DeMarinis v. Heritage Bank of Commerce ( 2024 )

Filed 12/11/23; Certified for Publication 1/8/24 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
NICOLE DEMARINIS et al.,
Plaintiffs and Respondents,
A167091
v.
HERITAGE BANK OF (Alameda County
COMMERCE, Super. Ct. No. RG20080970)
Defendant and Appellant.
This is a putative class action and representative action brought by
plaintiffs Nicole DeMarinis and Kelly Patire under the California Private
Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (PAGA) against
defendant Heritage Bank of Commerce (Heritage Bank) for wage and hour
and other Labor Code violations. Heritage Bank unsuccessfully moved to
compel arbitration of plaintiffs’ individual PAGA claims pursuant to a
“representative” action waiver in the parties’ arbitration agreement. Relying
principally on Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. ___ [142
S. Ct. 1906] (Viking River), Heritage Bank contends the denial of arbitration
was erroneous because the waiver provision is not, as the trial court ruled, an
unenforceable “wholesale” waiver of plaintiffs’ PAGA claims, but instead is
an enforceable waiver pertaining only to plaintiffs’ “nonindividual” PAGA
claims. We reject Heritage Bank’s contentions and affirm.
1
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs are current and former employees of Heritage Bank. Upon
their hiring, plaintiffs purportedly executed a “MUTUAL AGREEMENT TO
ARBITRATE CLAIMS” (arbitration agreement) reflecting the parties’
“mutual[] consent to the resolution by arbitration of all claims, arising out of
my employment (or its termination) that the Company may have against me,
or that I may have against the Company.” The arbitration agreement covers
claims for wages and other compensation, and for violations of any federal,
state, or other law, statute, regulation, or ordinance.
A section of the arbitration agreement entitled “Waiver of Right to File
Class, Collective, or Representative Actions” (waiver provision) contains two
paragraphs. The first paragraph states, in relevant part: “The Company and
I may bring claims against the other only in its or my individual capacity,
and not as a plaintiff or class member 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 second paragraph of the waiver provision includes a
nonseverability clause stating: “The Company and I acknowledge and agree
that the conditions set forth in [the waiver] provision are material terms of
this Agreement and may not be modified or severed, in whole or in part. If
this specific provision is found to be unenforceable, then the entirety of this
Agreement shall be null and void.” Plaintiffs refer to this last sentence as a
“poison pill,” and we do likewise. (See, e.g., Westmoreland v. Kindercare
Education LLC (2023) 90 Cal.App.5th 967, 972 (Westmoreland) [referring to
2
clause invalidating agreement upon unenforceability of waiver as “poison
pill”].)
In 2020, plaintiffs filed the instant action against Heritage Bank,
asserting nine causes of action for (1) failure to reimburse business-related
expenses; (2) failure to provide meal periods; (3) failure to provide rest
periods; (4) failure to pay minimum wages; (5) failure to pay overtime
compensation; (6) failure to provide accurate itemized wage statements;
(7) failure to pay all wages due at separation of employment; (8) violation of
the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200); and
(9) violation of PAGA. In the PAGA cause of action, plaintiffs allege they are
“aggrieved employees” as defined in Labor Code section 2699, subdivision (a),
and bring the PAGA action on behalf of the State of California with respect to
themselves and all persons employed by Heritage Bank in California during
the relevant time period.
In 2022, the United States Supreme Court issued its much-anticipated
decision in Viking River, which held the Federal Arbitration Act (FAA) (9
U.S.C. § 1 et seq.) preempts the ruling of Iskanian v. CLS Transportation Los
Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian) “insofar as [Iskanian]
precludes division of PAGA actions into individual and non-individual claims
through an agreement to arbitrate.” (Viking River, supra, 569 U.S. at p. ___
[142 S. Ct. at p. 1924].)
