Kourembanas v. Intercoast Colls.
Kourembanas v. Intercoast Colls.
Opinion of the Court
*307The plaintiffs are four former students who signed enrollment agreements with the defendant, a for-profit college; the enrollment agreements contained arbitration provisions. The students filed a suit against the defendant alleging unfair and deceptive trade practices, breach of contract, fraudulent inducement to contract, as well as intentional and negligent misrepresentation. The defendant moved to compel arbitration and to dismiss the lawsuit, and the plaintiffs responded that the defendant was barred from compelling arbitration, raising certain corporate and contract law defenses. Although disquieted by the result, the Court concludes that Supreme Court and First Circuit authority requires the Court to grant the motion to dismiss and compel arbitration in accordance with the enrollment agreement.
I. BACKGROUND
A. Procedural History
On August 29, 2017, the Plaintiffs initiated a class action lawsuit against InterCoast Colleges (InterCoast), alleging under various theories that InterCoast engaged in fraud by inducing students to borrow money through federally-funded financial aid programs to pay for a Licensed Practical Nursing (LPN) program that InterCoast operated in Maine, when the quality of the education in the InterCoast LPN program was deficient and deceptively below its advertised quality. Class Action Compl. (ECF No. 1 ) (Compl. ). On November 7, 2017, InterCoast moved to compel arbitration and to dismiss the lawsuit. Def.'s Mot. to Compel Arbitration and Dismiss the Case (ECF No. 7 ) (Def.'s Mot. ).
On October 3, 2018, the Plaintiffs moved for oral argument, Mot. for Oral Argument (ECF No. 24 ), which the Court granted on November 16, 2018. Order (ECF No. 33 ). On February 4, 2019, the Court held oral argument concerning the pending motion to compel arbitration and to dismiss the case. Min. Entry (ECF No. 35 ).
*308B. Factual Background
InterCoast operates for-profit programs in several jurisdictions across the United States; most in California. Compl. ¶ 24. From approximately October 2005 until early March 2016, InterCoast operated practical nursing education programs in Maine (InterCoast LPN Program). Id. ¶ 25. Students who enrolled in the InterCoast LPN Program signed an enrollment agreement entitled "InterCoast Career Enrollment Agreement" (the Enrollment Agreement). Def.'s Mot. Attach. 1. Decl. of Kelly Michaud , ¶ 7 (ECF No. 7 ) (Kelly Michaud Decl. ). Each Enrollment Agreement contained a provision requiring arbitration of disputes between the student and InterCoast. Id. The Plaintiffs-Stephanie Kourembanas, Caridad Jean Baptiste, Cathy Mande, and Catharine Valley-all enrolled in the InterCoast LPN Program. Compl. ¶¶ 1-5. Each Plaintiff signed the InterCoast Enrollment Agreement. Kelly Michaud Decl. ¶¶ 10, 15, 20, 29; Def.'s Mot. Attachs. 2-6 (ECF No. 7 ) (Pls.' Enrollment Agreements ).
The signed Enrollment Agreements provide:
Any dispute arising from enrollment at InterCoast Career Institute, other than grades and no matter how described, pleaded, or styled, shall be resolved by binding arbitration under the Federal Arbitration Act conducted by the American Arbitration Association ('AAA'), under its Commercial Rules. The award rendered by the arbitration may be entered in any court having jurisdiction. This provision incorporates the Arbitration provision found elsewhere in InterCoast Career Institute enrollment materials.
Kelly Michaud Decl. ¶¶ 11, 16, 20, 25, 30; Pls.' Enrollment Agreements. Immediately after this language, above the student's signature line, the Enrollment Agreement states:
I understand that this is a legally binding contract. My signature below certifies that I have read, understood, and agreed to my rights and responsibilities, and that the institution's cancellation and refund policies have been clearly explained to me.
Your signature below on this agreement acknowledges that you have been given reasonable time to read and understand this document....
Kelly Michaud Decl. ¶¶ 12, 17, 22, 26, 31; Pls.' Enrollment Agreements. In the Enrollment Agreements, the Plaintiffs signed on the line above "Signature of Student" and initialed each page of the Enrollment Agreement. Kelly Michaud Decl. ¶¶ 13, 18, 27, 32; Pls.' Enrollment Agreements.
