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Depianti v. Jan-Pro Franchising Int'l, Inc.

United States District Court, D. Massachusetts

August 22, 2014

GIOVANI DEPIANTI, et al., Plaintiffs,

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Giovani Depianti, and all others similarly situated, Plaintiff: Shannon E. Liss-Riordan, LEAD ATTORNEY, Harold L. Lichten, Lichten & Liss-Riordan, P.C., Boston , MA; Elizabeth A. Tully, Justice at Work, Boston , MA.

For Hyun KI Kim, and all others similarly situated, Kyu Jin Roh, and all others similarly situated, Plaintiffs: Shannon E. Liss-Riordan, LEAD ATTORNEY, Harold L. Lichten, Lichten & Liss-Riordan, P.C., Boston , MA.

For Gerardo Vazquez, and all others similarly situated, Gloria Roman, and all others similarly situated, Juan Aguilar, and all others similarly situated, Nicole Rhodes, and all others similarly situated, Mateo Garduno, and all others similarly situated, Todor Sinapov, and all others similarly situated, Plaintiffs: Harold L. Lichten, Shannon E. Liss-Riordan, LEAD ATTORNEYS, Lichten & Liss-Riordan, P.C., Boston , MA.

For Chiara Harris, and all others similarly situated, Plaintiff: Shannon E. Liss-Riordan, LEAD ATTORNEY, Lichten & Liss-Riordan, P.C., Boston , MA.

For Jan-Pro Franchising International, Inc., Defendant: Christopher M. Pardo, Jeffrey M. Rosin, Constangy, Brooks & Smith, LLP, Boston , MA.

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A. Facts

B. Procedural History


A. Plaintiffs' Motion to Amend the Complaint

B. JPI's Motion to File a Supplemental Answer



A. Additional Background

B. The GCA's Decision Is Preclusive

C. The GCA's Decision Is Consistent with Massachusetts Law


A. Additional Background

B. General Analysis

C. Misrepresentation

D. Unfair and Deceptive Business Practices

E. The Statute of Limitations


A. Additional Background

B. Quantum Meruit

C. Unjust Enrichment



This is a putative class action against defendant Jan-Pro Franchising International, Inc. (" JPI" ). JPI sits at the top of a three-tiered system of cleaning franchises. It sells the rights to use the " Jan-Pro" name to " regional master franchisees." These regional master franchisees sell the rights to use the Jan-Pro name to " unit franchisees," who perform cleaning services for customers. The regional master franchisees also solicit business for the unit franchisees and manage the process of billing the customers.

The named plaintiffs are seven unit franchisees from four states. The six-count Amended Complaint (the " Complaint" ) claims, in essence, that plaintiffs and others similarly situated were misled into entering into agreements that improperly classified them as independent contractors when, as a matter of law, they were employees. Plaintiffs also allege that the terms of the agreements they signed

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were inherently unfair, and that these terms were systematically breached. Plaintiffs assert claims of unfair and deceptive business practices (Count I); misclassification as independent contractors (Count II), along with related wage-law violations (Count III); misrepresentation (Count IV); quantum meruit (Count V); and unjust enrichment (Count VI).[1]

The proceedings to date have focused on plaintiff Giovani Depianti of Somerville, Massachusetts. The court certified three questions to be answered by the Massachusetts Supreme Judicial Court (the " SJC" ). The SJC has issued its answers to these questions. In addition, concurrent proceedings between the parties in the Georgia state courts have culminated in a decision in JPI's favor.

JPI moves for summary judgment on all counts. Plaintiffs move for summary judgment on Count II only, as to Depianti only. In addition, plaintiffs move to amend their complaint to add new named plaintiffs to the proceedings. JPI also moves to assert preclusion defenses that were not identified in its answer to the Complaint. For the reasons explained in this Memorandum, the court is deciding these motions as follows.

The court is allowing JPI's motion to assert a preclusion defense, in essence because the doctrines concerning preclusion implement important considerations of comity between competent courts. Conversely, because plaintiffs' motion to amend the complaint does not implicate the same considerations, and because it is unduly prejudicial at this late stage of the litigation, this motion is being denied.

Plaintiffs' motion for summary judgment is being denied, and JPI's motion for summary judgment is being allowed in part and denied in part, as follows.

