Britt v. IEC Corp.
| Decision Date | 13 September 2021 |
| Docket Number | 20-60814-CIV-ALTMAN/Hunt |
| Parties | KAREEM BRITT, et al, Plaintiffs, v. IEC CORP., et al, Defendants. |
| Court | U.S. District Court — Southern District of Florida |
When the Plaintiffs, Kareem Britt and Sharon Henry, enrolled in Florida Career College (“FCC”), they agreed to arbitrate any claims they might later bring against the school. In 2016, the Department of Education promulgated a series of regulations that required any school participating in a federal student-loan program (like FCC) to waive the arbitration agreements they had signed with their students. In accordance with those regulations, FCC sent its students a notice, in which it waived its right to arbitrate. But that notice wasn't timeless. It made clear that FCC's waiver would “apply to your arbitration agreement with [FCC] for any period during which these regulations are in effect.” While this case was pending, a new set of Department of Education regulations took effect. These new regulations, among other things, erased the prior scheme's anti-arbitration provisions. Because the now-excised regulations-which conditioned federal aid on the school's waiver-are no longer in effect FCC's waiver has expired, and the parties are bound by their original agreement to arbitrate. FCC's Motion to Compel Arbitration [ECF No. 70] (the “Motion”) is therefore GRANTED.
The Plaintiffs-Kareem Britt and Sharon Henry-are former students at FCC, a for-profit vocational school. See Compl. [ECF No. 66] ¶¶ 1, 31-35.[1] Britt enrolled in FCC's Heating, Ventilation, and Air Condition program in August 2018, and he graduated from that program the following year. Id. ¶¶ 31, 188. Henry enrolled in FCC's Medical Assistant Program in 2016, but she “dropped out of her program” before completing her degree. Id. ¶¶ 32, 231. Britt and Henry brought this putative class action against FCC, alleging (1) breach of contract; (2) negligence; (3) violations of the Florida Deceptive and Unfair Trade Practices Act; (4) violations of the Equal Credit Opportunity Act; and (5) violations of Title VI of the Civil Rights Act of 1964. Id. ¶¶ 265-311. They aver, in short, that FCC engages in certain “deceptive” conduct and that the school uses discriminatory admissions practices. Id. ¶¶ 1-27.
When they enrolled at FCC, each Plaintiff entered into a contract with the school, consisting of an Enrollment Agreement and a Course Catalog. Id. ¶¶ 129-31, 271-73; see also Britt Enrollment Agreement [ECF No. 70-2]; Britt Course Catalog [ECF No. 70-3]; Henry Enrollment Agreement [ECF No. 70-4]; Henry Course Catalog [ECF No. 70-5]. Each of the Enrollment Agreements contained the following arbitration clause:
Any dispute I may bring against School or any of its parents, subsidiaries, affiliated entities, officers, directors, agents or employees, without limitation, or which the School may bring against me, no matter how characterized, pleaded or styled, shall be resolved by binding arbitration conducted by the American Arbitration Association (the “AAA”), under its Consumer Arbitration Rules (“Consumer Rules”), and decided by a single Arbitrator.
See Britt Enrollment Agreement at 4; Henry Enrollment Agreement at 4. The Enrollment Agreements also included class-action waivers, which required the students to arbitrate their claims individually.
Those waivers looked like this:
I agree that any dispute or claim I may bring shall be brought solely in my individual capacity, and not as a plaintiff or class member in any purported class action, representative proceeding, mass action, consolidated or joint action.
See Britt Enrollment Agreement at 4; Henry Enrollment Agreement at 4. When signing their Enrollment Agreements, Britt and Henry acknowledged that they had read, understood, and agreed to the arbitration clauses and class-action waivers. See Britt Enrollment Agreement at 4; Henry Enrollment Agreement at 4.
