Munoz

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10 UNITED STATES DISTRICT COURT

11 SOUTHERN DISTRICT OF CALIFORNIA

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13 TLALOC MUNOZ, MIGUEL RUIZ, Case No.: 22-cv-01269-AJB-AHG

EDGAR CORONA, and STEVEN

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SNAVELY, individually and on behalf of ORDER DENYING DEFENDANTS’

15 themselves and all others similarly MOTION FOR SUMMARY

situated, JUDGMENT

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Plaintiffs,

17 (Doc. No. 61)

v.

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EARTHGRAINS DISTRIBUTION, LLC

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and BIMBO BAKERIES USA, INC.,

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Defendants.

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23 Before the Court is a motion for summary judgment filed by Defendants Earthgrains

24 Distribution, LLC and Bimbo Bakeries USA, Inc. (collectively “Defendants”), seeking to

25 dismiss Plaintiffs Tlaloc Munoz, Miguel Ruiz, and Edgar Corona’s (collectively

26 “Plaintiffs”) claims with prejudice. (Doc. No. 61.) Plaintiffs filed an opposition (Doc. No.

27 67), to which Defendants replied (Doc. No. 72). For the reasons set forth herein, the Court

28 DENIES Defendants’ motion.

1 I. BACKGROUND

2 A. Procedural Background

3 This wage-and-hour Private Attorneys General Act (“PAGA”) and putative class

4 action centers on the alleged misclassification of Plaintiffs as independent contractors

5 instead of employees. (See generally Doc. No. 52, First Amended Complaint (“FAC”).)

6 On September 13, 2024, the Court denied Defendants’ motion to compel arbitration

7 finding that the parties had not mutually assented to the arbitration clause and that, even if

8 they had, the arbitration clause was unconscionable and could not be preserved via the

9 contract’s severability clause. (Doc. No. 18.) Defendants appealed. (Doc. Nos. 20; 21.)

10 On appeal, the Ninth Circuit affirmed, concluding that (1) “the Distribution

11 Agreement is procedurally unconscionable to a moderate degree,” (2) the non-mutual carve

12 out for intellectual property claims, the shortened limitations period of covered disputes,

13 and the liquidated damages clause are substantively unconscionable provisions, and (3)

14 “the district court did not abuse its discretion when it refused to sever them.” Munoz v.

15 Earthgrains Distribution, LLC, No. 23-55818, 2024 WL 4144081 (9th Cir. Sept. 11, 2024).

16 (See also Doc. No. 28-1.)

17 On May 2, 2025, Plaintiffs filed the FAC, alleging the following violations of

18 California Labor Code and the Industrial Welfare Commission (“IWC”) Wage Order 1-

19 2001: (1) failure to reimburse expenses, (2) unlawful deductions from wages, (3) failure to

20 provide accurate wage statements, (4) failure to provide overtime, (5) failure to provide

21 meal periods, (6) failure to provide rest breaks, (8) unfair business practices in violation of

22 California’s Business & Professional Code, and (9) violation of PAGA. (See generally

23 FAC.)

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1 Defendants filed the instant motion for summary judgment, seeking to dismiss

2 Plaintiffs’ claims with prejudice based on the “Distributor’s General Release” each signed

3 upon selling their distribution rights.1 (Doc. No. 61.)

4 B. Factual Background2

5 Plaintiffs each signed substantially similar Distribution Agreements with

6 Defendants. (Doc. No. 61-2 at 6–34, Distribution Agreement (“DA”) (signed by Munoz in

7 2014); Doc. No. 61-2 at 48–75, Distribution Agreement (signed by Ruiz in 2014); Doc.

8 No. 61-2 at 91–121, Distribution Agreement (signed by Corona in 2019).) The Distribution

9 Agreements sold Distribution Rights for a specific Sales Area to Plaintiffs.3 The provisions

10 setting forth the “relationship” between Plaintiffs and Defendants address Plaintiff’s

11 Distribution Rights and purported status as independent contractors. (Id. art. 2.1–2.2.) With

12 regard to the former, the Distribution Agreement provides:

13 DISTRIBUTION RIGHTS. BAKERY hereby recognizes DISTRIBUTOR’s

ownership of Distribution Rights which ownership shall continue until the

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Distributor Rights are sold pursuant to the terms of this Agreement.

