Mujo v. Jani-King Int'l Inc.

• Decision Date: 21 December 2019
• Docket Number: No. 3:16-cv-1990 (VAB),3:16-cv-1990 (VAB)
• Citation: 431 F.Supp.3d 18
• Court: U.S. District Court — District of Connecticut
• Parties: Simon MUJO and Indrit Muharremi, on behalf of themselves and all others similarly situated, Plaintiffs, v. JANI-KING INTERNATIONAL INC. , et al., Defendants.

431 F.Supp.3d 18

Simon MUJO and Indrit Muharremi, on behalf of themselves and all others similarly situated, Plaintiffs,

v. JANI-KING INTERNATIONAL INC. , et al., Defendants.

No. 3:16-cv-1990 (VAB)

United States District Court, D. Connecticut.

Signed December 21, 2019

Adelaide Pagano, Shannon Liss-Riordan, Pro Hac Vice, Lichten & Liss-Riordan, P.C., Boston, MA, Richard Eugene Hayber, Hayber, McKenna & Dinsmore, LLC, Lori Ann Knuth, The Hayber Law Firm LLC, Hartford, CT, Michael T. Petela, Jr., Hayber, McKenna & Dinsmore, LLC, New Haven, CT, for Plaintiffs.

Aaron Van Oort, Kerry L. Bundy, Pro Hac Vice, Larry E. LaTarte, Pro Hac Vice, Rory Collins, Faegre Baker Daniels LLP, Minneapolis, MN, Alison G. Fox, Faegre Baker Daniels LLP, South Bend, IN, Peter Joseph Murphy, Shipman & Goodwin LLP, Hartford, CT, for Defendants.

RULING AND ORDER ON MOTION FOR SUMMARY JUDGMENT

VICTOR A. BOLDEN, UNITED STATES DISTRICT JUDGE

Simon Mujo and Indrit Muharremi, on behalf of a class of over 100 Jani-King franchisees (collectively "Plaintiffs"), allege that Jani-King International, Inc., Jani-King, Inc., and Jani-King of Hartford, Inc. (collectively "Defendants" or "Jani-King") unlawfully classified them as independent contractors and were unjustly enriched in violation of Conn. Gen. Stat. § 31-73(b).

Jani-King moves for summary judgment.

For the following reasons, Jani-King's motion for summary judgment is GRANTED.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

Plaintiffs signed Jani-King franchise agreements to "operate a Jani-King franchise cleaning and maintenance services company" and to provide commercial cleaning services using Jani-King's trademarks and system. Pls.' Local Rule 56(a)(2) Statement of Material Facts in Opp. to Jani-King Mot., ECF No. 155 ¶ 1 (Aug. 2, 2019) ("Pls.' SMF"); Ex. 2: Luli & Son LLC¹ Franchise Agreement, ECF No. 136-5 at § 4.1 (Apr. 23, 2014) ("Luli & Son Franchise Agmt."); Ex. 1: Simon Mujo Franchise Agreement, ECF No. 136-4 at § 4.1 (July 11, 2007) ("Mujo Franchise Agmt."). Plaintiffs' claims arise out of the Jani-King franchise agreement and the ensuing business relationship between the parties. The parties dispute whether Jani-King's franchise agreements permit the Plaintiffs to operate as independent contractors with their own commercial cleaning businesses, or whether Plaintiffs are employees. Pls.' SMF ¶ 1.

Jani-King's Franchise System and Model

Jani-King sells commercial cleaning service-based franchises, and requires franchisees to operate under its franchise system in a particular geographic area. Pls.' SMF ¶¶ 54, 56. Jani-King provides janitorial services to commercial entities. Id. ¶ 89. Jani-King's workers are classified as independent contractor franchisees. Id. ¶ 91 (citing Luli & Son Franchise Agmt. at § 12.6).

Jani-King owns all contracts with its cleaning customers and is solely responsible for drafting all cleaning contracts. Id. ¶ 93; see also Mujo Franchise Agmt. at § 4.7.1 ("All monies received from clients are the property of Franchisor."). Jani-King has the exclusive right to "secure commercial cleaning and maintenance contracts." Pls.' SMF ¶ 99 (citing Luli & Son Franchise Agmt. at § 4.3.1); see also Ex. 24: Jani-King Uniform Offering Circular, ECF No. 156-5 at JKCT00001104 (Apr. 30, 2007) ("UOC") ("All proposals for services made by [franchisees] to either current or prospective clients must be reviewed and approved by [Jani-King] staff. Any solicitation for services made by [franchisee] must be approved by [Jani-King]."). Additionally, franchisees are limited to accepting or rejecting Jani-King's offered business. Pls.'s SMF ¶ 100 (citing UOC at JKCT00001110). Along with the customer, Jani-King sets the terms of the cleaning services to be provided by franchisees, so franchisees must accept the contract negotiated between Jani-King and the customer. Id. ¶ 101.

