NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SERGE HAITAYAN; JASPREET 

DHILLON; ROBERT ELKINS; 

MANINDER LOBANA, individually, and 

on behalf of others similarly situated, 

Plaintiffs-Appellants, 

 v. 

7-ELEVEN, INC., a Texas corporation, 

Defendant-Appellee.

No. 18-55462 

D.C. No. 

2:17-cv-07454-JFW-JPR 

MEMORANDUM*

Appeal from the United States District Court

for the Central District of California

John F. Walter, District Judge, Presiding

SERGE HAITAYAN; JASPREET 

DHILLON; ROBERT ELKINS; 

MANINDER LOBANA, 

Plaintiffs-Appellants, 

 v. 

7-ELEVEN, INC., a Texas corporation, 

Defendant-Appellee.

No. 18-55910 

18-56346 

D.C. No. 

2:18-cv-05465-DSF-AS 

 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

FILED

FEB 27 2019

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2 

Appeal from the United States District Court

for the Central District of California

Dale S. Fischer, District Judge, Presiding

Argued and Submitted February 13, 2019

Pasadena, California

Before: FISHER, CALLAHAN and OWENS, Circuit Judges.

In No. 18-55462 (Haitayan I), plaintiff-franchisees appeal the district court’s 

grant of judgment on the pleadings on their claims that franchisor 7-Eleven 

misclassified them as independent contractors rather than employees in violation of

the Fair Labor Standards Act and the California Labor Code. In Nos. 18-55910

and 18-56346 (Haitayan II), the plaintiffs appeal the order of the district court

denying their motion for a preliminary injunction and corrective notice regarding

7-Eleven’s distribution of a franchise renewal agreement requiring franchisees to 

release their wage-and-hour claims in Haitayan I. We vacate and remand in both 

appeals.

A. Haitayan I

1. We vacate the judgment on the pleadings. See Doe v. United States, 

419 F.3d 1058, 1061 (9th Cir. 2005). In addressing the adequacy of the plaintiffs’ 

federal and state law claims, the court erred in two respects. First, it considered the 

persuasiveness of the plaintiffs’ factual allegations rather than the plausibility of 

the plaintiffs’ legal claims. This was error. See Turner v. Cook, 362 F.3d 1219, 

1225 (9th Cir. 2004) (stating that we must “accept all factual allegations in the 
3 

complaint as true and construe them in the light most favorable to [the non-moving 

party]” (citation omitted) (alteration in original)). Second, the court focused on the 

franchise agreement but did not consider the plaintiffs’ allegations regarding 7-

Eleven’s actual control. This too was error. See Estrada v. FedEx Ground 

Package Sys., Inc., 64 Cal. Rptr. 3d 327, 335 (Ct. App. 2007) (in conducting a 

misclassification analysis, “[t]he parties’ label is not dispositive and will be 

ignored if their actual conduct establishes a different relationship”); see also Real 

v. Driscoll Strawberry Assocs. Inc., 603 F.2d 748, 755 (9th Cir. 1979) (“Economic 

realities, not contractual labels, determine employment status for the remedial 

purposes of the FLSA.”). Accordingly, we vacate the district court’s judgment on 

the pleadings without prejudice to 7-Eleven seeking judgment as a matter of law at 

a later stage in the proceedings.

2. Following the district court’s entry of judgment, the California 

Supreme Court decided Dynamex Operations West, Inc. v. Superior Court, 416 

P.3d 1 (Cal. 2018). We leave it to the district court in the first instance to address 

the extent to which Dynamex applies to the plaintiffs’ claims, including the parties’ 

contentions regarding retroactive application of Dynamex. In addition, the district 

court is advised that this court is currently considering the application of Dynamex

to franchisees in Vazquez v. Jan-Pro Franchising Int’l Inc., No. 17-16096, argued 

December 18, 2018. To the extent appropriate, proceedings in the district court 
4 

may be stayed pending this court’s decision in Vazquez.

3. Because we vacate the underlying judgment, we need not address the 

district court’s taxation of costs. Because we can consider Massachusetts and 

California state court decisions without taking judicial notice, we deny the 

plaintiffs’ motions for judicial notice. See No. 18-55462, Dkts. 12, 28.