Relying on Viking River, Heritage Bank moved to compel arbitration of
plaintiffs’ “individual claims (including individual PAGA claims)” and to
dismiss “any class or non-individual PAGA claims.” The trial court denied
the motion. Observing that the waiver provision includes an improper waiver
of the right of employees to bring “an action in court as proxy or agent of the
LWDA und[er] the PAGA,” and that the nonseverability clause and poison
3
pill preclude severance of that unenforceable waiver, the court determined
the entire agreement to arbitrate is null and void and provides no basis for
compelling arbitration of plaintiffs’ individual PAGA claims. This timely
appeal followed.
DISCUSSION
I. Governing Law
A. Standard of Review
This case requires that we focus on the language of the parties’
arbitration agreement as it relates to plaintiffs’ PAGA claims, not their
individual causes of action directly under the Labor Code and the UCL.
“In evaluating an order denying a motion to compel arbitration, ‘ “ ‘we
review the arbitration agreement de novo to determine whether it is legally
enforceable, applying general principles of California contract law.’ ” ’ ”
(Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th
1096, 1106.)
B. FAA Preemption
Under the FAA and California law, an arbitration agreement is “valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” (9 U.S.C. § 2; OTO, LLC v. Kho
(2019) 8 Cal.5th 111, 125.) Section 2 of the FAA reflects “both a ‘liberal
federal policy favoring arbitration,’ and the ‘fundamental principle that
arbitration is a matter of contract.’ ” (AT&T Mobility LLC v. Concepcion
(2011) 563 U.S. 333, 339 (Concepcion), internal citations omitted.)
Although the FAA “preserves generally applicable contract defenses,
nothing in it suggests an intent to preserve state-law rules that stand as an
obstacle to the accomplishment of the FAA’s objectives.” (Concepcion, supra,563 U.S. at p. 343.) In Concepcion, the United States Supreme Court held
4
the FAA preempts California’s Discover Bank rule that class action waivers
in adhesive consumer arbitration agreements are unconscionable under
California law. As Concepcion explained, to the extent class arbitration is
compelled through the Discover Bank rule rather than the consent of the
contracting parties, the rule interferes with fundamental attributes of
arbitration. Specifically, class arbitration sacrifices the informality and
efficiency of arbitration; increases risks to defendants; and is poorly suited to
the higher stakes of class litigation due to the lack of multilayered review.
(Concepcion, at pp. 348–352.)
C. PAGA and Iskanian
PAGA was enacted “to augment the limited enforcement capability of
the [Labor and Workforce Development Agency (LWDA)] by empowering
employees to enforce the Labor Code as representatives of the [LWDA].”
(Iskanian, supra, 59 Cal.4th at p. 383.) The statute “deputizes an ‘aggrieved’
employee to bring a lawsuit ‘on behalf of himself or herself and other current
or former employees’ to recover civil penalties for Labor Code violations that
would otherwise be assessed and collected by the state. . . . Although an
aggrieved employee is the named plaintiff in a PAGA action, an employee
suing under PAGA ‘ “does so as the proxy or agent of the state’s labor law
enforcement agencies.” ’ [Citations.] Thus, ‘[e]very PAGA claim is “a dispute
between an employer and the state.” ’ ” (Seifu v. Lyft, Inc. (2023) 89
Cal.App.5th 1129, 1137 (Seifu).)
In Iskanian, the California Supreme Court held that an “arbitration
agreement requiring an employee as a condition of employment to give up the
right to bring representative PAGA actions in any forum is contrary to public
policy” because such an agreement seeks to exempt employers from
responsibility for their legal violations and violates the statutory rule that “ ‘a
5
law established for a public reason cannot be contravened by a private
agreement.’ ” (Iskanian, supra, 59 Cal.4th at pp. 360, 383, italics added.)
The court emphasized that public policy prohibits such agreements “whether
or not an individual claim is permissible under the PAGA” because “ ‘a single-
claimant arbitration under the PAGA for individual penalties will not result
in the penalties contemplated under the PAGA to punish and deter employer
practices that violate the rights of numerous employees under the Labor
Code.’ ” (Iskanian, at p. 384.)
