to dispute this, stating that they are JPI’s employees and therefore they
are performing cleaning services for JPI. This is legal argument and not a dispute of fact.
However, JPI has changed the term to “acknowledged” employees, so there is no dispute.
4 See Andrew F. Perrin et al., Multi-Unit Franchising – The Risks and Benefits, American
Bar Association 28th Annual Forum on Franchising, at *1, 16-19 (Oct. 19-21, 2005) (noting
primary reason for a franchise system to have this structure is growth and detailing
benefits/disadvantages of master franchising).
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DEFENDANT’S NOTICE OF MOTION AND MEMORANDUM OF POINTS AND
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essence, the Master Franchise structure allows for a more rapid spread of a brand/trademarks
geographically.5 It need only set up safeguards to protect and preserve its trademark.
Plaintiffs herein each purchased a unit franchise from a Master Owner (CNI or New
Venture) and, thus, have a franchise agreement and contractual relationship with a Master
Owner. Id. ¶¶ 28-30. No Plaintiffs herein have any contractual relationship with JPI itself. Id. ¶
34. Nor do they have any business dealings with anyone at JPI itself. Id. ¶¶ 35-38, 40. In their
depositions, all three Plaintiffs disclaimed any knowledge of JPI. Id. ¶¶ 37-38.
These undisputed facts are a critical foundation to address the categories of Plaintiffs’
claims: (i) that Plaintiffs’ Master Owners, as alleged agents of JPI, engaged in unfair business
practices for which JPI should be vicariously liable (Count I), (ii) that Plaintiffs are employees of
JPI and JPI has committed Labor Code violations (Counts II and III), and/or (iii) that JPI has
been unjustly enriched or should be liable in quantum meruit (Counts VI and VII (sic)).
As set forth below, JPI cannot be liable under any of these legal theories. Notably,
discovery revealed that no Plaintiff even has a viable claim for wrongdoing against his/her
individual “Master Owner” from the outset. They all bought franchises pursuant to California
and federal law, and received the necessary disclosures before their purchases. Further, all
Plaintiffs also received at least the benefits of their contractual bargains with their Master
Owners; in fact, they all received more than that. That said, even if one or more Plaintiffs had
evidence of wrongdoing by his/her Master Owner, JPI would not be liable for it.
The fundamental flaw in Plaintiffs’ theory of vicarious liability, as well as their theory of
employment by JPI, is that JPI does not exert any functional or day-to-day control over
Plaintiffs’ Master Owners, and JPI has no dealings with Plaintiffs at all. There are over 200
undisputed facts in the parties’ previous submissions which demonstrate as much. Such facts,
coupled with well-developed standards of law, are fatal to Plaintiffs’ claims, as such standards
5 In this way, JPI is different than other national franchisors of commercial cleaning
brands, such as Coverall North America and Jani-King International, who operate by either
directly selling franchises to persons or entities who do the cleaning or who have corporate
subsidiaries who sell franchises. (See Compendium of Exhibits filed herewith (CE), Tab 1, ¶ 11).
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require that JPI exercise “a comprehensive and immediate level of day-to-day authority” over the
alleged wrongdoing. See Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 499, 333 P.3d 739-
740 (Cal. 2014). As the California Supreme Court stated: “any other guiding principle would
disrupt the franchise relationship.” Id. 60 Cal. 4th at 498, 333 P.3d at 739; see also id. 60 Cal. 4th
at 499, 333 P.3d at 739 (“we cannot conclude that franchise operating
systems necessarily establish the kind of employment relationship that concerns us here. A
contrary approach would turn business format franchising “on its head.”). Plaintiffs’ unjust
enrichment and quantum meruit theories of liability stretch law and logic as well in this regard,
and JPI should be granted summary judgment on all Counts.
III. LEGAL ARGUMENT
1. This Court Should Grant Summary Judgment For JPI On Count I
To succeed on Count I, Plaintiffs first have the burden of proving an agency relationship
existed between their Master Owners and JPI. Given the standards of agency law that apply in
the franchise context, and the undisputed facts herewith, neither CNI nor New Venture are JPI’s
agent. Even if CNI and/or New Venture were JPI’s agent, given the undisputed facts, this is of
no consequence, as neither CNI nor New Venture even engaged in any wrongful conduct, let
alone wrongful conduct that rises to the level of a statutory violation of the California Business
& Professions Code, § 17200 et seq.. Finally, even if there was some “unlawful,” “unfair,” or
“fraudulent” practice to support an unfair competition claim under Section 17200 against CNI
and/or New Venture, JPI did not “enter the arena” and exercise “comprehensive” or “day-to-day
control” over the matter, as Patterson supra requires, and thus, JPI cannot be liable for it. As
such, on one or more of these grounds, summary judgment is proper for JPI on Count I.