Congress passed Title IV of the Higher Education Act of 1965 (the “HEA”) to expand access to higher education. The HEA empowers the Secretary of Education “to assist in making available the benefits of postsecondary education to eligible students . . . in institutions of higher education by” providing financial aid. 20 U.S.C. § 1070(a). The William D. Ford Federal Direct Loan Program (the “Direct Loan Program”) allows students who attend “participating institutions” to obtain direct loans from the federal government to help defray the costs of higher education. 20 U.S.C. § 1087a(a). Schools that participate in the Direct Loan Program must sign a “program participation agreement” with the Secretary of Education. 20 U.S.C. § 1094. “In signing such an agreement, the school promises to comply with all federal statutes applicable to [the HEA] and the regulations promulgated thereunder.” Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1044 (11th Cir. 2015).
The HEA gives the Secretary of Education authority to include in its program participation agreements such “provisions as the Secretary determines are necessary to protect the interests of the United States.” 20 U.S.C. § 1087d(a)(6). In exercising that authority, the Department of Education, on November 1, 2016, promulgated what the parties refer to as the 2016 Borrower Defense Regulations (the “Old Regulations”). 81 Fed. Reg. 75, 926 (Nov. 1, 2016) (). The Old Regulations amended the rules that govern the terms of the program participation agreements “to prohibit participating schools from using . . . predispute arbitration agreements or class action waivers.” Id. at 75, 926.
The Old Regulations provided that, “[i]n the program participation agreement, the school must promise to comply with the Act and applicable regulations and must agree to” waive any “[p]redispute arbitration agreements” and “[c]lass action bans.” 34 C.F.R. § 685.300(e), (f) (2018). With respect to arbitration agreements, the Old Regulations provided that “[t]he school will not enter into a predispute agreement . . . or rely in any way on a predispute arbitration agreement.” Id. § 685.300(f)(1)(i). And, for class-action waivers, the Old Regulations mandated that “[t]he school will not seek to rely in any way on a predispute arbitration agreement or on any other predispute agreement with a student who has obtained or benefited from a Direct Loan, with respect to any aspect of a class action.” Id. § 685.300(e)(1). To the extent the school had entered into an arbitration agreement or class-action waiver “before the effective date” of the Old Regulations, the school was required, as a condition of the program participation agreement, to either amend its agreement with the students or send the students a waiver notice. Id. § 685.300(e)(3)(iii), (f)(3)(iii). The Old Regulations required that the arbitration waiver read as follows:
We agree not to use any predispute arbitration agreement to stop you from bringing a lawsuit concerning our acts or omissions regarding the making of the Federal Direct Loan or the provision by us of educational services for which the Federal Direct Loan was obtained. You may file a lawsuit regarding such a claim or you may be a member of a class action lawsuit regarding such a claim even if you do not file it. This provision does not apply to any other claims. We agree that only the court is to decide whether a claim asserted in the lawsuit is a claim regarding the making of the Direct Loan or the provision of educational services for which the loan was obtained.
Id. § 685.300(f)(3)(iii)(B). And they mandated that the class-action waiver state the following:
We agree not to use any predispute agreement to stop you from being part of a class action lawsuit in court. You may file a class action lawsuit in court or you may be a member of a class action lawsuit even if you do not file it. This provision applies only to class action claims concerning our acts or omissions regarding the making of the Federal Direct Loan or the provision by us of educational services for which the Federal Direct Loan was obtained. We agree that only the court is to decide whether a claim asserted in the lawsuit is a claim regarding the making of the Federal Direct Loan or the provision of educational services for which the loan was obtained.
In May 2019, consistent with these provisions, FCC sent a notice to its current students (the “Notice”). See Notice [ECF No. 81-2]. FCC sent the Notice to Britt, who was a current student at the time, but never sent it to Henry, who (by that time) had left the school. See Reply [ECF No. 83] at 4. In its cover email, FCC told its students that it was “providing [them] with the attached notice as a supplement to [their] Enrollment Agreement.” See Notice. It then went on to say this:
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