15 DISTRIBUTOR must operate according to the terms of this Agreement. Any

termination of this Agreement requires DISTRIBUTOR, or BAKERY

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for the account of DISTRIBUTOR, to sell the Distribution Rights

17 pursuant to the terms of this Agreement.

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1 The instant motion requests that “the Court enter summary judgment in [Defendants’] favor on all

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of Plaintiffs’ claims and thus dismiss this action, in its entirety, with prejudice.” (Doc. No. 61-1 at 18.)

21 However, in opposition, Plaintiffs identify that Defendants do not put at issue Plaintiff Steven Snavely’s

claims and do not address the PAGA cause of action, which Plaintiffs assert cannot be resolved privately.

22 (Doc. No. 67 at 7 n.2, 30.) In reply, Defendants concede that if the Court grants their motion, Snavely’s

claims would remain along with the representative PAGA claims. (Doc. No. 72 at 2.)

23 2 Defendants include a Separate Statement of Uncontroverted Facts. (Doc. No. 61-3). As Plaintiffs

note (see Doc. No. 67-3 at 2), Defendants’ submission violates the undersigned’s Chambers Rules. See J.

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Battaglia’s Civ. Case Proc. § III.F. As Defendants did not request, nor did the Court grant, leave to file a

25 separate statement of facts, the Court does not consider it in rendering this decision.

3 “Distribution Rights” are “the exclusive right to sell Products to Outlets in the Sales Area by Direct

26 Store Delivery, or other manner if expressed in Schedule B, which rights have been purchased by

DISTRIBUTOR as evidenced by a bill of sale, or have been granted by BAKERY to DISTRIBUTOR as

27 evidenced in a writing signed by BAKERY in which BAKERY expressly grants ‘equity’ distribution

rights to DISTRIBUTOR.” (DA art. 1.1(d).) A “sales area” is defined as “that geographic area specifically

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1 (Id. art. 2.1 (emphasis added).)

2 Pursuant to the Distributions Agreements, Plaintiffs were permitted to sell their

3 Distribution Rights “in whole or part . . . provided that any such sale [is] subject to (1) the

4 approval of [Defendants] . . . and (b) a right of first refusal by [Defendants] on the same

5 terms and conditions offered to [Plaintiffs] by a bona fide purchaser[.]” (Id. art. 9.1.) The

6 Distribution Agreements further set forth the following provision governing any such sale:

7 SALE DOCUMENTS. Upon the sale by or for the account of

DISTRIBUTOR as described in this Article, DISTRIBUTOR must

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execute an appropriate bill of sale to the purchaser, and a general release

9 terminating, canceling and surrendering DISTRIBUTOR’s rights under

this Agreement and releasing any and all claims against BAKERY and

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its affiliates and its and their officers, directors, shareholders, employees,

11 successors and assigns arising under or out of or in any way related to

this Agreement, and BAKERY agrees to enter into a new Distribution

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Agreement with the purchaser in the form of agreement then being used by

13 BAKERY.

14 (Id. art. 9.6 (emphasis added).)

15 All three Plaintiffs sold their Distribution Rights, at which time they executed both

16 a Bill of Sale and the Distributor’s General Release (“Release”). (See Doc. No. 61-2 at 45–

17 47, Distributor’s General Release (“Release”) (signed by Munoz on March 10, 2019); Doc.

18 No. 61-2 at 88–90, Distributor’s General Release (signed by Ruiz on November 10, 2019);

19 Doc. No. 61-2 at 133–35, Distributor’s General Release (signed by Corona on January 30,

20 2022); Doc. No. 61-2 at 41–44, Bill of Sale (selling Munoz’s Distribution Rights to Lucloks

21 Killer Bread Corp. on March 10, 2019, for $145,987.00); Doc. No. 61-2 at 82–84, Bill of

22 Sale (selling a portion of Ruiz’s Distribution Rights to Corona on November 10, 2019, for

23 $28,460.00); Doc. No. 61-2 at 85–87, Bill of Sale (selling a portion of Ruiz’s Distribution

24 Rights to Avelee Incorp. on November 10, 2019, for $108,601.00); Doc. No. 61-2 at 128–

25 29, Bill of Sale (selling a portion of Corona’s Distribution Rights to Defendants on April

26 19, 2020, for $15,000.00); Doc. No. 61-2 at 130–32, Bill of Sale (selling Corona’s

27 remaining Distribution Rights to A&J Family Bread Co. on January 30, 2022, for

28 $99,607.00).)