Iskanian further held its rule was not preempted by the FAA because a
PAGA action is not a private dispute, but “a dispute between an employer
and the state [LWDA].” (Iskanian, supra, 59 Cal.4th at p. 384.) As such, a
prohibition against PAGA waivers “does not interfere with the FAA’s goal of
promoting arbitration as a forum for private dispute resolution.” (Iskanian,
at pp. 388–389.)
In light of Iskanian, “various courts held that employers may not
require employees to ‘split’ PAGA actions in a manner that puts individual
and non-individual components of a PAGA claim into bifurcated proceedings”
between arbitral and judicial forums. (Adolph v. Uber Technologies, Inc.
(2023) 14 Cal.5th 1104, 1118 (Adolph), citing Perez v. U-Haul Co. of
California (2016) 3 Cal.App.5th 408 and Williams v. Superior Court (2015)
237 Cal.App.4th 642.)
D. Viking River
In Viking River, the United States Supreme Court held the FAA
preempts the rule of Iskanian “insofar as it precludes division of PAGA
actions into individual and non-individual claims through an agreement to
arbitrate.” (Viking River, supra, 596 U.S. at p. ___ [142 S. Ct. at p. 1924].)
Central to the court’s holding was its view of the distinction between
6
“individual” and “non-individual” facets of a “representative” PAGA action,
which merits a detailed discussion.
As the Viking River court explained, PAGA “tends to use the word
‘representative’ in two distinct ways. . . . [¶] In the first sense, PAGA actions
are ‘representative’ in that they are brought by employees acting as
representatives—that is, agents or proxies—of the State.” (Viking River, 596
U.S. at p. ___ [142 S. Ct. at p. 1916].) In this sense, “ ‘ “every PAGA action is
. . . representative” ’ and ‘[t]here is no individual component to a PAGA
action.’ ” (Viking River, at p. ___ [142 S. Ct. at p. 1916].)
But PAGA also “contain[s] what is effectively a rule of claim joinder”
that allows aggrieved employees to “ ‘seek any civil penalties the state can,
including penalties for violations involving employees other than the PAGA
litigant herself.’ ” (Viking River, supra, 596 U.S. at p. ___ [142 S. Ct. at
p. 1915].) Viking River distinguished such “non-individual” PAGA claims
arising out of events involving other employees from “ ‘individual’ ” PAGA
claims premised on Labor Code violations actually sustained by the plaintiff.
(Viking River, at p. ___ [142 S. Ct. at p. 1916].)
Based on this distinction, Viking River held the FAA does not preempt
Iskanian’s “principal” rule prohibiting waivers of “representative” PAGA
claims “in the first sense” (that every PAGA action is representative) because
a PAGA action, which involves a single principal—the LWDA—is structurally
different from class actions and therefore does “not present the problems of
notice, due process, and adequacy of representation that render class
arbitration inconsistent with arbitration’s traditionally individualized form.”
(Viking River, supra, 569 U.S. at p. ___ [142 S. Ct. at pp. 1916–1917, 1921].)
However, Viking River found preemption of Iskanian’s secondary rule
prohibiting parties from contracting around PAGA’s claim joinder mechanism
7
because the rule interfered with the employer’s ability to enforce arbitration
as to just the individual PAGA claim. (Viking River, supra, 596 U.S. at p. ___
[142 S. Ct. at p. 1923].) As the court explained, “state law cannot condition
the enforceability of an arbitration agreement on the availability of a
procedural mechanism that would permit a party to expand the scope of the
arbitration by introducing claims that the parties did not jointly agree to
arbitrate.” (Id. at pp. 1923–1924.) “The effect of Iskanian’s rule mandating
this mechanism is to coerce parties into withholding PAGA claims from
arbitration. . . . This result is incompatible with the FAA.” (Viking River,
596 U.S. at p. ___ [142 S. Ct. at p. 1924].)
Of significant note, the arbitration agreement in Viking River
contained “a severability clause specifying that if the waiver was found
invalid, any class, collective, representative, or PAGA action would
presumptively be litigated in court. But under that severability clause, if any
‘portion’ of the waiver remained valid, it would be ‘enforced in arbitration.’ ”
(Viking River, 596 U.S. at p. ___ [142 S. Ct. at p. 1916].) The court
interpreted this clause as permitting the employer to enforce arbitration of
just the individual PAGA claim. (Viking River, 596 U.S. at p. ___ [142 S. Ct.