II. POSITIONS OF THE PARTIES
A. InterCoast's Motion
InterCoast argues that the Enrollment Agreements are covered under the Federal Arbitration Act (FAA) and that the Court should compel arbitration because: (1) there is an enforceable written agreement to arbitrate; (2) the disputed issues between InterCoast and the Plaintiffs fall within the scope of the arbitration agreement; and (3) InterCoast has not waived *309its right to arbitrate these disputed issues. Def.'s Mot. at 4-7.
InterCoast says that when each Plaintiff reviewed, signed, and initialed the Enrollment Agreement, they "entered into a contract which contained an agreement to arbitrate 'any dispute arising from enrollment, other than grades and no matter how described, pleaded, or styled.' " Id. at 5 (quoting Kelly Michaud Decl. ¶¶ 11, 16, 20, 25, 30 and exhibits A-E thereto). InterCoast maintains that courts generally apply basic principles of contract law to arbitration agreements and interpret these agreements as creating "a presumption of arbitrability which is only overcome if it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id. (quoting United States v. Consigli Constr. Co. ,
As to the second point, InterCoast argues the issues in this case fall within the arbitration agreement since the clause is broadly worded in stating "[a]ny dispute arising from enrollment at InterCoast Career Institute, other than grades and no matter how described, pleaded, or styled." Id. at 6. Because the Complaint asserts claims not relating to grades the Plaintiffs received but alleges unfair trade practices, breach of contract, and torts, InterCoast says their claims fall within the scope of the arbitration clause. Id. at 7. InterCoast points to Bercovitch v. Baldwin School, Inc. ,
B. Plaintiffs' Opposition
After complaining that the arbitration clauses were untitled and in fine print, the Plaintiffs acknowledge that each individual Plaintiff executed an Enrollment Agreement with "InterCoast Career Institute" (ICCI), which contained an arbitration clause. Pls.' Opp'n at 1-2. The Plaintiffs say the issue is not whether they signed the Enrollment Agreements but whether the arbitration clauses within the Enrollment Agreements are enforceable. Id. at 2. The Plaintiffs argue the Court should deny InterCoast's motion to compel arbitration and dismiss the case, because (1) the arbitration clauses are not enforceable as ICCI "is not a legally organized entity and lacked any capacity to contract with the Plaintiffs;" and (2) the arbitration clauses are unconscionable. Id. At oral argument, the Plaintiffs also asserted InterCoast engaged in fraud and fraudulently induced them to enter their Enrollment Agreements.
The Plaintiffs claim that the arbitration provisions in their Enrollment Agreements "are unenforceable under common law principles of corporate and contract law."Id. at 6. Specifically, the Plaintiffs aver that the arbitration clauses are not enforceable because "[t]here is no evidence *310that either InterCoast Career Institute or the entity for which it claims to have been a d/b/a, InterCoast Colleges [ ] ever has been validly organized as a corporation" and consequently, InterCoast "is not a legal entity capable of enforcing rights under a contract it purports to have entered with Plaintiffs." Id. at 7 (internal quotations omitted). The Plaintiffs contend that in its Corporate Disclosure Statement (ECF No. 13 ) (Corporate Disclosure I ), InterCoast claims that it is a corporation and that "its stock is owned by Inter-Coast International Training, Inc." Id. at 6.
However, the Plaintiffs argue "[t]his representation is at odds with the corporate disclosure statements that [InterCoast]" filed previously in this Court. Id. (internal quotation marks omitted) (citing Mason v. InterCoast Career Institute , 2:14-cv-0377-JAW and Perez-Webber v. InterCoast Career Institute , 2:16-cv-0196-JAW). The Plaintiffs contend that in Mason , Geeta Brown, the CEO, Secretary, CFO, and President of Inter-Coast International Training, Inc., made false representations to this Court. Id. at 7 n.8. The Plaintiffs say "[t]here is no evidence in the public record that InterCoast Colleges or ICCI ever was organized as a corporation in California, as Ms. Brown represents." Id. The Plaintiffs argue that InterCoast engaged in a "shell game" and that it will likely "have to seek to amend their complaint to name both Inter-Coast International Training, Inc. and Ms. Brown personally as defendants in this action." Id. At oral argument, the Plaintiffs represented that InterCoast had not started using its d/b/a InterCoast Colleges until 2017, years after the Enrollment Agreements were formalized.