First, the court is entering summary judgment for JPI on Counts II and III of the Complaint, which allege misclassification as independent contractors and related wage-law violations. The Georgia Court of Appeals (the " GCA" ) has determined that, as a matter of Massachusetts law, JPI is not Depianti's employer. Under the applicable federal doctrines concerning preclusion, the GCA's decision is binding on this court. Moreover, the court concludes that the GCA's decision is consistent with Massachusetts law, as explicated by the SJC.

Counts I and IV of the complaint allege unfair and deceptive business practices under Massachusetts General Laws Chapter 93A (" Chapter 93A" ) and misrepresentation. JPI is entitled to summary judgment as to some, but not all, of the allegations made in these counts. These counts rely on a theory of vicarious liability, according to which JPI is liable for the conduct of its regional master franchisee in eastern Massachusetts, BradleyMktg Enterprises, Inc. (" BME" ). Under Massachusetts law, as developed by the SJC, JPI is liable for BME's conduct if: (a) that conduct was actionable, and (b) JPI controlled, or had a right to control, the specific actionable policy or practice. A reasonable fact finder could find that JPI has the right to control one practice alleged in the Complaint -- the contracts that BME makes with its unit franchisees. Count IV of the Complaint alleges, among other things, that the terms of these contracts are inherently unfair in a manner actionable under Chapter 93A. This part of Count IV is, therefore, surviving summary judgment. JPI will, however, be permitted

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to argue at a later date that Depianti's surviving 93A claim is barred by the applicable statute of limitations, as this issue has not yet been developed sufficiently. Summary judgment is entering in JPI's favor on the other parts of Count IV and on all of Count I.

JPI is also entitled to summary judgment on Count V of the Complaint, which asserts a claim in quantum meruit. As a matter of law, this claim can only succeed if Depianti expected to be remunerated by JPI, and plaintiffs have conceded that Depianti did not have such an expectation.

This element of expectation to be remunerated is not required under the cause of action asserted in Count VI of the Complaint, unjust enrichment. JPI's argument for summary judgment on this count is, therefore, not meritorious. However, since unjust enrichment is an equitable doctrine, JPI will be permitted to argue at a later date that Depianti is not entitled to recover under this doctrine because an adequate remedy is available to him at law.


A. Facts

The following facts are generally not disputed. Factual disputes are discussed separately below.

JPI is a Massachusetts corporation with headquarters in Alpharetta, Georgia. JPI has trademarked the " Jan-Pro" name, and it sells the rights to used this name in specified geographic areas to regional master franchisees.

The regional master franchisees, which are separate corporate entities from JPI, acquire the exclusive rights to sell unit franchises in their respective territories. JPI provides each new regional master franchisee with several days of training. Each regional master franchisee is then provided with sample marketing materials and with electronic templates that may be used for various managerial purposes. Regional master franchisees pay JPI a fee for each unit franchise they sell. They also remit to JPI a percentage of the revenue that they collect for the cleaning work performed by their unit franchisees.

Regional master franchisees provide their unit franchisees with some initial training. Thereafter, they perform three basic services for the unit franchisees: they solicit cleaning accounts and offer them to the unit franchisees; they bill the customers for work performed by the unit franchisees and collect payment from the customers; and they distribute the revenue to unit franchisees. JPI does not perform these services.

The agreements between JPI and the regional master franchisees provide that the regional master franchisees are independent contractors, not agents or fiduciaries of JPI. JPI visits its regional master franchisees' offices no more than annually. Regional master franchisees are responsible for their own accounting, which JPI does not monitor. They may choose whether or not to advertise and, except for the requirement that they use the Jan-Pro logo, the content of any such advertising.

Unit franchisees may be individuals or corporations. The agreements between the regional master franchisees and each unit franchisee, like the agreements between JPI and each regional master franchisee, state that the unit franchisee is an independent contractor, not an agent or employee of the regional master franchisee. Unit franchisees control their own marketing and bookkeeping. They are permitted to hire employees, and some do so.

Every new unit franchisee is guaranteed, in its agreement with the regional master franchisee, a volume of cleaning

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accounts worth a specified amount of gross annual billing. The amount specified varies between unit franchisees, and affects the price charged for the unit franchise. If the regional master franchisee fails to provide the required amount of business, the unit franchisee is entitled to a full or partial refund. The contracts between regional master franchisees and unit franchisees permit the regional master franchisees to offer the unit franchisees business anywhere within the regional master franchisee's geographic region. However, regional master franchisees sometimes agree to provide the required amount of business within a more limited area convenient to the unit franchisee.

