Arbitration Agreement Selecting Maryland Law Held Unenforceable As To Private Attorney General Claims Brought Under California Law

A choice of law provision within an arbitration agreement selecting Maryland law was held unenforceable in so far as it would result in waiver of claims under the California Private Attorneys General Act (PAGA), contrary to California's "fundamental policy."

Because the diversity action was brought in federal court in California, the court was required to follow California's choice-of-law rules. California law provides that application of choice of law provisions that would yield results conflicting with California's fundamental policy is error. The Ninth Circuit stated that PAGA represents a "fundamental California policy." Therefore, the arbitration agreement's choice of law rules selecting Maryland law could not be enforced, because they would waive the plaintiff's PAGA claims.

However...