B. Haitayan II

1. We also vacate the denial of preliminary injunctive relief and 

corrective notice. See Earth Island Inst. v. Carlton, 626 F.3d 462, 468 (9th Cir. 

2010). Under California law, an employee may not waive a wage-and-hour claim 

by contract. See Cal. Labor Code §§ 206.5, 2804. This rule is relevant to the 

preliminary injunction factors at issue here, including the likelihood of success on 

the merits, irreparable harm and the balance of equities. The district court, 

however, did not consider this California rule. We therefore vacate the denial of 

relief and remand for reconsideration. We are concerned that the plaintiffs’ request 

for relief is time sensitive. Franchisees are required to sign the challenged waivers 

in April 2019. We therefore urge the district court to address the plaintiffs’ 

requests for relief on an expedited basis.

2. Because they may arise on remand, we also provide guidance to the 

district court on several of the other issues raised on appeal. See United States v. 

Hernandez-Vasquez, 513 F.3d 908, 917 (9th Cir. 2008).
5 

a. Likelihood of Success on the Merits

In addressing the likelihood of success on the merits, the district court relied 

on Ahussain v. GNC Franchising, LLC, 2008 WL 11336812 (C.D. Cal. Mar. 19, 

2008). The plaintiffs contend this reliance was unwarranted. We agree. Ahussain

applies to general releases in franchise renewal agreements, but it does not address 

California’s prohibition on the contractual waiver of the plaintiffs’ claims. The 

district court should bear this distinction in mind on remand.

We reject 7-Eleven’s suggestion that the waiver is permissible as a 

settlement. Labor claims may be settled only by release and payment, which has 

not occurred here. See Watkins v. Wachovia Corp., 92 Cal. Rptr. 3d 409, 417 (Ct. 

App. 2009).

We also reject 7-Eleven’s contention that the plaintiffs are contractually 

obligated to sign the general release because the franchise 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 claims.

b. Irreparable Harm

Although putative class members must sign the waiver to protect their 

livelihoods, it is not clear how 7-Eleven will proceed once they sign. The district 

court correctly noted that if class members are ultimately found to be employees, 
6 

the waiver will likely be deemed unconscionable and unenforceable. If they are 

ultimately found to be independent contractors, however, 7-Eleven may attempt to 

hold them in breach of contract for participating in Haitayan I. These uncertainties 

place franchisees in a difficult position. If they do not sign the waiver, they may 

forfeit their livelihoods. If they sign the waiver, they may have to choose between 

(1) participating in Haitayan I (as parties or witnesses), thereby risking civil 

liability for breach of contract, or (2) foregoing their right to participate in

Haitayan I. This uncertainty imposes immediate and irreparable harm by deterring 

franchisees from participating in the case. This harm warrants consideration on 

remand.

c. Balance of the Equities

With regard to the balance of the equities, the district court focused on the 

public interest in enforcing valid contracts but did not consider California’s interest 

in allowing colorable wage-and-hour claims to proceed. The plaintiffs argue that 

the court should have done so, and we agree. The public interest here is 

substantial. See Dynamex, 416 P.3d at 5 (“[T]he misclassification of workers as 

independent contractors rather than employees is a very serious problem, depriving 

federal and state governments of billions of dollars in tax revenue and millions of 

workers of the labor law protections to which they are entitled.”). In balancing the 

equities, the district court should also consider the parties’ relative size and 
7 

strength. See Int’l Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 827 (9th 

Cir. 1993).

C. Consolidation

To serve the interest of judicial efficiency, and for the convenience of the 

parties, we encourage the district court to consolidate these two cases before a 

single district judge.1

D. Conclusion

In No. 18-55462, the appellants’ motions for judicial notice, filed October 1, 

2018 (Dkt. 12), and December 21, 2018 (Dkt. 28), are DENIED.

In No. 18-55462, the judgment is vacated and the case is remanded. In Nos. 

18-55910 and 18-56346, the order of the district court is vacated and the case is 

remanded. 

In Nos. 18-55462, 18-55910 and 18-56346, costs of appeal are awarded to 

the plaintiffs. 

In Nos. 18-55462, 18-55910 and 18-56346, no petitions for rehearing will be 

entertained and the mandates shall issue forthwith. See Fed. R. App. P. 2.

VACATED AND REMANDED.

 

1 At oral argument, both parties agreed consolidation would be appropriate.