B. Procedural History

The instant suit was brought on April 18, 2008. Eleven individual plaintiffs were initially named. Plaintiffs Grasielle Regina Dos Santos, Hyun Ki Kim, Todor Sinapov, and Kyu Jin Roh have since been dismissed by stipulation.

The operative Complaint was filed after the court denied JPI's Motion to Dismiss and Supplemental Motion to Dismiss. See Nov. 25, 2008 Order.[2] As described earlier, the Complaint asserts claims of unfair and deceptive business practices under Chapter 93A, misclassification as independent contractors and related wage-law violations, misrepresentation, quantum meruit, and unjust enrichment.

With the court's permission, the parties filed cross-motions for summary judgment before class certification was addressed. See Sept. 15, 2009 Order ¶ 2. JPI sought summary judgment on all claims as to all plaintiffs. Plaintiffs sought summary judgment on Count II with regard to " Massachusetts plaintiffs," namely Depianti. The motions for summary judgment revealed that in the parties' view, the law that governs each claim is the law of the state in which the relevant regional master franchisee is located. See also Apr. 12, 2010 Joint Report (confirming that this is the parties' position). The court decided to focus, at first, on Depianti's claims. See Apr. 13, 2010 Order ¶ 2; Apr. 16, 2010 Tr. at 4.

The court then certified three questions presented by Depianti's case to be answered by the SJC. See Depianti v. Jan-Pro Franchising Int'l, Inc., Civ. A. No. 08-10663, 2012 WL 3835090 (D. Mass. Aug. 31, 2012) (" Depianti Questions" ). The first question concerned the court's jurisdiction. A plaintiff asserting a claim of employee misclassification under Massachusetts law is required by statute, Mass. Gen Laws ch. 149, § 150, to file a complaint with the Massachusetts Attorney General before bringing suit. Depianti had apparently not satisfied this requirement. However, the court found that JPI had " waived the argument that Depianti failed to exhaust administrative remedies," because the only mention of this argument in JPI's submissions was intentionally inconspicuous. Id. at *2-*3. Accordingly, the SJC was asked " [w]hether a plaintiff's failure to exhaust administrative remedies . . . by filing a complaint with the Attorney General deprives a court of jurisdiction to consider the plaintiff's claims." Id. at *3 (Order ¶ 1(a)).

The second question certified by the court concerned Depianti's claims of misrepresentation and unfair and deceptive business practices under Chapter 93A.

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These claims rely on a theory of vicarious liability, according to which JPI would be held liable for the acts of its regional master franchisee, BME. The SJC was asked to explain " [w]hether and how to apply the 'right to control test' for vicarious liability to the franchisor-franchisee relationship." Id. (Order ¶ 1(b)).

The third question concerned Depianti's claims of misclassification and wage-law violations. Because there is no direct contractual relationship between JPI and Depianti, the SJC was asked " [w]hether a defendant may be liable for employee misclassification . . . where there was no contract for services between the plaintiff and defendant." Id. (Order ¶ 1(c)).

On June 17, 2013, the SJC answered the questions certified to it. See Depianti v. Jan-Pro Franchising Int'l, Inc., 465 Mass. 607, 990 N.E.2d 1054, 1060-62 (Mass. 2013) (" Depianti Answers" ). The SJC's answers were as follows. First, a plaintiff's failure to file a complaint with the Massachusetts Attorney General before bringing suit does not deprive the court of jurisdiction. Id. at 1060-62. Second, as discussed in detail below, a franchisor is vicariously liable for the conduct of its franchisee where " the franchisor controls or has a right to control the specific policy or practice resulting in harm to the plaintiff." Id. at 1064. Third, as discussed below as well, the absence of a contract between two parties does not, itself, preclude liability for misclassification. Id. at 1064-69.

Concurrent to the instant suit, proceedings between JPI and Depianti have taken place in the Georgia state courts. There, JPI filed suit against Depianti and a unit franchisee from Pennsylvania, Hyun Ki Kim.[3] JPI sought a declarative judgment that it is not the " employer" of those individuals under the laws of Massachusetts and Pennsylvania, respectively. Depianti moved to dismiss for lack of personal jurisdiction. The trial court denied his motion and issued a certificate of immediate review. Depianti did not file an interlocutory appeal.