A. Neither CNI Nor New Venture Were JPI’s Agent Under The
Standards Of Law That Apply In The Franchise Relationship
A critical element of being a franchisor, as recognized by both federal and state franchise
law, is that a franchisor exercise “a significant degree of control” over its franchisees. See 16
C.F.R. § 436.1(h)(2) (stating the three definitional elements of a franchise); CAL. CORPS. CODE §
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31005(a) (discussing how franchisee’s business must be “substantially proscribed” by the
franchisor and “substantially associated” with the franchisor’s business). In fact, both federal
and state trademark law require the franchisor, as licensor-trademark holder, to supervise and
have a right to monitor the operations of the franchisee-licensee to ensure the quality of
goods/services bearing the trademarked name, as failure to do so may cause it to lose its rights in
the trademark. See 15 U.S.C. §1064(5)(A), CAL. Bus. & PROF. CODE § 14230(c)(1), (d); see
also CAL. Bus. & PROF. CODE § 14272 (noting that California trademark law should be interpreted
consistent with the Lanham Act); see also Baramerica Int’l USA Trust v. Tyfield Imps., Inc., 289
F.2d 589, 595-596 (9th Cir. 2002); Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358,
366 (2d Cir. 1959) (“[The Lanham] Act places an affirmative duty upon [trademark holder] to
take reasonable measures to detect and prevent misleading uses of his mark by licensees or suffer
cancellation of his federal registration”). As the 7th Circuit stated: “The purpose of the Lanham
Act, however, is to ensure the integrity of registered trademarks, not to create a federal law of
agency . . . [or to] automatically saddle the licensor with the responsibilities under state law of a
principal for his agent.” Oberlin v. Marlin Am. Corp., 596 F.2d 1322, 1327 (7th Cir. 1979)
(emphasis added); see also Torres v. Goodyear Tire & Rubber Co., Inc., 867 F.2d 1234, 1236
(9th Cir. 1989) (trademark holder not liable for licensee/subsidiary harm as licensee/subsidiary
not an agent); L.A. Gear, Inc. v. E.S. Originals, Inc., 859 F. Supp. 1294, 1300 (C.D. Cal. 1994)
(licensor not liable despite exercising control).
Thus, while under traditional principles of agency law, the principal’s mere “right of
control” over the agent may establish an agency relationship, the law is different in franchising,
and the California Supreme Court has recognized as such in Patterson, noting:
[A] franchise contract consists of standards, procedures, and requirements that regulate
each [Domino’s] store for the benefit of both parties. This approach minimizes chain-
wide variations that can affect product quality, customer service, trade name, business
methods, public reputation, and commercial image. . . . More to the point, there are
sound and legitimate reasons for business format contracts.
60 Cal.4th at 497, 333 P.3d at 738-739. The Court went on to recognize that such standards,
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procedures and requirements could not, standing alone, create liability in the franchise context.
Instead, the Court went on to state that to become potentially liable for the actions of a franchisee
(here, CNI and/or New Venture), the franchisor must “enter the arena” and retain or assume
control over “day-to-day” aspects of the harm alleged. Id. As the Court stated, “[a]ny other
guiding principle would disrupt the franchise relationship.” Id.6
In reaching its decision, the Court in Patterson recognized that its position was consistent
with the majority rule across the country, summarized in the widely cited case of Kerl v. Dennis
Rasmussen, Inc., 682 N.W.2d 328, 338 (Wis. 2004). Of note, Kerl was also followed in prior
proceedings in this matter to resolve the Massachusetts plaintiff’s case, Depianti v. Jan-Pro
Franchising Int’l, Inc., 465 Mass. 607, 990 N.E.2d 1054, 1063 (2013) (answering certified
questions in this matter when pending in Massachusetts). See Patterson, 60 Cal.4th at 499, 333
P.3d at 739 (citing, Depianti and Kerl). Such precedent should again be followed here.
Here, it is undisputed that CNI and New Venture are separate corporations from JPI, with
their own operations, staff and vendors, and with only the bare minimum of oversight by JPI
necessary for JPI to protect its brand and goodwill. See SOF ¶¶ 1-9; 59-77.7 Of particular note,
Master Owners rarely communicate with, and hardly ever even receive a visit from JPI. Id. ¶¶
59, 61, 63, 69-70, 72-76, 78-81, 111. It is also undisputed that that they purchased their regional
rights from JPI pursuant to state and federal franchise laws, which make them subfranchisors
responsible for complying with state and federal franchise laws themselves. See SOF ¶¶ 9, 44,
45. CNI’s and New Venture’s Master Franchise Agreements with JPI also expressly state that
6 As an example, a franchisor will proscribe standards for operations, and need to train
franchisees in those standards, and such training is expressly anticipated and/or provided for by
the state and federal franchise law. See 16 C.F.R. §§ 436.4 (at Item 11), 436.5 (explaining how
franchisors must describe training provided by franchisor to franchisees, including in § 436(k) at
Table 11); see also CAL CORPS CODE § 31113 (California law anticipating that "training" could be
an "item included in the offering" by the franchisor). Thus, a franchisor’s training in brand
standards cannot be a basis for agency liability without "turning franchising on its head.”
7 Plaintiffs claim to “dispute” facts that JPI sets forth in Paragraph 59-77 about JPI’s lack
of oversight of Master Owners, but Plaintiffs’ alleged disputes are not material or genuine. They
either do not address the facts cited, or they constitute mere argument without facts.
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they are not JPI’s agents (see CE-Tab 8A and Tab 9A, each at Section 15.6) which the California
Supreme Court recognizes is one relevant factor to finding they are not agents of JPI. See
Patterson, 60 Cal.4th at 500, 333 P.3d at 740.
