Case Information
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA TLALOC MUNOZ, MIGUEL RUIZ, Case No.: 22-cv-01269-AJB-AHG EDGAR CORONA, and STEVEN SNAVELY, individually and on behalf of ORDER DENYING DEFENDANTS’ themselves and all others similarly MOTION FOR SUMMARY situated, JUDGMENT
Plaintiffs, (Doc. No. 61)
v.
EARTHGRAINS DISTRIBUTION, LLC and BIMBO BAKERIES USA, INC.,
Defendants.
Before the Court is a motion for summary judgment filed by Defendants Earthgrains Distribution, LLC and Bimbo Bakeries USA, Inc. (collectively “Defendants”), seeking to dismiss Plaintiffs Tlaloc Munoz, Miguel Ruiz, and Edgar Corona’s (collectively “Plaintiffs”) claims with prejudice. (Doc. No. 61.) Plaintiffs filed an opposition (Doc. No. 67), to which Defendants replied (Doc. No. 72). For the reasons set forth herein, the Court DENIES Defendants’ motion.
I. BACKGROUND
A. Procedural Background
This wage-and-hour Private Attorneys General Act (“PAGA”) and putative class action centers on the alleged misclassification of Plaintiffs as independent contractors instead of employees. ( See generally Doc. No. 52, First Amended Complaint (“FAC”).)
On September 13, 2024, the Court denied Defendants’ motion to compel arbitration finding that the parties had not mutually assented to the arbitration clause and that, even if they had, the arbitration clause was unconscionable and could not be preserved via the contract’s severability clause. (Doc. No. 18.) Defendants appealed. (Doc. Nos. 20; 21.)
On appeal, the Ninth Circuit affirmed, concluding that (1) “the Distribution
Agreement is procedurally unconscionable to a moderate degree,” (2) the non-mutual carve
out for intellectual property claims, the shortened limitations period of covered disputes,
and the liquidated damages clause are substantively unconscionable provisions, and (3)
“the district court did not abuse its discretion when it refused to sever them.”
Munoz v.
Earthgrains Distribution, LLC
, No. 23-55818,
On May 2, 2025, Plaintiffs filed the FAC, alleging the following violations of California Labor Code and the Industrial Welfare Commission (“IWC”) Wage Order 1- 2001: (1) failure to reimburse expenses, (2) unlawful deductions from wages, (3) failure to provide accurate wage statements, (4) failure to provide overtime, (5) failure to provide meal periods, (6) failure to provide rest breaks, (8) unfair business practices in violation of California’s Business & Professional Code, and (9) violation of PAGA. ( See generally FAC.)
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/// 1 Defendants filed the instant motion for summary judgment, seeking to dismiss Plaintiffs’ claims with prejudice based on the “Distributor’s General Release” each signed upon selling their distribution rights. [1] (Doc. No. 61.)
B. Factual Background [2] Plaintiffs each signed substantially similar Distribution Agreements with Defendants. (Doc. No. 61-2 at 6–34, Distribution Agreement (“DA”) (signed by Munoz in 2014); Doc. No. 61-2 at 48–75, Distribution Agreement (signed by Ruiz in 2014); Doc. No. 61-2 at 91–121, Distribution Agreement (signed by Corona in 2019).) The Distribution Agreements sold Distribution Rights for a specific Sales Area to Plaintiffs. [3] The provisions setting forth the “relationship” between Plaintiffs and Defendants address Plaintiff’s Distribution Rights and purported status as independent contractors. ( Id. art. 2.1–2.2.) With regard to the former, the Distribution Agreement provides:
DISTRIBUTION RIGHTS. BAKERY hereby recognizes DISTRIBUTOR’s ownership of Distribution Rights which ownership shall continue until the Distributor Rights are sold pursuant to the terms of this Agreement. DISTRIBUTOR must operate according to the terms of this Agreement. Any termination of this Agreement requires DISTRIBUTOR, or BAKERY for the account of DISTRIBUTOR, to sell the Distribution Rights pursuant to the terms of this Agreement .