at p. 1917].) And because Iskanian’s rule of indivisibility interfered with the
employer’s ability to do so, it was preempted by the FAA. 1
1 As we understand Viking River, enforcement of an arbitration
agreement as to a severable “individual” PAGA claim is permissible
notwithstanding that the claim is still “representative” in the “first sense” of
PAGA because the substantive right (to seek civil penalties for Labor Code
violations as an agent or proxy of the state) has not been altered or abridged;
all that has changed is “how those rights will be processed,” namely, the
forum in which the right must be litigated. (Viking River, supra, 569 U.S. at
p. ___ [142 S. Ct. at p. 1919].) But most employers will not agree to
arbitration of nonindividual PAGA claims, as “[a]rbitration is poorly suited to
the higher stakes’ of massive-scale disputes of this kind,” and because a state
8
In the final section of its opinion, Viking River reiterated its holding
that an employee’s nonindividual PAGA claims “may not be dismissed simply
because they are ‘representative.’ Iskanian’s rule remains valid to that
extent.” (Viking River, supra, 596 U.S. at p. ___ [142 S. Ct. at p. 1925].)
However, in the Viking River court’s view, enforcing arbitration as to the
plaintiff’s individual PAGA claim resulted in a loss of standing to maintain
her nonindividual PAGA claims in court. “When an employee’s own dispute
is pared away from a PAGA action, the employee is no different from a
member of the general public, and PAGA does not allow such persons to
maintain suit. [Citation.] As a result, [the plaintiff] lacks statutory standing
to continue to maintain her non-individual claims in court, and the correct
course is to dismiss her remaining claims.” (Viking River, at p. ___ [142 S.
Ct. at p. 1925].)
In a concurring opinion, Justice Sotomayor explained that Viking
River’s standing analysis was “based on available guidance from California
courts,” and that “if this Court’s understanding of state law is wrong,
California courts, in an appropriate case, will have the last word.” (Viking
River, supra, 596 U.S. at p. ___ [142 S. Ct. at p. 1925] (conc. opn. of
Sotomayor, J).) 2
law mechanism that mandates mass arbitration “radically expands the scope
of PAGA actions,” it “effectively coerces” employers to opt for a judicial forum,
contravening the fundamental principle of the FAA that arbitration is a
matter of consent. (Viking River, at p. ___ [142 S. Ct. at pp. 1915,1924].)
2 In the wake of Viking River, several California appellate courts
declined to follow Viking River’s interpretation of PAGA on the issue of
standing after an individual PAGA claim has been ordered to arbitration.
(See Seifu, supra, 89 Cal.App.5th at pp. 1139, 1141; Piplack v. In-N-Out
Burgers (2023) 88 Cal.App.5th 1281, 1292–1293 (Piplack); Galarsa v. Dolgen
California, LLC (2023) 88 Cal.App.5th 639, 652–653 (Galarsa).) Standing is
not at issue in this appeal.
9
E. Adolph
The last word came just over a year later when the California Supreme
Court held in Adolph that an aggrieved employee who was compelled to
arbitrate his individual PAGA claim nonetheless maintained standing to
pursue his nonindividual PAGA claims in court. (Adolph, supra, 14 Cal.5th
p. 1114.) The court explained that a plaintiff obtains standing as an
“aggrieved employee” for PAGA purposes “upon sustaining a Labor Code
violation committed by his or her employer.” (Adolph, at p. 1120.) Once
obtained, PAGA standing “is not affected by enforcement of an agreement to
adjudicate a plaintiff’s individual claim in another forum,” as this “does not
nullify the fact of the violation or extinguish the plaintiff’s status as an
aggrieved employee.” (Adolph, at p. 1121.) In so concluding, the Adolph
court emphasized it was not bound by Viking River’s interpretation of
California law. (Adolph, at p. 1119.)
