Pope, Andrew v. Espeseth, Inc. et al

Brief in Reply

W.D. Wis.November 7, 2016

IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WISCONSIN Andrew Pope Joshua Rave On behalf of himself and all others similarly situated, Plaintiffs, v. Fish Window Cleaning Services, Inc. Espeseth, Inc. Anthony Espeseth, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 3:15-cv-00486 Defendant Fish Window Cleaning Services, Inc.’s Reply Brief in Further Support of Its Motion for Summary Judgment Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 1 of 37 -i- TABLE OF CONTENTS Introduction ......................................................................................................................................1 Argument .........................................................................................................................................3 I. Fish Window Cleaning is Not a Joint Employer Under The FLSA. ...................................3 A. There Is No Dispute That the Appropriate Legal Standard in Determining a Joint Employer Relationship Under the FLSA Requires a Finding of Control..................................................................................3 B. The Policy and Procedure Manual Franchisee Distributed Does Not Create an Employment Relationship Between Fish Window Cleaning and Plaintiffs. ............................................................................................5 1. There Is No Genuine Dispute of Material Fact that Fish Window Cleaning Required Neither Promulgation of the Policy and Procedure Manual Nor Franchisee Employees’ Compliance with It. ......................................................................................6 2. Even if Fish Window Cleaning Did Require Compliance with the Policy and Procedure Manual, It Would Not Be Sufficient To Create an Issue of Material Fact as to the Existence of an Employment Relationship Between Fish Window Cleaning and Plaintiffs. ...............................................................12 C. An “Effective Recommendation” Regarding a Compensation Program Is Not a Requirement and Does Not Create an Issue of Fact As to Whether Fish Window Cleaning Was Plaintiffs’ Employer. ...............................................................................................................15 II. Plaintiffs’ Apparent Agency Thoery Fails. ........................................................................18 A. Plaintiffs Have Not Pled a Claim for Liability Based on Apparent Agency. ..................................................................................................................19 B. There Is No Controlling Authority that Suggests Plaintiffs Can Rely on the Tort-Based Concept of Apparent Agency to Prove Fish Window Cleaning is Liable for Statutory Wage Claims. ......................................21 C. Plaintiffs have Offered No Admissible Evidence that Franchisees Act as Apparent Agents of Fish Window Cleaning. ..............................................24 III. Fish Window Cleaning Is Not an Employer of Plaintiffs Under Wisconsin State Law. ...28 Conclusion .....................................................................................................................................31 Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 2 of 37 -ii- TABLE OF AUTHORITIES Page(s) FEDERAL CASES Abels v. Farmers Commodities Corp., 2000 U.S. Dist. LEXIS 22887 (N.D. Iowa 2000) ....................................................................20 American Society of Mech. Engineers v. Hydrolevel Corp., 456 U.S. 556 (1982) .................................................................................................................21 Anderson v. Liberty Lobby, 477 U.S. 242 (1986) .................................................................................................................10 Arriaga v. Florida Pacific. Farms, LLC, 305 F.3d 1228 (11th Cir. 2002) ...............................................................................................22 Beck v. Boce Group, L.C., 391 F. Supp. 2d 1183, 1189–90 (S.D. Fla. 2005) ....................................................................13 Blakes v. Illinois Bell Tel. Co., 75 F. Supp. 3d 792 (N.D. Ill. 2014) ...................................................................................20, 21 Blood v. MTP., Inc., No. 02 C 50029, 2002 WL 31949885 (N.D. Ill. Jan. 14, 2002) ..............................................27 Butler v. Drive Automotive Indus. of Am., Inc., 793 F.3d 404 (4th Cir. 2015) .....................................................................................................5 Depianti v. Jan-Pro Franchising Int’l, Inc., 39 F. Supp. 3d 112 (D. Mass. 2014) ............................................................................29, 30, 31 Dinkins v. Varsity Constr. Inc., Case No. 04-C-1438, 2005 U.S. Dist. LEXIS 6732 (N.D. Ill. Mar. 10, 2005) ........................16 Donnelly v. Corvest Prop. Trust, 2010 U.S. Dist. LEXIS 54713 (C.D. Ill. 2010) ........................................................................17 Espenscheid v. Directsat USA, 2011 U.S. Dist. LEXIS 154706 (W.D. Wis. 2011) ................................................................3, 4 Freeman v. Foley, 911 F. Supp. 326 (N.D. Ill. 1995) ............................................................................................17 Hale v. State of Ariz., 993 F.3d 1387 (9th Cir. 1993) ...................................................................................................5 Hopkins v. Cornerstone Am., 545 F.3d 338 (5th Cir. 2008) .....................................................................................................5 Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 3 of 37 -iii- Howell v. Chick Fil-A, Inc., Case No. 92-30188-RV, 1993 U.S. Dist. LEXIS 19030 (N.D. Fla. 1993) ........................26, 27 Hulsey v. Gunn, Case No. 1:95-cv-403, 1995 U.S. Dist. LEXIS 17042 (N.D. Ga. Oct. 3, 1995) .....................13 In re Enter. Rent-A-Car Wage & Hour Employment Practices Litig., 683 F.3d 462 (3d Cir. 2012).........................................................................................11, 12, 18 Insolia v. Philip Morris, Inc., 216 F.3d 596 (7th Cir. 2000) ...................................................................................................20 Klein v. L-3 Comm’cns Corp., Case No. 1:12-cv-956-MEF, 2013 U.S. Dist. LEXIS 156663 (M.D. Ala. Nov. 1, 2013) ....................................................................................................................................13 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) .................................................................................................................10 Moldenhauer v. Tazewell-Pekin Consol. Commc’ns Ctr., 536 F.3d 640 (7th Cir. 2008) .............................................................................................3, 4, 5 Myers v. Garfield & Johnson Enterp., 679 F. Supp. 2d 598 (E.D. Penn. 2010) ...................................................................................23 Ochoa v. McDonald’s Corp., 133 F. Supp. 3d 1228 (N.D. Cal. 2015) ...................................................................................22 Pineda-Marin v. Classic Painting Inc., No. CV-08-798-HU, 2010 U.S. Dist. LEXIS 28827 (D. Ore. Mar. 25, 2010) ........................18 Pippenger v. McQuik’s Oilube, Inc., 854 F. Supp. 1411 (S.D. Ind. 1994) .........................................................................................24 Pona v. Cecil Whittaker’s, Inc., 155 F.3d 1034 (8th Cir. 1998) .................................................................................................23 Reyes v. Remington Hybrid Seed Co., 495 F.3d 403 (7th Cir. 2007) .....................................................................................................4 Shager v. Upjohn Co., 913 F.2d 398 (7th Cir. 1990) ...................................................................................................17 Singh v. 7-Eleven, No. C05-04534-RMW, 2007 WL 715488 (N.D. Cal. Mar. 8, 2007) ........................................5 Stomper v. Amalgamated Transit Union, Local 241, 27 F.3d 316 (7th Cir. 1994) .....................................................................................................21 Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 4 of 37 -iv- Vann v. Massage Envy Franchising LLC, Case No. 13-cv-2221-BEN (WVG), 2015 U.S. Dist. LEXIS 1002 (S.D. Cal. Jan. 6, 2015) .............................................................................................................................15 Williams v. Ford Motor Co., 990 F. Supp. 551 (N.D. Ill. 1997) ............................................................................................20 Wright v. Mountain View Lawn Care, LLC, Case No. 7:15-cv-00224, 2016 U.S. Dist. LEXIS 31353 (W.D. Va. Mar. 11, 2016) ........................................................................................................................................23 Wright v. Mountain View Lawn Care, LLC, No. 7:15-cv-224, 2016 WL 1060341 (W.D. Va. Mar. 11, 2016) ..............................................5 STATE CASES Armenta v. Osmose, Inc., 135 Cal. App. 4th 314 (Cal. Ct. App. 2005) ............................................................................22 Diaz v. AutoZoners, LLC, 