United States District Court, C.D. California
LUIGI AMBROSE ET AL.
AVIS RENT A CAR SYSTEMS INC. ET AL
Attorneys for Plaintiffs: Christina Humphrey, Stanley Saltzman.
Attorneys for Defendants: Julie Patterson, Glenn Plattner, Jonathan Solish.
CIVIL MINUTES - GENERAL
Honorable CHRISTINA A. SNYDER.
Proceedings: PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT (dkt. 88, filed October 29, 2014) DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (dkt. 89, filed October 29, 2014)
Plaintiff Tammy Dotson, joined by twenty-one other individuals and twenty-two corporations, initially filed this complaint in Los Angeles County Superior Court on October 14, 2011, against defendants Avis Rent a Car System, Inc. (" Avis"), Budget Rent a Car System, Inc. (" Budget"), Avis Budget Group, Inc. (" Avis Budget"), and Does 1-100 (collectively, " defendants"). Defendants removed the action to this Court on December 1, 2011.
After significant motion practice, twenty-seven plaintiffs ultimately filed the operative sixth amended complaint (" SAC") on October 11, 2012. The SAC alleges ten claims for relief: (1) declaratory relief; (2) failure to pay overtime compensation in violation of California Labor Code § 1194; (3) failure to indemnify and illegal wage deductions in violation of California Labor Code § § 226 and 2802; (4) failure to compensate for meal and rest breaks in violation of California Labor Code § § 226.7, 512, and 558; (5) failure to pay wages upon termination in violation of California Labor Code § § 201-203; (6) failure to provide an accurate, itemized wage statement in violation of California Labor Code § 226; (7) fraud and deceit: concealment; (8) violation of California Business and Professions Code § 17200, et seq . (" UCL"); (9) accounting; (10) remedies under the Private Attorneys General Act of 2004 (" PAGA"), California Labor Code § 2698 et seq .
On March 10, 2014, the parties informed the Court that twenty-six of the twenty-seven plaintiffs had voluntarily dismissed the action following successful, private mediation. Dkt. 80. Thus, the only claims pending before this Court are those of plaintiff Tammy Dotson; specifically, Dotson alleges claims 1-6, 8, and 9 against defendants.
On October 29, 2014, plaintiff Dotson filed a motion for partial summary judgment, dkt. 88, which defendants opposed on November 19, 2014, dkt. 94. Defendants also filed a motion for summary judgment on October 29, 2014, dkt. 89, which was likewise opposed by plaintiff on November 19, 2014, dkt. 95. The Court held a hearing on December 8, 2014. Having carefully considered the parties' arguments, the Court finds and concludes as follows.
This case involves the proper classification of a business relationship that fits neatly within neither the contours of the franchisee-franchisor framework, nor the employee-employer framework. Except where noted, the following relevant facts are not in dispute.
Avis Budget is an international car rental company that owns both Avis and Budget. Joint Separate Statement of Facts (" SS") No. 1. In California, Avis Budget rents cars from three different types of facilities: (i) corporate-owned locations operated by workers employed by Avis Budget; (ii) franchises operated under franchise agreements; (iii) and locations operating under independent operator agreements. Id. No. 131. There are currently 133 Avis Budget locations operating under independent operator agreements in California. Id. No. 2.
In 2006, plaintiff and her husband, Ken Dotson, contacted Budget seeking to become agency operators. Id. Nos. 15-17. In September 2006, Dotson completed a 60-90 day training course offered by Budget, which was mandatory for new agency operators who lacked prior rental car experience. Id. No. 22. After completing the training, plaintiff was offered an independent operator location in Riverside, California (" the Riverside Location"), which had previously been operated as a corporate location. Id. No. 23. As a prerequisite to entering into an Independent Operator Agreement (" OA") with Budget, the Dotsons filed articles of organization to create a limited liability company by the name of Visions Unlimited, LLC (" Visions"). Id. No. 187. Ken Dotson was named as Visions' President, and Tammy Dotson was named as Visions' Vice President. Id. No. 188.
On November 1, 2006, Visions entered into an OA with Budget, which Tammy Dotson executed as Visions' Chief Financial Officer. Id. No. 190. The OA identifies Visions as the " Operator, " and expressly provides that the " Operator is an Independent Contractor." Joint App., Ex. 1 (the OA) at 1. The OA also states that the Operator " is not a franchisee, " and provides that the Operator has not " paid [Budget] a fee for the right to enter into this Agreement." Id. Further, the OA incorporates by reference the Budget Agency Operator Guidelines (" the Guidelines").
Pursuant to the OA, Visions was required to hire employees to staff the Riverside Location, and was " solely responsible for all aspects of their employment including compensation, training, staffing and hours/days worked." OA at 5. The OA also required Visions to obtain workers' compensation insurance for its employees, and to obtain liability insurance for the Riverside Location itself. OA at 10. The employees hired by Visions were required to be " uniformed, competent and trained . . . [and] capable." OA at 8. Moreover, Visions was required to staff the Riverside Location with a full-time business manager " who is acceptable to [Budget]." Id. Additionally, Visions was required to conduct a driver's license check on all employees authorized to use a Budget vehicle. Id.