1 Pursuant to the Release, Plaintiffs agreed to receive “One Dollar ($1.00) and other

2 good and valuable consideration” in exchange for “release[ing] and dischar[ing]

3 RELEASEE [(Defendants)] from each and all of the following: a) any claim, cause of

4 action, right or interested of [Plaintiffs] and its owners/members arising out of [Plaintiffs’]

5 ownership of certain Distribution Rights[.]” (Release at 46.) The Release includes an

6 express waiver of California Civil Code § 1542:

7 RELEASOR [(Plaintiffs)] for itself and its owners/members voluntarily and

8 knowingly waives, relinquishes and abandons each and every right, protection

and benefit under Section 1542 of the Civil Code of the State of California, as

9 well as under any other statutes or common law principles of similar effect to

10 said Section 1542, whether now or hereinafter existing under the laws of

California or any other applicable federal or state law with jurisdiction over

11 the parties’ relationship. In making this voluntary express waiver,

12 Distributor/Franchisee acknowledges that claims or facts in addition to or

different from those which are now known or believed to exist with respect to

13 the matters mentioned herein may later be discovered and that it is Distributor

14 Franchisee’s intention to hereby fully and forever settle and release any and

all matters, regardless of the possibility of later discovered claims or facts.

15 RELEASOR acknowledges and agrees that the foregoing waiver of Section

16 1542 is an essential, integral and material term of this Release.

17 (Id. at 46–47.)

18 II. LEGAL STANDARD

19 Pursuant to Rule 56 of the Federal Rules of Civil Procedure, granting summary

20 judgment is appropriate if the moving party demonstrates “that there is no genuine dispute

21 as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.

22 Civ. P. 56(a). A fact is “material” if it “might affect the outcome of the suit under the

23 governing law[.]” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A dispute

24 as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return

25 a verdict for the non-moving party.” Long v. Cnty. of L.A., 442 F.3d 1178, 1185 (9th Cir.

26 2006). “Where the moving party will have the burden of proof on an issue at trial, the

27 movant must affirmatively demonstrate that no reasonable trier of fact could find other than

28 for the moving party.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir.

1 2007).

2 “The court must view the evidence in the light most favorable to the nonmovant and

3 draw all reasonable inferences in the nonmovant’s favor.” City of Pomona v. SQM N. Am.

4 Corp., 750 F.3d 1036, 1049 (9th Cir. 2014). “Where the record taken as a whole could not

5 lead a rational trier of fact to find for the non-moving party, there is no genuine issue for

6 trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); see

7 also Anderson, 477 U.S. at 251–52 (“In essence, though, the inquiry [is] whether the

8 evidence presents a sufficient disagreement to require submission to a jury or whether it is

9 so one-sided that one party must prevail as a matter of law.”).

10 III. DISCUSSION

11 The issue before the Court is narrow: Defendants seek summary judgment on the

12 basis that the Releases signed by Plaintiffs are enforceable and bar the claims at issue. (See

13 generally Doc. Nos. 61-1; 72.) Plaintiffs oppose Defendants’ motion, asserting the

14 Releases are unenforceable under California law. (See generally Doc. No. 67.) Defendants

15 do not seek summary judgment on the merits of Plaintiffs’ claims. (Doc. No. 72 at 5; see

16 generally Doc. No. 61.)

17 A. Party Arguments

18 The parties’ arguments are fundamentally premised on opposite responses to the

19 following question: whether the Releases are prospective waivers.

20 Defendants’ arguments regarding scope and enforceability of the Releases are built

21 on the premise that the Releases were signed at the termination of the parties’ relationship

22 and, thus, are not prospective. (See generally Doc. Nos. 61-1; 72.) Regarding scope,

23 Defendants assert that the current claims fall within the bounds of the Releases because the

24 Releases include an express waiver of California Civil Code § 1542. (Doc. No. 61-1 at 10–

25 11.) Regarding enforceability, Defendants argue that Plaintiffs received valuable

26 consideration, namely the ability to sell Distribution Rights to a third party for financial

27 benefit. (Id. at 10.) Defendants also assert that the Releases were not obtained through

28 fraud, deception, misrepresentation, duress, or undue influence. (Id. at 11–12.) Finally,

1 Defendants argue the Releases are not barred by California law because there is a bona fide

2 dispute over whether the wages are due, and no other provision separately prohibits the

3 release of Plaintiffs’ expense claim. (Id. at 12–17.)