484 S.W.3d 64 (Mo. Ct. App. 2015) ..................................................................................12, 13 Iowa Nat’l Mut. Ins. Co. v. Backens No. 69, 51 Wis. 2d 26 (Wis. 1971) .................................................................................................19, 24 Kerl v. Dennis Rasmussen, 672 N.W.2d 71 (Wis. App. 2003) .................................................................................... passim Kerl v. Rasmussen, 682 N.W.2d 328 (Wis. 2004) .......................................................................................24, 28, 30 Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474 (Cal. 2014) ................................................................................................14, 15 Ramirez v. Yosemite Water Co., 20 Cal. 4th 785 (Cal. 1999) ......................................................................................................22 FEDERAL STATUTES Fair Labor Standards Act ....................................................................................................... passim RULES Federal Rule of Civil Procedure 56 .................................................................................................1 Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 5 of 37 -1- Defendant Fish Window Cleaning Services, Inc. (“Fish Window Cleaning”), pursuant to Federal Rule of Civil Procedure 56 and the Standing Order related to Motions for Summary Judgment in cases assigned to Judge Peterson (ECF No. 33), submits the following Reply Brief in Further Support of Its Motion for Summary Judgment. Introduction When Plaintiffs first sought to hold Fish Window Cleaning liable for the alleged failure of one of its franchisees to pay their wages, they pled multiple allegations regarding the supposed control Fish Window Cleaning exerted over the franchised operation of Espeseth, Inc. and its owner, Anthony Espeseth (collectively “Franchisee”). They claimed this “control” resulted in an employment relationship between Plaintiffs and Fish Window Cleaning. But after months of discovery, Plaintiffs have tacitly conceded none of these allegations—for example, the claim that Fish Window Cleaning “[did not] permit franchisees to keep track of the number of hours worked by their window cleaners” (Am. Compl. at ¶ 15, ECF No. 14)—have any basis in fact or support in the record, and have abandoned their reliance on them. Instead, Plaintiffs have pivoted and now rely on two faulty arguments in an effort to create an issue of fact. They now claim that two tools that Fish Window Cleaning provided to Franchisee are sufficient to create a material issue of disputed fact regarding whether Fish Window Cleaning was Plaintiffs’ joint employer: (1) a sample Policy and Procedure Manual, which Fish Window Cleaning made available to its franchisees and which Franchisee in turn distributed to Plaintiffs, and (2) a suggested method of compensation for window cleaners that Fish Window Cleaning “effectively recommended” to Franchisee. Neither of these arguments creates an issue of fact sufficient to overcome Fish Window Cleaning’s summary judgment motion. As discussed below, there is no factual dispute that Fish Window Cleaning neither Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 6 of 37 -2- required promulgation of the Policy and Procedure manual by Franchisee nor Plaintiffs’ compliance with it. Even if there were a question of fact as to whether Fish Window Cleaning required Plaintiffs’ compliance with the policies in that Manual, it would be immaterial: mandatory compliance with employment policies is not sufficient to create an employment relationship where the entity promulgating the policies is not responsible for interpreting or enforcing them. Finally, Plaintiffs have conceded—as they must—that Fish Window Cleaning’s recommendations for window cleaner compensation are merely suggestions and not mandatory. Their attempt to recast them as mandatory by calling them an “effective recommendation” does not change the undisputed fact that the suggestions were not mandatory and that Franchisee and others could and did deviate from these suggestions. Plaintiffs also assert an alternative argument that first appeared in their Motion for Conditional Certification (ECF Nos. 47, 48): that Fish Window Cleaning can be held liable to Plaintiffs under an apparent agency theory. That argument also fails, because (1) Plaintiffs failed to plead an apparent agency theory in their Amended Complaint; (2) apparent agency is not a theory of relief on which Plaintiffs can appropriately rely to support their statutory wage claims; and (3) in any event, the undisputed facts demonstrate that Plaintiffs cannot satisfy the basic elements of an apparent agency theory.1 Plaintiffs cannot identify any genuine disputes of material fact, and the Court should grant summary judgment in Fish Window Cleaning’s favor on all Plaintiffs’ claims against Fish Window Cleaning. 1 Shortly before Fish Window Cleaning filed this Reply, Plaintiffs filed a motion for leave to file a second amended complaint. (See Docket No. 79.) Fish Window Cleaning opposes that motion and will respond to it in due course. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 7 of 37 -3- Argument I. Fish Window Cleaning is Not a Joint Employer Under The FLSA. A. There Is No Dispute That the Appropriate Legal Standard in Determining a Joint Employer Relationship Under the FLSA Requires a Finding of Control. As Plaintiffs recognize, Moldenhauer v. Tazewell-Pekin Consol. Commc’ns Ctr., 536 F.3d 640 (7th Cir. 2008), “defin[es] the applicable approach for determining joint employer status under the FLSA.” (Pls.’ Br. at p. 3.) In its opening brief, Fish Window Cleaning explained that the Moldenhauer court articulated the “economic realities test” to be applied in this case; listed four relevant factors the Court should consider; held each alleged employer “must exercise control over the working conditions of the employee;” and noted the “ultimate determination will vary depending on the specific facts of each case.” (Def.’s Br. at p. 10 (quoting Moldenhauer, 536 F.3d, at 643–44) (emphasis added).) Plaintiffs claim the analysis under Moldenhauer is different from the one Fish Window Cleaning described because joint employer liability can be established “for an entity that does not perform any human resources functions, and that relies upon another employer to implement and enforce its policies and procedures upon jointly employed employees.” (Pls.’ Br. at p. 1.) But applying the Moldenhauer test certainly does not limit the identification of joint employers to those that perform “human resources” functions, and indeed the two cases Plaintiffs cite in support of their argument only bolster the analysis set forth in Fish Window Cleaning’s opening brief. In Espenscheid v. Directsat USA, 2011 U.S. Dist. LEXIS 154706, at *50–53 (W.D. Wis. 2011), cited by Plaintiffs, Judge Crabb of this Court applied the four factors from Moldenhauer and found joint employer liability where the putative joint employer “provide[d] all of [the direct employer’s] human resources services, maintain[ed] all of the human resource records. . . Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 8 of 37 -4- [and] implement[ed] all employee discipline, recruiting, hiring and termination decisions”— precisely the opposite of what Plaintiffs claim this case held. (Pls.’ Br. at pp. 3–4). Likewise, in Reyes v. Remington Hybrid Seed Co., 495 F.3d 403, 408 (7th Cir. 2007), the Seventh Circuit Court of Appeal concluded a putative joint employer of agricultural workers could be liable for FLSA violations where it directly controlled the fields where the employees worked, provided the equipment they used, and supervised the quality of the agricultural work the Plaintiffs were performing, telling Plaintiffs when the job had to be re-done. Id. at 408. Thus, the employer in Reyes performed just the sorts of supervisory functions that fall squarely within the four-factor Moldenhauer test. See Moldenhauer, 536 F.3d, at 644 (factors to consider include whether the putative employer supervised the employees). As detailed in Fish Window Cleaning’s opening Brief and accompanying materials, Fish Window Cleaning performed none of the functions described in Espenscheid or Reyes with respect to Franchisee or its employees. Indeed, the undisputed facts demonstrate that: Franchisee directly supervised Plaintiffs’ work, including giving feedback on performance and setting Plaintiffs’ work schedules; hired, terminated, and disciplined Plaintiffs, all without input from or consultation with Fish Window Cleaning; and maintained all records associated with Plaintiffs’ employment. (See Fish Window Cleaning’s Br. at p. 3, ECF No. 54). Plaintiffs further claim the cases Fish Window Cleaning collected from around the country applying this economic realities test in the franchisor/franchisee context are not persuasive authority because those decisions relied on “rigid test[s]” that the Seventh Circuit has declined to apply. (Pls.’ Br. at p. 4.) Plaintiffs are incorrect. The three cases that Plaintiffs challenge applied tests that their respective circuit courts of appeal have specified require consideration of, variously, “the totality of the circumstances;” a “non-exhaustive list of factors” Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 9 of 37 -5- including the “degree of control;” and a list of nine different factors, where none is dispositive and the element of “control remains the principal guidepost.” See Singh v. 7-Eleven, No. C05- 04534-RMW, 2007 WL 715488, at *3 (N.D. Cal. Mar. 8, 2007) (quoting Hale v. State of Ariz., 993 F.3d 1387, 1394 (9th Cir. 1993)); Hopkins v. Cornerstone Am., 545 F.3d 338 (5th Cir. 2008) (articulating test later applied in Reese v. Coastal Restoration & Cleaning Serv. Inc., No. 10C1V36-RHW, 2010 WL 5184841 (S.D. Miss. Dec. 15, 2010)); Wright v. Mountain View Lawn Care, LLC, No. 7:15-cv-224, 2016 WL 1060341, at *4 (W.D. Va. Mar. 11, 2016) (quoting Butler v. Drive Automotive Indus. of Am., Inc., 793 F.3d 404 (4th Cir. 2015)). In sum, all of the foregoing cases fundamentally apply an “economic realities” test similar to that which was articulated and applied in Moldenhauer, and which governs here. Under Moldenhauer, the dispositive question is whether the Fish Window Cleaning controlled the working conditions of the Plaintiffs, and factors such as whether Fish Window Cleaning supervised Plaintiffs, had the authority to hire or fire them, determined their rates and methods of payment, and maintained their employment records, are relevant to this Court’s analysis. Based on the undisputed facts and the controlling test articulated in Moldenhauer, Fish Window Cleaning was not, as a matter of law, an employer of Plaintiffs. B. The Policy and Procedure Manual Franchisee Distributed Does Not Create an Employment Relationship Between Fish Window Cleaning and Plaintiffs. Plaintiffs devote seven pages of their opposition brief to their argument that one version of a sample Policy and Procedure Manual that Fish Window Cleaning made available to Franchisee, and which Franchisee distributed to Plaintiffs without apparent customization or modification, is sufficient to create Fish Window Cleaning’s liability to Plaintiffs for alleged Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 10 of 37 -6- FLSA violations.2 This argument fails because (1) there is no genuine dispute of material fact that Fish Window Cleaning required neither the promulgation of the Manual by Franchisee nor compliance with the Manual by Franchisee’s employees; and (2) even if distribution of the Policy and Procedure Manual were required, it would not be sufficient to create an employer– employee relationship between Fish Window Cleaning and Plaintiffs. 1. There Is No Genuine Dispute of Material Fact that Fish Window Cleaning Required Neither Promulgation of the Policy and Procedure Manual Nor Franchisee Employees’ Compliance with It. Plaintiffs’ assertion that Fish Window Cleaning requires compliance by franchisee employees with the entire contents of the Policy and Procedure Manual is based on a single excerpt of testimony given by Anthony Espeseth at his deposition. Mr. Espeseth testified first that distribution of the Policy and Procedure Manual was a recommendation made by Fish Window Cleaning, and not a requirement; then, in response to the question “And is that [that Espeseth’s employees are required to follow the Manual] something dictated by Fish?” he answered: “Yes. That’s stated right here.” (Espeseth Depo. 78:17–22, ECF No. 57). From this snippet, Plaintiffs urge the Court to find the existence of a dispute of material fact on the issue of whether Fish Window Cleaning required Franchisee’s employees to adhere to the policies set forth in the Policy and Procedures Manual. Viewed in light of the basic nature of the franchised business Anthony Espeseth purchased, and read in context with the rest 2 Plaintiffs initiated their lawsuit against Fish Window Cleaning with numerous allegations regarding the allegedly extensive control they sought to prove Fish Window Cleaning exerted over Franchisee. For example, Plaintiffs alleged Fish Window Cleaning required franchisees to “use its software system to determine the amount of compensation owed to window cleaners,” “[did] not permit franchisees to keep track of the number of hours worked by their window cleaners, make supplemental payments to window cleaners, . . . or . . . compensate window cleaners for their work other than cleaning windows,” and had franchisees send window cleaners to clean windows “on routes designed and managed by Fish Window Cleaning’s computer software.” Am. Compl. at ¶¶ 11, 15, 16, 21 (ECF No. 14). Necessarily conceding that virtually none of these allegations are supported by the fact record in this case, Plaintiffs have abandoned these allegations and focus instead almost exclusively on this Policy and Procedure Manual. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 11 of 37 -7- of his deposition, his testimony does not bear the weight of the argument Plaintiffs would have it support. As explained in Fish Window Cleaning’s opening brief, Franchisee—and every other Fish Window Cleaning franchisee—contracts with Fish Window Cleaning for a license to operate their business using the FISH WINDOW CLEANING® name and trademarks. (Fish Window Cleaning’s Statement of Proposed Findings of Fact (“SPF”) at ¶ 2.) Fish Window Cleaning franchisees therefore register in the states they do business under their corporation name, “doing business as” Fish Window Cleaning. (See Espeseth Depo. 61:22–62:7, ECF No. 57.) They also receive a license, through their franchise agreement, to use the FISH WINDOW CLEANING® trademarked name and logo. (See Franchise Agreements, ¶¶ ¶ 1.D, 2, 3, ECF 56). Anthony Espeseth made this point in his deposition testimony: Q: Okay. You mentioned earlier that you were doing business as Fish Window Cleaning? A: Yes. Q: Was that part of the business model, to set it up that way? A: Yes. It’s the name of the franchise. Q: All right. And Fish told you to do business as Fish Window Cleaning? A: Fish didn’t tell me. It’s the business that I bought. The name of the business is Fish Window Cleaning. (Espeseth Depo. 61:22–62:7, ECF No. 57.) Since these franchises do business as Fish Window Cleaning, they frequently refer to themselves and their independently owned and operated businesses with the name “Fish Window Cleaning” or “Fish,” which Anthony Espeseth also explained during his deposition. When asked Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 12 of 37 -8- to review a window cleaner job description that had a section titled “FISH offers:” followed by a list describing work hours and pay, Anthony Espeseth gave the following testimony: Q: Okay. So but the first section of this document describes the employment benefits that Fish Window Cleaning provides to its employees, right? A: Yes. Q: And these would also be Espeseth, Inc.’s employees, right? A: Yes. Q: What paid training is provided? A: Wait a minute. I’d like that question repeated. Q: Sure. The question is, would these employees who would receive this document, assuming they’re hired, also be Espeseth, Inc.’s employees? A: They would only be Espeseth, Inc.’s employees. Q: All right. But the document refers to Fish offering these employee benefits to employees, right? A: Because I’m Fish. Q: Were you involved in drafting this document? A: No, sir. Q: Then how do you know whether this document is referring to Fish Window Cleaning or referring to you as Fish? A: The name of my company is Fish Window Cleaning. Q: Okay. But a franchisor is also Fish Window Cleaning? A: The franchisor is Fish Window Cleaning Services. (Id. at 63:25–65:6 (emphasis added); Window Cleaning Technician Job Description, Ex. A to November 7, 2016 Perkins Decl.). At this point in his testimony, Anthony Espeseth made clear that when Franchisee distributed documents to Plaintiffs and other Franchisee employees that Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 13 of 37 -9- had the word “Fish” on them, he sometimes, if not always, understood “Fish” to be referring to his own independently owned and operated business, and that only a reference to “Fish Window Cleaning Services, Inc.” was an unambiguous reference to the franchisor. Turning to the Policy and Procedure Manual, nothing in Anthony Espeseth’s testimony about that manual indicates he was opining on what he believed Fish Window Cleaning Services required, as opposed to what he himself required, as the owner of Espeseth, Inc., d/b/a Fish Window Cleaning. Just like in the job description example provided above, the Policy and Procedure Manual says: “Every Fish employee will receive a copy of this manual, and every Fish employee will be expected to comply with its guidelines as a condition of his/her employment with Fish.” (ECF No. 52-4, pp. 2, 3) (emphasis added). Regarding this Manual, Anthony Espeseth testified as follows: Q. All right. Are Espeseth’s employees required to follow this manual? A. Yes. Q. All right. And is that something dictated by Fish? A. Yes. That's stated right here (indicates). (Id. at 78:17–22.)3 In light of the unambiguous testimony Anthony Espeseth had provided just moments earlier that Franchisee employees who received documents he gave them were “only” employees of “Esepseth, Inc.,” and that he understood “Fish” to refer to his own independently owned and operated business, Plaintiffs cannot reasonably ask this Court to construe the excerpt 3 During the quoted testimony, Anthony Espeseth is reviewing Espeseth Deposition Exhibit No. 6. The Policy and Procedure Manual quoted by Plaintiffs and available in the docket at ECF No. 52-4 was entered as Exhibit No. 4 in a different deposition, but it is the same document Anthony Espeseth reviewed during his deposition. (November 7, 2016, Perkins Decl. at ¶ 4.) Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 14 of 37 -10- of testimony above as indicating Anthony Espeseth believed Fish Window Cleaning Services, Inc. required his own employees to follow the contents of the Policy and Procedure Manual. But even if Anthony Espeseth’s testimony could support an inference he believed Fish Window Cleaning required Franchisee’s employees to follow the terms of the Manual, this still would be insufficient to generate a genuine fact dispute as to whether Franchisee compliance with the manual was, in fact, required by Fish Window Cleaning. On summary judgment, the nonmoving party must “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). It must present “significant probative evidence” in support of its complaint to defeat the motion for summary judgment. Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986) (emphasis added). Anthony Espeseth’s testimony on this point falls far short of the “significant, probative evidence” Plaintiffs must provide to overcome Fish Window Cleaning’s summary judgment motion. There is no fact dispute that the Franchise Agreements between Franchisee and Fish Window Cleaning expressly reserved the right and obligation to employ franchisee employees exclusively to Franchisee. (SPF at ¶¶ 9, 10, ECF No. 61; Franchise Agreements at ¶¶ 6.K, 7.E, ECF No. 56.) There is likewise no dispute that Franchisee understood it was the sole employer of Plaintiffs, as reflected by the testimony quoted above. (See also SPF at ¶¶ 52–65.) With respect to the Policy and Procedure Manual at issue, there is no genuine fact dispute that Fish Window Cleaning communicated to Franchisee—orally and in writing—that the Manual it provided was a sample; that Franchisee was not required to adopt it or distribute it; and that it could and should be modified to suit Franchisee’s particular business needs. (Id. at ¶¶ 14, 15, 34, 35; Nov. 7, 2016, Masters Decl. at ¶ 2 and Ex. A.) Fish Window Cleaning Services provided Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 15 of 37 -11- the Policy and Procedure manual to Franchisee and other franchisees as a template to modify as each business owner saw fit. And as Fish Window Cleaning explained in its Opposition to Plaintiffs’ Conditional Certification Motion, other franchisees modified it to suit their own business needs. (Fish Window Cleaning’s Br. in Opp. to Pls.’ Conditional Certification Motion at pp. 9–12, ECF No.69, and supporting declarations, ECF Nos. 72, 73, 77.) Indeed, in at least one case, a franchisee disregarded the Policy and Procedure Manual altogether and instead chose to use a manual prepared by a third-party vendor. (See id.) In sum, even if Plaintiffs could show Anthony Espeseth held the erroneous belief that Franchisee’s employees were required to comply with the terms of the Policy and Procedure manual, that erroneous belief cannot generate a genuine fact dispute as to whether such a requirement actually existed. To the contrary, the undisputed facts show the Policy and Procedure Manual was a sample template document that Fish Window Cleaning provided to its franchisees. (See, e.g., Fish Window Cleaning’s SPF ¶¶ 25.). And the promulgation of a such a document falls far short of the exercise of “control” over the working conditions of Plaintiffs necessary to justify holding Fish Window Cleaning liable for Franchisee’s alleged statutory wage violations. For example, in In re Enter. Rent-A-Car Wage & Hour Employment Practices Litig., 683 F.3d 462, 471 (3d Cir. 2012), the Third Circuit Court of Appeal declined to find joint employer liability under FLSA. The court held: [W]hile the plaintiffs contend that Enterprise Holdings, Inc. functionally held many of these roles [e.g., hiring, firing, authority to set compensation] by way of the guidelines and manuals it promulgated to its subsidiaries, we are not influenced by this claim. Inasmuch as the adoption of Enterprise Holdings, Inc.’s suggested policies and practices was entirely discretionary on the part of the subsidiaries, Enterprise Holdings, Inc. had no more authority over the conditions of the assistant managers’ employment than would a third-party consultant who made suggestions for improvements to the subsidiaries’ business practices. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 16 of 37 -12- Id. at 471. Similarly, here, Fish Window Cleaning’s promulgation of optional policies and practices through a template Policy and Procedure Manual does not rise to the level of control necessary to establish a joint employer relationship. 2. Even if Fish Window Cleaning Did Require Compliance with the Policy and Procedure Manual, It Would Not Be Sufficient To Create an Issue of Material Fact as to the Existence of an Employment Relationship Between Fish Window Cleaning and Plaintiffs. Even if the Court concludes there is a genuine fact question as to whether Fish Window Cleaning required Franchisee employees to comply with the terms of the Policy and Procedure Manual, Plaintiffs still cannot overcome Fish Window Cleaning’s summary judgment motion because this fact dispute would, ultimately, be immaterial to the Court’s determination. As a threshold matter, the promulgation of an employment handbook by a franchisor, holding company, or parent organization for use with employees of the franchisee or subsidiary organization is far from the unusual circumstance Plaintiffs would have this Court believe, and by itself is not sufficient to create a joint employment relationship. For example, in Diaz v. AutoZoners, LLC, 484 S.W.3d 64, 80 (Mo. Ct. App. 2015), the court considered a plaintiff’s argument that a holding company that provided “Store Handbooks” containing policies and procedures for its wholly owned subsidiaries to distribute to store employees was also an employer of a recipient of the handbook who brought a claim of sexual harassment against the holding company. The court distinguished between the promulgation of written policies and the interpretation and enforcement of them, and held: the provision of . . . the Store Handbook and Code of Conduct . . . may support a determination that [the holding company] was responsible for establishing policies, it does not demonstrate that [the holding company] was responsible for training employees; receiving, investigating, and responding to complaints; or disciplining noncompliant employees. And the simple provision of . . . manuals has been held insufficient to establish employer status. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 17 of 37 -13- Id.; see also Klein v. L-3 Comm’cns Corp., Case No. 1:12-cv-956-MEF, 2013 U.S. Dist. LEXIS 156663, at *27 (M.D. Ala. Nov. 1, 2013) (holding parent company was entitled to summary judgment on joint employment issue in FMLA and Title VII case despite facts showing the parent company issued an employee handbook to its subsidiaries for distribution to subsidiary employees, and was involved with the subsidiary’s operations because “such involvement did not exceed the bounds of control any parent company is expected to exercise and maintain over its subsidiary”); Beck v. Boce Group, L.C., 391 F. Supp. 2d 1183, 1189–90 (S.D. Fla. 2005) (holding the policies in a handbook a parent corporation required its subsidiaries to distribute to employees were “not specifically geared towards the Plaintiffs” and were “too generic or formulaic to serve as evidence that the [parent corporation] exercised the requisite degree of control over the Plaintiffs”); Hulsey v. Gunn, Case No. 1:95-cv-403, 1995 U.S. Dist. LEXIS 17042, at *10–11 (N.D. Ga. Oct. 3, 1995) (holding no joint employer relationship under Title VII despite the fact the franchisor apparently promulgated an employee handbook for use at franchisee locations that indicated “some standard treatment as to employees as far as . . . compensation, pay periods, . . . [and] rules as to scheduling” where there was “no showing” the franchisor “ma[de] any decisions as to hiring or firing employees”). Likewise, in this case, even if Fish Window Cleaning promulgated a set of policies with which Plaintiffs were required to comply, it is undisputed that Franchisee applied those policies in practice without any input from Fish Window Cleaning. (See SPF at ¶¶ 56, 86–88, 122, 123.) Indeed, when Anthony Espeseth was asked about Fish Window Cleaning’s involvement in the discipline of Franchisee employees, he testified as follows: Q: Does your company ever discipline employees? A: Yes. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 18 of 37 -14- Q: Will Fish be notified of the discipline? A: No. Q: Will Fish be employed [sic] in disciplining employees? A: No. (Espeseth Depo. 33:12–18, ECF No. 57.) Furthermore, the policies in the challenged Manual do not in any way relate to the specific practices challenged in this lawsuit. Nowhere does the Manual suggest or state how window cleaners will be paid; there is no mention of mileage reimbursement; and no mention of minimum wage. Instead, the Policy and Procedure Manual contains policies related largely to behavior that could affect public perception of the Fish Window Cleaning brand (for example, “Positive Attitude,” “Four C’s for Taking Good Care of our Customers,” and the “Fish Uniform”), safety (prohibition on illegal drug use, or possession of weapons on company property) and standard anti-discrimination and anti-harassment policies. (See Policy and Procedure Manual, ECF No. 52-4.) The promulgation of policies consistent with maintaining uniformity in brand appearance and customer service experiences, the application of which is left to the discretion of the franchisee to administer and enforce, does not rise to the level of control necessary to establish an employment relationship. For example, in Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 478 (Cal. 2014), a franchisee employee sued the franchisor for sexual harassment. The court declined to find joint employer liability despite the fact that franchisee employees received a handbook distributed by the franchisor, noting: A franchisor, which can have thousands of stores located far apart, imposes comprehensive and meticulous standards for marketing its trademarked brand and operating its franchises in a uniform way. To this extent, the franchisor controls the enterprise. However, Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 19 of 37 -15- the franchisee retains autonomy as a manager and employer. It is the franchisee who implements the operational standards on a day-to-day basis, hires and fires store employees, and regulates workplace behavior. Id. at 478 (emphasis added). The court also found it relevant that the specific policies and procedures over which the franchisor exercised some level of control through the promulgation of the handbook and other means did not relate to sexual harassment—the claim at issue in that case. Id. Just like in Patterson, the handbook through which Plaintiffs claim Fish Window Cleaning exerted control over them has nothing at all to do with the allegedly illegal compensation practices they challenge in this lawsuit. See also Vann v. Massage Envy Franchising LLC, Case No. 13-cv-2221-BEN (WVG), 2015 U.S. Dist. LEXIS 1002, at *20 (S.D. Cal. Jan. 6, 2015) (“[Franchisor’s] policies on attire, the types of massages offered, what types of products could be used during a massage, and the types of conversations that should be had with clients were policies to assist in brand uniformity. . . . [Franchisor] was not an employer or joint employer . . . and cannot be liable for any wage and hour violations made by a [franchisee].”). Plaintiffs cannot escape summary judgment by arguing compliance with the Policy and Procedure Manual was required by Fish Window Cleaning, and the Court should grant Fish Window Cleaning’s Motion. C. An “Effective Recommendation” Regarding a Compensation Program Is Not a Requirement and Does Not Create an Issue of Fact As to Whether Fish Window Cleaning Was Plaintiffs’ Employer. Plaintiffs concede, as they must, that the commission-based compensation program for window cleaners suggested to Fish Window Cleaning for use by franchisees is only a Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 20 of 37 -16- recommendation4—not a requirement. But they attempt to create an issue of fact by characterizing it as an “effective” recommendation, hoping to persuade the Court that a finding of joint employer liability is appropriate. Once again, the cases Plaintiffs cite to support their argument that an “effective recommendation” can amount to employer “control” for purposes of an FLSA violation do not stand for this proposition. For example, Dinkins v. Varsity Constr. Inc., Case No. 04-C-1438, 2005 U.S. Dist. LEXIS 6732 (N.D. Ill. Mar. 10, 2005), is not analogous to the present case. In Dinkins, the owner of the premises where the plaintiff worked had the authority to physically bar the plaintiff from entrance onto the premises, thereby ending plaintiffs’ employment as a practical matter. Here, of course, the production-based compensation program suggested by Fish Window Cleaning could, and often did, have no practical impact whatsoever on franchisee employees. As set forth in Fish Window Cleaning’s Opposition to Plaintiffs’ Motion for Conditional Certification, franchisees—including Franchisee here—departed from the commission-based compensation method that Fish Window Cleaning suggested. Fish Window Cleaning has provided uncontroverted evidence that at least one franchisee pays its window cleaners on an hourly basis; some pay their window cleaners on a commission basis that is different from the program Fish Window Cleaning suggests; and at least one uses a hybrid combination of commission-based compensation and hourly pay. (See Fish Window Cleaning’s 4 Plaintiffs’ assertion that Fish Window Cleaning had the “right to control” compensation because documents concerning optional pay programs were contained within a “manual” that Fish Window Cleaning distributed to its franchisees (see Pls.’ Br. at 14) ignores the undisputed facts and language of the Franchise Agreement. The Franchise Agreements mandate compliance with required standards, not optional tools such as the compensation program, and franchisees uniformly understand that employee compensation was an area within their exclusive control and discretion. See Background Section II, above; (Franchise Agreements at ¶ 6.E (Exs. E and F to Sept. 30, 2016 Masters Decl.) (“The Manuals [or Fishing Hole, in the Renewal Franchise Agreement] contain both requirements and recommendations . . . . You must adopt and use the required standards.” (emphases added).) Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 21 of 37 -17- Opposition to Plaintiffs’ Motion for Conditional Certification at pp. 8–13, ECF No. 69, and supporting declarations, ECF Nos. 72, 73, 77). The other two cases plaintiffs cite, Donnelly v. Corvest Prop. Trust, 2010 U.S. Dist. LEXIS 54713 (C.D. Ill. 2010), and Freeman v. Foley, 911 F. Supp. 326 (N.D. Ill. 1995), are likewise inapposite. The Donnelly court held the fact record could support the finding of a joint employer relationship where the putative employer: (1) actually gave bonuses to other individuals employed by the plaintiff’s direct employer (and also recommended that the plaintiff not receive a bonus); (2) discussed job performance concerns regarding the plaintiff; and (3) appeared to have made the decision to terminate the plaintiff. Id. at *3, 20. Here, in contrast, the undisputed facts demonstrate that Franchisee set Plaintiffs’ compensation and made all hiring, firing and disciplinary decisions. (See, e.g., Fish Window Cleaning’s SPF at ¶¶ 34, 40, 53, 56, 57, 63, 91, 92, 93, 95, 97, 118, 119, 126, 127.) Freeman analyzes the circumstances under which an individual supervisor can be held liable for breach of an employer’s statutory duty along with the employing entity itself. This case, too, is fundamentally different from the situation before this Court. A corporation can only act through the individuals it employs, and so courts and statutes often impose individual liability such that the individual wrongdoer is held responsible in addition to the entity on behalf of which he or she acted. See, e.g., Shager v. Upjohn Co., 913 F.2d 398, 404 (7th Cir. 1990) (“The deliberate act of an employee acting within the scope of his authority is the act of the employer, for an employer, at least where it is a corporation, acts only through agents.”). No such policy considerations apply here, where Plaintiffs are not alleging Fish Window Cleaning is an individual through whom Franchisee must act. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 22 of 37 -18- These cases do not stand for the proposition that Fish Window Cleaning—a separate and distinct entity from Franchisee—can be held liable for Franchisee’s independent decisions regarding a compensation program that it was free to adopt, modify, or disregard as it chose. Indeed, the weight of authority holds just the opposite: generalized recommendations regarding the operation of a business, even when those recommendations are adopted by the direct employer, are not sufficient to establish a joint employer relationship, as a matter of law. See Pineda-Marin v. Classic Painting Inc., No. CV-08-798-HU, 2010 U.S. Dist. LEXIS 28827, at *10-11 (D. Ore. Mar. 25, 2010) (finding no joint employment relationship in FLSA case and noting that although the direct employer likely set the plaintiffs’ wages at the recommendation of the alleged joint employer, it was a decision the direct employer “adopted . . . as his own decision” and he “could have followed the recommendations [of the alleged joint employer] or not, as he chose”); see also In re: Enterprise Rent-a-Car Employment Practices Litig., 683 F.3d at 466 (holding that corporate parent’s recommended compensation guides, which included guidance on which subsidiary employees should be salaried and which should be paid by the hour, were insufficient to create an issue of fact on joint employment of wholly-owned subsidiary employees by parent where no evidence that the parent required use of compensation guides). Accordingly, Fish Window Cleaning’s suggested commission-based method of compensation—which Franchisee and multiple other franchisees chose not to follow—cannot form the basis of Fish Window Cleaning’s liability to Plaintiffs, and the Court should grant summary judgment in Fish Window Cleaning’s favor. II. Plaintiffs’ Apparent Agency Thoery Fails. Plaintiffs’ second theory of liability—their “apparent agency” argument—was