( Id. art. 2.1 (emphasis added).)
Pursuant to the Distributions Agreements, Plaintiffs were permitted to sell their Distribution Rights “in whole or part . . . provided that any such sale [is] subject to (1) the approval of [Defendants] . . . and (b) a right of first refusal by [Defendants] on the same terms and conditions offered to [Plaintiffs] by a bona fide purchaser[.]” ( Id. art. 9.1.) The Distribution Agreements further set forth the following provision governing any such sale:
SALE DOCUMENTS. Upon the sale by or for the account of DISTRIBUTOR as described in this Article, DISTRIBUTOR must execute an appropriate bill of sale to the purchaser, and a general release terminating, canceling and surrendering DISTRIBUTOR’s rights under this Agreement and releasing any and all claims against BAKERY and its affiliates and its and their officers, directors, shareholders, employees, 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 Agreement with the purchaser in the form of agreement then being used by BAKERY.
( Id. art. 9.6 (emphasis added).)
All three Plaintiffs sold their Distribution Rights, at which time they executed both a Bill of Sale and the Distributor’s General Release (“Release”). ( See Doc. No. 61-2 at 45– 47, Distributor’s General Release (“Release”) (signed by Munoz on March 10, 2019); Doc. No. 61-2 at 88–90, Distributor’s General Release (signed by Ruiz on November 10, 2019); Doc. No. 61-2 at 133–35, Distributor’s General Release (signed by Corona on January 30, 2022); Doc. No. 61-2 at 41–44, Bill of Sale (selling Munoz’s Distribution Rights to Lucloks Killer Bread Corp. on March 10, 2019, for $145,987.00); Doc. No. 61-2 at 82–84, Bill of Sale (selling a portion of Ruiz’s Distribution Rights to Corona on November 10, 2019, for $28,460.00); Doc. No. 61-2 at 85–87, Bill of Sale (selling a portion of Ruiz’s Distribution Rights to Avelee Incorp. on November 10, 2019, for $108,601.00); Doc. No. 61-2 at 128– 29, Bill of Sale (selling a portion of Corona’s Distribution Rights to Defendants on April 19, 2020, for $15,000.00); Doc. No. 61-2 at 130–32, Bill of Sale (selling Corona’s remaining Distribution Rights to A&J Family Bread Co. on January 30, 2022, for $99,607.00).)
Pursuant to the Release, Plaintiffs agreed to receive “One Dollar ($1.00) and other good and valuable consideration” in exchange for “release[ing] and dischar[ing] RELEASEE [(Defendants)] from each and all of the following: a) any claim, cause of action, right or interested of [Plaintiffs] and its owners/members arising out of [Plaintiffs’] ownership of certain Distribution Rights[.]” (Release at 46.) The Release includes an express waiver of California Civil Code § 1542:
RELEASOR [(Plaintiffs)] for itself and its owners/members voluntarily and 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 well as under any other statutes or common law principles of similar effect to said Section 1542, whether now or hereinafter existing under the laws of California or any other applicable federal or state law with jurisdiction over the parties’ relationship. In making this voluntary express waiver, 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 the matters mentioned herein may later be discovered and that it is Distributor 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. RELEASOR acknowledges and agrees that the foregoing waiver of Section 1542 is an essential, integral and material term of this Release.
( Id. at 46–47.)
II. LEGAL STANDARD
Pursuant to Rule 56 of the Federal Rules of Civil Procedure, granting summary
judgment is appropriate if the moving party demonstrates “that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). A fact is “material” if it “might affect the outcome of the suit under the
governing law[.]”
Anderson v. Liberty Lobby, Inc.
,
“The court must view the evidence in the light most favorable to the nonmovant and
draw all reasonable inferences in the nonmovant’s favor.”
City of Pomona v. SQM N. Am.
Corp.