4 However, Plaintiffs argue that, although the Releases themselves were signed at the

5 termination of the parties’ relationship, Plaintiffs’ signing of the Releases was mandated

6 by the Distribution Agreements which were executed at the beginning of the parties’

7 relationship. (See generally Doc. No. 67.) As such, Plaintiffs argue that the Releases are

8 unenforceable under California law because (1) they are impermissible prospective waivers

9 of employment rights and (2) they are unconscionable, just like the arbitration provision.

10 (Id. at 14–26.) Additionally, Plaintiffs argue that there was no bona fide dispute over past

11 wages when Plaintiffs agreed to waive future claims at the signing of the Distribution

12 Agreements. (Id. at 26–30.)

13 B. Distribution Agreements Make the Releases Prospective

14 Defendants assert that “Plaintiffs did not prospectively waive their wage claims,”

15 but rather “[t]hey simply acknowledged in the D[istribution Agreement] that if they chose

16 to sell their distribution rights (a separate, voluntary transaction), they would execute a bill

17 of sale and a general release.” (Doc. No. 72 at 8.) To support this stance, Defendants then

18 rely on case law where plaintiffs were made aware in advance that possible severance

19 benefits would require a release and, once later executed at termination of the employment

20 relationship, those releases were deemed enforceable by the courts. (Id. at 8–9 (collecting

21 cases); see also Doc. No. 61-1 at 9–11, 13–17.)

22 Defendants’ analogizing Distribution Rights to severance benefits is inapposite. In

23 severance cases where the benefits were not otherwise earned, the plaintiffs had the choice

24 after ending their employment to receive a benefit upon execution of a release or sue

25 without signing a release. See, e.g., Jimenez v. JP Morgan Chase & Co., No. 08-CV-0152

26 W (WMC), 2008 WL 2036896, *1, *3–4 (S.D. Cal. May 8, 2008) (“[T]his appears to be a

27 typical situation where Plaintiff agreed to release certain claims in exchange for severance

28 benefits not otherwise earned.”); Skrbina v. Fleming Cos., Inc., 45 Cal. App. 4th 1353,

1 1366–67 (1996); Lu v. AT & T Servs., Inc., No. C 10-05954 SBA, 2011 WL 2470268, *1,

2 *3 (N.D. Cal. June 21, 2011); Reynov v. ADP Claims Servs. Grp., Inc., No. C 06-2056-

3 CW, 2007 WL 5307977 (N.D. Cal. Apr. 30, 2007); Young v. AmeriGas Propane, Inc., No.

4 14-CV-00583-BAS RBB, 2014 WL 5092878, *1–2, *4–5 (S.D. Cal. Oct. 9, 2014).

5 Here, as Defendants state, “Plaintiffs had the choice to sue for alleged violations”

6 while still being required to perform on their contracts “or sell their routes for tens of

7 thousands of dollars and release all claims[.]” (See Doc. No. 72 at 8 n.6.) Under the

8 circumstances, there is sufficient evidence to dispute whether the relationship between the

9 parties could not end without Plaintiffs’ signing the release or breaching the Distribution

10 Agreement.

11 Defendants also rely on analogizing to cases where courts enforced releases

12 executed after litigation commenced as a part of settlement agreements. (See Doc. No. 61-

13 1 at 8–9, 14–15 (citing first Gopal v. Yoshikawa, 147 Cal. App. 3d 128, 130 (1983), then

14 Aleman v. AirTouch Cellular, 209 Cal. App. 4th 556 (2012)).) For instance, Defendants

15 cite to Aleman to demonstrate both enforcement of settlements where there is a bona fide

16 dispute over wages due and upholding the exchange of a right to a yet-vested contractual

17 benefit as valid consideration for a general release. (Doc. No. 61-1 at 9, 14–15.) In Aleman,

18 the plaintiff signed a “Release of Claims Agreement” while the lawsuit was pending that

19 released the defendant from any and all claims, including the split shift pay and reporting

20 time claims at issue, in exchange for the right to exercise long-term incentive awards.