II. Analysis
Against this backdrop, we turn to the arbitration agreement in
question. The waiver provision reflects the parties’ agreement to waive their
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.” (Emphasis
added.) We conclude this provision is unenforceable under Iskanian’s
principal rule, which “Viking River left undisturbed” (Adolph, supra, 14
Cal.5th at p. 1117), because it requires plaintiffs to waive their right to bring
any “representative” PAGA claim “in any forum,” arbitral or judicial (see
Iskanian, supra, 59 Cal.4th at pp. 360, 383).
10
Heritage Bank insists, however, that in light of Viking River’s
distinction between individual and nonindividual PAGA claims, “any state
rule that prohibits a party from waiving the right to bring non-individual
claims is preempted by the FAA.” This is incorrect. Viking River did not hold
the FAA preempts a state law rule that prohibits the waiver of nonindividual
PAGA claims. To the contrary, Viking River left intact Iskanian’s principal
rule prohibiting employers from imposing a waiver of an employee’s right to
bring a “representative” PAGA claim in any forum, either in its individual or
nonindividual sense. (Viking River, supra, 569 U.S. at p. ___ [142 S. Ct. at
p. 1925] [Iskanian’s rule that PAGA “claims may not be dismissed simply
because they are ‘representative’ . . . remains valid to that extent”].) Rather,
the portion of Iskanian that Viking River abrogated was its rule of
indivisibility that effectively coerces employers either to submit to a mass
arbitration of individual and nonindividual PAGA claims, or to forgo
arbitration completely. (Viking River, at p. ___ [142 S. Ct. at p. 1924].)
Nothing in Viking River suggests that employers may require employees to
completely forgo their rights to bring nonindividual PAGA claims as a
condition of employment.
Moreover, Adolph recognizes that an individual PAGA claim in a case
may proceed to arbitration, while nonindividual PAGA claims in the matter
remain in court. (Adolph, supra, 14 Cal.5th at p. 1123; see, e.g., Piplack
supra 88 Cal.App.5th at p. 1289.) Thus, parties remain free to utilize the
informal and expedient procedures of arbitration for an individual PAGA
claim, without forsaking the advantages of a judicial forum (e.g., procedural
rigor, multilayered review) for the nonindividual PAGA claims. (See Viking
River, supra, 569 U.S. at p. ___ [142 S. Ct. at p. 1924].)
11
To facilitate this, employers are free to draft a severability clause like
the one that Viking River interpreted in conjunction with the PAGA waiver to
permit arbitration of just the individual PAGA claim. (Viking River, 596 U.S.
at p. ___ [142 S. Ct. at p. 1917].) But here, Heritage Bank did not do so;
instead, it used an arbitration agreement containing a nonseverability clause
and a poison pill which together specified that all conditions in the waiver
provision are material and may not be modified or severed, either “in whole
or in part,” and that if the waiver provision is found unenforceable, then “the
entirety” of the arbitration agreement is “null and void.” As the trial court
aptly observed, these provisions preclude “giv[ing] effect to the Viking River
distinction between ‘individual’ and ‘non-individual’ claims” because they
prohibit severance of the unenforceable nonindividual PAGA claims waiver.
And because the waiver provision’s terms cannot be severed in any way,
application of Iskanian’s principal rule renders the entire waiver provision
unenforceable, which in turn renders void the entire arbitration agreement.
Our colleagues in Division Two reached a similar conclusion in
Westmoreland. There, as here, the arbitration agreement included a waiver
of “class, collective, or representative” claims, as well as a poison pill stating
in relevant part that “ ‘if the Waiver of Class and Collective Claims is found
to be unenforceable, then this agreement is invalid and any claim brought on
a class, collective, or representative action must be filed in a court of
competent jurisdiction.’ ” (Westmoreland, supra, 90 Cal.App.5th. at p. 972.)