,
III. DISCUSSION
The issue before the Court is narrow: Defendants seek summary judgment on the basis that the Releases signed by Plaintiffs are enforceable and bar the claims at issue. ( See generally Doc. Nos. 61-1; 72.) Plaintiffs oppose Defendants’ motion, asserting the Releases are unenforceable under California law. ( See generally Doc. No. 67.) Defendants do not seek summary judgment on the merits of Plaintiffs’ claims. (Doc. No. 72 at 5; see generally Doc. No. 61.)
A. Party Arguments
The parties’ arguments are fundamentally premised on opposite responses to the following question: whether the Releases are prospective waivers.
Defendants’ arguments regarding scope and enforceability of the Releases are built on the premise that the Releases were signed at the termination of the parties’ relationship and, thus, are not prospective. ( See generally Doc. Nos. 61-1; 72.) Regarding scope, Defendants assert that the current claims fall within the bounds of the Releases because the Releases include an express waiver of California Civil Code § 1542. (Doc. No. 61-1 at 10– 11.) Regarding enforceability, Defendants argue that Plaintiffs received valuable consideration, namely the ability to sell Distribution Rights to a third party for financial benefit. ( Id. at 10.) Defendants also assert that the Releases were not obtained through fraud, deception, misrepresentation, duress, or undue influence. ( Id. at 11–12.) Finally, Defendants argue the Releases are not barred by California law because there is a bona fide dispute over whether the wages are due, and no other provision separately prohibits the release of Plaintiffs’ expense claim. ( Id. at 12–17.)
However, Plaintiffs argue that, although the Releases themselves were signed at the termination of the parties’ relationship, Plaintiffs’ signing of the Releases was mandated by the Distribution Agreements which were executed at the beginning of the parties’ relationship. ( See generally Doc. No. 67.) As such, Plaintiffs argue that the Releases are unenforceable under California law because (1) they are impermissible prospective waivers of employment rights and (2) they are unconscionable, just like the arbitration provision. ( Id. at 14–26.) Additionally, Plaintiffs argue that there was no bona fide dispute over past wages when Plaintiffs agreed to waive future claims at the signing of the Distribution Agreements. ( Id. at 26–30.)
B. Distribution Agreements Make the Releases Prospective Defendants assert that “Plaintiffs did not prospectively waive their wage claims,” but rather “[t]hey simply acknowledged in the D[istribution Agreement] that if they chose to sell their distribution rights (a separate, voluntary transaction), they would execute a bill of sale and a general release.” (Doc. No. 72 at 8.) To support this stance, Defendants then rely on case law where plaintiffs were made aware in advance that possible severance benefits would require a release and, once later executed at termination of the employment relationship, those releases were deemed enforceable by the courts. ( Id. at 8–9 (collecting cases); see also Doc. No. 61-1 at 9–11, 13–17.)
Defendants’ analogizing Distribution Rights to severance benefits is inapposite. In
severance cases where the benefits were not otherwise earned, the plaintiffs had the choice
after
ending their employment to receive a benefit upon execution of a release or sue
without signing a release.
See, e.g.
,
Jimenez v. JP Morgan Chase & Co.
, No. 08-CV-0152
W (WMC),
Here, as Defendants state, “Plaintiffs had the choice to sue for alleged violations” while still being required to perform on their contracts “ or sell their routes for tens of thousands of dollars and release all claims[.]” ( See Doc. No. 72 at 8 n.6.) Under the circumstances, there is sufficient evidence to dispute whether the relationship between the parties could not end without Plaintiffs’ signing the release or breaching the Distribution Agreement.
Defendants also rely on analogizing to cases where courts enforced releases
executed after litigation commenced as a part of settlement agreements. (
See
Doc. No. 61-
1 at 8–9, 14–15 (citing first
Gopal v. Yoshikawa
,
A few cases cited by Defendants involve a release executed to settle a prior action
that courts found barred subsequent litigation arising from the same conduct. (
See, e.g.
,
Doc. No. 61-1 at 10–11, 13 (citing first
Jefferson v. Cal. Dep’t of Youth Auth.
