SAN FRANCISCO — Charles Dell’Ario can’t say he wasn’t warned.
Before appearing at the California Supreme Court last June, Dell’Ario tested out his arguments about franchisor liability in a moot court at Golden Gate University School of Law. “Counsel, here’s what really concerns me about your position,” said professor Myron Moskovitz, playing the role of one of the justices. “If we rule in your favor, does that mean virtually all the franchisees in California—McDonald’s, Domino’s, Burger King, Wendy’s—they all become agents of the franchisor for all purposes?”
Five months later, Justice Kathryn Mickle Werdegar hit Dell’Ario with virtually the same question during the actual argument in Patterson v. Domino’s Pizza. “If you were to prevail, how much would what we say spill over to other franchise agreements?” Werdegar asked. “Is there some broad principle you would articulate for franchise agreements?”
At Golden Gate, Dell’Ario had disputed Moskovitz’s premise—probably not the best strategy. Before Werdegar, his answer was more confident. “The broad principle that I would articulate for franchise agreements is that the agency test that has been employed by the California courts for the past 50 years … works very well,” he told her. “We’ve had 50 years of expanding franchises.”
Dell’Ario lost his case by one vote Thursday when the California Supreme Court limited franchisor liability for sexual harassment that occurs in a franchisee’s workplace. Werdegar led the three dissenting justices, arguing that Dell’Ario’s client had raised a triable issue of fact as to whether Domino’s maintained enough control over its franchisee’s workplace to be on the hook.
Moot courts are typically private affairs, but Dell’Ario and Moskovitz agreed to let The Recorder observe their argument and write about it following the decision. Moskovitz has organized moot courts of California Supreme Court cases for many years, first at Golden Gate and now in his private practice at California Appellate Law Group. They give attorneys a chance to field live questions and sharpen their responses, and when conducted at the school offer students a window into appellate advocacy.
For the Patterson case, Moskovitz brought in former First District Court of Appeal Justice William Stein and Skadden, Arps, Slate, Meagher & Flom partner Raoul Kennedy. They did not go easy on Dell’Ario—though of course that’s the point.
Dell’Ario, a veteran appellate attorney based in Napa, represents Taylor Patterson, who got a job at a Thousand Oaks Domino’s when she was 16 years old. She alleges that assistant store manager Renee Miranda made lewd comments and grabbed her breasts and buttocks, according to the Supreme Court’s opinion. She sued Miranda, store owner Daniel Poff and Domino’s.
Domino’s disclaimed any responsibility for hiring and training employees, saying its franchise agreement limits the company’s involvement to maintaining its trademark, brand and business goodwill. Dell’Ario argued that, in reality, Domino’s exercised broad control over the franchise stores, including personnel decisions.
“You are claiming that the franchisee was the agent of Domino’s for all purposes, so everything they do—contracts, torts, everything they do is attributed to Domino’s?” Moskovitz asked. “That’s your position?”
“That’s my position,” Dell’Ario affirmed. With regard to sexual harassment, Domino’s approved the training materials and its area manager, Claudia Lee, even advised Poff to “get rid of” Miranda after the allegations surfaced.
“Does that hurt Domino’s position?” Kennedy asked Dell’Ario. “Would they be better off if Ms. Lee said, ‘Aw, keep him on, what’s a molester here or there?’”
“You’re familiar with Weeks v. Baker & McKenzie?” asked Stein, referring to the groundbreaking sexual harassment decision he authored in 1998. “Wasn’t that pretty good advice Ms. Lee gave him, you better get rid of this guy, before you’re on the hook for $3.5 million if he does it again?”
The grilling lasted 30 minutes. Afterward, Stein commended Dell’Ario’s presentation while cautioning him not to get his hopes up. “Your argument about the franchise agreement being an illusion is a very good point,” he said. “I’m not so sure that’s going to win, but I think that’s a point you have to convince them of.”
Stein found it odd that all seven Supreme Court justices had voted to grant review of a fact-intensive case that never went to trial. It didn’t make sense “unless it’s split somehow, three of them want to go that way and three of them want to go this way.”
THE REAL ARGUMENTS
Dell’Ario has appeared many times before the California Court of Appeal and Supreme Court. Still, he had his hands full June 4 in Los Angeles as the justices seemed especially exercised by the Patterson case, aggressively questioning Dell’Ario and his opponent, Snell & Wilmer partner Mary-Chris Sungaila.
Leading the charge were Justices Marvin Baxter and Ming Chin, who told Dell’Ario to focus on the franchise agreement. “Doesn’t it say that it’s an independent contractor relationship?” Chin asked.
“It absolutely does your honor,” Dell’Ario calmly replied. “But it also says many other things.”
Chin cut him off. “And doesn’t it say that no training, assistance, supervision … shall be deemed to negate the independent contractor relationship?”
Yes, Dell’Ario said, but it contains other contradictory language, “a phenomenon that occurs throughout contracts in California.”
Moments later, Baxter channeled Kennedy’s question. “Let’s say in this case, when Poff asks, ‘Well, what should I do?’ and the consultant, Mrs. Lee, says, ‘You ought to get rid of the guy.’ Well, I’m sure you would agree with that, right?” he asked Dell’Ario. “In other words, the worst thing she could have said was, ‘Well, sexual harassment is an everyday occurrence. Give him a second chance.’”
Dell’Ario responded that there’s no good reason to treat franchisors differently than traditional employers. “If the franchisor wants to have company-owned stores and franchise stores that none of us ever could tell the difference from when we walked in one, shouldn’t they all be treated the same?” he said.
A SPLIT DECISION
On Thursday, Baxter answered Dell’Ario’s question. “Franchising, especially in the fast-food industry, has become a ubiquitous, lucrative, and thriving business model,” Baxter wrote. A broad rule of vicarious liability for sexual harassment would “disrupt the franchise relationship.”
Werdegar dissented, saying there was sufficient dispute over the extent of Domino’s control to warrant a trial. It’s not the place of the court, she wrote, “to promote the use of franchising as a business model.”
The vote fulfilled Stein’s forecast from the moot court: The justices split four votes to three, with Dell’Ario’s position falling just shy of a majority.
Stein had made another important point that day: The Supreme Court justices usually decide cases internally before hearing argument. Dell’Ario was well aware of the practice. After the June argument, he said he’d noticed justices occasionally glancing down at paperwork that he presumed was the court’s draft opinion.
“I don’t think any minds were changed there,” he said at the time. Nevertheless, he felt the moot court “really helped me a lot. It forced me to prepare a little earlier in the process. And they asked me a couple of questions that did come up.”
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