21 Aleman, 209 Cal. App. 4th at 564–65. In contrast to the Aleman plaintiff who released

22 claims after the events triggering the injury occurred, Plaintiffs here were contractually

23 obligated by the Distribution Agreement to release any potential claims before any conduct

24 and thus any claims could have arisen.

25 A few cases cited by Defendants involve a release executed to settle a prior action

26 that courts found barred subsequent litigation arising from the same conduct. (See, e.g.,

27 Doc. No. 61-1 at 10–11, 13 (citing first Jefferson v. Cal. Dep’t of Youth Auth., 28 Cal. 4th

28 299 (2002), next Winet v. Price, 4 Cal. App. 4th 1159 (1992), then Aguilar v. Zep Inc., No.

1 13-CV-00563-WHO, 2014 WL 1900460 (N.D. Cal. May 12, 2014)).) However, once

2 again, the conduct giving rise to the released claims occurred before the signing of any

3 release. See Jefferson, 28 Cal. 4th at 302, 310 (holding that a release executed to settle a

4 worker’s compensation claim barred a later filed employment discrimination claim

5 predicated on the same events and injury); Winet, 4 Cal. App. 4th at 1162–63, 1166–68

6 (holding that a release executed to settle a prior dispute over legal fees incurred drafting a

7 partnership agreement barred a suit alleging malpractice in legal services, including the

8 drafting of the agreement); Aguilar, 2014 WL 1900460, at *4–5 (finding that a release

9 signed by a putative absent class member barred participation as the named plaintiff in a

10 subsequent class action asserting the same wage-and-hour claims for the same time period).

11 As with the other cases cited by Defendants, cases like Jefferson, Winet, and Aguilar fail

12 to address the heart of the issue with the instant Releases—that they were contracted prior

13 to any events giving rise to Plaintiffs’ allegations. The Court agrees with Plaintiffs that,

14 beyond analogizing to inapposite circumstances of post-conduct release, Defendants fail to

15 meaningfully address how the instant circumstances in substance are the same.4 (See Doc.

16 No. 67 at 17.)

17 Defendants assert that the same releases have been upheld by other courts and, thus,

18 this Court should uphold the instant Releases as well. (Doc. No. 61-1 at 12 (citing Robins

19 v. Bimbo Foods Bakeries Distrib., Inc., No. 12-5392, 2013 WL 5803783, at *6–7 (E.D. Pa.

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4 The only case Defendants address where a release was executed prior to occurrence of the

22 allegedly injurious conduct is one proffered and rebutted in anticipation of Plaintiffs’ arguments. (Doc.

No. 61-1 at 17–18 (analyzing Haitayan v. 7-Eleven, Inc., 762 F. App’x 393, 396 (9th Cir. 2019) (vacating

23 the district court’s denial of a preliminary injunction in a misclassification case)).) Addressing the

likelihood of the franchisee plaintiffs’ success on the merits, the Ninth Circuit “reject[ed] 7-Eleven’s

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contention that the plaintiffs are contractually obligated to sign the general release because the franchise

25 agreements they signed in 2004 said a general release would be required for renewal. 7-Eleven has not

shown that this provision negates California’s prohibition on contractual waiver of wage-and-hour

26 claims.” Haitayan, 762 F. App’x at 396. However, as noted by Defendants, the Ninth Circuit also

“reject[ed] 7-Eleven’s suggestion that the waiver is permissible as a settlement” because “[l]abor claims

27 may be settled only by release and payment, which has not occurred here.” Without additional facts, it is

unclear whether the contractual rights conveyed by the franchise renewal contract were deemed

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1 Oct. 28, 2013); Cobb v. George Weston Bakers Distrib., Inc., No. 10-676, 2012 WL

2 2344452, at *7 (D.N.J. June 19, 2012); Order, Kharchyna v. Kuvshynova, Index No.