, 28 Cal. 4th
299 (2002), next
Winet v. Price
,
Defendants assert that the same releases have been upheld by other courts and, thus,
this Court should uphold the instant Releases as well. (Doc. No. 61-1 at 12 (citing
Robins
v. Bimbo Foods Bakeries Distrib., Inc.
, No. 12-5392,
Considering the Releases in context with the Distribution Agreements and the circumstances presented in the instant action, the Court finds that the Releases are prospectively mandated by the Distribution Agreements which were executed at the beginning of the parties’ relationship.
C. No Bona Fide Dispute Existed
Having found that the Releases were prospectively signed, the Court turns next to Defendants’ assertions that a bona fide dispute existed permitting the enforceable release of potential Labor Code claims. (Doc. Nos. 61-1 at 12–17; 72 at 3–6.)
Pursuant to the California Labor Code,
An employer shall not require the execution of a release of a claim or right on 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 or executed in violation of the provisions of this section shall be null and void as between the employer and the employee. Violation of this section by the employer is a misdemeanor.
Cal. Lab. Code § 206.5(a). “Labor Code section 206.5 is to be read in light of Labor Code
section 206.”
Watkins v. Wachovia Corp.
,
Because the Court has found that the Releases were prospectively contracted at the
beginning of the parties’ relationship, there could not have been a bona fide dispute over
past
wages.
Cf. Chindarah v. Pick Up Stix, Inc.
, 171 Cal. App. 4th 796, 803 (2009)
(“[P]ublic policy is not violated by a settlement of a bona fide dispute over wages
already
earned
. The releases here settled a dispute over whether Stix had violated wage and hour
laws
in the past
; they did not purport to exonerate it from future violations. Neither did the
releases condition the payment of wages concededly due on their executions. The trial court
correctly found the releases barred the Chindarah plaintiffs from proceeding with the
lawsuit against Stix.”) (emphasis added);
Prostek v. Lincare Inc.
,
D. California Prohibits the Release of Labor Claims Prospectively As acknowledged by the California Supreme Court, “section 219 prohibits an employer and employee from agreeing, even voluntarily, to circumvent provisions of article I (consisting of §§ 200–243) of the Labor Code.” Schachter v. Citigroup, Inc. , 47 Cal. 4th 610, 619 (2009); see also Cal. Labor Code § 219(a) (“[N]o provision of this article can in any way be contravened or set aside by a private agreement, whether written, oral, or implied.”). “[A]greements prospectively waiving an employee’s rights under sections 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 (cleaned up) (emphasis in original).
Having found that the Releases are prospective and, thus, that no bona fide dispute
could have existed, the Releases are unenforceable under California law. Defendants assert
that Plaintiffs “cite ‘no authority to support’ the idea that [the unfair competition claim]
should be treated like a wage claim even though it is not one.” (Doc. No. 72 at 3 (quoting
Thomas v. State Farm Ins. Co.
,
E. The Releases are Unconscionable
Finally, even if the Court had not found the Releases prospective, Plaintiffs argue the Court should find the Releases both substantively and procedurally unconscionable. (Doc. No. 67 at 22–26.)
“A contract is unconscionable if one of the parties lacked a meaningful choice in
deciding whether to agree and the contract contains terms that are unreasonably favorable
to the other party.”
OTO, L.L.C. v. Kho
,
“The procedural element addresses the circumstances of contract negotiation and
formation, focusing on oppression or surprise due to unequal bargaining power.”
OTO,
L.L.C.
,
“[T]he two types of unconscionability ‘need not both be present to the same
degree.’”
