Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

BACKGROUND 

This case arises from an employment dispute.  According to the Complaint, Defendant Gilchrist formed F45 Training, Inc. (“F45”) in 2013. F45 originated as an Australian company headquartered in Sydney with a mission of creating a global fitness community through franchising brick-and-mortar studios. The key component of the program was “Functional Fitness” which offers a mix of HIIT cardio and strength training in a modern, high-tech gym setting.  

Plaintiff Duncan Cork initially worked for F45 as an outside consultant.  The Complaint alleges Cork was key to establishing a successful relationship between F45 and NBA and NFL teams.  Cork continued to expand the company’s marketing efforts, and Gilchrist formally hired Cork as the Chief Marketing Officer for F45 around the middle of 2017.  Gilchrist later promoted Cork to President of F45 where Cork oversaw U.S. operations, marketing, and new business development.  

In 2019, and in preparation of F45’s Initial Public Offering (IPO), Gilchrist moved Cork to the position of Chief Growth Officer. Over the following years, Cork developed many of Gilchrist’s various business and franchise concepts, both within and outside of the job function of F45.  

In particular, Gilchrist wanted to establish a retail coffee business as a franchise concept. Gilchrist envisioned a network of coffee espresso stores and coffee trucks inspired by the Australian coffee culture and to franchise this concept to American consumers as “F45.” In 2018, he asked Cork to create Defendant U.S. of E., LLC, short for “United States of Espresso,” and to design and build this coffee business.  Gilchrist asserted it was inconvenient for Cork to remain an F45 employee while also developing U.S. of E. and pursuing Gilchrist’s other concepts.  

In June 2021, Gilchrist directed Cork to leave F45, move to U.S. of E. and assume the position of CEO.  Cork was hesitant to make the move from F45 considering the anticipated F45 IPO would result in a share acquisition valued at $3 million, a sum that was commensurate with other C Level executives at F45.  But Gilchrist assured him the compensation package he proposed through U.S. of E. would reflect the value of Cork’s contributions to F45, and the anticipated IPO windfall. Relying on Gilchrist’s promises, Cork accepted Gilchrist’s offer in lieu of the shares in F45, and left F45 prior to the IPO to begin working full time for U.S. of E.  

F45 went public a month later in July 2021 at a valuation of $1.6 billion, yet the Complaint alleges Gilchrist orchestrated the timing of Cork’s move to avoid paying Cork for his work at F45.  

Gilchrist and Cork subsequently negotiated a compensation package on behalf of U.S. of E. consistent with the foregoing understanding which was formalized by a written Employment Agreement effective August 1, 2021 (“Employment Agreement”).  The Employment Agreement defines Cork’s duties and role with U.S. of E. (he was to be the CEO) and specifies his compensation and severance package.   

Cork worked tirelessly to launch U.S. of E.  He created a viable store location and built three coffee trucks in support of the launch of the franchise concept. U.S. of E. was rapidly working toward a viable business model when, in March 2022, Gilchrist told Cork that he could no longer pay him and significantly reduced the budget of the company’s operation from March until all funding ceased on June 1, 2022.  

Cork was personally advancing U.S. of E. salaries to staff and covering necessary operation expenses during this time, relying upon the constant assurances from Gilchrist that he would reimburse Cork. But U.S. of E. (through Gilchrist) could no longer pay Cork’s salary or support its capital needs. Gilchrist adamantly did not want to let go of the coffee business and in April 2022, he proposed a potential solution to Cork. Gilchrist, in his capacity as CEO of F45, offered Cork $50,000 a month plus a substantial bonus up to $2 million if Cork returned to work for F45, and moved to Florida to oversee the construction and opening of 1,200 new F45 studios. Cork would not be an employee; instead, he would remain as an outside consultant to F45 while continuing to oversee the U.S. of E. operation.  

That arrangement put double pressure and time challenges on Cork who, from that point forward, was essentially working two full time jobs simultaneously, one at F45 and the other at U.S. of E.  F45 paid Cork to rapidly expand and develop F45 franchises while at U.S. of E.; he would work without pay as CEO until the business became viable or further funding was secured. This arrangement did not last long.  

Almost immediately after Cork moved to Florida in reliance upon Gilchrist’s representations that he would be properly compensated, Gilchrist stepped down as CEO of F45 and received an exit payment of $7 million. F45’s new leadership revoked Cork’s F45 consulting contract in August 2022.  The total elimination of financial and logistic support from Gilchrist hampered any realistic opportunity to turn U.S. of E. into an independently successful business.  

On July 13, 2022, Gilchrist instructed Cork to lay off all staff at U.S. of E. and reduce operating expenses to net zero, while keeping the company afloat. Cork rapidly reduced expenses, fired and reassigned key staff, paid all salary commitments related to staff terminations, and advanced urgent expenses that kept the business afloat, all from his personal funds while relying upon Gilchrist’s assurances that he would be paid back.  

Gilchrist subsequently asked Cork to raise external capital for U.S. of E. But Gilchrist rejected all investment offers Cork presented to him and, instead, chose to run the company himself.  In August 2022, Gilchrist stopped responding to pleas for funds to cover U.S. of E. expenses. Cork was therefore forced to sell his house to pay critical obligations for the business and personal living costs.  

Having not been paid since March 15, 2022, with the F45 consultant’s fees and promised financial support no longer forthcoming, Cork had no choice but to leave U.S. of E. in October 2022 thereby terminating his employment. He communicated this decision directly to Gilchrist and over the ensuing months, the parties discussed a resolution of their disputes.   

