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Guifu Li, Meng Wang, Fang Dai, Lin v. A Perfect Franchise

June 8, 2011


The opinion of the court was delivered by: Lucy H. Koh United States District Judge


Defendants A Perfect Day Franchise, Inc., Minjian Hand Healing Institute, Inc., Tailiang Li, and Jin Qui (together, Defendants) have moved to stay these proceedings pending an appeal of 20 this Court's order denying Defendants' request to dismiss this case and compel arbitration. See Dkt. No. 154 ("Motion"). After considering the parties' briefs relating to Defendants' Motion, the Court finds this matter suitable for decision without oral argument. See Civ. L. R. 7-1(b).

Accordingly, the hearing on this Motion, set for June 16, 2011 is hereby VACATED. The case 24 management conference set to follow the hearing on the Motion is hereby re-set for Friday, June 17 25 at 1:30 p.m. For the reasons set forth below, the Court DENIES Defendants' Motion.


Plaintiffs in this putative class action are current and former workers for A Perfect Day Franchise, Inc. ("Perfect Day"). Perfect Day owns and operates spas in Fremont, Santa Clara, and 5

A. Factual Background

Millbrae, California. For example, Plaintiffs claim that Perfect Day has mis-categorized them as 6 independent contractors rather than employees. According to Plaintiffs, Perfect Day failed to pay them and other putative class members minimum wages and overtime, wrongly subtracted materials costs from Plaintiffs' wages, wrongly took Plaintiffs' tips, and committed other violations of California wage and hour laws. Based on these allegations, Plaintiffs claim violations of both the Fair Labor Standards Act (FLSA, 29 U.S.C. §§ 201-19) and California law. Perfect Day denies any unlawful conduct.

B. Procedural Background

Plaintiffs filed their first complaint on March 22, 2010, and a First Amended Complaint (FAC) on May 12, 2010. Defendants were ineffectively served with Plaintiffs' first complaint on March 27, 2010, but were properly served with the FAC on June 3, 2010. putative class members' employment, retaining only electronic scans in accordance with their 17 asserted "paperless policy." See October 22, 2010 Tr. at 44:20-45:18; Opp'n. to Sanctions Mot. at 4. Defendants state that they have departed from this paperless policy after receipt of the FAC, and 19 now retain newly-generated documents in their original (paper) form. Opp'n. to Sanctions Mot. at Defendants claim arbitration of Plaintiffs' claims is required by an Independent Contractor's Agreement (ICA) between Plaintiffs and Defendants, and moved to dismiss 23 proceedings and compel arbitration. Dkt. No. 35. However, Defendants destroyed the original ICAs, the documentary evidence of the asserted arbitration agreement, pursuant to the paperless 25 policy. See Opp'n. to Sanctions Mot. at 4. Defendants claim to have maintained electronic records 26 of these documents, which they submitted to the Court in support of their arbitration motion. In 27 opposition, Plaintiffs cited the testimony of several workers who denied signing the ICAs offered 28 by Defendants. See Opp'n. to Arbitration Mot. at 10. Plaintiffs introduced a different ICA, which Defendants have destroyed the original copies of many employment documents relating to they claim is the document the workers actually signed. Order Den. Mot. to Compel Arbitration 2 and for Sanctions (Dkt. No. 142) at 5.

In denying Defendants' motion to compel arbitration, the Court held Defendants did not meet their burden to establish, by a preponderance of the evidence, that an arbitration agreement existed. Id. at 6. Specifically, the Court found the testimony of Defendants' witnesses regarding the purported ICAs to be inconsistent and lacking in credibility, while Plaintiffs' witnesses gave credible and consistent testimony that Defendants' ICAs were not the ICAs Plaintiffs had signed.

Id. at 7. For these reasons, the Court denied Defendants' Motion to Compel Arbitration, holding that "[b]ecause Perfect Day's testimony on this subject is inconsistent and lacks credibility, the Court concludes that it has not met its burden to show that a valid agreement to arbitrate exists between Perfect Day and Plaintiffs." Id. at 6-8.

On February 14, 2011, Defendants appealed the Court's Order denying their motion. Dkt. No. 151. On February 23, 2011, A Perfect Day moved to stay these proceedings pending this 13 appeal. Dkt. No. 154.


16 principles." Nken v. Holder, 129 S. Ct. 1749, 1760-61 (2009) (citation omitted). Petitioners do not 17 have an absolute right to a stay "even if irreparable injury might otherwise result;" instead, the 18 propriety of granting a stay depends on the circumstances of each case. Id. at 1760 (citing Virginian R. Co., 272 U.S. 658, 672 (1926)). This Court may accordingly grant or deny a stay in 20 accordance with its best judgment; the Court is not, as Defendants suggest, divested of jurisdiction 21 over this matter. Mot. at 2. In some circuits, denial of a motion to compel arbitration 22 automatically results in a stay of the case in district ...

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