DeMarinis v. Heritage Bank of Commerce, 2023 WL 9113099 (Cal. Ct. App. 2023)

Former bank employees filed a lawsuit against their former employer for various wage-and-hour violations. The lawsuit included a Private Attorneys General Act (“PAGA”) claim, under which plaintiffs sued on behalf of all other “aggrieved employees” of the company. In response, the bank filed an unsuccessful motion to compel plaintiffs’ “individual” claims to arbitration. Pursuant to the arbitration agreement, the parties waived their respective rights to bring any claims against one other “in any purported class or representative proceeding. There shall be no right or authority for any dispute to be brought, heard, or arbitrated on a class, collective, or representative basis and the Arbitrator may not consolidate or join the claims of other persons or Parties who may be similarly situated.”

The appellate court rejected the bank’s argument that the waiver provision did not constitute a “wholesale waiver” of plaintiffs’ PAGA claims, but instead was an enforceable waiver pertaining only to plaintiffs’ “nonindividual” PAGA claims, though the waiver provision made no distinction between “individual” and “non-individual” PAGA claims. Furthermore, the waiver provision contained a “poison-pill provision” that stated that if the waiver provision were severed in any way, the entire arbitration agreement would be voided. Thus, the Court concluded that the “poison pill” clause invalidated the entire arbitration agreement. See also Westmoreland v. Kindercare Education LLC, 90 Cal. App. 5th 967 (2023) (also holding that a poison-pill provision invalidated an entire arbitration agreement).