Both CNI and New Venture also submit affidavits in support of this Motion describing
how JPI has no involvement in any aspect of their operations including, in particular, anything
having to do with Plaintiffs’ franchises, their cleaning accounts and the pricing of those accounts.
See generally CE-Tab 8 (Affidavit of Fulton Connor), CE-Tab 9 (Affidavit of Carmen Garcia).
Indeed, JPI’s complete lack of involvement in CNI’s and/or New Venture’s business operations
is either expressly undisputed on most facts, or not materially and genuinely disputed on all other
facts. See JPI SOF ¶¶ 52-174; see also Note 8, supra. While Plaintiffs claim in numerous places
in JPI’s SOF herewith that various undisputed facts are “Not Material,” Plaintiffs miss the point.
The undisputed facts they claim are “Not Material” are highly material to showing that JPI is not
exercising the day-to-day or operational control over CNI and/or New Venture so as to create an
agency relationship from the outset. Summary judgment should be granted in favor of JPI on
Count I for all three Plaintiffs on this ground alone. Plaintiffs have not (and cannot) establish
that CNI or New Venture was JPI’s agent.
B. Neither CNI Nor New Venture Engaged In Any Wrongful Conduct,
Let Alone Conduct That Rises To The Level Of A Violation of Section 17200
None of the Plaintiffs allege (or have evidence of, because there is none) a violation of
the California Franchise Investment Law or the California Franchise Relations Act either in the
course of their franchise purchases or in the operation of their franchises. See CAL. CORPS. CODE
§§ 31000-31516; CAL. BUS. & PROFS CODE §§ 20000-20043. Thus, it is fair for this Court to
conclude that CNI and New Venture sold franchises to Plaintiffs in conformance with those
laws. Moreover, to the extent Plaintiffs’ first cause of action -- their UCL claim -- is based on
JPI allegedly willfully misclassifying them under California Labor Code Section 226.8, Plaintiffs
lack standing to bring such a claim, as such statute does not provide a private right of action. See
Noe v. Superior Court, 237 Cal.App.4th 316, 334-41 (2015); see also Pineda v. Bank of America,
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N.A., 50 Cal.4th 1389, 1401-02 (2010) (civil penalties are not recoverable as restitution under
UCL). JPI submits that Plaintiffs cannot actually point to anything CNI and New Venture did
wrong, let alone JPI.
CNI/New Venture certainly did nothing wrong when they did not make the Plaintiffs’
franchise agreements available in other languages, as alleged in Paragraphs 22-24 of the Second
Amended Complaint. See Juarez v. Jani-King of California, Inc., No. 09-3495-SC, 2012 WL
177564 at * 9 (N.D. Cal. Jan. 23, 2012) (recognizing there is no such obligation under the
franchise law, and that persons are presumed to read and understand documents before they sign
them (citations omitted)). This is particularly so for Vazquez, who admittedly reads and
understands English. See SOF ¶ 452.
They also did nothing wrong in the course of Plaintiffs’ franchise relationships, as
generally alleged in the remaining Paragraphs in the Second Amended Complaint. To prove an
unfair competition law claim in violation of Section 17200: “[A] plaintiff must establish that the
practice is either unlawful (i.e ., is forbidden by law), unfair (i.e., harm to victim outweighs any
benefit) or fraudulent (i.e., is likely to deceive members of the public).” Creager v. Yoshimoto et
al., No. C 05-01985 JSW, 2007 WL 2938168, at *4-5 (N.D. Cal. Oct. 9, 2007) (analyzing claim
under California Business and Professions Code). Further, such claims carry a 4-year statute of
limitations. See CAL. BUS. & PROF. CODE § 17208.
It is unclear what Roman is claiming was wrongful at all. Roman purchased a franchise
for $5,000 in annual business, and she received more than $5,000, specifically noting she was
given more accounts when she asked. (SOF ¶¶ 436-438, 447) As of 2009, Roman was billing
more than $30,000 in annual revenue. (CE-Tab 8) Various issues with Roman’s accounts,
including written customer complaints of poor service and theft, are documented in CE-Tab 8D,
¶ 10 and in Tab 8D at 32-22, 60-62, 66, 68-70. See also SOF ¶¶ 438, 444-446.8
Regarding Aguilar, to the extent he is claiming that there was some misrepresentation
8 Roman is also one of the plaintiffs in this case who freely and openly operates an entirely
different cleaning business from her Jan-Pro franchise. (See JPI SOF ¶¶ 440-441, 345; see also
DE-67, CE-Tab 8 (Connor Affidavit), ¶ 11).
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made to him at the time he purchased his franchise, such a claim would be time-barred, as he
purchased his franchise in 2003, see SOF ¶ 409, and the initial complaint in this matter was filed
over 5 years later, on April 18, 2008. See Docket Entry 1. Thus, to pursue a viable claim through
trial, Aguilar must prove some wrongdoing after the purchase of his franchise, and after April 18,
2004, and prove that such wrong was unlawful, unfair or fraudulent. Aguilar has no such claim.