3 711099/2021 (N.Y. Sup. Ct. Dec. 16, 2024), Doc. No. 62). However, none of the cases

4 cited by Defendants apply California or Ninth Circuit law to the releases, none of the

5 underlying complaints were predicated on misclassification claims as are here, and none

6 of the plaintiffs challenged the validity of the releases as prospective due to the distribution

7 agreements. Moreover, two of the cited opinions turn on fact-specific analysis of the

8 precise circumstances pertaining to the applicable plaintiff’s execution of a release. See

9 Robins, 2013 WL 5803783, at *6–7 (analyzing whether elements of duress were present

10 when Robins executed his release); Cobb, 2012 WL 2344452, at *4–7 (analyzing whether

11 Cobb’s release was knowing and voluntary considering inter alia his education, business

12 experience, time to deliberate, access to counsel, opportunity to negotiate).

13 Considering the Releases in context with the Distribution Agreements and the

14 circumstances presented in the instant action, the Court finds that the Releases are

15 prospectively mandated by the Distribution Agreements which were executed at the

16 beginning of the parties’ relationship.

17 C. No Bona Fide Dispute Existed

18 Having found that the Releases were prospectively signed, the Court turns next to

19 Defendants’ assertions that a bona fide dispute existed permitting the enforceable release

20 of potential Labor Code claims. (Doc. Nos. 61-1 at 12–17; 72 at 3–6.)

21 Pursuant to the California Labor Code,

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An employer shall not require the execution of a release of a claim or right on

23 account of wages due, or to become due, or made as an advance on wages to

be earned, unless payment of those wages has been made. A release required

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or executed in violation of the provisions of this section shall be null and void

25 as between the employer and the employee. Violation of this section by the

employer is a misdemeanor.

26

27 Cal. Lab. Code § 206.5(a). “Labor Code section 206.5 is to be read in light of Labor Code

28 section 206.” Watkins v. Wachovia Corp., 172 Cal. App. 4th 1576, 1586–87 (2009). “In

1 case of a dispute over wages, the employer shall pay, without condition and within the time

2 set by this article, all wages, or parts thereof, conceded by him to be due, leaving to the

3 employee all remedies he might otherwise be entitled to as to any balance claimed.” Cal.

4 Lab. Code § 206(a). “Together, these statutes prohibit employers from coercing settlements

5 by withholding wages concededly due.” Estrada v. Royalty Carpet Mills, Inc., 76 Cal. App.

6 5th 685, 708 (2022), aff’d, 15 Cal. 5th 582 (2024) (citation omitted). However, “[w]hen a

7 bona fide dispute exists, the disputed amounts are not ‘due,’ and the bona fide dispute can

8 be voluntarily settled with a release and a payment—even if the payment is for an amount

9 less than the total wages claimed by the employee.” Watkins, 172 Cal. App. 4th at 1587.

10 Because the Court has found that the Releases were prospectively contracted at the

11 beginning of the parties’ relationship, there could not have been a bona fide dispute over

12 past wages. Cf. Chindarah v. Pick Up Stix, Inc., 171 Cal. App. 4th 796, 803 (2009)

13 (“[P]ublic policy is not violated by a settlement of a bona fide dispute over wages already

14 earned. The releases here settled a dispute over whether Stix had violated wage and hour

15 laws in the past; they did not purport to exonerate it from future violations. Neither did the

16 releases condition the payment of wages concededly due on their executions. The trial court

17 correctly found the releases barred the Chindarah plaintiffs from proceeding with the

18 lawsuit against Stix.”) (emphasis added); Prostek v. Lincare Inc., 662 F. Supp. 3d 1100,

19 1117 (E.D. Cal. 2023) (“Indeed, since Prostek was signing on-boarding paperwork, it is

20 unclear whether any wages would have been due at the time Prostek signed.”).

21 D. California Prohibits the Release of Labor Claims Prospectively

22 As acknowledged by the California Supreme Court, “section 219 prohibits an

23 employer and employee from agreeing, even voluntarily, to circumvent provisions of

24 article I (consisting of §§ 200–243) of the Labor Code.” Schachter v. Citigroup, Inc., 47

25 Cal. 4th 610, 619 (2009); see also Cal. Labor Code § 219(a) (“[N]o provision of this article

26 can in any way be contravened or set aside by a private agreement, whether written, oral,

27 or implied.”). “[A]greements prospectively waiving an employee’s rights under sections

28 201 and 202 to receive all his or her earned but deferred or unpaid wages constitute waivers

1 which section 219 renders illegal and unenforceable.” Schachter, 47 Cal. 4th at 619

2 (cleaned up) (emphasis in original).

