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Sanchez v. CleanNet USA, Inc.

United States District Court, N.D. Illinois, Eastern Division

January 15, 2015

JOSE SANCHEZ, on behalf of himself and all other persons similarly situated, Plaintiff,
v.
CLEANNET USA, INC. and CLEANNET OF ILLINOIS, INC., Defendants

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For Jose Sanchez, on behalf of himself and all other persons similarly situated, Plaintiff: Christopher J Williams, LEAD ATTORNEY, Alvar Ayala, Jenee Gaskin, Workers' Law Office, P.c., Chicago, IL; Yolanda Carrillo, LEAD ATTORNEY, Lydia Colunga-Merchant, Working Hands Legal Clinic, Chicago, IL.

For Cleannet USA Inc., Cleannet of Illinois, Inc., Defendants: Darren Mason Mungerson, LEAD ATTORNEY, Littler Mendelson, P.C., Chicago, IL; Francis P. Tighe, III, LEAD ATTORNEY, Frank P. Tighe, III, Chicago, IL.

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MEMORANDUM OPINION AND ORDER

James B. Zagel, United States District Judge.

This putative class action arises out of Plaintiff Jose Sanchez's participation as a franchisee in a nationwide network of commercial cleaning franchised businesses. On March 26, 2014, Plaintiff filed an 8-count complaint alleging that franchisor Defendants CleanNet U.S.A., Inc. (" CleanNet USA" ) and CleanNet of Illinois, Inc. (" CleanNet IL," and collectively, " Defendants" ) improperly classified him and other franchisees as independent contractors instead of employees, thereby depriving them of the benefits of an employment relationship under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., the Illinois Minimum Wage Law, 820 ILCS 105/1 et seq., and the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. Plaintiff also alleges that Defendants engaged in fraud in the inducement to entice him to enter into the franchise agreement, and that Defendants violated the Illinois Franchise Disclosure Act, 815 ILCS 705/1 et seq.

This matter is presently before the court on Defendants' motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) or, in the alternative, stay Sanchez's complaint pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (" FAA" ), on the ground that his individual claims are subject to final and binding arbitration pursuant to the dispute resolution provisions in his franchise agreement.

FACTS

CleanNet USA is a master franchisor whose brand of commercial cleaning franchises is represented by area operators, such as CleanNet IL, that offer unit franchises to investors interested in owning and operating a commercial cleaning business. Jose Sanchez is a Spanish speaker with a limited education who, along with his brother-in-law, purchased a " package" of $2,500 in monthly billing for a franchise price of $11,800. They paid $6,000 in money they borrowed for the franchise and CleanNet IL financed the remaining $5,800 at 9%.

As a part of this purchase, Sanchez entered into a 41-page franchise agreement with CleanNet IL on May 19, 2011 (the " Franchise Agreement" ). Yvette Lopez appeared at the meeting on behalf of CleanNet and discussed the Franchise Agreement with Sanchez in Spanish. Sanchez alleges that CleanNet provided him with the Franchise Agreement in English on a take it-or-leave-it basis and failed to inform him that the Franchise Agreement contained a dispute resolution provision or limited his remedies while leaving Defendants' available remedies completely intact. In addition to signing his name in full on the final page, Sanchez initialed every page of the Franchise Agreement next to the statement " I have read, understood, and agree with the statements on this page as written."

The Franchise Agreement contains a dispute resolution provision that provides for mediation and, if the dispute remains unresolved, arbitration before the American Arbitration Association:

A. Mediation. Before, and as a necessary condition precedent to, filing a demand for arbitration in accordance with this Agreement, Franchisee and Franchisor shall attempt to settle the dispute through mediation administered by the American Arbitration Association (" AAA" ) at its office closest in proximity to Franchisor's office in accordance with

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the Commercial Mediation Rules of the AAA. . . .
B. Arbitration. All disputes, controversies, and claims of any kind arising between the parties, including but not limited to claims arising out of or relating to this Agreement, the rights and obligations of the parties, the sale of the franchise, or other claims or causes of action relating to the performance of either party that are unable to be settled through mediation shall be settled by arbitration administered by the AAA at its office closest in proximity to the Franchisor's office, in accordance with the Federal Arbitration Act and the Commercial Rules of the AAA, unless the parties otherwise agree in accordance with Section XXII.C of this Agreement. . . .
5. No arbitration or action under this Agreement shall include, by consolidation, joinder, or any other manner, any claims by any person or entity in privity with or claiming through or on behalf of Franchisee. Franchisee shall not seek to arbitrate or litigate as a representative of, or on behalf of, any other person or entity, any dispute, controversy, and claim of any kind arising out of or relating to this Agreement, the rights and obligations of the parties, the ...

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