Esquer v. Educ. Mgmt. Corp.

• Decision Date: 08 November 2017
• Docket Number: Case No. 17–cv–01240–BAS–AGS
• Parties: Steven ESQUER, Plaintiff, v. EDUCATION MANAGEMENT CORPORATION, and The Art Institute of California–San Diego, Defendants.
• Court: U.S. District Court — Southern District of California

292 F.Supp.3d 1005

Steven ESQUER, Plaintiff,

v.EDUCATION MANAGEMENT CORPORATION, and The Art Institute of California–San Diego, Defendants.

Case No. 17–cv–01240–BAS–AGS

United States District Court, S.D. California.

Signed November 8, 2017

Filed November 9, 2017

Gabriela Margarita Torres, Resolve Legal Solutions, San Diego, CA, for Plaintiff.

Jeffrey Kenneth Brown, Payne and Fears, Irvine, CA, for Defendants.

ORDER:

(1) GRANTING MOTION TO COMPEL ARBITRATION [ECF No. 8];

(2) STAYING ACTION; AND

(3) ADMINISTRATIVELY CLOSING THE ACTION

Hon. Cynthia Bashant, United States District Judge

Pending before the Court is Defendants Education Management Corporation ("EMC") and the Art Institute of California–San Diego's ("AICSD") (together "Defendants") Motion to Compel Individual Arbitration and to Dismiss or Stay Proceedings Pending Arbitration. (ECF No. 8–1.) Plaintiff Steven Esquer has opposed the motion (ECF No. 10) and Defendants have responded (ECF No. 11). For the reasons set forth below, the Court grants Defendants' motion to compel individual arbitration.

I. BACKGROUND

A. Relevant Factual Background

On December 20, 2013, Plaintiff Steven Esquer applied for admission to Defendant AICSD to pursue a B.S. in Graphic and Web Design. (ECF No. 1 ¶¶ 19, 20). AICSD is an educational institution offering bachelor and associated degrees and is a subsidiary of Defendant Education Management Corporation, a publicly-traded corporation based in Pittsburg, Pennsylvania. (Id. ¶¶ 15–16.) At the time he applied to AICSD, Esquer completed several forms, including an Enrollment Agreement. (Id. ¶ 21.)

The first page of the Enrollment Agreement Esquer signed contained the following language under a section titled "Student's Agreement": "I understand that this Agreement becomes a legally binding document after I sign it and it is accepted by The Art Institute of California ..." (ECF No. 8–3, Declaration of Abdo Antun ("Antun Decl."), Ex. 1.) Immediately preceding the student signature line was a provision reading: "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 ..." (Id. ) Page 2 of the Enrollment Agreement contained the following provisions:

ARBITRATION

Every student and The Art Institute agrees that any dispute or claim between the student and The Art Institution (or any company affiliated with The Art Institute ...) arising out of or relating to a student's enrollment or attendance at The Art Institute whether such dispute arises before, during, or after the student's attendance and whether the dispute is based on contract, tort, statute, or otherwise, shall be, at the student's or The Art Institute's election, submitted to and resolved by individual binding arbitration pursuant to the terms described herein....

Either party may elect to pursue arbitration upon written notice to the other party.... If a party elects to pursue arbitration, it should initiate such proceedings with JAMS, which will serve as the arbitration administrator pursuant to its rules of procedure ... This provision does not preclude the parties from mutually agreeing to an alternate arbitration forum or administrator in a particular circumstance. If either party wishes to propose such an alternate forum or administrator, it should do within twenty (20) days of its receipt of the other party's intent to arbitrate. IF EITHER A STUDENT OR THE ART INSTITUTE CHOOSES ARBITRATION.... THE ARBITRATOR'S DECISION WILL BE FINAL AND BINDING.

... Upon a student's written request, The Art Institute will pay the filing fees charged by the arbitration administrator, up to a maximum of $3,500 per claim. Each party will bear the expense of its own attorneys, experts and witnesses, regardless of which party prevails, unless applicable law gives a right to recover any of those fees from the other party ... the arbitrator may award sanctions in the form of fees and expenses reasonably incurred by the other party (including arbitration administration fees, arbitrators' fees, and attorney, expert and witness fees), to the extent such fees and expenses could be imposed under Rule 11 of the Federal Civil Rules of Civil Procedure.

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1, et seq., shall govern this arbitration provision ... (Antun Decl. Ex. 1.)