In practice, Visions hired at least twenty-three employees to staff the Riverside Location between November 2006 and January 2011, when Budget terminated the OA. SS No. 217. Dotson determined the work hours for Visions' employees, arranged their schedules to avoid paying overtime, set their rate of pay, and contracted with a third-party to handle payroll. Id. Nos. 220, 225, 226. Although Budget policy forbids hiring known felons as corporate employees, Dotson hired two known felons to staff the Riverside Location without objection from Budget. Id. Nos. 209, 228. Further, with the exception of one corporate employee retained by the Dotsons, Budget did not speak with any of Visions' employees before they were hired. Id. No. 208. While Budget asserts that Dotson " decided who would be hired and fired at her Location, " Dotson asserts that Budget prevented her from hiring an individual who had been accused of theft at another Budget location. Id. No. 227.
The OA also required Visions to " honor Budget standards" and follow the Agency Operator Guidelines. For example, Visions was obligated to follow Budget rental procedures, comply with Budget's credit qualification practices, accept confirmed car rental reservations, use Budget-approved forms, and participate in Budget's Emergency Road Service Program. Id. Nos. 89, 93, 94, 96, 97. Further, the OA obligated Visions to pay taxes and cover " the cost of all office supplies and operational expenses at the Location, including . . . stationery, postage, photocopy paper, courier and/or shipping charges, and janitorial services . . . ." Id. No. 202.
While operating the Riverside Location, Tammy Dotson engaged in marketing efforts that ultimately brought in new rental business from at least three other companies. Id. No. 230. However, Dotson complains that Budget was not always willing to accept the business terms proposed by potential customers solicited by Dotson. For example, Dotson asserts that she submitted a bid to provide a supermarket chain with six cars on a monthly basis, but that Budget " did not approve this proposed corporate rental because it determined that too many miles would be put on the cars." SS No. 64. Although defendants assert that they cannot verify whether they ever denied approval of such deals, they do not deny that they had the power to do so, instead asserting that, " [i]t would be unfair to have a trier of fact second guess Budget's economic decisions in the course of deciding whether Mrs. Dotson was an employee." Defs' Opp'n Summ. J. at 4.
Budget also maintained certain rights and obligations pursuant to the OA. Among other things, Budget owned and insured the fleet of rental vehicles at the Riverside Location, determined which vehicle groups would be made available, supplied Visions' business license, leased the Riverside facility in its own name, paid for the facilities' utilities, and provided uniforms to Dotson and staff at the Riverside Location. Id. Nos. 70, 158-164, 171. Budget also supplied the Riverside Location's furniture and, with the exception of a laptop computer purchased by the Dotsons, supplied general office equipment such as computers, printers, and telephones. Id. Nos. 169-170. Additionally, Budget provided the Riverside Location with the " Wizard" software platform, Budget's uniform system for processing rental reservations. Id. Nos. 142-143. The Wizard system allowed Budget to maintain centralized control of business processes, including " fleet acquisition and logistics, sales to corporate accounts, and determination of rental rates." Id. No. 144.
Budget also set the rates for all rentals booked through the Budget website or phone lines. Id. No. 141. With regard to walk-up rentals, although Budget disputes that it ever set minimum rental rates, the undisputed evidence indicates that Budget did indeed maintain such minimum rates. See, e.g., Joint App., Ex. 21 Deposition of Diane Hagner-Gibson 133:12-134:7 (affirming that there is " some minimum" rate set by Budget that agency operators are required to charge for walk-up rentals). On average, the amount of walk-up business as the Riverside Location fluctuated between 12-28% of all monthly rentals. SS No. 66.
Pursuant to the OA, a Territory Performance Manager (" TPM"), employed directly by Budget, conducted periodic inspections of the Riverside Location and completed an " Agency Contact Report, " which evaluated vehicle quality, facility image, uniforms, customer service, and whether Visions had conducted a " rate shop" of local competitors. Id. No. 119. The TPM also established business goals that were noted and tracked on Agency Contact Reports. Id. No. 120.
The terms of the OA further provide that the Riverside Location is to be kept open for such " minimum hours" as the parties " mutually agreed." Id. No. 200. Once these hours were set, they could not be changed without Budget's express approval. Id. No. 82.
Pursuant to the OA, Visions received 12% of the net total revenue derived from each rental, and 55% of revenue derived from the on-site refueling service. Id. No. 239. All revenue went to Budget first, which then calculated the commission owed to Visions and directly deposited commission checks into Visions' bank account. Id. Nos. 152-154, 156.
Although the OA does not have an expiration date, it contains termination provisions. Id. No. 151. The OA grants both parties the right to terminate without cause upon at least 90 days' prior written notice. OA at 14. With 30 days' notice, the OA permits Budget to terminate the contract for " good cause, " such as Visions' failure to rent vehicles in accordance with Budget's policies. OA at 13. Further, the OA permits Budget to terminate the contract immediately for good cause if, inter alia, Visions or its employees " engage[d] in a pattern or practice of discrimination, " Visions abandoned the Riverside Location, or Visions attempted to assign any rights under the OA. Id. at 12-13.
Over the course of the four and a half years that Visions operated the Riverside Location, Visions received two notices from Budget concerning perceived shortcomings. The first, a letter dated June 1, 2010, noted that the Riverside Location had experienced a drop in counter sales of optional services and advised that " [c]ontinued poor performance . . . could force Avis Budget Group to exercise its rights signed by both parties in the operators agreement." Id. No. 118. That same month, plaintiff ...