Case Number: KC068671 Hearing Date: May 23, 2018 Dept: J

Re: Blanca Franco, et al. v. H.W. Allstars, Inc., etc. (KC068671)

(1) MOTION TO LIFT THE STAY; (2) RENEWED MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT; (3) MOTION TO DESIGNATE CASE AS COMPLEX AND TRANSFER TO COMPLEX LITIGATION PROGRAM

Moving Parties: Plaintiffs Blanca Franco and Andres Franco

Respondents: Defendants H.W. Allstars, Inc. dba Doubletree by Hilton Claremont and Harry Wu

Plaintiffs are employed as banquet servers with H.W. All Stars, Inc. dba Doubletree by Hilton Claremont (“Doubletree”). Plaintiffs contend that they are third party beneficiaries of banquet contracts which entitle them to certain distributions that they have not received. The complaint was filed on 8/23/16. The First Amended Complaint (“FAC”), filed on 8/31/16, asserts causes of action against Doubletree, Harry Wu (“Wu”) and DOES 1-25 for:

1. Third Party Beneficiary Breach of Contract (against Doubletree only)

2. Violation of Unfair Competition Law, Section 17200 et seq. of the Business and Professions Code (against Doubletree and Wu)

3. Fraud (against Doubletree only)

4. Declaratory Relief (against Doubletree only)

On 12/20/16, the court sustained Henry Wu’s (“Wu”) demurrer to the second cause of action and Doubletree’s demurrer to the third cause of action without leave to amend; at that time, the language “and on behalf of all others similarly situated” was ordered stricken from the FAC.

On 2/9/17, Doubletree’s motion for an order compelling arbitration was granted and the case was ordered stayed pending the completion of arbitration. A Status Conference re: Arbitration is set for 5/23.

(1) MOTION TO LIFT STAY:

Plaintiffs Blanca Franco and Andres Franco (“plaintiffs”) move the court, per CCP § 1281.4, for an order lifting the stay in this case.

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies…” CCP § 1281.4.

“Section 1281.4 provides for a stay of pending litigation while a related arbitration is proceeding. (Heritage Provider Network, Inc. v. Superior Court (2008) 158 Cal.App.4th 1146, 1152). Once a stay is granted the trial court retains vestigial powers over the matters submitted to arbitration, including the power to rule on a petition to confirm, correct, or vacate an award. (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487; Finley v. Saturn of Roseville (2004) 117 Cal.App.4th 1253, 1258). ‘This vestigial jurisdiction over the action at law consists solely of making the determination, upon conclusion of the arbitration proceedings, of whether there was an award on the merits…or not (at which point the action at law may resume to determine the rights of the parties). [Citations.]’ (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796).” Cinel v. Christopher (2012) 203 Cal.App.4th 759, 769.

Here, it is undisputed that the arbitration was closed prior to the issuance of any award on the merits. Accordingly, “the action at law may resume to determine the rights of the parties.” The motion is granted.

(2) RENEWED MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT:

Plaintiffs Blanca Franco and Andres Franco (“plaintiffs”) now renew their request for an order granting them leave to file their proposed Second Amended Complaint.

“The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading…” CCP § 473(a)(1); and see § 576. A motion for leave to amend must (1) include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments, (2) state what allegations in the previous pleading are proposed to be deleted, if any, and where (by page, paragraph and line number) the deleted allegations are located, and (3) state what allegations are proposed to be added to the previous pleading, if any, and where (by page, paragraph, and line number) the additional allegations are located. California Rules of Court (“CRC”) Rule 3.1324(a). Additionally, a separate declaration must accompany the motion and must specify (1) the effect of the amendment, (2) the reason why the amendment is necessary and proper, (3) the time when the facts giving rise to the amended allegations were discovered, and (4) the reasons why the request for amendment was not made earlier. CRC Rule 3.1324(b).

Plaintiffs seek to add (1) formal class-wide allegations and (2) a statutory claim under Labor Code § 351. On 8/23/16, plaintiffs filed their complaint in their individual capacities “and on behalf of all others similarly situated,” but represented, in their “Civil Case Cover Sheet,” that the case was not a class action suit. On 8/31/16, plaintiffs filed their First Amended Complaint (“FAC”), again in their individual capacities “and on behalf of all others similarly situated.”

On 12/20/16, Defendants H.W. Allstars, Inc. dba Doubletree by Hilton Claremont’s (“Allstars”) and Henry Wu’s (collectively, “defendants”) demurrer to plaintiffs’ FAC was heard; at that time, the following dialogue ensued:

“THE COURT: …Mr. Armstrong, did you intend for this to be a class action?

MR. ARMSTRONG: Not necessarily, Your Honor.
We tracked the language of 17200 when we added the language of ‘on behalf of others similarly situated.’ We don’t know how many people that would be. It would be limited to people who are currently employed as servers and/or bussers and bartenders who might have been injured by the same allegations in the—in thecomplaint. And whether or not those people would meet the numerosity requirement is currently unknown.

THE COURT: Well, it sounds like a class action to me. Mr. Leahy, you want to weigh in on it?
MR. LEAHY: It either seems like a two-party action—a two-plaintiff action or a class action, Your Honor, to me as well. And if it were a class action, it seems to have some procedural and substantive deficiency, I think, in terms of the procedure, in terms of how it was filed, and substantively in terms of the procedure, in terms of how it was filed, and substantively in terms of the allegations within the first amended complaint at issue.

THE COURT: Yeah. My thought, Mr. Armstrong, would be to transfer the matter to Department 1 for reassignment as a class action.