Lastly, the Plaintiffs contend that the arbitration clauses are unconscionable. Id. at 8. The Plaintiffs claim "[t]he issue of whether a valid arbitration agreement exists 'is to be decided with reference to state contract law principles.' " Id. (quoting Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc. ,
C. InterCoast's Reply
InterCoast asserts "[t]he fact that the Enrollment Agreements were signed under Defendant's trade name [InterCoast Career Institute] instead of its corporate name [Inter-Coast International Training, Inc.] does not render the Enrollment Agreements and their arbitration provisions invalid." Def.'s Reply at 7 (citing Pickering v. Urbantus, LLC ,
*311InterCoast is also unconvinced by the Plaintiffs' unconscionability argument because, as InterCoast sees it, the argument stems from the lack of "special notice" in the arbitration clause, but they cite no Maine caselaw to support this requirement. Id. at 9. InterCoast points to Champagne v. Victory Homes, Inc. ,
III. LEGAL STANDARD
The FAA,
Maine has an analogous statute, the Maine Uniform Arbitration Act, 14 M.R.S. §§ 5927 -49, which Maine courts have interpreted in a fashion similar to federal court interpretations of the FAA. The Maine Uniform Arbitration Act applies "where there is '[a] written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties.' " J.M. Huber Corp. v. Main-Erbauer, Inc. ,
"To compel arbitration, the movant must demonstrate 'that a valid agreement to arbitrate exists, that [he] is entitled to invoke the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause's scope.' " Patton v. Johnson , No. 18-1750,
A contract exists if the parties mutually assent to be bound by all its material terms, the assent is either expressly or impliedly manifested in the contract, and the contract is sufficiently definite to enable the court to ascertain its exact meaning and fix exactly the legal liabilities of each party.
Gove v. Career Sys. Dev. Corp. ,
*312IV. DISCUSSION
Applying the four First Circuit criteria in Patton for determining whether to compel arbitration, the arbitration clauses in the Plaintiffs' Enrollment Agreements appear on their face to meet the First Circuit's requirements. Each Enrollment Agreement contains a "valid agreement to arbitrate." Patton ,
The Plaintiffs raise three arguments challenging InterCoast's ability to enforce the arbitration clauses contained in their Enrollment Agreements. The Plaintiffs claim: (1) InterCoast engaged in fraud and fraudulently induced them to enter their Enrollment Agreements; (2) the Enrollment Agreements are not enforceable because the Plaintiffs entered into the Enrollment Agreements with "InterCoast Career Institute", which is a d/b/a of InterCoast Colleges which, in turn, is owned by Inter-Coast International Training, Inc., and which was not previously registered as a d/b/a in Maine; (3) the arbitration clauses are unconscionable.
The Court concludes that the Plaintiffs' first argument must be decided by an arbitrator because it concerns the validity of the Enrollment Agreements as a whole, as opposed to the existence of the Enrollment Agreement itself or the validity of the arbitration clauses specifically. As to the latter two arguments, the Court concludes as a matter of law, a nonregistered legal entity may enforce a contract and the arbitration clauses are not unconscionable.
A. Existence of Enrollment Agreements and the Validity of the Agreements to Arbitrate
"In deciding whether an agreement to arbitrate is to be enforced, we normally apply ordinary state-law principles that govern the formation of contracts, including validity, revocability, and enforceability of contracts." Bezio v. Draeger ,
In Prima Paint Corporation v. Flood & Conklin Manufacturing Company ,
Based on its reading of the text of the FAA, the Prima Paint Court sided with the Second Circuit.
[I]f the claim is fraud in the inducement of the arbitration clause itself-an issue which goes to the "making" of the agreement to arbitrate-the federal court may proceed to adjudicate it. But the statutory language does not permit the federal court to consider claims of fraud in the inducement of the contract generally.
Here, the Plaintiffs claim InterCoast engaged in fraud in its representations of its corporate existence and it fraudulently induced them to enter their Enrollment Agreements:
InterCoast, to induce Plaintiffs to enter into contracts to enroll in the InterCoast LPN Program, made positive statements of fact regarding the quality and content of the education it would provide, and the accreditation status of the program, that were false, material to the contract, and relied upon by Plaintiffs in deciding to enroll [and] InterCoast knew *314that its statements regarding the quality and content of the education it promised to provide to Plaintiffs, and the program's accreditation status, were false at the time they were made and did not intend to satisfy the statements at the time they were made.