The Enrollment Agreement was signed by both Plaintiff and an official of AICSD. (Id. )

B. Procedural Background

Esquer brought suit against AICSD and EMC on June 19, 2017, alleging claims under Title III of the Americans with Disabilities Act ("ADA") 42 U.S.C. § 12101 et seq. ; Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq. ; California's unfair competition law; and state law tort claims. (ECF No. 1.) On June 26, 2017, Defendant AICSD informed Plaintiff in writing of its election to resolve the dispute in arbitration pursuant to the arbitration provisions of the Enrollment Agreement. (ECF No. 8–4 Ex. B.) Defendants EMC and AICSD have moved to compel Esquer to submit his claims in this action to arbitration under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. (ECF No. 8.) They request that the Court either dismiss the action in its entirety or stay it pending arbitration. (Id. )

II. LEGAL STANDARD

The FAA applies to contracts that evidence transactions involving interstate commerce. 9 U.S.C. §§ 1, 2. The FAA provides that contractual arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Id. § 2. The "primary" purpose of the FAA is to ensure that "private agreements to arbitrate are enforced according to their terms." Volt Info. Scis., Inc. v. Bd. of Trs. of the Leland Stanford Junior Univ. , 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). Therefore, "as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). "[A] district court has little discretion to deny an arbitration motion" once it determines that a claim is covered by a written and enforceable arbitration agreement. Republic of Nicar. v. Standard Fruit Co. , 937 F.2d 469, 475 (9th Cir. 1991). Arbitration agreements, "[l]ike other contracts ... may be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability.’ " Rent–A–Ctr., W., Inc. v. Jackson , 561 U.S. 63, 68, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) (quoting Doctor's Assocs., Inc. v. Casarotto , 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) ). "In determining whether to compel a party to arbitration, a district court may not review the merits of the dispute[.]" Marriott Ownership Resorts, Inc. v. Flynn , No. 14-00372 JMS-RLP, 2014 WL 7076827, at *6 (D. Haw. Dec. 11, 2014). Instead, a district court's determinations are limited to (1) whether a valid arbitration agreement exists and, if so, (2) whether the agreement covers the relevant dispute. See 9 U.S.C. § 4 ; Chiron Corp. v. Ortho Diagnostic Sys., Inc. , 207 F.3d 1126, 1130 (9th Cir. 2000).

III. DISCUSSION

In the instant motion, Defendants seek to compel arbitration pursuant to the arbitration provisions of the Enrollment Agreement. Defendants argue that the question of arbitrability has been delegated to the arbitrator and thus the scope of this Court's review is narrow. Plaintiff argues that the agreement's delegation clause is unenforceable and that, even if it is enforceable, certain claims are outside the scope of the arbitration provisions.

A. The Parties Clearly and Unmistakably Delegated Arbitrability

A threshold issue the Court must decide is whether the Enrollment Agreement delegated the arbitrability determination to the arbitrator. The determination of whether an arbitration clause is valid, applicable, and enforceable is reserved to the district court unless "the parties clearly and unmistakably provide[d] otherwise," such as by delegating the issue of arbitrability to arbitration. AT & T Technologies, Inc. v. Commc'ns Workers of Am. , 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). Even if a delegation of arbitrability is clear and unmistakable it may be found unenforceable if the delegation itself is unconscionable. Rent-A-Ctr., 561 U.S. at 71–74, 130 S.Ct. 2772.

Defendants argue that the delegation provision requires that any dispute pertaining to arbitrability must be submitted to the arbitrator. (ECF No. 8–1 at 13.) Defendants argue the parties have shown a clear and unmistakable intent to delegate the question of arbitrability to the arbitrator because (1) the arbitration provision requires the arbitration of "any dispute or claim," (id. (citing Antun. Decl. Ex.1 at 2)), and (2) the agreement incorporates the JAMS procedural rules, which in turn provide JAMS with the authority to determine jurisdiction and arbitrability. Plaintiff disputes delegation on the grounds that (1) the arbitration agreement does not expressly state that the arbitrator has the power to determine arbitrability and (2) the arbitration agreement merely references the requirement to initiate proceedings with JAMS, not JAMS's procedural rule regarding its jurisdiction over arbitrability.

The delegation clause of the arbitration agreement here states that upon initiation of arbitration JAMS "will serve as the arbitration administrator pursuant to its rules of procedure. " (Id. at 2 (emphasis added).) There appears to be a dispute between the parties as to which JAMS rules of procedures apply. Whereas Defendants point to Rule 8(b) of the JAMS Streamlined Arbitration Rules & Procedures, Plaintiff points to Rule 11 of the JAMS Comprehensive Arbitration Rules & Procedures.¹ The Court need not decide which set of rules is appropriate under the arbitration agreement's delegation clause because both sets of Rules contain an...