As Westmoreland observed, “Had Kindercare simply included a waiver of
representative claims in its arbitration agreement and not included the
poison pill at the end of the agreement, the result here could have been
substantially similar to that in Viking River” and other California decisions
following Viking River. (Westmoreland, at p. 982, citing Vaughn v. Tesla
12
(2023) 87 Cal.App.5th 208, Piplack, supra, 88 Cal.App.5th 1281, and Galarsa,
supra, 88 Cal.App.5th 639.) And similar to the conclusion we reach here,
Westmoreland ruled the poison pill unambiguously “leaves no room for
Kindercare to choose to bifurcate Westmoreland’s claims between arbitration
and court; it instead invalidates the agreement.” (Ibid.)
Westmoreland also found it “[i]ronic” that the poison pill utilized by
Kindercare “necessitates a result similar to the ‘claim joinder’ rule in PAGA
that Viking River deemed problematic when imposed by state law.”
(Westmoreland, supra, 90 Cal.App.5th at p. 982.) This underscores why
Heritage Bank’s preemption argument carries no force. Because it is the
contractual nonseverability and poison pill provisions, not the secondary rule
of Iskanian or any other state law rule, that prevent plaintiffs’ individual and
nonindividual PAGA claims from being divided between different forums, the
indivisibility is consensual, not coerced, and the federal preemption
precedents therefore have no application. Indeed, it would contravene the
FAA not to enforce the nonseverability of the agreed waiver provision
according to its express terms. (See Concepcion, supra, 563 U.S. at p. 339
[FAA embodies fundamental principle that arbitration is matter of contract].)
Finally, Heritage Bank argues the waiver provision should be
construed not as a so-called “wholesale” waiver of plaintiffs’ PAGA claims in
violation of Iskanian, but instead more narrowly as an enforceable waiver of
only the nonindividual PAGA claims. As we understand this argument,
Heritage Bank believes an unenforceable wholesale PAGA waiver is one that
waives both individual and nonindividual claims, and thus, Iskanian’s
principal rule (as well as the effect of the poison pill) may be avoided if we
interpret the waiver provision as waiving only nonindividual PAGA claims.
This argument fails for two reasons. First, it rests on a misapprehension of
13
what Iskanian means by a wholesale PAGA waiver. Second, and in any
event, Heritage Bank’s construction of the waiver provision is not reasonable.
To reiterate, an unenforceable wholesale PAGA waiver is one that
requires an employee as a condition of employment to waive their right to
bring any “representative” PAGA claims, individual or nonindividual, “in any
forum.” (Iskanian, supra, 59 Cal.4th at p. 360, italics added.) The focus of
this determination is whether the waiver requires an employee to forgo a
“substantive” right (e.g., to seek civil penalties for Labor Code violations on
behalf of the state), as opposed to merely changing “how those rights will be
processed” (e.g., in an arbitral forum under arbitral rules). (Viking River,
supra, 569 U.S. at p. ___ [142 S. Ct. at p. 1919].) For the reasons already
discussed, the waiver provision here requires plaintiffs to completely abandon
their right to bring both individual and nonindividual PAGA claims in any
forum, and, for that reason, it is against public policy.
Indeed, even if the individual PAGA claims were expressly subject to
arbitration, requiring plaintiffs to completely waive their rights to bring
nonindividual PAGA claims in any forum would still constitute a “wholesale”
PAGA waiver that violates public policy under Iskanian. Gregg v. Uber
Technologies, Inc. (2023) 89 Cal.App.5th 786 (Gregg) illustrates this precise
point. There, the challenged PAGA waiver consisted of two distinct clauses,
one that waived the plaintiff’s right to bring a PAGA action “ ‘in any court or
in arbitration,’ ” and the other requiring “any claim brought on a private
attorney general basis” to be “resolved in arbitration on an individual basis
only.” (Gregg, at p. 797.) Observing that “both clauses make clear that Gregg
must completely forgo his statutory right to seek civil penalties for Labor
Code violations committed against other employees, whether in court or in
arbitration,” the court invalidated the waiver provision because it “requires
14
Gregg to do that which is still prohibited by Iskanian.” (Gregg, at p. 797; see
also Seifu, supra, 89 Cal.App.5th at p. 1139 [waiver of right to bring PAGA
claims “ ‘on behalf of others’ in ‘any court or in arbitration’ ” constituted
unenforceable “wholesale waiver of Seifu’s right to bring nonindividual PAGA
claims in any forum”].) We agree with Gregg and Seifu that even after Viking
River, a complete waiver of the right to bring nonindividual PAGA claims in
any forum remains prohibited by Iskanian. (See Viking River, supra, 569
U.S. at p. ___ [142 S. Ct. at p. 1925] [Iskanian’s rule that nonindividual
PAGA claims may not be dismissed simply because they are representative
remains valid].)
