Streedharan v. Stanley Indus. & Auto.

Decision Date27 September 2022
Docket Number5:22-cv-0322-MEMF (KSx)
PartiesVIJAYAN STREEDHARAN, an individual, on behalf of himself and all other similarly situated, Plaintiff, v. STANLEY INDUSTRIAL & AUTOMOTIVE, LLC doing business as “MAC TOOLS”, a Delaware corporation and DOES 1 through 100, inclusive, Defendants.
CourtU.S. District Court — Central District of California

VIJAYAN STREEDHARAN, an individual, on behalf of himself and all other similarly situated, Plaintiff,
v.

STANLEY INDUSTRIAL & AUTOMOTIVE, LLC doing business as “MAC TOOLS”, a Delaware corporation and DOES 1 through 100, inclusive, Defendants.

No. 5:22-cv-0322-MEMF (KSx)

United States District Court, C.D. California

September 27, 2022


ORDER DENYING DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS OR, ALTERNATIVELY, TO COMPEL ARBITRATION [ECF NO. 14]

MAAME EWUSI-MENSAH FRIMPONG UNITED STATES DISTRICT JUDGE

Before the Court is Defendant Stanley Industrial & Automotive, LLC's Motion for Judgment on the Pleadings or, Alternatively, to Compel Arbitration. ECF No. 14. The Court held oral argument on this matter on August 18, 2022. For the reasons stated herein, the Court hereby DENIES the Motion for Judgment on the Pleadings or, Alternatively, to Compel Arbitration.

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BACKGROUND

I. Factual Background[1]

Defendant Stanley Industrial & Automotive, LLC, is a Delaware limited liability company that does business as “Mac Tools” (hereinafter “Mac Tools”). Compl. ¶ 8. Mac Tools is a subsidiary of Stanley Black & Decker, Inc., a Connecticut Corporation which “is the number one worldwide company for tools and storage.” Id. ¶ 10. Mac Tools “manufactures and distributes tools and related products like tool boxes [sic] and service equipment” and “sells Products to mechanics, technicians, and other service professionals as well as businesses providing these services.” Id. ¶ 14. One of the ways Mac Tools distributes its products is through “Distributors” or “Franchisees.” Id. ¶ 15. Distributors operate vehicles or “mobile stores” that display Mac Tools brands and marks. Id. Distributors “must purchase and operate a mobile vehicle [] stocked with Products within a Mac Tools-assigned geographic territory or route.” Id. ¶ 3.

Plaintiff Vijayan Streedharan (“Streedharan”) worked as Mac Tools Franchisee/Distributor[2] in California beginning in 2019. Id. ¶ 7. Mac Tools exerts “vast control[] over” Distributors but “attempts to classify these workers as ‘independent contractors.'” Id. ¶ 2. In doing so, “Mac Tools cheats these individuals out of protections provided by [] California law such as overtime pay and reimbursement of business expenses.” Id. ¶ 3. Among other things, the mobile stores may only be used to operate the distributorship and “may not be altered without Mac Tools's express approval.” Id. ¶ 15. Mac Tools controls the customer lists, reserves the right to set prices of products sold to Distributors and functionally sets the price of products to end-purchasers based on the company's online catalogues, flyers, and website. Id. ¶¶ 19, 20. Mac Tools requires that Distributors “personally work full-time to diligently promote, market, and increase the sale of Products as well as [the] Mac Tools's customer base.” Id. ¶ 18. Distributors “pay for the right to work for Mac Tools” by

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providing non-refundable initial fees, annual fees, paying costs to attend mandatory out-of-state training, and paying restock fees on returned merchandise. Id. ¶ 28.

Distributors sign contracts with Mac Tools that classify Distributors as independent contractors. Id. ¶ 24. On June 28, 2018, Streedharan received a Franchise Disclosure Document (“FDD”) from Mac Tools that included a copy of the Mac Tools's Franchise Agreement, an addendum to the Franchise Agreement, and an addendum to the FDD. ECF No. 21, Declaration of Vijayan Streedharan (“Streedharan Decl.”) ¶ 3; ECF No. 14-1, Declaration of Cory D. Catignani (“Catignani Decl.), ¶ 5, Ex. 1. The addendum to the Franchise Agreement and the FDD and its addendum included language that indicates that some of its provisions may be unenforceable under California law. Streedharan Decl. ¶ 2. On August 21, 2018, Streedharan executed the Mac Tools Franchise Agreement and an Addendum to Mac Tools Franchise Agreement for the State of California. Streedharan Decl. ¶ 3; Catignani Decl., ¶ 5, Ex. 1. Streedharan also executed a Guaranty of Payment and Performance of an Entity Mac Tools Franchisee. Streedharan Decl. ¶ 4.

Section 19.2 of the Franchise Agreement sets out a dispute resolution process.

