Taco Bell Franchise’s Arbitration Bid Chopped Up

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By Jon Steingart

Nov. 10 — An arbitration clause in a Taco Bell job application is unenforceable because it’s unclear whether it applies to franchisees, a California appeals court ruled ( Mendoza v. Century Fast Foods, Inc. , 2016 BL 374132, Cal. Ct. App., 2d Dist., No. B267158, unpublished 11/9/16 ).

The ruling underscores that arbitration is a creature of contract law that is subject to ordinary rules of contract interpretation. The franchisee might have been successful if the arbitration clause used its name rather than a vague term.

Jesus Mendoza sued franchisee Century Fast Foods Inc. for allegedly failing to provide meal and rest breaks as required by state law. He also said the company didn’t pay for all hours worked, which deprived him of earned overtime.

Employment disputes against Taco Bell or “its related companies” must be arbitrated, the clause states. Franchisee Century Fast Foods Inc. presented no court rulings on arbitration that have interpreted such terms to include franchisees, Justice Tricia A. Bigelow wrote Nov. 9 for the California Court of Appeal.

Ambiguous Term Resolved Against Drafter

Mendoza and Century presented rulings from courts that had analyzed whether “related companies” includes franchisees. In light of the different opinions, the term was ambiguous, Bigelow said.

Contract law principles generally hold that ambiguous terms are resolved against the pact’s drafter, especially when the drafter has superior bargaining power or some other advantage over the other side. The ambiguity in the job application put the burden on Century to show Mendoza understood it required him to arbitrate disputes with the franchisee.

Century didn’t meet its burden, Bigelow said, refusing to compel arbitration.

Attorneys on both sides and for Century didn't respond Nov. 10 to requests for comment.

Matern Law Group attorneys Matthew Matern, Dalia Khalili and Roy Suk in Manhattan Beach, Calif., represented Mendoza. Fisher & Phillips attorneys Lonnie Giamela in Los Angeles and Irvine, Calif., and Sarina Saluja in Los Angeles represented Century.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

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