Finally, even assuming—generously—that Iskanian’s prohibition on
wholesale PAGA waivers could be avoided by interpreting the waiver
provision here as waiving only nonindividual PAGA claims, 3 we would still
reject Heritage Bank’s construction of the provision.
The express language of the waiver provision here resists a
construction that would permit an employee to bring an individual PAGA
claim in arbitration. (See Civ. Code, § 1638 [language of contract governs its
3 We acknowledge that certain language in Viking River lends itself to
Heritage Bank’s mistaken view that a PAGA waiver is “wholesale” only when
it waives both individual and nonindividual PAGA claims. Specifically, the
Viking River court stated that due to the severability clause, “the agreement
still would have permitted arbitration of [the plaintiff’s] individual PAGA
claim even if wholesale enforcement was impossible.” (Viking River, supra,
569 U.S. at p. ___ [142 S. Ct. at p. 1917], italics added.) As we have
explained, however, Iskanian’s prohibition against wholesale PAGA waivers
applies whenever an employee is required to forgo their substantive right to
seek civil penalties as an agent or proxy of the state in any forum, either as
an individual or nonindividual PAGA claim. (Iskanian, supra, 59 Cal.4th at
p. 360.) Nothing in Viking River purports to change Iskanian’s principal rule
in this respect. (Viking River, supra, 596 U.S. at p. ___ [142 S. Ct. at
p. 1925].)
15
interpretation].) The provision mandates the employee’s agreement to bring
claims “only in . . . my individual capacity” and not as a plaintiff in any
“representative proceeding.” But “ ‘ “every PAGA action is . . .
representative” ’ ” (Viking River, supra, 596 U.S. at p. ___ [142 S. Ct. at
p. 1916]), including individual PAGA claims, which, despite arising from
Labor Code violations the plaintiff has personally sustained, are still asserted
by the plaintiff as a proxy or agent of the state (see Iskanian, supra, 59
Cal.4th at p. 380; Seifu, supra, 89 Cal.App.5th at p. 1137 [every PAGA claim
is a dispute between employer and the state]). As such, a claim brought in
the employee’s “individual capacity” does not reasonably include a
“representative” claim that, by its nature, is brought on behalf of the state.
(See Iskanian, p. 381 [PAGA penalties recovered on state’s behalf are
“distinct from” employees’ statutory damages “in their individual
capacities”].)
Other language in the arbitration agreement reinforces this conclusion.
(See Waller v. Truck Ins. Exchange (1995) 11 Cal.4th 1, 18 [language in
contract must be interpreted as a whole].) The arbitration provision covers
all employment-related claims “that the Company may have against me, or
that I may have against the Company.” (Italics added.) These first-person
references cannot reasonably be construed as permitting an employee to
arbitrate PAGA claims, individual or nonindividual, as those claims would
belong to the state, not the employee personally. (See Seifu, supra, 89
Cal.App.5th at p. 1137 [every PAGA claim is dispute between employer and
the state].)
Viking River does not compel a different conclusion because it was the
severability clause in that case that permitted arbitration of the individual
PAGA claim. (Viking River, 596 U.S. at p. ___ [142 S. Ct. at pp. 1916–1917].)