To briefly recap the undisputed facts submitted herewith, Aguilar does not dispute that (i) he
purchased a franchise promising him $5,000 in gross annual billings and received much more
than that (i.e., as of 2009, he was billing more than $30,000 in annual revenue (see CE-8 (Connor
Affidavit) ¶ 8)), (ii) he understood the fees he would be charged in the course of his franchise
business (which were explained to him before his purchase in his UFOC), (iii) CNI, his Master
Owner, had more than enough accounts for him, (iv) his accounts were geographically
convenient, (v) he was never promised some supposed hourly rate of pay, and (vi) he was never
told how many hours it would take to service his accounts. See SOF ¶¶ 409-416, 419-422.
The two claims Aguilar makes of alleged wrongdoing are completely vague,
unsupported, and refuted by affirmative evidence from CNI. First, Aguilar vaguely suggests he
lost accounts without explanation, although when pressed at his deposition, he could not name
one. Id. ¶ 423. It is Aguilar’s burden to name such account(s), however, but to be sure, CNI
submits herewith affirmative evidence of multiple written complaints produced by CNI
pertaining to his accounts, which led to account termination or non-renewal. See SOF ¶ 423
(with cites to CE-Tab 8 ¶¶ 8-9 and CE-Tab 8C) Second, Aguilar also claimed at his deposition
that he was charged fees on his Walgreens account after he stopped cleaning it; however, both of
these claims are also refuted by affirmative evidence from CNI, which includes Aguilar’s
monthly revenue statements after he stopped cleaning the Walgreens account. See SOF ¶¶ 423-
424. As such, there is no genuine or material dispute on these issues.
The same is true for Vazquez, who purchased a franchise for $20,000 in annual billings
on July 5, 2007, and he was offered and accepted accounts worth $20,712 in annual billings
(notably, without having to pay a Sales & Marketing Fee on the extra gross revenue). See SOF
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¶¶ 450, 452, 456-457. All of his accounts were within 10-20 miles of his home and he agreed he
did not have an issue with their geographic location. See SOF ¶ 460. He never lost any accounts,
a fortiori, he never had any accounts “taken” away. See SOF ¶¶ 466-467. Vasquez claims he
could not operate profitably, see SOF ¶ 469, further stating that he was promised a $25-$30
hourly rate of pay upon his franchise purchase. Id. ¶ 470. However, this is not a trial worthy
claim because Vasquez does not dispute he was in charge of how the cleaning got done (whether
he did it himself or whether he paid his mother to help him), and no one ever represented to him
the amount of hours it would take him to clean his accounts. Id. ¶¶ 461, 462, 470. In other
words, the efficiency of his cleaning was up to him, and whether he incurred employee expenses
to meet the needs of customers was up to him. With these two components entirely within his
control, Vasquez’s “hourly earnings” were also entirely within his control.9
Notably, Vasquez’s claim regarding earnings or profitability are also plainly refuted by
the express terms of his own UFOC when he purchased his franchise that informed him that CNI
was not making any earnings claims and he could not (and should not) rely on any such claims if
they were being made. See CE-Tab 26 at Item 19, pp. 22-23 (no representations being made as to
profits, operating expenses, and noting that profits depend on the quality and efficiency of
cleaning services franchisee performs, as well as management of expenses). It further informed
him that if he felt any such representations had been made, he must provide a written statement
as such next to his signature on his franchise agreement. Id. at 23. Vasquez never did that. See
9 Still, JPI has gone a step further to put Vasquez’s claim to rest with affirmative evidence
from New Venture. Vaszquez had only 4 accounts during his short tenure as a franchisee. The
new unit franchisees cleaning three out of the four of Vazquez’s accounts – i.e., Calidad,
Supercuts and Kindercare – informed New Venture that it takes 2.0 hours per night clean Calidad
(which account is cleaned one night per week), 1.0 hour per night to clean Supercuts (one night
per week also), and 3.0 hours per night to clean Kindercare (five nights per week), and the scope
of the work requested by those customers and the days of the week these accounts are cleaned
has not changed since Vazquez serviced them. See SOF ¶ 471; Garcia Aff. at ¶ 6. Coupled with
Vazquez’s testimony that it took him an average of 3 hours per night to clean Caritas Counseling
(two nights per week) see JPI SOF ¶ 458, 472, a unit franchisee servicing all four of these
accounts would work 24 hours per week. Given that Vazquez’s monthly revenue was $1,726 per
month, see JPI SOF ¶ 456, it is clear that his claim of lack of profitability lacks merit.
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CE-Tab 26. Finally, Vaszquez’s franchise agreement informed him that “[s]uccess, financial or
otherwise, is not guaranteed by [New Venture].” See CE-Tab 18, Section 13.
Such disclaimers provide the legal basis for dismissal of any alleged misrepresentation
regarding Vasquez’s profitability. See, e.g., California Bagel Co. v. America Bagel Co., No. CV
97-8863, 2000 WL 35798199, at *1 (C.D. Cal. June 7, 2000) (granting summary judgment on
claims of fraud/misrepresentation disclaimed by offering circular and franchise agreement). This
conclusion is even more compelling given that, when Vasquez signed his franchise agreement, it
made clear that it was a fully integrated contract in which Vasquez expressly agreed he was not
relying on any statements made outside such document. See Tab 18 at Section 17, p. 15. See
Duncan v. McCaffrey Grp., Inc., 200 Cal. App. 4th 346, 369 (Cal. Ct. App. 2011 (“[A]n
integrated contract establishes terms of the agreement between the parties, and evidence
suggesting terms are other than those stated in the agreement is irrelevant.”); see also SOF ¶ 58.