3 Having found that the Releases are prospective and, thus, that no bona fide dispute

4 could have existed, the Releases are unenforceable under California law. Defendants assert

5 that Plaintiffs “cite ‘no authority to support’ the idea that [the unfair competition claim]

6 should be treated like a wage claim even though it is not one.” (Doc. No. 72 at 3 (quoting

7 Thomas v. State Farm Ins. Co., 2020 WL 13517861, at *1 (S.D. Cal. Feb. 3, 2020), aff’d,

8 2021 WL 4596286 (9th Cir. 2021)).)5 However, Plaintiffs’ Unfair Competition Law claim

9 is “predicated upon violations of California’s Labor Code and Wage Order 1,” specifically

10 relisting all the actions Plaintiffs allege violate the California Labor Code and seeking an

11 order enjoining Defendants from engaging in such allegedly unlawful business practices in

12 the future. (FAC ¶¶ 4, 70–80.) Moreover, “[a]n injunction to require an employer to pay

13 overtime, to afford meal breaks, or any other conduct mandated by the Labor Code is not

14 subject to waiver by any private agreement.” Gomez v. J. Jacobo Farm Lab. Contractor,

15 Inc., 188 F. Supp. 3d 986, 996 (E.D. Cal. 2016).

16 E. The Releases are Unconscionable

17 Finally, even if the Court had not found the Releases prospective, Plaintiffs argue

18 the Court should find the Releases both substantively and procedurally unconscionable.

19 (Doc. No. 67 at 22–26.)

20 “A contract is unconscionable if one of the parties lacked a meaningful choice in

21 deciding whether to agree and the contract contains terms that are unreasonably favorable

22 to the other party.” OTO, L.L.C. v. Kho, 8 Cal. 5th 111, 125 (2019); Armendariz v. Found.

23 Health Psychcare Servs., Inc., 24 Cal. 4th 83, 113 (2000) (noting unconscionability is “a

24

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5 The Court is baffled as to how Thomas, when read in full, is applicable to the instant action, let

26 alone the arguments at issue. See Thomas, 2020 WL 13517861, at *1 (“reject[ing the p]laintiff’s attempt

to transform a question of law into a question of fact to justify further discovery” because the plaintiff

27 “cites no authority to support that the covenant of good faith and fair dealing requires insurers to conduct

legal assessments of the retroactive application of a statute, or that the mere possibility of an unfavorable

28

1 principle of equity applicable to all contracts generally”). “Under California law, a

2 contract provision is unenforceable due to unconscionability only if it is both procedurally

3 and substantively unconscionable.” Shroyer v. New Cingular Wireless Servs., Inc., 498

4 F.3d 976, 981 (9th Cir. 2007).

5 “The procedural element addresses the circumstances of contract negotiation and

6 formation, focusing on oppression or surprise due to unequal bargaining power.” OTO,

7 L.L.C., 8 Cal. 5th at 125; see also Szetela v. Discover Bank, 97 Cal. App. 4th 1094, 1100

8 (2002) (“When the weaker party is presented the clause and told to ‘take it or leave it’

9 without the opportunity for meaningful negotiation, oppression, and therefore procedural

10 unconscionability, are present.”). “Substantive unconscionability pertains to the fairness of

11 an agreement’s actual terms and to assessments of whether they are overly harsh or one-

12 sided.” OTO, L.L.C., 8 Cal. 5th at 125; see also Bakersfield Coll. v. Cal. Cmty. Coll.

13 Athletic Assn., 41 Cal. App. 5th 753, 765 (2019) (“The paramount consideration in

14 assessing [substantive] unconscionability is mutuality.”) (cleaned up).