16
But where, as here, severance of any portion of the waiver provision is
expressly prohibited, and the remaining contractual language reflects an
agreement to arbitrate only the employee’s own personal claims, the waiver
provision cannot be construed narrowly to waive only nonindividual PAGA
claims. It necessarily includes waiver of all “representative” claims brought
on behalf of the LWDA. Thus, even under Heritage Bank’s mistaken view of
what constitutes a wholesale PAGA waiver, the provision here still violates
public policy. 4
The principle of noscitur a sociis does not assist Heritage Bank.
Noscitur a sociis means that “a word takes its meaning from the company it
keeps. [Citation.] Under this principle, courts will adopt a restrictive
meaning of a listed item if acceptance of a broader meaning would make
other items in the list unnecessary or redundant, or would otherwise make
the item markedly dissimilar to the other items in the list.” (Blue Shield of
California Life & Health Ins. Co. v. Superior Court (2011) 192 Cal.App.4th
727, 740.) Relying on this canon of construction, Heritage Bank maintains
the word “representative” must be interpreted in the context of its
surrounding words—e.g., “class” and “collective” actions—to refer to
procedures that allow an employee to assert claims “on behalf of other
employees.” Again, we disagree.
Acceptance of a broader construction of the word “representative” that
includes both individual and nonindividual PAGA claims would not make the
4 To reiterate, at issue here is the contractual language relating to
plaintiffs’ individual PAGA claims, not their individual causes of action under
other sections of the Labor Code and the UCL. But because the entire
arbitration agreement is rendered null and void by operation of the poison
pill, we need not address Heritage Bank’s additional contentions regarding
the arbitrability of plaintiffs’ non-PAGA claims.
17
other listed items unnecessary or redundant. To the contrary, an
impermissible redundancy occurs if we adopt Heritage Bank’s narrower
construction of “representative” to mean only “on behalf of other employees,”
as this would be superfluous to the notion of a “class” or “collective” action on
behalf of other employees. (See Boghos v. Certain Underwriters at Lloyd’s of
London (2005) 36 Cal.4th 495, 503 [rules of contractual interpretation require
giving force and effect to every provision so as to avoid surplusage].)
Meanwhile, the broader construction of “representative” is not markedly
dissimilar to the other items in the list, as they all still generally refer to
claims and actions brought on behalf of another (e.g., other employees, the
LWDA).
For the foregoing reasons, we conclude the waiver provision in the
arbitration agreement constitutes an unenforceable wholesale waiver of
plaintiffs’ rights to bring “representative” PAGA actions. Further, by
operation of the nonseverability and poison pill clauses, the unenforceability
of the waiver provision renders the entire arbitration agreement null and
void. Accordingly, the trial court properly denied the motion to compel.
DISPOSITION
The trial court’s order denying the motion to compel arbitration is
affirmed. Plaintiffs are entitled to their costs on appeal.
18
_________________________
Fujisaki, J.
WE CONCUR:
_________________________
Tucher, P.J.
_________________________
Petrou, J.
DeMarinis v. Heritage Bank (A167091)
19
Filed 1/8/24
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
NICOLE DEMARINIS et al.,
Plaintiffs and Respondents,
A167091
v.
HERITAGE BANK OF (Alameda County
Super. Ct. No. RG20080970)
COMMERCE,
Defendant and Appellant.
BY THE COURT:**
The written opinion which was filed on December 11, 2023, has now
been certified for publication pursuant to rule 8.1105(b) of the California
Rules of Court, and it is ordered published in the official reports.
Dated: _1/8/2024______ ___/s/Tucher, P.J.________
Presiding Justice
** Tucher, P.J., Fujisaki, J., and Petrou, J.
Trial Court: Alameda County Superior Court
Trial Judge: Hon. Evelio Grillo
Counsel: Womble Bond Dickinson (US) LLP, Christopher J. Mead,
Edward L. Seidel and Scott M. Mcleod for Defendant
and Appellant
Torres & Tolman, Benjamin J. Tolman and James J. Torres
for Plaintiffs and Respondents
DeMarinis v. Heritage Bank of Commerce (A167091)
2