Compl. ¶¶ 123-24. At oral argument, the Plaintiffs claimed that InterCoast was "hiding the ball" as to its corporate identity. Because the Plaintiffs' allegations of fraud pertain to the contract as a whole, not the arbitration clause specifically, whether InterCoast fraudulently induced the Plaintiffs into entering the contracts is for an arbitrator to decide. Rent-A-Ctr. ,
The Enrollment Agreements' arbitration clauses provide, "[a]ny dispute arising from enrollment at InterCoast Career Institute, other than grades and no matter how described, pleaded, or styled, shall be resolved by binding arbitration under the Federal Arbitration Act...." Pls.' Enrollment Agreements at 5-6. The Plaintiffs have not otherwise argued that the clause is ambiguous as to whether it covers their claims or that their claims falls outside its scope. Accordingly, because the Plaintiffs' claim of fraudulent inducement concerns the validity of the contract in its entirety, this is a question for an arbitrator, not this Court, to determine. See Buckeye Check Cashing, Inc., v. Cardegna ,
B. Existence of the Enrollment Agreements and Unconscionability
In contrast to the Plaintiffs' first argument, the Plaintiffs' two remaining arguments are proper for this Court to resolve because one questions the existence of the contract itself and the other contends the arbitration clause is unconscionable.
1. Nonregistered Legal Entity and Enforceability of Contracts
Whether an unregistered entity, which serves as a d/b/a of registered and incorporated corporation, may enforce a contract concerns whether there was the requisite mutual assent necessary for a contract to be formed. Although there is limited authority on this question, the Court concludes that under Maine law an unregistered legal entity may enforce a contract.
*315a. The Parties' Positions
The Plaintiffs claim that "[t]here is no evidence that either InterCoast Career Institute" or the entity for which it claims to have been a 'd/b/a,' 'InterCoast Colleges' [ ] ever has been validly organized as a corporation" and that it cannot enforce the Enrollment Agreements. Pls.' Opp'n at 7. The Plaintiffs contend while Inter-Coast International Training, Inc., "appears to be a California corporation," the Enrollment Agreements do not refer to InterCoast's formal corporate name, and they claim there is no indication that the Plaintiffs otherwise dealt with Inter-Coast International Training, Inc. Id. at n.7. At oral argument, they disputed InterCoast's characterization that InterCoast Career Institute or InterCoast Colleges was a d/b/a of Inter-Coast International Training, Inc., in light of its prior corporate disclosure statements.
InterCoast replies that the fact that it signed the Enrollment Agreements under its trade name-"InterCoast Career Institute"-rather than its corporate name-"Inter-Coast Internal Training Inc."-does not undermine the validity of the Enrollment Agreements "because a party may be sued under its own name or the name it chooses to use in transactions, and the use of such a name does not invalidate a contract." Def.'s Reply at 7-8 (internal quotation marks omitted) (quoting Pickering ,
b. InterCoast's Prior Corporate Disclosures and Inter-Coast International Training, Inc.'s Registration
Inter-Coast International Training, Inc., has been a registered and incorporated corporation under the laws of California since 1994.
*316The Plaintiffs sued "InterCoast Colleges, d/b/a InterCoast Career Institute". See Compl. The Plaintiffs allege that "InterCoast Colleges ... is a California corporation that operates for-profit.... In Maine, InterCoast did business under the name of InterCoast Career Institute." Id. ¶ 6. In its Corporate Disclosure Statement, dated November 28, 2017, InterCoast stated:
"Defendant Intercoast Colleges, d/b/a Intercoast Career Institute states that it is owned by Inter-Coast International Training, Inc. There are no other owners, or any publicly held corporation owning 10% or more of its stock."
Corporate Disclosure I. In December 2014, in Mason v. InterCoast Career Institute , 2:14-cv-00377-JAW, InterCoast disclosed
"1. It does not have a parent corporation; 2. There is no publicly held corporation owning 10% or more of the stock of Defendant Intercoast Career Institute."