advanced by Plaintiffs for the first time in their Motion for Conditional Certification, and appears again in Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 23 of 37 -19- their opposition to Fish Window Cleaning’s summary judgment motion. As Fish Window Cleaning explained in its opposition to Plaintiffs’ Conditional Certification Motion, and will briefly summarize again here, this newly asserted argument fails as a matter of law for at least three independent reasons: (1) Plaintiffs failed to plead a theory of apparent agency in their Amended Complaint; (2) there is no controlling authority that suggests apparent agency is a theory under which Plaintiffs or any collective action member can recover wages owed under the FLSA; and (3) there is no evidence that Franchisee acted with the apparent agency of Fish Window Cleaning in the course of its employment of Plaintiffs. A. Plaintiffs Have Not Pled a Claim for Liability Based on Apparent Agency. Plaintiffs wholly failed to plead a theory of relief based on apparent agency, and cannot advance it now in opposition to Fish Window Cleaning’s summary judgment motion. Under Wisconsin law, a plaintiff claiming liability through apparent agency or apparent authority must prove, at a minimum, three elements: “(1) Acts by the agent or principal justifying belief in the agency; (2) Knowledge thereof by the party sought to be held . . . [and] (3) Reliance thereon by the plaintiff, consistent with ordinary care and prudence.” Iowa Nat’l Mut. Ins. Co. v. Backens No. 69, 51 Wis. 2d 26, 34 (Wis. 1971) (citations and quotations omitted). The Amended Complaint lacks any allegation that Franchisee acted with the apparent agency or authority of Fish Window Cleaning. Indeed, the words “apparent,” “authority,” and “agency” are entirely absent from their Amended Complaint. (See Am. Compl., ECF No. 14). The Amended Complaint likewise contains no factual allegations necessary to support an apparent agency theory of relief: there are no allegations that Fish Window Cleaning or Franchisee (or other franchisees) engaged in acts that would justify belief in an agency relationship; no allegations that Fish Window Cleaning was aware Franchisee (or other franchisees) failed to inform Plaintiffs or window cleaners it was an independently owned and Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 24 of 37 -20- operated business; and no allegation that Plaintiffs (or other window cleaners) reasonably relied upon the apparent agency relationship in their decision to work for and stay employed by a franchisee. Plaintiffs’ Amended Complaint does not state a claim for relief based upon a theory of agency. As discussed in Fish’s Response to Plaintiffs’ Conditional Certification brief, courts routinely hold that a complaint relying on agency “must plead facts which, if proved, could establish the existence of any agency relationship.” Abels v. Farmers Commodities Corp., 2000 U.S. Dist. LEXIS 22887, at *19-22 (N.D. Iowa 2000) (granting motion to dismiss for failure to adequately plead an agency relationship and collecting multiple cases describing the pleading standards required to sustain a theory of relief premised on an agency relationship); Williams v. Ford Motor Co., 990 F. Supp. 551, 554 (N.D. Ill. 1997) (same). And Plaintiffs cannot overcome Fish Window Cleaning’s Motion for Summary Judgment by raising theories that are absent from their Amended Complaint. Insolia v. Philip Morris, Inc., 216 F.3d 596, 606 (7th Cir. 2000) (“plaintiff may not amend his complaint through arguments in his brief in opposition to a motion for summary judgment”). The United States District Court for the Northern District of Illinois rejected a similar attempt to change theories in opposition to a summary judgment motion, noting the plaintiffs’ proposed theory was a “major alteration of ‘what the claim is’ and the ‘grounds upon which it rests,’” in large part because the knowledge necessary to sufficiently and adequately describe this new basis for their claims was within the plaintiffs’ knowledge from the inception of the lawsuit. Blakes v. Illinois Bell Tel. Co., 75 F. Supp. 3d 792, 803–804 (N.D. Ill. 2014) (rejecting plaintiffs’ effort to rely on “unreasonable efficiency standards” as a basis for an off-the-clock claim where they had pled their off-the-clock work was based on job-site maintenance, travel, and insufficient time to complete timesheets). Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 25 of 37 -21- Just like in Blakes, the alleged facts on which Plaintiffs rely to support their theory of apparent authority—for example, that Plaintiffs wore uniforms and used invoices with the Fish Window Cleaning logo on it; that Plaintiffs believed they were employees of a national organization, that “working for a national company” was “extremely important” to Plaintiffs because it “indicated a level of job and income security that would not exist, if [they were] working for a mom and pop shop,” and that Plaintiffs “believed Fish had delegated day to day operation of the Eau Claire Department to Espeseth, Inc. (Oct. 19, 2016 Pope Decl. at ¶ 17, ECF No. 67; Oct. 19, 2016 Rave Decl. at ¶ 21, ECF No. 66)—were certainly within their knowledge when they filed their lawsuit. Plaintiffs’ attempt to pivot their theory of the case should not be permitted, and the Court should reject their request to certify a class (and overcome Fish Window Cleaning’s Motion for Summary Judgment) based on a theory they did not plead. B. There Is No Controlling Authority that Suggests Plaintiffs Can Rely on the Tort-Based Concept of Apparent Agency to Prove Fish Window Cleaning is Liable for Statutory Wage Claims. Even if Plaintiffs had advanced an apparent agency theory in their Amended Complaint, the theory fails on the merits. Plaintiffs offer no controlling authority holding that the common- law doctrine of apparent agency can be used to create liability under the FLSA. Nor could Fish Window Cleaning find such authority. Indeed, as the Seventh Circuit Court of Appeals has noted, “[o]nce Congress has legislated, the common-law rules courts apply to fill interstices fall away.” Stomper v. Amalgamated Transit Union, Local 241, 27 F.3d 316, 319 (7th Cir. 1994). The cases Plaintiffs cite for the proposition that apparent authority is applicable to their case are, like their joint employer cases, not supportive of their claims in this case. In American Society of Mech. Engineers v. Hydrolevel Corp., 456 U.S. 556 (1982), for example, the U.S. Supreme Court concluded that “the apparent authority theory is consistent with the congressional intent to encourage competition,” and held the theory could be applied to an antitrust case. It did Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 26 of 37 -22- not discuss or consider apparent agency liability in the context of an alleged wage violation. And although the Eleventh Circuit Court of Appeals did consider an apparent agency argument in the context of an FLSA claim in Arriaga v. Florida Pacific. Farms, LLC, 305 F.3d 1228 (11th Cir. 2002), that court ultimately rejected the Plaintiffs’ argument on the basis there were no facts to suggest the plaintiffs believed the putative employer had caused the specific injury they complained of. Id. at 42–43. Likewise, in this case, Plaintiffs assert only that they believe they worked for a “national organization,” which afforded them “job and income security,” and that they believed the Policy and Procedure Manual they received (which did not discuss compensation) would “govern [their] terms and conditions of employment.” (Oct. 19, 2016 Pope Decl. at ¶¶ 8, 17, ECF No. 67; Oct. 19, 2016 Rave Decl. at ¶¶ 10, 21, ECF No. 66). They do not claim they believed Fish Window Cleaning determined or controlled the method by which they were compensated. In addition, while Ochoa v. McDonald’s Corp., 133 F. Supp. 3d 1228 (N.D. Cal. 2015), is a case that discussed the doctrine of apparent authority, there, the wage and hour claims were brought exclusively under the California labor code—not the FLSA. State and federal courts in California routinely explain that the California State Labor Code affords significantly more relief to employees than similar federal statutory schemes. See, e.g., Armenta v. Osmose, Inc., 135 Cal. App. 4th 314, 324 (Cal. Ct. App. 2005) (“A review of our labor statutes reveals a clear legislative intent to protect the minimum wage rights of California employees to a greater extent than federally.”); Ramirez v. Yosemite Water Co., 20 Cal. 4th 785, 795 (Cal. 1999) (“The [Industrial Wage Commission’s] wage orders, although at times patterned after federal regulations, also sometimes provide greater protection than is provided under federal law in the [FLSA] and accompanying federal regulations.”). Accordingly, a state court’s application of Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 27 of 37 -23- California’s common-law doctrine of apparent agency to its interpretation of the California Labor Code offers no persuasive, let alone controlling, authority as to the FLSA claims at issue here. And contrary to Plaintiffs’ assertion that the court in Myers v. Garfield & Johnson Enterp., 679 F. Supp. 2d 598 (E.D. Penn. 2010), held that the “franchisor was [the] employer,” that decision considered a motion to dismiss claims brought pursuant to Title VII and the Pennsylvania Human Rights Act. Not