15 “[T]he two types of unconscionability ‘need not both be present to the same

16 degree.’” Shroyer, 498 F.3d at 981 (quoting Nagrampa v. MailCoups, Inc., 469 F.3d 1257,

17 1289 (9th Cir. 2006)). Rather a “sliding scale is invoked,” such that “the more substantively

18 oppressive the contract term, the less evidence of procedural unconscionability is required

19 to come to the conclusion that the term is unenforceable, and vice versa.” Armendariz, 24

20 Cal. 4th at 114.

21 Defendants assert that “there is at most a ‘low’ degree of procedural

22 unconscionability,” because Plaintiffs were not surprised by the Releases. (Doc. No. 72 at

23 11.) However, absent from Defendants’ reply is any discussion of oppression or the Ninth

24 Circuit’s findings of unconscionability on appeal. (See generally Doc. No. 72.) In fact,

25 despite Defendants’ failure to address it, the Ninth Circuit already found that the

26 Distribution Agreement is “procedurally unconscionable to a moderate degree” because:

27

[t]he Distribution Agreement was a contract of adhesion presented to

28 Plaintiffs-Appellees on standardized, preprinted forms that were

1 nonnegotiable. In addition, Plaintiffs-Appellees have not completed a college

degree, and they did not have an opportunity to have an attorney review the

2

Distribution Agreement. In contrast, Bimbo was a sophisticated company,

3 being the “largest baking company in the United States,” with the parent

company generating billions of dollars in sales.

4

5 Munoz, 2024 WL 4144081, at *1.

6 Considering the Releases themselves, they are also contracts of adhesion presented

7 to Plaintiffs on standardized, preprinted forms that were nonnegotiable. The same contrast

8 in education and representation of the parties exists for the Releases as did for the

9 Distribution Agreements. Thus, the Court similarly finds the same moderate degree of

10 procedural unconscionability.

11 Turning to substantive unconscionability, the Ninth Circuit analyzed arbitration-

12 related provisions of the Distribution Agreement, describing the Distribution Agreement

13 as a “one-sided agreement” that was “exacerbated by the shortened limitation period of

14 Covered Disputes” and a unilateral liquidated damages provision. Munoz, 2024 WL

15 4144081, at *1–3. The Ninth Circuit found that “[e]ach of these provisions is substantively

16 unconscionable.” Id. at *3. At issue here, the provision regarding sale of Distribution

17 Rights and the corresponding Release are both similarly one-sided as Plaintiffs were

18 required to execute the Releases in order to sell their Distribution Rights, the only claims

19 released were those that could be brought by Plaintiffs against Defendants, and the

20 Releases are expansive in nature covering “any and all claims” that “aris[e] under or out of

21 or in any way relate[]” to the Distribution Agreements, including express waivers of

22 California Civil Code § 1542, and the included confidentiality provision is one-sided. (See

23 DA art. 9.6; Release 46–47.) None of these aspects demonstrate mutuality. In the

24 Distribution Agreement, Defendants do “agree[] to enter into a new Distribution

25 Agreement with the purchaser.” (DA art. 9.6.) However, considering the additional rights

26 Defendants retain regarding approval of any potential sale and right of first refusal, the

27 terms are “unreasonably favorable” to Defendants, the more powerful party. See OTO,

28 L.L.C., 8 Cal. 5th at 125.

l Accordingly, the Court finds that the Releases exhibit sufficient procedural and

2 ||substantive unconscionability such that they are unenforceable to bar Plaintiffs’ claims.

3 || See, e.g., Total Vision, LLC v. Vision Serv. Plan, 717 F. Supp. 3d 922, 935 (C.D. Cal. 2024)

4 CONCLUSION

5 Based on the foregoing, because Defendants as the moving parties have failed to

6 ||demonstrate they prevail as a matter of law, the Court DENIES Defendants’ Motion for

7 Summary Judgment. (Doc. No. 61.) The Court further ORDERS:

8 1. Any motion for class certification must be filed no later than

9 || November 3, 2025.

10 2. Any opposition to the motion for class certification must be filed no later

11 || than November 24, 2025.

12 3. Any reply must be filed no later than December 8, 2025.

13 4. A hearing on the motion for class certification is SET for January 15, 2026,

14 || at 2:00 PM in Courtroom 4A before the undersigned.

15 5. Any request to modify the deadlines set herein must be filed in compliance

16 |} with the Civil Local Rules and the undersigned Civil Case Procedures. Additionally, any

17 ||such requests must address with specificity the cause justifying the request, supported by

18 || declarations.

19 IT IS SO ORDERED.

20 Dated: October 15, 2025 ©

21 Hon, Anthony J.Battaglia

22 United States District Judge

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