Def.'s Corporate Disclosure Statement (ECF No. 10 ) (Corporate Disclosure II ). On September 28, 2017, in Perez-Webber v. InterCoast Career Institute , 2:16-cv-00196-JAW, InterCoast disclosed that:
"It does not have a parent corporation; 2. There is no publicly held corporation owning 10% or more of the stock of Defendant Intercoast Career Institute."
Def.'s Corporate Disclosure Statement (ECF No. 47 ) (Corporate Disclosure III ).
In Mason v. InterCoast Career Institute , 2:14-cv-00377-JAW, Geeta Brown, the President of InterCoast, submitted a declaration in support of InterCoast's motion for summary judgement, and stated that "Intercoast Career Institute ("InterCoast") a private closely held California Corporation which previously operated a private-for-profit Vocational Nursing School in Kittery, Maine from approximately December, 2010 to May 2015...." Decl. of Geeta A. Brown, President of InterCoast Career Institute, in Support of Def.'s Mot. for Summ. J. (ECF No. 71-1 ) (Brown Decl. I ). In Perez-Webber v. InterCoast Career Institute , 2:16-cv-00196-JAW, Ms. Brown gave another declaration in support of InterCoast's motion for summary judgment, and stated "I am the Corporate President of the InterCoast Career Institute ("InterCoast") a private for profit California Corporation which previously operated a Practical Nursing Program in Kittery, Maine...." Decl. of Geeta A. Brown in Support of Def.'s Mot. for Summ. J. (ECF No. 62 ) (Brown Decl. II ).
c. Standing to Enforce Enrollment Agreements
Under Maine law, mutual assent means the parties agree to "be bound by all its material terms, the assent is either expressly or impliedly manifested in the contract, and the contract is sufficiently definite to enable the court to ascertain its exact meaning and fix exactly the legal liabilities of each party." Sullivan ,
To support their argument that a nonexistent legal entity cannot enforce a contract, the Plaintiffs cite *317International Sport Divers Association v. Marine Midland Bank, N.A. ,
InterCoast cites South Shore Hellenic Church, Inc. v. Artech Church Interiors, Inc. ,
The Maine Business Corporate Act, 13-C M.R.S. §§ 101 et seq. , provides a framework of laws for corporations in Maine. Sections of 1501 through 1510 of the Maine Business Corporate Act concerns foreign corporations conducting business in Maine. Section 1502(5) states:
Notwithstanding subsections 1 and 2 [which provide foreign corporations or their successors cannot maintain a proceeding in Maine State court without proper filing], the failure of a foreign corporation to file an application for authority does not impair the validity of its corporate acts, including contracts, or prevent it from defending any proceeding in this State.
The Maine Business Corporate Act also discusses what assumed and fictitious names a corporation may use (§§ 401-04, 1506) when conducting business in Maine; these sections do not, however, state that noncompliance invalidates otherwise valid corporate acts.
In Lipman v. Thomas ,
The statute [M.R.S., Chap. 167, §§ 4, 8 ], does not disclose directly or by implication that it was the intention of the Legislature to invalidate business transactions otherwise valid because of the failure of the plaintiffs to comply with its provisions. The statute does not declare the transaction void. It does not forbid doing business before complying with its provisions. It does not forbid recovery. It does not provide for forfeiture. "The prohibition of the statute extends to the use of a name not his own. It does not extend to the business done or contract made."
It is not clear whether InterCoast properly registered its trade name to conduct business in Maine before its authority to operate as a foreign corporation was revoked in August 2016. However, even assuming InterCoast did not, its noncompliance does not mean the contract between *318InterCoast Career Institute/InterCoast Colleges (neither of which was formally registered or incorporated in Maine) and the Plaintiffs is unenforceable as a matter of law.
2. Unconscionability
A claim that the arbitration clause itself is unconscionable, as opposed to a claim that a contract as a whole was fraudulently induced, is a matter for the Court to adjudicate because it "challenges to the substance of the clause itself." Sleeper Farms ,
While it is InterCoast's burden to compel arbitration, the Plaintiffs have the burden to establish unconscionability. Bose Corp. v. Ejaz ,
There are two different types of unconscionability: procedural and substantive. Blanchard v. Blanchard ,
a. Substantive Unconscionability
The Plaintiffs cite Cullinane v. Uber Technologies, Inc. ,
In contrast, here, the Plaintiffs have the burden to show unconscionability. The facts of Cullinane are also distinguishable. In Cullinane , Uber did not claim the plaintiffs read the arbitration clause or "even clicked on the Terms of Services & Privacy Policy button."