On this ground as well, summary judgment is proper for JPI on Count I.
C. Even If Any One Or More Plaintiff Had Proof Of A Wrong By CNI
And/Or New Venture Giving Rise To An Unfair Competition Claim Under
Section 17200, JPI Exercised No “Complete” Or “Day-To-Day” Control
Over The Wrong, As Patterson Requires In Order To Hold JPI Liable
For this argument, JPI incorporates by reference the points it made in Part I.A above
regarding the more than 200 undisputed facts here, and remainder that are not genuinely
disputed. Further stating, as for Aguilar and Roman, there is no evidence whatsoever that JPI
was ever involved in the “day-to-day” operations of CNI’s business, let alone the alleged
wrongful taking of accounts, or alleged ongoing fees charged after termination of an account (of
which there were none). To the contrary, there is clear evidence from CNI there was no such
involvement whatsoever. See CE-Tab 8. Fulton Connor’s affidavit on behalf of CNI provides
affirmative evidence that even if Aguilar or Roman could claim some “harm” here (which they
cannot), JPI “never had any involvement with Aguilar or Roman’s businesses or other unit
franchisees’ business or Aguilar or Roman’s cleaning accounts or those of any other unit
franchisees.” Id. ¶ 7. Notably, Roman is still a franchisee today, which is nearly 13 years after
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she bought her franchise. Clearly, something is going just fine from her perspective.
As for Vasquez, JPI’s SOF herewith and the testimony from Carmen Garcia, Vice
President of New Venture, is clear: JPI had no role in New Venture’s business at all, let alone
Vasquez’s business. See SOF, 60, 64, 67, 75, 94, 109, 110, 123, 127; CE-Tab 9. JPI certainly
had no role (and there is no evidence it had a role) in any alleged claims about earnings or
profitability that Vasquez alleges. Consistent with the holding in Patterson, this is all a further
and final reason to grant JPI summary judgment on Count I.
IV. Plaintiffs Had No Employment Relationship with JPI and Judgment Should Enter
For JPI on Counts II and III
Plaintiffs are alleging JPI is their primary employer and that they are directly employed
by JPI.10 See Transcript of Hearing, November 20, 2008, at 15 (“We allege Jan-Pro International
is their employer. We don’t need to say that they’re joint employers with other entities that
we’re pursuing in arbitration.”11) Such theory of liability cannot withstand scrutiny in light of (i)
Plaintiffs having no contractual, business or financial dealings with, or even knowledge of, JPI,
and (ii) JPI not even having any records or knowledge of Plaintiffs themselves, or any
involvement in CNI’s or New Venture’s sale of franchises to them, their customer accounts,
customer dealings, or business operations. See SOF ¶¶ 23-40, 81, 116-120, 137, 148, 158-159,
165, 403-473. Given that JPI has a Master Franchise structure, moreover, which inherently
means it has no regional control, JPI is even further attenuated from the franchise relationships in
Juarez, et al. v. Jani-King of California, et al., Civil Action No. 09-3495 SC, 2012 WL 177564,
10 Plaintiffs are judicially estopped from claiming a joint employment relationship, as set
forth by JPI in the parties’ Case Management Conference statement. (See Docket Entry 229 at 7-
8 (citing, Rissetto v. Plumbers and Steamfitters Local 343, 94 F.3d 597, 600 (9th Cir. 1996)
(“Judicial estoppel, sometimes also known as the doctrine of preclusion of inconsistent positions,
precludes a party from gaining an advantage by taking one position, and then seeking a second
advantage by taking an incompatible position.”)
11 Plaintiffs’ franchise agreements all require arbitration of claims of wrongdoing against
their Master Owners, who are not parties to this case (however, by now, such attempts would be
time-barred); see also Note 1, supra.
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*12 (N.D. Cal. Jan. 23, 2012) that this Court found not to constitute an employment relationship.
There, Jani-King contracted directly with, and actually sold franchises to, the franchisees who
were suing them, and the Court recognized there was no employment relationship between them
and granted summary judgment to Jani-King on plaintiffs’ labor code claims. Id. at *1.12
In fact, JPI is not aware of any court precedent finding a Master Franchisor the direct
employer of its subfranchisees; and there are certainly no cases finding as such where there are
so many undisputed facts detailing JPI’s lack of any involvement even in the business of CNI and
New Venture, Plaintiffs’ actual franchisors. See JPI SOF ¶¶ 5-170. In 2014, Patterson supra set
forth the standard for this Court’s analysis of employment-based claim against a franchisor.
Thus, as set forth above under Patterson, Plaintiffs must prove that JPI “enter[ed] the arena” and
has a “comprehensive and immediate level of day-to-day control” over their business operations.