The Georgia trial court then allowed Depianti's motion for summary judgment. JPI appealed, and the GCA reversed, finding that, under Massachusetts General Laws ch. 149, § 148B (the " Misclassification Statute" ), JPI is not Depianti's employer. See Jan-Pro Franchising Int'l, Inc. v. Depianti, 310 Ga.App. 265, 712 S.E.2d 648 (Ga. Ct. App. 2011) (" Depianti Georgia" ). Depianti petitioned the Supreme Court of Georgia (the " SCG" ) for certiorari. At first, the SCG stayed its decision. See Pls.' Jan. 3, 2012 Notice of Suppl. Authority Ex. A. On July 9, 2013, after the SJC had answered the questions that had been certified to it by this court, Depianti's petition for certiorari was denied.

After the SJC and the Georgia courts issued their respective decisions, this court permitted the parties to file supplemental briefing, including a reply and a sur-reply. See Sept. 4, 2013 Order. When briefing was complete, on December 6, 2013, the court held a status conference to discuss the pending motions and how this case should proceed. The parties confirmed that their cross-motions for summary judgment are ripe for decision, as are motions by both parties, discussed below, to amend or supplement their pleadings.


A. Plaintiffs' Motion to Amend the Complaint

Plaintiffs move to file a Second Amended Complaint. By this motion (the " Motion

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to Amend" ), plaintiffs seek to add additional unit franchisees from Massachusetts as new named plaintiffs.

The Motion to Amend was initially motivated by plaintiffs' concern that Depianti's misclassification claim would be barred because he had failed to file a complaint with the Massachusetts Attorney General before bringing suit. See Mot. to Amend Compl. ¶ ¶ 4-5. The SJC has since allayed this concern by finding, in response to the first question certified to it by this court, that failure to file a complaint with the Massachusetts Attorney General is not jurisdictional. See Depianti Answers, 990 N.E.2d at 1060-62. However, plaintiffs now wish to make the same proposed amendment in order to avoid the preclusion of Depianti's claim by the decisions of the Georgia courts. See Pls.' Oct. 8, 2013 Reply Suppl. at 3 & n.2.

JPI opposes the Motion to Amend. It argues, among other things, that the proposed addition of new plaintiffs " at this stage in the case -- where discovery is completed, the merits are ripe for ruling, and plaintiffs had years of notice as to JPI's affirmative defenses -- is far too prejudicial to JPI and far too late." JPI's Opp'n to Pl.'s Mot. to Amend at 3; JPI's Oct. 22, 2013 Sur-Reply Suppl. Submission at 7.

The general rule is that amendment should be allowed " [u]nless there appears to be an adequate reason (e.g., undue delay, bad faith, dilatory motive, futility of amendment, prejudice)." Mirpuri v. ACT Mfg., Inc., 212 F.3d 624, 628 (1st Cir. 2000) (quoting Glassman v. Computervision Corp., 90 F.3d 617, 622 (1st Cir. 1996)). The First Circuit has explained that:

As a case progresses . . . the burden on a plaintiff seeking to amend a complaint becomes more exacting. Scheduling orders, for example, typically establish a cut-off date for amendments . . . . Once a scheduling order is in place, the liberal default rule is replaced by the more demanding " good cause" standard of Fed.R.Civ.P. 16(b). . . . Where the motion to amend is filed after the opposing party has timely moved for summary judgment, a plaintiff is required to show " substantial and convincing evidence" to justify a belated attempt to amend a complaint. . . .
[T]he longer a plaintiff delays, the more likely the motion to amend will be denied, as protracted delay, with its attendant burdens on the opponent and the court, is itself a sufficient reason for the court to withhold permission to amend. Particularly disfavored are motions to amend whose timing prejudices the opposing party by " requiring a re-opening of discovery with additional costs, a significant postponement of the trial, and a likely major alteration in trial tactics and strategy."

Steir v. Girl Scouts of the USA, 383 F.3d 7, 12 (1st Cir. 2004) (citations omitted); see also In re Sonus Networks, Inc. Sec. Litig., 229 F.R.D. 339 (D. Mass. 2005).