Under Maine law, "parties to a contract are deemed to have read the contract and are bound by its terms."
*320BlueTarp Fin., Inc. v. Melloul Blamey Const. S.C., Ltd. ,
As to the placement of the arbitration clause, in some of the Enrollment Agreements, the arbitration clause is split between the fifth and sixth pages, the first half of the clause appears right above where each Plaintiff placed initials. See Kourembanas Agreement at 5-6; Baptiste Agreement at 5-6; First Mande Enrollment Agreement at 5-6; Valley Enrollment Agreement at 5-6. The exception is the second Cathy Mande Enrollment Agreement, where the arbitration clause appears in full on the fifth page. Second Mande Enrollment Agreement at 5. The fact that the arbitration clauses lack language about waiving rights and about costs associated with arbitration, and does not define "disputes" to include legal disputes or claims does not render the clauses unconscionable. These omissions do not "shock the conscience." Barrett ,
b. Procedural Unconscionability
The Court also concludes the arbitration clause contained in the Enrollment Agreements is not procedurally unconscionable. "Procedural unconscionability is analyzed based on the circumstances that existed at the time the contract was adopted." Blanchard ,
The Plaintiffs say the arbitrations clauses are procedurally unconscionable because for some of the Plaintiffs, English is their second language, InterCoast targeted them, and there was unequal bargaining power between the parties. They say the clauses are unconscionable in light of the totality of the circumstances. Given that it is the Plaintiffs' burden to show unconscionability, on the record before it, the Court concludes that the Plaintiffs have not sustained their burden. Looking at the time and circumstances when the Enrollment Agreements were entered into, the *321record lacks sufficient indicia to show that the Enrollment Agreements were the result of "exploitation" or "undue influence." While the Plaintiffs say they were targeted, only one Plaintiff, Catherine Valley, learned of InterCoast through its advertising campaign soliciting students. Compl. ¶ 90. The remaining Plaintiffs either learned of InterCoast on their own initiative or a friend referred them to InterCoast. Id. ¶¶ 63, 74, 82. Although as a corporation, InterCoast likely had more bargaining power, that is not enough by itself to constitute procedural unconscionable. RESTATEMENT (SECOND) OF CONTRACTS § 208, comment d (unequal bargaining power not alone enough to set aside unfavorable contract terms). To the degree the Plaintiffs are arguing that the arbitration clauses were adhesion agreements, this argument is belied by the fact that the Court has not been presented with "some element of overreaching by a party who exploits a vastly unequal bargaining position." Brower v. ADT LLC , No. 2:15-cv-00337-JAW,
C. Remaining Factors for a Motion to Compel Arbitration
The Plaintiffs do not contend that their claims against InterCoast fall outside the scope of the arbitration clause or that InterCoast waived its right to arbitrate. The Court therefore concludes that InterCoast has met the two remaining factors in deciding whether to grant a motion to compel arbitration. The Court concludes that the Plaintiffs claims against InterCoast are arbitrable and grants InterCoast's motion to compel arbitration.
*322D. Dismissal or Stay
The remaining issue is whether the Court should dismiss or stay the action. InterCoast asks the Court to dismiss the case. Def.'s Mot. at 8. Courts in the First Circuit retain the discretion to dismiss or stay a case when the issues before a court are arbitrable. Garcia ,
Any post-arbitration remedies sought by the parties will not entail renewed consideration and adjudication of the merits of the controversy but would be circumscribed to a judicial review of the arbitrator's award in the limited manner provided by law. This course of action will also make the arbitrability issue immediately appealable and avoid the litigation expenses and delay if the arbitration conducted were vacated by a later appeal.
Boulet ,
V. CONCLUSION
The Court GRANTS Defendants' Motion to Compel Arbitration and Dismiss the Case (ECF No. 7 ). The Court DISMISSES without prejudice Plaintiffs' Complaint (ECF No. 1 ) and GRANTS Defendant's motion to compel arbitration.
SO ORDERED.