Gilchrist proposed to send Cork a Separation Agreement which would confirm the financial obligations owed to Cork under the terms of Cork’s Employment Agreement, but a formal document never materialized.  Plaintiff alleges that Gilchrist has been actively selling whatever assets U.S. of E. held to reduce the likelihood Plaintiff will successfully collect monies U.S. of E. owes to him. 

The Employment Agreement contains a mandatory arbitration provision which states, “Any controversy or claim arising out of or relating to this Agreement, its enforcement, arbitrability or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or arising out of or relating in any way to Employee’s employment or termination of employment, including, for example, any alleged violation of statute, common law or public policy, shall be submitted to final and binding arbitration, to be held in Los Angeles County, California, before a single arbitrator, in accordance with the FAA and the then-current JAMS Arbitration Rules and Procedures for Employment Disputes (which rules are available which are available at http://www.jamsadr.com/rules-employment arbitration/), as modified by the terms and conditions contained in this Paragraph.”  

(Employment Agreement, §9(b).) 

Consistent with the mandatory arbitration provision, Cork commenced arbitration with JAMS on June 12, 2023.  Cork claims U.S. of E. refused to pay the arbitration fees, and the arbitration ended on or about December 8, 2023 when JAMS closed its file on this matter.  By allegedly refusing to meet its obligation to pay the arbitration costs, Cork claims U.S. of E. has waived its rights to require this litigation be resolved through arbitration as required under the arbitration provision in the Employment Agreement.  

This action ensued.  The operative complaint alleges six claims against U.S. of E. and Gilchrist for (1) breach of contract, (2) fraud, (3) recovery of unreimbursed expenses, (4) recovery of unpaid wages and penalties, (5) civil theft, and (6) unjust enrichment.   

This hearing is on U.S. of E.’s motion to dismiss or in the alternative to compel arbitration and stay the action.  U.S. of E. argues it has not waived its right to compel arbitration—it did not refuse to pay arbitration fees but merely delayed paying the fees because Cork proposed the parties engage in mediation efforts first.  U.S. of E. also argues Cork has improperly commenced litigation in California state court rather than seek an order compelling arbitration in federal District Court as required by the Federal Arbitration Act (“FAA”), which controls under the parties’ arbitration agreement.  Cork does not oppose the matter proceeding to arbitration, but asks that the Court include the terms of the arbitration agreement in any order compelling arbitration and also that any stay be limited to Cork’s action against U.S. of E.   

 

ANALYSIS 

U.S. of E. argues it has not waived the right to compel arbitration.  The Court agrees. 

The Employment Agreement provides that the FAA applies.  The FAA does not set forth a test for waiver, but the Ninth Circuit has held that the party asserting waiver must demonstrate “(1) knowledge of an existing right to compel arbitration and (2) intentional acts inconsistent with that existing right.”  (Armstrong v. Michael Stores, Inc. (9th Cir. 2023) 59 F.4th 1011, 1015.)  A party generally acts inconsistently with exercising the right to arbitrate when it “makes an intentional decision not to move to compel arbitration”, and it “actively litigates the merits of a case for a prolonged period of time in order to take advantage of being in court.”  (Id.) 

Here, the facts do not show either.  Cork filed an arbitration demand with JAMS.  U.S. of E told Cork they would be participating in the arbitration and proposed to “robustly defend itself” in the arbitration.  (Ex. E to Motion.)  The parties then agreed to attempt mediation before proceeding to arbitration.  (Ex. E to Motion.)  U.S. of E. claims it was waiting before paying the arbitration fee because the parties had agreed to mediation.  (Ex. R to Motion.)  The parties continued to discuss mediation through January 2024.   

On July 16, 2024, Cork emailed U.S. of E, a draft Complaint and threatened to file the Complaint unless U.S. of E. made a further settlement offer to Cork.  In or around August 2024, the parties’ attorneys had a telephone call, and in that call, defense counsel told Cork’s counsel that if Cork commenced litigation as threatened, this would be in breach of the arbitration clause of the Employment Agreement, and U.S. of E would immediately file a motion to compel arbitration.  Plaintiff filed the threatened complaint, and since being served, U.S. of E. has taken no action to defend or progress the litigation nor filed any responsive pleading responding the Complaint other than filing the instant motion. 

These facts do not support waiver.  To the contrary, they show U.S. of E. continually maintained the action should be arbitrated.  (Armstrong, 59 F.4th at 1015 (no waiver where “[the employer defendant] was consistently vocal about its intent to move to compel arbitration.”)  U.S. of E. also never actively litigated the merits of the case.  This case presents even stronger facts than in Armstrong where the Ninth Circuit found no waiver even though the employer defendant moved to compel within a year after the complaint was filed and sought limited discovery requests.  (Id. at 1015-1016.)  Here, U.S. of E. propounded no discovery requests, and it filed the motion to compel arbitration on December 17, 2024, less than two months after being served with the Complaint on October 22, 2024.           

Because the arbitration agreement was not waived, the Court grants the motion to compel arbitration and stays the proceedings as to U.S. of E., pending completion of arbitration.  While Plaintiff does not oppose proceeding to arbitration, it asks the Court to include the terms of the arbitration agreement in its order.  The arbitration agreement governs the arbitration, and it is unnecessary for the Court to restate its terms in its order.   

 

CONCLUSION 

For the foregoing reasons, the Court GRANTS U.S. of E.’s motion to compel arbitration and stays the action as to U.S. of E. only, pending completion of the arbitration proceedings.   

IT IS SO ORDERED. 

 

DATED: January 31, 2025 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court