60 Cal. 4th at 499, 333 P.3d at 739-740.
Notably, the Patterson case involved a claim by the franchisee’s acknowledged employee
against the franchisor. Here, JPI does not acknowledge, and specifically disputes, that Plaintiffs
even have an employment relationship with their actual franchisors, CNI and New Venture. In
fact, while not precedent here, the Employment Development Department (“EDD”) recently
audited CNI and initially asserted that CNI’s franchisees were its employees; CNI petitioned for
review before the California Unemployment Insurance Appeal Board (“CUIAB”); CUIAB held a
5-day hearing in 2014 before an Administrative Law Judge (“ALJ”), and the CUIAB determined
that CNI’s franchisees were not its employees, citing Patterson.13 See CE-Tab 52. This decision,
12 This case is before the 9th Circuit, but it remains useful guidance given that JPI is once
removed from the position of the defendant Jani-King, who contracted directly with the
plaintiffs, sold them their franchises, performed billing/collection services for them, and
interacted with their customers.
13 This decision was later vacated because the ALJ who heard the evidence was laid off
before he could issue a decision, and because of that, he was not the ALJ who decided the case.
This, the CUIAB found, violated “due process.” CNI has challenged that, as CNI believes that
both EDD and CNI stipulated to the new ALJ deciding the case. CNI’s challenge was dismissed
on procedural grounds. No subsequent proceedings are scheduled. In addition, CNI also was
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and the analysis in it, should be persuasive; it certainly makes the Patterson standards even more
difficult for Plaintiffs to satisfy here given that JPI is not even in the same kind of relationship
with Plaintiffs that CNI has.
The Court of Appeal for the 4th District provided a foundational basis for the Patterson
holding in Cislaw v. Southland Corp., 4 Cal.App.4th 1284, 1296, 6 Cal.Rptr.2d 386 (Cal. Ct.
App. 1992). There, the court digested numerous cases and determined that, where there is a
legitimate franchisor-franchisee relationship (as there was between Aguilar and CNI and Roman
and CNI, and as there was between Vazquez and New Venture (see SOF ¶¶ 28-30)), there must
be a showing that the franchisor exercised control “beyond that necessary” to protect and
maintain its interest in its trademark, trade name, and good will to establish a prima facie case of
an employer-employee relationship. Id. The Cislaw court digests numerous cases and ultimately
recognized in the franchise context as follows: “California courts have consistently held that a
principal-agent relationship exists only when the franchisor retains complete or substantial
control over the daily activities of the franchisee's business.” Id. at 1296 (emphasis added).
Here, even accepting Plaintiffs’ argument at face value, and ignoring CNI and New
Venture, there is no evidence whatsoever that JPI exercised any control over Aguilar, Roman and
Vasquez in any way; a fortiori, there is no evidence that JPI exercised “comprehensive,”
“complete” or even “substantial” control over them. Notably, this is exactly what prior
precedent held regarding the Massachusetts plaintiff, Giovanni Depianti (“Depianti”), who
contracted with a Massachusetts regional master franchisee, BradleyMktg Enterprises. First, the
Georgia Court of Appeals recognized that JPI did not “control” Depianti’s business, and that this
was one of a number of reasons Depianti was not JPI’s employees. See Jan-Pro Franchising Int’l,
Inc. v. Depianti, 310 Ga. App. 265 (2011) (reconsideration/ petition for certiorari denied, July 9,
2013). Next, prior to transferring the remainder of this case to this Court, the Massachusetts
federal court not only applied res judicata regarding that Georgia ruling, but recognized that
audited by the Federal Department of Labor during the same time period, and DOL found no
misclassification or violations.
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under the undisputed facts, the ruling was proper and, among other things, JPI did not control
Depianti. (See D. Mass. Civil Action No. 08-10663, N.D. Cal. Civil Action No. 3:2016-cv-
05961, Docket Entry 191, August 22, 2014 Memorandum and Order at 27-36 (published at
Depianti v. Jan-Pro Franchising Int’l, Inc., 39 F. Supp. 3d 112 (D. Mass. 2014))
These identical findings regarding Depianti should apply to Plaintiffs here. To find
otherwise would be inconsistent with those rulings, but more importantly, it would also be
inconsistent with Patterson and other similar California case law. See also Singh v. 7-Eleven,
Inc., No. C-05-04534 RMW, 2007 WL 715488, at *6-7 (N.D. Cal. Mar. 8, 2007) (granting
summary judgment in favor of franchisor on labor law claims brought by franchisee's employees
claiming "employment relationship" with the franchisor as franchisor only exercising legally
required "controls" over franchisee).
Respecting the classification of Plaintiffs as franchisees here is particularly important
given that state and federal franchise laws actually define Plaintiffs as business owners. See CAL.