MR. ARMSTRONG: Your Honor, we don’t know that we’re going to meet the requirements for a class action under the Code and would request that that—that the court not do that pending discovery on the issue.

THE COURT: Well. My problem is you’ve—you filed this on behalf of two individuals and all others similarly situated. And if it is potentially a class action, it has no business being here.

MR. ARMSTRONG: It could be amended to remove that language.

MR. LEAHY: We can stipulate on the record right now to remove that language.
THE COURT: All right. Do you want to stipulate now that the language in the caption of the complaint that it’s filed on behalf of all others similarly situated be stricken?

MR. ARMSTRONG: We can do that, Your Honor. I think that with discovery we might find that it’s more appropriately characterized as a class action; but I think for purposes of today, yes, we would stipulate to that.

THE COURT: So stipulated, Mr. Leahy?

MR. LEAHY: So stipulated, Your Honor.
THE COURT: All right. That stipulation is approved. The complaint is amended pursuant to stipulation to strike the wording ‘on behalf of all others similarly situated’ from the caption…

MR. LEAHY: …And can I just add, I’m sorry, one thing?

THE COURT: Sure.
MR. Leahy: I think that wording’s not only in the caption of the complaint, but I think it’s—and I might have been confused to what you were representing. I think it’s in the caption of each cause of action as well.

So I would just ask that it—I understand the court’s ruling as to the stipulation to mean that it’s really stricken from the entirety of the first amended complaint; but I think it appears in other pages of the first amended complaint as well, the same sort of phrase.

MR. ARMSTRONG: And I agree with that, Your Honor. I think that it’s sort of—it’s peppered throughout the complaint.
THE COURT: All right. Then that language ‘on behalf of all others similarly situated’ is stricken from the complaint wherever is [sic] currently exists.” (Leahy Decl., Exhibit “1,” 1:20-3:10 and 3:14-4:1).

Plaintiffs’ counsel Shannon Liss-Riordan (“Liss-Riordan”) asserts that the addition of class-wide allegations is appropriate at this juncture, because “the limited written discovery that has taken place to date confirms that class-wide claims are appropriate…” (Liss-Riordan Decl., ¶ 6). Liss-Riodan, however, is silent with respect to what “limited written discovery” yielded this conclusion, why the amendment is “necessary and proper,” and when this information was obtained, as required by CRC Rule 3.1324(b).

Additionally, plaintiffs have failed to explain why they seek to now add a statutory claim under Labor Code § 351 (i.e., “[n]o employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for. An employer that permits patrons to pay gratuities by credit card shall pay the employees the full amount of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit card payment processing fees or costs that may be charged to the employer by the credit card company. Payment of gratuities made by patrons using credit cards shall be made to the employees not later than the next regular payday following the date the patron authorized the credit card payment”), incontravention to their counsel’s earlier position, set forth on the record on 12/20/16 that this case did not involve a wage or tip claim:

“MR. ARMSTRONG: …It’s—it’s not a wage claim. It’s a straight up breach ofcontract, third party beneficiary claim…

The reality of this, it’s not a wage claim or a tip claim. It’s that, according to paragraph 8, Doubletree promises to pay 21 percent of the banquet bill to servers and, where applicable, bussers and bartenders. So it’s really just that simple.” (Leahy Decl., ¶ 4, Exhibit “1,” 7:10-23).
Liss-Riordan does not explain why plaintiffs appear to now be taking an “about-face” with respect to their earlier asserted position.

Plaintiffs’ motion, then, is denied.

(3) MOTION TO DESIGNATE CASE AS COMPLEX AND TRANSFER TO COMPLEX LITIGATION PROGRAM:

Plaintiffs Blanca Franco and Andres Franco (“plaintiffs”) move the court, per California Rules of Court (“CRC”) Rule 3.400, for an order designating this case as complex and transferring the case to the complex litigation program.

“A ‘complex case’ is an action that requires exceptional judicial management to avoid placing unnecessary burdens on the court or the litigants and to expedite the case, keep costs reasonable, and promote effective decision making by the court, the parties, and counsel.” CRC Rule 3.400(a). “In deciding whether an action is a complex case under (a), the court must consider, among other things, whether the action is likely to involve: (1) Numerous pretrial motions raising difficult or novel legal issues that will be time-consuming to resolve; (2) Management of a large number of witnesses or a substantial amount of documentary evidence; (3) Management of a large number of separately represented parties; (4) Coordination with related actions pending in one or more courts in other counties, states, or countries, or in a federal court; or (5) Substantial postjudgment judicial supervision.” CRC Rule 3.1400(b).

“Except as provided in (d), an action is provisionally a complex case if it involves one or more of the following types of claims:…(6) Claims involving class actions…” CRC Rule 3.1400(c). “With or without a hearing, the court may decide on its own motion, or on a noticed motion by any party, that a civil action is a complex case or that an action previously declared to be a complex case is not a complex case.” CRC Rule 3.403(b).

Plaintiffs’ motion is predicated on their motion to amend being granted; specifically, they represent that “if the Court grants [their] pending Motion to Amend to add class claims and a statutory claim under Cal. Labor Code § 351, Plaintiffs expect that this case may involve extensive pretrial motion practice, including a motion for class certification and motions for summary judgment on the new Labor Code claim as well as post-judgment supervision of any class-wide judgment or settlement in the case.” (Motion, 1:12-16).

The motion to amend, however, is denied; accordingly, this instant motion is denied.