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Depianti v. Jan-Pro Franchising International, Inc.

United States Court of Appeals, First Circuit

September 29, 2017

GIOVANI DEPIANTI, and all others similarly situated, Plaintiff, Appellant, HYUN KI KIM, and all others similarly situated; KYU JIN ROH, and all others similarly situated; 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; CHIARA HARRIS, and all others similarly situated; TODOR SINAPOV, and all others similarly situated; GRASIELLE REGINA DOS SANTOS, Plaintiffs,


          Shannon Erika Liss-Riordan, with whom Adelaide H. Pagano and Lichten & Liss-Riordan, P.C. were on brief, for appellant.

          Jeffrey Mark Rosin, with whom Constangy, Brooks, Smith & Prophete, LLP was on brief, for appellee.

          Before Thompson, Selya, and Barron, Circuit Judges.

          THOMPSON, Circuit Judge.

         Generation after generation of parents have passed along a basic adage to their children: if at first you don't succeed, try, try again. Such advice encouraging perseverance can serve one well throughout a myriad of life experiences. But while steadfast determination may, in the abstract, be worthy of aspiration, the legal field has--as is often the case--made an exception to this generalized rule.

         Plaintiff Giovanni Depianti ("Depianti") appeals from the district court's grant of summary judgment to Defendant Jan-Pro Franchising International, Inc. ("Jan-Pro"). The lower court's ruling rested on principles of res judicata, concluding that the court was bound by a Georgia court judgment involving the exact same parties and the exact same issues. Because we agree that Depianti has already had his bite at the apple and is not entitled to yet another, we affirm.

         Getting Our Factual Bearings

         We recite here only a brief synopsis of the factual background of this dispute, saving our energy, instead, for the necessary heavy lift that our discussion of this case's procedural history will require. Jan-Pro is a national company principally headquartered in Alpharetta, Georgia that organizes commercial cleaning franchises. Under its particular franchise model, Jan-Pro contracts with what are known as intermediary "master franchisees" or "master owners" (regional, third party entities) to whom it sells exclusive rights to use the "Jan-Pro" logo, which is trademarked. As of 2009 (which is the most up-to-date figure in the record), ninety-one different master owners existed. These master owners, in turn, sell business plans to "unit franchisees." In other words, the business model set up by Jan-Pro is twofold, with (1) Jan-Pro acting as franchisor and the master owner acting as franchisee, in one instance and (2) the master owner acting as franchisor to the unit franchisee, in the other.

         Jan-Pro and its master owners are separate corporate entities and each has its own staff. Moreover, master owners may sell or transfer their individual businesses without approval from Jan-Pro. Jan-Pro also reserves the right to inspect any premises serviced by either the master owner or any of the master owner's franchisees to ensure the Jan-Pro standards are being maintained. Still, master owners have their own entity names and internal business structures, and are responsible for their own marketing, accounting, and general operations.

         As for master owners and their unit franchisees, under the terms of the model franchise agreement, master owners agree to provide their franchisees with an initial book of business, as well as start-up equipment and cleaning supplies. Moreover, the master owner furnishes a training program for its unit franchisees. Once initial set-up and training is complete, the master owner agrees to (1) assist in the unit franchisee's customer relations (by, for example, providing substitute employees or contractors to supply services in the event of an emergency impacting the unit franchisee); (2) provide the unit franchisee with invoicing and billing services; (3) advance the unit franchisee amounts that have been billed but not yet collected from customers; and (4) make available to the unit franchisee any improvement or changes in services or business methods that are made available to other franchisees. Additionally, the agreement notes that a unit franchisee is at all times an independent contractor solely in business for itself. As such, the unit franchisee may, for example, hire its own employees and decide what to pay them, as well as decide whether or not to pursue certain business opportunities.

         One such master owner is Bradley Marketing Enterprises, Inc. ("BME"), which purchased master franchise rights from Jan-Pro in 2003 for a region covering parts of Massachusetts. In June 2003, Depianti signed a franchise agreement with BME at the level of "FP-100" (which is simply shorthand lingo for saying that Depianti was promised $100, 000 in gross annual billings through his franchise relationship with BME). In order to enter into this agreement and obtain the unit franchise, Depianti was required to pay BME $23, 400.

         A Whirlwind Procedural Tour

         Having given a very short overview of the lay of the land, we now embark on the more burdensome task of sketching out the nearly decade long life-cycle of this matter.

         A. The District of Massachusetts

         On April 18, 2008, Depianti brought suit against Jan-Pro alleging that his status as a unit franchisee of BME was a farce and that he was actually a direct employee of Jan-Pro.[1] He further maintained that due to this misclassification, he was denied certain employment benefits in violation of the Massachusetts Independent Contractor Law, Mass. Gen. Laws c. 149, § 148B ("Section 148B claim"). In particular, Depianti argued that the alleged misclassification resulted in the following: (1) unlawful deductions were taken from his pay; (2) he was forced to pay unnecessary expenses that ordinarily would have been borne by Jan-Pro (such as thousands of dollars in franchise fees); (3) he was not guaranteed minimum wage or overtime pay; and (4) he was ineligible for unemployment and workers' compensation.

         After discovery closed both sides moved for summary judgment as to the Section 148B Claim.[2] The district court was then tasked with applying Section 148B's three-prong test to the undisputed, material facts presented before it. Under that test, an individual performing a service is considered an employee unless:

(1)the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
(2)the service is performed outside the usual course of the business of the employer; and,
(3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

Mass. Gen. Laws ch. 149, § 148B.[3]

         The district court, however, encountered difficulties in properly applying the test. It expressed uncertainty as to how the multi-leveled franchise model employed by Jan-Pro would impact application of the three prongs. For example, the court noted that the relevant contract in the litigation was a franchise agreement between BME and Depianti--not one between Jan-Pro and Depianti--and that it had found no cases where a defendant was held liable under Section 148B without the named defendant being a party to the contract at issue. In light of the lack of developed Massachusetts state law or controlling state precedent on this issue, the court declined to rule one way or the other on the motions for summary judgment and, instead, issued an order explaining that it was "concerned that the [Massachusetts Supreme Judicial Court ("SJC")] has not yet been given an opportunity to decide legal questions that will likely have a substantial impact on the conduct of business throughout the Commonwealth." The court, therefore, explained that it was certifying the following question to the SJC: "[w]hether a defendant may be liable for employee misclassification under [Mass. Gen. Laws ch. 149, § 148B], where there was no contract for service between the plaintiff and defendant."[4] The district court then stayed the case pending a response by the SJC.

         B. Georgia State Court

         At the same time the Massachusetts case was being litigated in the federal district court, a separate action initiated by Jan-Pro was making its way through the Georgia state-court system. As is relevant to this appeal, Jan-Pro had sought a declaratory judgment holding that no employment relationship between Jan-Pro and Depianti existed under Section 148B and that Jan-Pro was, therefore, not liable to Depianti in tort or contract. In the same case, Jan-Pro also sought a declaratory judgment against another unit franchisee, Hyun Ki Kim ("Kim") (the reason this seemingly extraneous fact is mentioned will become apparent later in our analysis).

         At the early stages of the case, Depianti moved the Georgia superior court (the state's trial-level court) to dismiss the Georgia action for lack of personal jurisdiction. The superior court, however, refused to do so. On the contrary, the court concluded Depianti had not met his burden of demonstrating that he lacked the minimum contacts necessary to ...

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