CORPS. CODE § 31005(a) (defining a franchise as a contract under which a “franchisee is granted
the right to engage in the business of offering, selling or distributing goods or services under a
marketing plan or system” (emphasis added); 16 C.F.R. § 436.1(h)(1) (“The franchisee will
obtain the right to operate a business that is identified or associated with the franchisor’s
trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or
associated with the franchisor’s trademark.”) Like any typical business owner, Plaintiffs here
bought a business; they chose to grow their businesses or downsize; they chose whether to do
work by rejecting accounts they do not like and accepting accounts they did like (whether based
on pricing, geography or any other reason); they chose to use employees to help them; they
coordinate issues directly with customers; and they can sell their businesses.14 See SOF, ¶¶ 417,
14 “Antithetical to typical employment arrangements, a franchise arrangement proceeds on
the premise that a franchisee can earn and retain the profits of his venture, and create a business
with an identifiable value that the franchise owner can sell for a profit.” Fredric A. Cohen ET
AL., When is Control by Franchisors Out of Control?, A.B.A. 34TH ANNUAL FORUM ON
FRANCHISING 5 (2011).
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425-429, 438-439, 442-443, 461, 462, 464; see also CE-Tabs 16-18, ¶ 21. These are all critical
indicia of business ownership; they are present here; and they should warrant the conclusion that
Plaintiffs are, in fact, business owners as the franchise laws define them.
This Court should grant summary judgment in favor of JPI on Counts II and III.
III. Counts VI and VII (sic) For Quantum Meruit And Unjust Enrichment Fail Because
Plaintiffs Had (1) No Expectation Of Compensation From JPI Or (2) Relationship
With JPI Upon Which To Base These Theories of Recovery
Summary judgment should be granted dismissing Counts VI and VII (sic) of Plaintiffs’
Second Amended Complaint. Before addressing such counts specifically, it is unclear from
Plaintiffs’ Second Amended Complaint what is being pleaded to support the claims. To the
extent such claims are predicated on new rights granted by the California Labor Code, Counts VI
and VII are barred by the “new right-exclusive remedy” doctrine. See Helm v. Alderwoods
Group, Inc., 696 F. Supp. 2d 1057 (N.D. Ca. 2009) (applying the “new right-exclusive remedy”
doctrine to dismiss claims for quantum meruit and unjust enrichment predicated on California
Labor Code violations for failure to provide meal and rest breaks and inaccurate pay stubs).
Taking Count VII for unjust enrichment first, in Parino v. BidRack, Inc. (WHA), 838 F.
Supp. 900, (N.D. Cal. 2011), this Court summarized unjust enrichment as follows:
In California, unjust enrichment is ‘not a cause of action ... or even a remedy, but rather a
general principle, underlying various legal doctrines and remedies. It is synonymous with
restitution.’ . . . Thus, a claim for unjust enrichment/restitution is properly pled as a claim
for a contract implied-in-law. It ‘does not lie when an enforceable, binding agreement
exists defining the rights of the parties.’ California does, however, recognize an
exception to the rule that unjust enrichment exists only when an enforceable contract
does not: ‘Restitution may be awarded in lieu of breach of contract damages when the
parties had an express contract, but it was procured by fraud or is unenforceable or
ineffective for some reason.’
Id. at 908 (citations omitted, emphasis added).
Here, Plaintiffs have no express contract with JPI. See SOF ¶¶ 28, 29, 30, 34. They have
contracts with CNI (plaintiffs Roman, Aguilar) and New Venture (plaintiff Vasquez), which
were entered into in compliance with state and federal franchise laws. See JPI SOF ¶¶ 404, 409,
434, 436, 448, 450; see CAL. CORPS. CODE § 31111 et seq. CAL Bus & Prof Code § 20000 et
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seq. (detailing state franchise law) 16 C.F.R. §§ 436.1 et seq. (detailing federal franchise law);
see also T-Bird Nevada LLC v. Outback Steakhouse, Inc., 2010 WL 1951145, at *3-4 (Cal. App.
2 Dist. 2010) (provide an overview of the regulatory requirements to sell a franchise).
As such, without an express contract with JPI, the “restitution” theory of liability does not
apply to JPI. Notably, as the holder of the trademark that Plaintiffs are sublicensed to use by
virtue of their franchise agreements with CNI and New Venture, JPI stands as a third party
beneficiary in Plaintiffs’ franchise agreements, and JPI receives royalty revenue from CNI and
New Venture as a result of CNI and New Venture’s franchise sales and revenue from
commercial cleaning. See SOF ¶¶ 172, 173). 15 However, as a mere third party beneficiary and
holder of a trademark, JPI is not liable to Plaintiffs under Plaintiffs’ contracts with CNI/New
Venture. See Comer v. Micor, Inc., 436 F.3d 1098, 1102 (9th Cir. 2006) (recognizing that third
party beneficiary cannot be sued for breach of contract where it is not a party to contract);
National Rural Telecommunications Cooperative v. DirecTV, Inc., 319 F. Supp. 2d 1059, 1067
(C.D. Cal. 2003) (same); cf. Paulsen v. CNF Inc., 559 F.3d 1061, 1079 (9th Cir. 2009)
(recognizing that, on the contrary, third party beneficiaries may have rights to enforce contracts);
see also Motorsport Engineering, Inc. v. Maserati SPA, 316 F.3d 26, 29 (1st Cir. 2002)
(recognizing that third party beneficiary is not liable to either party to a contract it did not sign,
even if the third party beneficiary is given rights to enforce the contract, citing Restatement
(Second) of Contracts § 304 (1981); Farnsworth, Contracts § 10.9, at 773 (1990)).
For these reasons, summary judgment should be granted in favor of JPI on Count VII.