After this filing, on December 6, 2017, the Plaintiffs moved to stay all proceedings and to extend time within which to respond to InterCoast's motion to compel arbitration. Pls.' Mot. to Stay Proceedings and for Extension of Time to File Opp'n to Mot. to Compel Arbitration (ECF No. 14 ). On December 12, 2017, InterCoast responded to the Plaintiffs' motion to stay and extend time. Def.'s Opp'n to Pls.' Mot. to Stay Proceedings and for Extension of Time to File Opp'n to Mot. to Compel Arbitration (ECF No. 17 ). On December 15, 2017, the Plaintiffs filed a reply. Pls.' Reply to Def.'s Opp'n to Mot. to Stay Proceedings and for Extension of Time to File Opp'n to Mot. to Compel Arbitration (ECF No. 18 ). On August 27, 2018, the Court denied the Plaintiff's motion to stay but granted Plaintiffs' motion to extend time to respond to InterCoast's motion to compel arbitration. Order on Mot. to Stay and Mot. to Extend Time to Respond to Def.'s Mot. to Compel Arbitration (ECF No. 19 ).
At oral argument, having thoroughly briefed a series of complicated issues under the Higher Education Act (HEA), the Plaintiffs conceded that the HEA provides for no private right of action, and that they could not enforce the Borrower Defense Regulations. The Plaintiffs acknowledged that only the Department of Education may enforce HEA regulations against entities like InterCoast. Therefore, the Court will not address the parties' respective arguments concerning the effect of the Borrower Defense Regulations on the pending motion.
In deciding a motion to compel arbitration, the Court may consider facts alleged in the complaint as well as the arbitration agreement documents the parties submitted in connection with the motion. See Soto v. State Indus. Prods., Inc. ,
Both the Plaintiffs and InterCoast cite Maine caselaw to support the positions in their memoranda, see Pls.' Opp'n at 8; Def.'s Reply at 10, and at oral argument, both acknowledged that Maine contract law controls. Stenzel ,
See Cal. Sec. of State, Entity Number C1748993, https://www.sos.ca.gov. The Plaintiffs concede this point in their opposition memorandum. Pls.' Opp'n at 7 n.7 ("Inter-Coast International Training, Inc. appears to be a California corporation"). In fact, they allege the same in their Complaint, albeit referring to InterCoast Colleges, not Inter-Coast International Training Inc. Compl. ¶ 6 ("InterCoast Colleges ... is a California corporation that operates for-profit post-secondary educational programs....").
"This Court may take judicial notice of a fact that is not subject to dispute in that it is 'capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.' " Wilson v. Bodnar ,
This conclusion does not bar the Plaintiffs from raising questions about the validity of the contract before the arbitrator. Also, it is an open question for the arbitrator whether this arbitration clause permits aggregation of the students' claims. See Dunn v. Dunn ,
At oral argument, the Plaintiffs conceded that it is their burden to establish unconscionability.
The last name in the first Cathy Mande Enrollment Agreement seems to be Mande. First Mande Enrollment Agreement at 1, 6. However, in the second Cathy Mande Enrollment Agreement, the name appears to be Manote. Second Mande Enrollment Agreement at 1.
The Court is disquieted by the result here. To enforce an arbitration clause in a contract between clearly equal parties, such as two businesses, seems only proper because they must live with what they agreed to and could have struck a different bargain. Here, where one party is a business engaged in for-profit education and the other is a prospective student, the balance of power rests heavily with the school and it strikes the Court as harsh to hold the student to an arbitration clause in an enrollment agreement, particularly one waiving the student's right to bring or participate in a class action lawsuit.
But the Court concluded that the recent authority from the United States Supreme Court and the Court of Appeals for the First Circuit compels a different result and this Court owes its allegiance to their rulings. For example, in Epic Systems Corporation v. Lewis , --- U.S. ----,
There are just a few exceptional situations where a district court may "loosen the iron grip of stare decisis. " United States v. Reveron Martinez ,
Encouraged by its view of the congressional intent in favor of arbitration underlying the FAA, the Supreme Court has adopted a favorable view of arbitration. Yet particularly in the context of consumer transactions, these rulings have been criticized. See DIRECTV, Inc. v. Imburgia , --- U.S. ----,
Reference
- Full Case Name
- Stephanie KOUREMBANAS v. INTERCOAST COLLEGES
- Cited By
- 2 cases
- Status
- Published