only is the case non-binding, it is also unpersuasive because Myers did not involve the FLSA and because the holding was limited to whether the allegations in the complaint could support an eventual finding that the franchisor was the employer. Here, in contrast, Fish Window Cleaning has offered specific, uncontroverted facts that demonstrate that it cannot. Other courts have rejected the attempt to insert the doctrine of apparent authority into a federal statutory scheme. For example, the Eighth Circuit Court of Appeals, in dismissing a plaintiff’s ADA claim against a franchisor, wrote “The question of [the franchisor’s] liability under Title III of the ADA depends on its actual connection with the premises, not on [the plaintiff’s] belief about that relationship.” Pona v. Cecil Whittaker’s, Inc., 155 F.3d 1034, 1036 (8th Cir. 1998).5 (emphasis added). Similarly here, Fish Window Cleaning cannot be held liable to Plaintiffs for alleged statutory wage violations based solely on their erroneous claimed belief that Fish Window Cleaning employed them. See Wright v. Mountain View Lawn Care, LLC, Case No. 7:15-cv-00224, 2016 U.S. Dist. LEXIS 31353, at *30 (W.D. Va. Mar. 11, 2016) (observing that Virginia courts had declined to apply the doctrine of apparent authority in the 5 Judge Morris Sheppard Arnold wrote the opinion for a divided court; however, all three judges on the appellate panel concurred in the portion of the Court’s opinion regarding the franchisor’s liability. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 28 of 37 -24- context the plaintiff was proposing, and holding plaintiff had pointed to no authority to persuade it to apply apparently agency to Title VII in the franchise context). Plaintiffs can offer no controlling or persuasive authority for the proposition that their apparent agency theory can be appropriately applied to their FLSA claims in this case. C. Plaintiffs have Offered No Admissible Evidence that Franchisees Act as Apparent Agents of Fish Window Cleaning. Finally, Plaintiffs’ apparent agency theory fails because Plaintiffs cannot present competent evidence that Franchisee acted with the apparent authority of Fish Window Cleaning. As set forth above, a plaintiff claiming apparent authority must prove at least three elements: “(1) Acts by the agent or principal justifying belief in the agency; (2) Knowledge thereof by the party sought to be held . . . [and] (3) Reliance thereon by the plaintiff, consistent with ordinary care and prudence.” Iowa Nat’l Mut. Ins. Co. 51 Wis. 2d, at 34. In addition, the Wisconsin Supreme Court has spoken clearly on the extent to which a franchisor can be held vicariously liable6 for the actions of its franchisees or franchisee employees, and added a fourth element to this test: “a franchisor may be held vicariously liable for the tortious conduct of its franchisee only if the franchisor has control or a right of control over the daily operation of the specific aspect of the franchisee’s business that is alleged to have caused the harm.” Kerl v. Rasmussen, 682 N.W.2d 328, 331-32 (Wis. 2004) (emphasis added) (noting a “more precisely focused test” is needed to establish vicarious liability in the franchisor/franchisee context than under traditional vicarious liability principles). 6 Apparent agency or apparent authority is a type of vicarious liability. See, e.g., Kerl v. Dennis Rasmussen, 672 N.W.2d 71, 76–77 (Wis. App. 2003) (developing test for vicarious liability in franchisor context by reviewing, among other cases, decisions analyzing the apparent authority doctrine), aff’d, Kerl, 682 N.W.2d 328; Pippenger v. McQuik’s Oilube, Inc., 854 F. Supp. 1411, 1421 (S.D. Ind. 1994) (“There are several different types of common law agency theories that may lead to a corporate principal’s vicarious liability for the wrongful acts of its agents: actual authority; apparent authority; and respondeat superior.”). Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 29 of 37 -25- Plaintiffs cannot satisfy the Kerl test. To start, they have offered no admissible evidence that Fish Window Cleaning had knowledge that Franchisee took actions justifying belief in any alleged agency. To the contrary, Fish Window Cleaning requires its franchisees to affirmatively take steps to make it clear that the franchisee is an independent business. For example, the Franchise Agreement requires the Franchisee to “hold [themselves] out to the public as an independent contractor operating the Business pursuant to a license from us,” and to “clearly indicate on [their] business checks, stationery, purchase orders, receipts, and other written materials that [they] are the owner of [their] Business and that [they] are a Fish Window Cleaning franchisee,” as required in the franchise agreements. (Franchise Agreements at ¶ 3.C, ECF Nos. 56-5, 56-6.) Moreover, Plaintiffs have offered no evidence that they reasonably relied on any representation that Fish Window Cleaning—and not Franchisee—was responsible for their compensation. And the evidence in the record demonstrates that any such reliance on Plaintiffs’ part was, in fact, unreasonable. To start, the very Policy and Procedure Manual Plaintiffs put front and center in their opposition brief explains on its face that Plaintiffs were joining a franchise organization and that Fish Window Cleaning Services, Inc. does not manage the business they are working for. Specifically, the Manual thanks the recipient for “joining Fish Window Cleaning®.” It goes on to communicate that “Fish Window Cleaning®” has “franchises growing throughout the United States,” and that “Fish Window Cleaning® provides window-cleaning services and Fish Window Cleaning Services, Inc. awards franchises and provides training and support to franchisees.” (Policy and Procedure Manual, pp. 2, 3, ECF No. 52-4.) Moreover, the other undisputed facts in the record demonstrate that any reliance on Plaintiffs’ part was unreasonable: Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 30 of 37 -26- • There is no dispute that Plaintiffs each signed non-compete agreements with Espeseth, Inc. on their first day of employment. Those documents defined Espeseth, Inc. as their employer and restricted them from competing with Espeseth, Inc. in a geographic region defined by Franchisee’s franchise territory. (SPF at ¶¶ 75, 112.) • There is no dispute that they received paychecks and W-2’s that identified Espeseth, Inc. as their employer. (Id. at ¶¶ 98, 99, 130, 131.) • Plaintiff Pope testified that he understood that Anthony Espeseth was the owner of the franchised location where he worked, and assumed that the owner set his compensation. (Id. at ¶¶ 92, 93.) • Plaintiff Rave testified that he understood that Anthony Espeseth was the “owner of a franchise of Fish Window Cleaning,” and that Anthony Espeseth and his daughter were “managing the business together.” (Id. at ¶ 118, 119.) Plaintiffs’ protestations that they joined Fish Window Cleaning because they believed it “indicated a level of job and income security that would not exist, if [they were] working for a mom and pop shop,” (Oct. 19, 2016 Pope Decl. at ¶ 17, ECF No. 67; Oct. 19, 2016 Rave Decl. at ¶ 21, ECF No. 66)—even if true—are not sufficient to establish that their reliance on their belief that an organization with which they by their own admission never interacted was somehow responsible for their wages was at all reasonable. Plaintiffs are trying to hold Fish Window Cleaning liable under the theory that Plaintiffs mistakenly believed their employer’s use of a nationally recognized name and logo also meant decisions about their employment and compensation were subject to control by the same entity that owned the trademark. This theory has been rejected time and again by courts around the country. In Howell v. Chick Fil-A, Inc., Case No. 92-30188-RV, 1993 U.S. Dist. LEXIS 19030, at *17-18 (N.D. Fla. 1993), the court considered and rejected the notion that a plaintiff could reasonably believe a franchisor controlled the labor decisions of the franchisee because—just Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 31 of 37 -27- like in this case—the plaintiff received a paycheck each week signed by the franchisee, and received income tax documents each year with the franchisee’s name on them. The Howell court further noted “[t]he plaintiff has chosen to sue the wrong defendant. If she believes that she was improperly classified as an exempt employee pursuant to Section 16(b) of the [FLSA], she should sue the person who made that decision—her employer [the franchisee].” Id. at *18; see also Blood v. MTP., Inc., No. 02 C 50029, 2002 WL 31949885, at *1 (N.D. Ill. Jan. 14, 2002) (“Blood’s idea that boilerplate and prefatory pleasantries in the handbook, like “We hope you enjoy working for Papa John’s and have a long and successful career with our Franchise Family” and “We need and welcome you to the Papa John’s Franchise Family” and “You are a team member in the nation's fastest-growing pizza company,” constitute an offer of employment by [the franchisor] has so many fallacies the court would not know where to begin.”). Finally, the undisputed record shows that Fish Window Cleaning had no control over, and no right to control, the aspect of its franchisees’ businesses that is alleged to have caused Plaintiffs’ harm: window cleaner compensation, thus failing the test articulated by Kerl. Plaintiffs concede as they must that Fish Window Cleaning’s suggestion on compensation were nothing more than recommendations. (See Pls.’ Br. at pp. 12–19.) As set forth above, the rights and responsibilities related to compensation of franchisee employees are reserved to the exclusive control of franchisees. (See Franchise Agreements at ¶ 7.E (Exs. E and F to Sept. 30, 2016 Masters Decl.) (“[The franchise] must hire and supervise efficient, competent, and courteous persons as [its] employees . . . and set and pay their wages, commissions and incentives with no liability on [Fish Window Cleaning]”.).) Franchisee understood that employee compensation is within its exclusive control, and regularly departed from the optional production-based compensation method Fish Window Cleaning offered to its franchisees. Under Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 32 of 37 -28- Kerl, then, Fish Window Cleaning cannot be held vicariously liable under an apparent agency theory or any other for FLSA violations alleged by franchisee employees. In sum, summary judgment is appropriate because Plaintiffs cannot demonstrate Fish Window Cleaning has any liability to Plaintiffs under a joint employer relationship or a theory of apparent agency. III. Fish Window Cleaning Is Not an Employer of Plaintiffs Under Wisconsin State Law. Like Plaintiffs’ claims under federal law, Plaintiffs’ state law claims fail because Plaintiffs are unable to show Fish Window Cleaning controlled their terms or conditions of employment. Plaintiffs propose that the Court apply the Kerl test to Plaintiffs’ state statutory wage claims, and hold that Fish Window Cleaning can be liable to Plaintiffs’ for their employer’s alleged statutory wage violations because it had the “right to control over [sic] the daily operation of the specific aspect of the franchisee’s business that is alleged to have caused the harm.” (Pls.’ Br. at p. 26). But this argument misconstrues Kerl and the Franchise Agreements at issue. To start, Kerl is premised on the Wisconsin Supreme Court’s determination that a franchisor’s potential for vicarious liability should be more limited than the common law would ordinarily permit. Kerl, 682 N.W.2d , at 332 (holding there is “no justification” for the traditional “broad rule” of vicarious liability in the franchisor/franchisee context, and that a “more precisely focused test is required”). With this goal in mind, the Kerl court held that a franchisor’s liability to those circumstances when it “has control or a right of control over the daily operation of the specific aspect of the franchisee’s business that is alleged to have caused the harm.” Id. at 342. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 33 of 37 -29- Plaintiffs claim that the Renewal Franchise Agreement dated August 2, 20147 between Franchisee and Fish Window Cleaning is distinguishable from the franchise agreement at issue in Kerl based on a provision that permits Fish Window Cleaning to assume control in the event of a narrowly defined set of circumstances, including Franchisee’s indictment for a criminal act, mental or physical incapacity, or other default under the terms of the Franchise Agreement. (Renewal Agreement at ¶ 10.E, 11.A, ECF No. 56-6.) But this “right to assume control” in the event of a default is not an unqualified “right to control” that could result in the type of liability contemplated by the Kerl court. In Depianti v. Jan-Pro Franchising Int’l, Inc., 39 F. Supp. 3d 112 (D. Mass. 2014), the court considered whether similar provisions regarding the right to assume control in the event of a franchisee’s default could constitute actual control or the right to control such that the franchisor’s vicarious liability could be justified. Applying the analysis articulated in Kerl, the court concluded it did not. First, the court reviewed the provisions that could potentially give the franchisor the right to exercise control over the franchisee’s operations: A fact finder also could not reasonably conclude that [franchisor] has a right to control [franchisee’s] decisions concerning whether to terminate a [putative employee’s] work on a given account. The most pertinent provision in the contract between [franchisor] and [franchisee] states that [francisee] “agrees to be solely responsible for the relations with any [putative employees].” . . . Other provisions state: (a) that [franchisor] has the right “to enforce any provision of any . . . agreement [with a putative employee]” if [franchisee] fails to do so after receiving written notice from [franchisor]; [and] (b) that, if JPI receives recurring complaints from a customer, it is permitted to “assume the rights and obligations” under a contract with that customer; and (c) that [franchisor] has “the right to establish company policies and/or procedures pertaining to the operation 7 This provision is absent from the Franchise Agreement between Franchisee and Fish Window Cleaning that was in effect before August 2, 2014. (See generally Franchise Agreement, ECF No. 56-5). Accordingly, if the Court denies Fish Window Cleaning’s Motion for Summary Judgment on the basis of this provision, Fish Window Cleaning respectfully requests the Court also limit Plaintiffs’ damages to August 2, 2014, and later. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 34 of 37 -30- of [franchisee’s] franchised business, the terms of this Agreement, or the business of any unit franchisee.” Id. at 137. The Court went on to explain that these provisions only gave the franchisor the right to assume control, not the unqualified right to control relevant aspects of the franchisee’s operations. Under these provisions, only extraordinary circumstances permit [franchisor] to intervene in [franchisee’s] ordinary course of business. The last of these provisions also gives [franchisor] the right to establish what are essentially “the marketing, quality, and operational standards commonly found in franchise agreements.” . . . Such standards . . . “are insufficient to establish the close supervisory control or right of control necessary to demonstrate the existence of a master/servant relationship for all purposes or as a general matter.” In all, the record would not permit a reasonable fact finder to conclude that [franchisor] has a right to control “the daily conduct or operation” of [franchisee’s] decisions to terminate [putative employees’] cleaning accounts, or that it exercises such control. See id.; Kerl, 682 N.W.2d at 340 (a general right to impose operational requirements does not generate vicarious liability). Id. at 137–38. The Depianti court recognized the difference between the exercise of control or the right to control the specific aspect of the franchisee’s operations that caused the alleged harm, and provisions like the ones in the Renewal Agreement at issue in this case and the franchise agreements in Depianti—where the franchisor reserved only a right to assume control in the event of a defined set of circumstances for the purpose of maintaining “the marketing, quality, and operational standards commonly found in franchise agreements.” Id. Assuming for the sake of argument only that Franchisee failed to pay Plaintiffs’ wages in accordance with state and federal law, and further assuming for the sake of argument only that this failure triggered Fish Window Cleaning’s right to assume temporary control of Franchisee’s operations under Paragraph 10.E of the Renewal Agreement, Plaintiffs’ proposed result would stretch application of Kerl well beyond its actual holding. In the scenario Plaintiffs propose, Fish Window Cleaning could be held liable for Franchisee’s statutory wage violations based on its Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 35 of 37 -31- “right to control” the payment of wages to Plaintiffs, even though that right that could not exist until after the alleged wage violations had already occurred. As the Depianti court concluded, this is not an appropriate application of the Kerl test. Accordingly, even if the Court concludes Kerl is a basis under which it may consider the imposition of vicarious liability under the Wisconsin wage statutes, Fish Window Cleaning respectfully submits it should rule Fish Window Cleaning is still not Plaintiffs’ employer as a matter of law. Conclusion For the reasons discussed above, and in its Motion and Statement of Proposed Findings of Facts, filed concurrently herewith, Fish Window Cleaning respectfully requests the Court enter judgment in its favor and against Plaintiffs on all of Plaintiffs’ claims. Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 36 of 37 -32- Dated: November 7, 2016. FAEGRE BAKER DANIELS LLP s/ Heather Carson Perkins Patrick M. Miller, WI Bar No. 1035040 patrick.miller@faegrebd.com 311 S. Wacker Dr., Suite 4300 Chicago, IL 60606 Telephone: (312) 212-6500 Facsimile: (312) 212-6501 Heather Carson Perkins Appearing pro hac vice heather.perkins@faegrebd.com 3200 Wells Fargo Center 1700 Lincoln Street Denver, CO 80203 Telephone: (303) 607-3500 Facsimile: (303) 607-3600 Samantha M. Rollins Appearing pro hac vice samantha.rollins@faegrebd.com 801 Grand Avenue, 33rd Floor Des Moines, Iowa 50309-8003 Telephone: (515) 248-9000 Facsimile: (515) 248-9010 ATTORNEYS FOR DEFENDANT FISH WINDOW CLEANING SERVICES, INC. US.108774316.07 Case: 3:15-cv-00486-jdp Document #: 82 Filed: 11/07/16 Page 37 of 37