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Franco v. Arakelian Enterprises, Inc.

California Court of Appeals, Second District, First Division

February 26, 2015

EDIXON FRANCO, Plaintiff and Respondent,
ARAKELIAN ENTERPRISES, INC., Defendant and Appellant.

[As modified Mar. 11, 2015]

APPEAL from an order of the Superior Court of Los Angeles County No. BC369201, John A. Kronstadt, Judge.

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Hill, Farrer & Burrill, Kyle D. Brown, James A. Bowles and E. Sean McLoughlin; Gibson, Dunn & Crutcher, Julian W. Poon and Jesse A. Cripps for Defendant and Appellant.

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Rastegar & Matern, Matthew J. Matern, Farzad Rastegar and Thomas S. Campbell for Plaintiff and Respondent.



Our Supreme Court has transferred this matter to us with directions to vacate our decision filed November 26, 2012 and to reconsider the cause in light of Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 [173 Cal.Rptr.3d 289, 327 P.3d 129] (Iskanian).[1]

Following the rule announced in Iskanian, we reverse and remand with directions the trial court’s order denying the petition of defendant Arakelian Enterprises, Inc. (Arakelian) to compel arbitration of plaintiffs claims for individual and class action relief, and for representative relief under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, §§ 2698-2699.5) (PAGA).[2]


This matter comes before us for the third time. The facts are taken from our opinion and the record in Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277 [90 Cal.Rptr.3d 539] (Franco I), and the exhibits filed in connection with the second petition to compel arbitration following the Franco I decision, with reference to our (now-vacated) November 26, 2012 opinion in Franco v. Athens Disposal Co., Inc.[*] (Cal.App.) (Franco II).

The complaint

On April 9, 2007, plaintiff Edixon Franco filed a lawsuit individually and on behalf of other similarly situated current and former employees, alleging his status as an employee of “Athens Disposal Company, Inc., dba Athens Services” (Athens Services). In the first through fourth and sixth causes of action, Franco brought claims as an individual and putative class representative, seeking relief against Athens Services based on his employment as a

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nonexempt hourly employee, alleging that Athens Services engaged in systematic and illegal Labor Code and wage-order violations.[3] In the fifth cause of action, Franco sued in a representative capacity under the PAGA, seeking civil penalties for Athens Services’ violations of its Labor Code obligations to Franco and other current and former employees. (Franco I, supra, 171 Cal.App.4th at p. 1283.) The sixth cause of action alleged a violation of the California unfair competition law. (Bus. & Prof. Code, § 17200 et seq.)

First petition to compel arbitration

On June 22, 2007, Athens Services petitioned to compel arbitration and to dismiss or stay the civil action. The petition stated that Athens Services was in the business of trash removal, hauling, disposal, and recycling, and that it was engaged in interstate commerce within the meaning of the Federal Arbitration Act (9 U.S.C. §§ 1-16).

According to Franco, he was employed by Athens Services from May 20, 2005, to May 12, 2006. (Franco I, supra, 171 Cal.App.4th at p. 1285.) In August 2005, he had signed an “Employee Agreement to Arbitrate” as a condition of his employment, which acknowledged his receipt and review of the Athens Services's mutual arbitration policy (MAP). The MAP provided (so far as relevant here) that it “will govern all existing or future disputes between you and the Company that are related in any way to your employment;” that it “covers all disputes relating to or arising out of an employee’s employment with the Company or the termination of that employment;” that the mutual obligation to arbitrate claims “means that both you and the Company are bound to use the MAP as the only means of resolving any employment-related disputes, ” and that “both you and the Company forego and waive any right to join or consolidate claims in arbitration with others or to make claims in arbitration as a representative or as a member of a class or in a private attorney general capacity....” But it also provided that “No remedies that otherwise would be available to you individually or to the Company in a court of law, however, will be forfeited by virtue of this

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agreement to use and be bound by the MAP, ” and that the parties retain the right to use small claims court. (Id. at p. 1284.)[4]

Athens Services's petition to compel arbitration alleged that arbitration was required under the MAP agreement. (Franco I, supra, 171 Cal.App.4th at pp. 1283-1284.) Its petition was supported by declarations, including that of the president of “Athens Disposal Company, doing business as Athens Services, ” alleging Franco’s employment by Athens Services as a waste truck driver, and his (and all other Athens Services waste hauling drivers’) exemption from California’s overtime wage laws and regulations. (Id. at p. 1285.)

In opposition to the petition, Franco submitted expert and other declarations to show that his wage and hour claims can be heard only as a class action, whether in court or in arbitration, because of the small size of each individual claim and the unavailability of legal representation for the prosecution of such claims. If arbitration were required, the experts contended, the result would be an inability to deter Arakelian and other such employers from continuing their Labor Code violations. (Franco I, supra, 171 Cal.App.4th at pp. 1298-1299.)

The trial court, Elizabeth A. Grimes, Judge, granted the petition to compel arbitration, reasoning that Franco’s claims for overtime compensation lacked merit, and that classwide arbitration would not be significantly more effective than individual arbitrations. The court concluded that the Athens Services arbitration program “would not disadvantage any employee who pursued claims through individual arbitration.” (Franco I, supra, 171 Cal.App.4th at p. 1287.) Franco appealed.[5]

The Franco I Appeal

This court concluded in Franco I that the MAP’s provisions requiring arbitration and waiving class actions were unenforceable. (Franco I, supra, 171 Cal.App.4th at pp. 1282, 1303.) Athens Services's petition for review by the ...

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