In this case, a Scheduling Order was issued, which established December 12, 2008 as the deadline for any motions to amend the pleadings. See Nov. 21, 2008 Order ¶ 2. The deadline for the completion of all discovery was September 15, 2009, and all fact discovery was to be completed by June 26, 2009. See Apr. 17, 2009 Electronic Order; May 22, 2009 Electronic Order.

The Motion to Amend was filed on June 6, 2012, approximately 42 months after the deadline established by the Scheduling Order, 33 months after conclusion of all discovery, and 32 months after JPI filed its motion for summary judgment. If the Motion to Amend were allowed, it would prejudice JPI by " requiring a re-opening of discovery with additional

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costs [and] a significant postponement of the trial." Steir, 383 F.3d at 12 (citing Acosta-Mestre, 156 F.3d at 52). It would also disrupt the progress of this complicated and long-filed case by requiring additional discovery, briefing, and argument. Moreover, the individuals proposed to be added as named plaintiffs would not be prejudiced by the denial of the Motion to Amend because they may, in any event, file one or more separate suits on their own behalf(s). Cf. In re Sonus Networks, 229 F.R.D. at 346. Plaintiffs' Motion to Amend is, therefore, being denied.

B. JPI's Motion to File a Supplemental Answer

JPI moves to file a supplemental answer to the Complaint. It seeks, by this motion (the " Motion to Supplement" ), to assert a defense of claim preclusion and issue preclusion based on the GCA's decision that JPI is not, as a matter of law, Depianti's employer. Plaintiffs oppose the Motion to Supplement, arguing that JPI's proposed defenses should have been raised at an earlier date. See Pls.' Opp'n to JPI's Mot. to File Suppl. Answer/Affirmative Defenses.

The court may have the discretion to consider the potential preclusive effect of the GCA's decision even if JPI does not file a supplemental answer. " Respect for prior judgments is deeply ingrained in our legal regime," and this value is protected by constitutional and statutory provisions. Newman v. Krintzman, 723 F.3d 308, 310 (1st Cir. 2013) (citing U.S. Const. art. IV, § 1; 28 U.S.C. § 1738). The rules of claim and issue preclusion serve to " relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication." Apparel Art Int'l, Inc. v. Amertex Enterprises Ltd., 48 F.3d 576, 583 (1st Cir. 1995) (quoting Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980)). As the Ninth Circuit has recognized, the rules and policies concerning preclusion may be so important as to trump the ordinary pleading rules under certain circumstances. See Jackson v. Hayakawa, 605 F.2d 1121, 1129 (9th Cir. 1979).

In any event, JPI's Motion to Supplement is meritorious. " A motion to supplement the pleadings under Rule 15(d) is addressed to sound discretion of the Court." Structural Sys., Inc. v. Sulfaro, 692 F.Supp. 34, 36 (D. Mass. 1988); 6A Charles Alan Wright et al., Federal Practice and Procedure § 1504 (3d ed. 2010) (citing Farmer v. Brennan, 511 U.S. 825, 845, 114 S.Ct. 1970, 128 L.Ed.2d 811 (1994)). The considerations of comity, judicial economy, and consistency that underlie the preclusion rules are important factors in the court's exercise of its discretion. In addition, the Motion to Supplement, unlike plaintiffs' Motion to Amend, is based on developments that occurred during the pendency of this case, namely the decisions of the GCA and the SCG. Consequently, JPI cannot be faulted for failing to include its preclusion defense in its answer to the Complaint. Cf. Grieve v. Tamerin, 269 F.3d 149, 154 (2d Cir. 2001); Momand v. Paramount Pictures Distrib. Co., 6 F.R.D. 222, 223 (D. Mass. 1946).

It is true that JPI did not file its Motion to Supplement until July 24, 2013, long after the GCA had issued its June 23, 2011 decision. However, plaintiffs were put on notice of JPI's intention to rely on the GCA's decision no later than September 21, 2011, when JPI filed a Motion for Stay and/or Reconsideration in Light of the Principles of Res Judicata on the basis of

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the GCA's decision.[4] In addition, JPI's delay in filing its Motion to Supplement was excusable, to some degree, during two periods of time: until July 9, 2013, because the SCG had not yet denied certiorari, and after August 31, 2012, because a stay was entered in the instant case. In summary, JPI's delay in ...

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