Shroyer
,
Defendants assert that “there is at most a ‘low’ degree of procedural unconscionability,” because Plaintiffs were not surprised by the Releases. (Doc. No. 72 at 11.) However, absent from Defendants’ reply is any discussion of oppression or the Ninth Circuit’s findings of unconscionability on appeal. ( See generally Doc. No. 72.) In fact, despite Defendants’ failure to address it, the Ninth Circuit already found that the Distribution Agreement is “procedurally unconscionable to a moderate degree” because:
[t]he Distribution Agreement was a contract of adhesion presented to Plaintiffs-Appellees on standardized, preprinted forms that were nonnegotiable. In addition, Plaintiffs-Appellees have not completed a college degree, and they did not have an opportunity to have an attorney review the Distribution Agreement. In contrast, Bimbo was a sophisticated company, being the “largest baking company in the United States,” with the parent company generating billions of dollars in sales.
Munoz
,
Considering the Releases themselves, they are also contracts of adhesion presented to Plaintiffs on standardized, preprinted forms that were nonnegotiable. The same contrast in education and representation of the parties exists for the Releases as did for the Distribution Agreements. Thus, the Court similarly finds the same moderate degree of procedural unconscionability.
Turning to substantive unconscionability, the Ninth Circuit analyzed arbitration-
related provisions of the Distribution Agreement, describing the Distribution Agreement
as a “one-sided agreement” that was “exacerbated by the shortened limitation period of
Covered Disputes” and a unilateral liquidated damages provision.
Munoz
, 2024 WL
4144081, at *1–3. The Ninth Circuit found that “[e]ach of these provisions is substantively
unconscionable.”
Id.
at *3. At issue here, the provision regarding sale of Distribution
Rights and the corresponding Release are both similarly one-sided as Plaintiffs were
required to execute the Releases in order to sell their Distribution Rights, the only claims
released were those that could be brought by Plaintiffs against Defendants, and the
Releases are expansive in nature covering “any and all claims” that “aris[e] under or out of
or in any way relate[]” to the Distribution Agreements, including express waivers of
California Civil Code § 1542, and the included confidentiality provision is one-sided. (
See
DA art. 9.6; Release 46–47.) None of these aspects demonstrate mutuality. In the
Distribution Agreement, Defendants do “agree[] to enter into a new Distribution
Agreement with the purchaser.” (DA art. 9.6.) However, considering the additional rights
Defendants retain regarding approval of any potential sale and right of first refusal, the
terms are “unreasonably favorable” to Defendants, the more powerful party.
See OTO,
L.L.C.
,
Accordingly, the Court finds that the Releases exhibit sufficient procedural and
substantive unconscionability such that they are unenforceable to bar Plaintiffs’ claims.
See, e.g.
,
Total Vision, LLC v. Vision Serv. Plan
,
IV. CONCLUSION
Based on the foregoing, because Defendants as the moving parties have failed to demonstrate they prevail as a matter of law, the Court DENIES Defendants’ Motion for Summary Judgment. (Doc. No. 61.) The Court further ORDERS :
1. Any motion for class certification must be filed no later than November 3, 2025 .
2. Any opposition to the motion for class certification must be filed no later than November 24, 2025 .
3. Any reply must be filed no later than December 8, 2025 .
4. A hearing on the motion for class certification is SET for January 15, 2026 , at 2:00 PM in Courtroom 4A before the undersigned.
5. Any request to modify the deadlines set herein must be filed in compliance with the Civil Local Rules and the undersigned Civil Case Procedures. Additionally, any such requests must address with specificity the cause justifying the request, supported by declarations.
IT IS SO ORDERED.
Dated: October 15, 2025
Notes
[1] The instant motion requests that “the Court enter summary judgment in [Defendants’] favor on all 20 of Plaintiffs’ claims and thus dismiss this action, in its entirety, with prejudice.” (Doc. No. 61-1 at 18.) However, in opposition, Plaintiffs identify that Defendants do not put at issue Plaintiff Steven Snavely’s 21 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. 24 Battaglia’s Civ. Case Proc. § III.F. As Defendants did not request, nor did the Court grant, leave to file a separate statement of facts, the Court does not consider it in rendering this decision. 25
[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 described in Schedule A” of the applicable Distribution Agreement. ( Id. art. 1.1(j).)
[3]
[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.
,
[9]
[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
,
[12]