Once franchisees pay an initial franchise fee down payment and initial finder's fee down payment, they operate under Jani-King's marketing system and use Jani-King's intellectual property. Id. ¶¶ 55, 57. Plaintiffs deny that they acquire rights to operate the franchise and allege that "[a]t all times, Jani-King controls the operation." Id. at ¶ 55. Plaintiffs note that among other indices of control, their franchise agreements state that:

Franchisor has developed and used, and continues to develop, use and control in connection with its System, certain confidential information, programs, devices, methods, techniques and processes which are not generally known to the public pertaining to franchising, promotion, marketing, operation and management of a business,... which includes but is not limited to information regarding the operational, sales, promotional methods and techniques, and marketing methods and techniques of Franchisor and the Jani-King program.

Id. (citing Mujo Franchise Agmt. at § 4.1.2; Luli & Son Franchise Agmt. at § 4.1.3). Plaintiffs also allege that some franchisees pay the entirety of the initial fee upfront, while others pay it over time, with the fee being deducted from their pay. Id. ¶ 96.

According to the franchise agreement, Jani-King has the "exclusive right to perform all billing and accounting functions for the services." Luli & Son Franchise Agmt. at § 4.8. The franchisee must pay 3% of gross revenue as an accounting fee to Jani-King. Id. Plaintiffs allege they must agree to these support services even if they would rather forgo them. Pls.' SMF ¶ 58.

According to the franchise agreement, franchisees pay various fees: a 10% royalty fee on monthly gross revenue, subject to certain minimum accounts, id. ¶ 59 (citing Luli & Son Franchise Agmt. at § 4.5.1); an advertising fee of 1.5% gross revenue for specified marketing programs intended to "maximize general public recognition and acceptance of the registered trademarks and enhance the collective success of all [Jani-King] franchises," id. ¶ 61 (citing Luli & Son Franchise Agmt. at § 4.5.2(1)); and a finder's fee for additional cleaning work—over and above the initial business purchased—referred by Jani-King, id. ¶ 62 (citing Luli & Son Franchise Agmt. at § 4.6). Other fees include insurance fees (otherwise known as the "business protection plan"), complaint fees, miscellaneous fees, and charge-backs. Id. ¶ 97; see also id. ¶ 98 (explaining that a charge-back occurs when a customer fails to pay Jani-King for work already performed by Plaintiffs; Jani-King deducts this amount from Plaintiff's earnings); Luli & Son Franchise Agmt. at § 4.8.1 ("Any money not collected in an account for any reason will be charged back to Franchisee."). These contractual fees are all deducted monthly from the gross revenue generated by franchisees. Id. ¶ 64. Plaintiffs deny that the franchise agreement defined "compensation," but Jani-King alleges that Plaintiffs "expressly agreed that their compensation would exclude all fees set out in their respective agreements." Id.

Under the franchise agreement, franchisees are responsible for providing and maintaining worker's compensation and liability insurance. Id. ¶ 66.

In order to ensure continuous service and client communication, Jani-King has required franchisees to notify the regional office of vacations and contact information for the people who will be responsible for servicing the accounts. Id. ¶ 67. Subject to customer requirements, franchisees set their own schedules. Id. ¶ 68. Franchisees could exchange customer accounts with other franchisees, subject to Jani-King approval, and franchisees also could decline or stop servicing customer accounts, but they risk not getting additional work to make up the difference in revenue. Id. (citing UOC at JKCT00001057).

Jani-King requires franchisees to "purchase certain professional products and equipment ... under specifications in the Franchise Agreement and operating manuals." UOC at JKCT00001090; see generally id. at JKCT00001090-91 (describing restrictions on sources of products, supplies, and equipment for the cleaning services). Jani-King also determines the advertising and promotional materials used by franchisees, Pls.' SMF ¶ 106 (citing UOC at JKCT00001098),

Franchisees are responsible for inspecting their customer accounts, Pls.' SMF ¶ 70, and Jani-King also conducts "quality control inspections of accounts ... from time to time in order to insure [sic] that the service is performed in accordance with the cleaning schedule or instructions associated with the contract between Franchisor [Jani-King] and the customer and to the performance standards of Jani-King," Luli & Son Franchise Agmt. at § 4.19.3.

Jani-King requires franchisees to "meet brand standards addressing everything from cleaning results, to the appearance of people cleaning (e.g., that cleaners should wear clean uniforms with name tags ...), to how the service is associated with Jani-King trade names and advertising." Pls.' SMF ¶ 71; see also id. ¶ 108 (cleaners must wear Jani-King branded uniforms). Additionally, franchisees are prohibited from bringing extra items or non-employees (including children and animals) to the customer site.

Jani-King requires franchisees to agree not to hold themselves out as an agent, servant, or employee of Jani-King, so that franchisees may not, without prior written approval, obligate Jani-King for any expenses, liabilities, or other obligations. Id. ¶ 72 (citing Mujo Franchise Agmt. at § 12.7; Luli & Son Franchise Agmt. at § 12.6).

Franchisees may sell their businesses, subject to Jani-King's right of first refusal and written consent. Pls.' SMF ¶ 74. Franchisees are subject to non-compete and non-solicitation provisions after leaving the Jani-King franchise system for a period of two years (within the originally-contracted territory) or one year (outside the territory); during that period, franchisees may not engage in an "independently established trade, occupation, or business" in the commercial cleaning industry. Id. ¶¶ 75, 117 (citing Luli &...