19.2 Resolution of Disputes. Except with respect to the enforcement of the patties' rights and remedies under (i) any promissory note executed by you in Mac Tools' favor and/or under any security agreement between the parties, or (ii) any promissory note executed by you in favor of a third party and/or under any security agreement between you and a third party, either of which promissory note and/or security agreement is assigned to Mac Tools by such third party, as to which the procedures specified in this Section 19.2 shall not apply, the procedures specified in this Section 19.2 are the only procedures for the resolution of any and all controversies, disputes or claims of any nature whatsoever arising out of or related to this Agreement or any other agreement between you and Mac Tools, including the breach, termination or validity of any such agreement, or the relationship between you and Mac Tools and/or the operation of the Mac Tools Business and including any and all controversies, disputes or claims of any nature against Mac Tools by anyone claiming through you. However, before or during the time that you and Mac Tools follow these procedures, either you or Mac Tools can go to the appropriate court to get a preliminary injunction or other preliminary judicial relief if you or Mac Tools reasonably believes that such a step is necessary to avoid irreparable damage or harm Even if either you or Mac Tools takes such action, you and Mac Tools will continue to participate in good faith in the procedures specified in this Article 19. Notwithstanding anything in Section 19 to the contrary, without obligation to pursue the negotiation, mediation or arbitration described herein, Mac Tools shall at all times have the right to seek from an appropriate court replevin or similar orders, as Mac Tools reasonably believes such order(s) are necessary
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ECF No. 14-2, pg. 32. Section 19.2 subsection (d) provides:

(d) Arbitration. If the matter has not been resolved pursuant to mediation within 60 business days of the initiation of such procedure, or if either party will not participate in a mediation, the controversy shall be settled by arbitration by a sole arbitrator in accordance with the then-effective JAMS Comprehensive Arbitration Rules and Procedures. Any arbitrator shall be mutually elected by you and Mac Tools or, if you and Mac Tools cannot agree, by JAMS, The Resolution Experts in accordance with the then-effective JAMS Comprehensive Arbitration Rules and Procedures. The arbitrator is not empowered to and shall not, award punitive, exemplary, indirect, special consequential or incidental damages or any other damages in excess of actual direct damages or in excess of any limit on direct damages set forth in this Agreement, whichever is lower. Unless the parties agree otherwise in writing, the place of arbitration shall be at the JAMS Resolution Center in New York, New York. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. Courts of the State of Ohio or the United States District Court for the Southern District of Ohio will have sole jurisdiction over enforcement of arbitration and/or enforcement of the Agreement. Judgment upon the award rendered by the arbitrator may be entered by any state or federal court in Ohio having jurisdiction thereof. If either party is required to compel arbitration, that party shall be reimbursed for the costs and expenses incurred in connection therewith.

ECF No. 14-2, pg. 33.

The Franchise Agreement and its addendum were presented to Streedharan on a “take-it-or-leave-it” basis with no opportunity to negotiate its terms. Id. ¶ 5.

II. Procedural History

On November 24, 2021, Streedharan filed a class action against Mac Tools in the Superior Court of California, County of San Bernardino, asserting seven causes of action: (1) failure to reimburse expenses; (2) unlawful deductions from wages; (3) failure to pay overtime; (4) failure to provide meal breaks; (5) failure to provide rest breaks; (6) failure to pay wages when due; and (7) unfair competition. See generally Compl. On February 21, 2022, Mac Tools filed a Notice of Removal, and this case was removed to federal court. ECF No. 1 (“Notice of Removal”). On February 28, 2022, Mac Tools filed an Answer to the Complaint. ECF No. 9. On April 8, 2022, Mac Tools filed the instant Motion for Judgment on the Pleadings, or Alternatively, to Compel Arbitration. ECF No. 14 (“Motion” or “Mot.”). Mac Tools seeks a full order granting judgment on the pleadings on the grounds that Streedharan was not its employee and therefore he lacks standing to bring employment-

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related claims. Mot. at 2. Mac Tools also moves, in the alternative, to compel arbitration pursuant to the arbitration provisions located in the Franchise Agreement (“Arbitration Agreement”). Id. at 2-3. Streedharan filed an opposition on June 9, 2022. ECF No. 21 (“Opp'n”). Mac Tools filed its Reply on June 16, 2022. ECF No. 22 (“Reply”). A hearing on the Motion was held on August 18, 2022.

REQUEST FOR JUDICIAL NOTICE

I. Applicable Law

A court may take judicial notice of facts not subject to reasonable dispute where the facts “(1) [are] generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b). Under this standard, courts may take judicial notice of “undisputed matters of public record,” but generally may not take judicial notice of “disputed facts stated in public records.” Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001), overruled on other grounds by Galbraith v. Cnty....

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