Without an express contract, Plaintiffs attempt a quasi-contract theory of liability,
alleging in Count VI that JPI is liable to them in quantum meruit. However, quantum meruit
does not apply here either. As one Court has summarized:
15 In the course of their franchise relationships with CNI and New Venture, Plaintiffs have
paid certain fees to CNI and New Venture as required by their franchise agreements. (See JPI
SOF ¶¶ 157, 169, 170; see also CE-Tabs 16-17, Section 7; CE-Tab 18, Section 8) JPI receives
an 8-10% royalty on the amount CNI/New Venture collects from initial franchise sales as well as
sales of new accounts to franchisees, and JPI receives a 3-4% royalty of the revenue CNI and
New Venture collect from customer account billing. (See JPI SOF ¶¶ 172, 173)
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Quantum meruit is an equitable remedy implied by California law. ‘The underlying idea
behind quantum meruit is the law's distaste for unjust enrichment. If one has received a
benefit which one may not justly retain, one should ‘restore the aggrieved party to his [or
her] former position by return of the thing or its equivalent in money.’ . . . In order to
establish a claim for quantum meruit, the plaintiff must prove that: (1) the plaintiff has
rendered services that benefitted the defendant, and (2) the defendant would be unjustly
enriched if the plaintiff was not compensated. . . . A plaintiff who has established these
elements is entitled to recover the “reasonable value” of the services provided.
Arrison v. Information Resources, Inc., No. C95-3554-THE, 1999 WL 551232, at *6 (N.D. Cal.
July 16, 1999). As another Court summarized, quantum meruit requires proof of four elements:
(1) that the plaintiff performed certain services for the defendant, (2) their reasonable
value, (3) that they were rendered at defendant's request, and (4) that they are unpaid.
Heller v. Adobe Systems Inc., 2016 WL 1213762, at *3 (N.D. Cal. Mar. 29, 2016) (emphasis
added, citations omitted).
Critically, to prove the claim, a plaintiff must show “the services were rendered under
some understanding or expectation of both parties that compensation therefor was to be made.”
Strong v. Beydoun, 166 Cal. App. 4th 1398, 1404 (Cal. App. 3 Dist. 2008) (emphasis added).
Here, Plaintiffs are attempting to apply this quasi-contract theory to JPI; however, it is
specifically “undisputed” that no plaintiff expected compensation from JPI. See JPI SOF ¶ 165
(Undisputed)). Further, even in their individual depositions, Aguilar directly admitted that he did
not expect compensation from JPI (see JPI SOF ¶ 407), and Roman and Vasquez presented no
proof that they did. To the contrary, all three Plaintiffs’ acknowledgement of not even knowing
about the existence of JPI demonstrates that they could not have expected anything from JPI, let
alone compensation. (See JPI SOF ¶¶ 37, 38 435, 453) In fact, all three Plaintiffs were
compensated by their franchisors, in compliance with their franchise agreements, from payments
their customers made to them, with their franchisors collecting the money and distributing it to
them. See SOF ¶ 16.
Plaintiffs purport to dispute that they did not know about JPI’s existence, primarily with
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the argument that they just understood there to be a “Jan-Pro” entity, but no separate entity called
“Jan-Pro Franchising, International.” (See JPI SOF ¶¶ 406, 408, 435, 453) However, this is not a
genuine dispute either, as Jan-Pro Franchising International was separately identified in their
franchise disclosure documents and franchise agreements. See, e.g., CE-Tab 26 at Item 1, ¶ 2;
see also Tab 20, where Vasquez acknowledges receipt of the UFOC; see also CE-Tab 18 at 1st
Whereas Clause, and 4C; CE-Tabs 16-17, Section 4C.
The quantum meruit theory of liability would certainly entitle Plaintiffs to sue their
customers, if for some reasons their customers did not pay for the services they requested, having
received the benefit of such services. This is because the customer would have requested the
services, and it would have been clear to both parties that the services were not “gratuitous” but
something for which one would reasonably expect to be paid. Cf. Strong, 166 Cal. App. 4th at
1404 (“law implies a promise to pay for services performed under circumstances disclosing that
they were not gratuitously rendered”); Heller, 2016 WL 1213762, at *3 (N.D. Cal. Mar. 29,
2016) (plaintiff’s complaint for quantum meruit dismissed, but plaintiff granted leave to replead
to show what services he actually performed for the defendant and what the value of those
services were); Raisin Bargaining Ass’n v. Hartford Cas. Ins. Co., 715 F. Supp. 2d 1079, 1090
(E.D. Cal. 2010) (party who might be liable in quantum meruit is one who consented to the
services but failed to pay for them). However, they cannot sue JPI under this theory.
Summary judgment should be granted in favor of JPI on Count VI.
IV. CONCLUSION
Summary judgment should be granted dismissing all claims of all Plaintiffs.
Dated: February 16, 2017
Respectfully submitted,
JAN-PRO FRANCHISING INTERNATIONAL, INC.
/s/ Jeffrey M. Rosin
Jeffrey M. Rosin (Admitted pro hac vice)
Philip J. Smith (SBN 232462)
CONSTANGY, BROOKS, SMITH & PROPHETE, LLP
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