Cernohorsky et al v. Career Education Corporation et al

Filing 34

ORDER granting 10 Motion to compel arbitration. The Clerk of Court is directed to administratively close this case pending outcome of arbitration and all other pending motions shall be terminated but may be renewed if later appropriate. Signed by Judge Elizabeth A. Kovachevich on 6/28/2013. (SN)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

RONALD CERNOHORSKY, et al.,
Plaintiffs,
v.

CASE NO. 8:13-cv-00124-EAK-AEP

CAREER EDUCATION CORPORATION,
and INTERNATIONAL ACADEMY OF

MERCHANDISING & DESIGN, INC.,
Defendants.

ORDER ON DEFENDANTS' MOTION TO COMPEL ARBITRATION
AND STAY PROCEEDINGS

This cause is before the Court on Defendants' Motion to Compel Arbitration and
Stay Proceedings (Doc. 10), Plaintiffs' Response in Opposition to Defendants' Motion to
Compel Arbitration and Stay Proceedings (Doc. 17), and Defendants' Reply to Plaintiffs'
Response in Opposition to Defendants' Motion to Compel Arbitration and Stay
Proceedings (Doc. 33). For the reasons set forth below, Defendants' motion is
GRANTED.
PROCEDURAL HISTORY

Plaintiffs, Ronald Cernohorsky and others similarly situated, filed this action on

Jan. 14, 2013, in the Middle District of Florida. Defendants, Career Education Corp.
("CEC") and International Academy of Merchandising and Design, Inc. ("IADT
Online"), filed the Motion to Compel Arbitration and Stay Proceedings (Doc. 10) on Feb.
11, 2013. Plaintiffs filed the Response in Opposition (Doc. 17) on Mar. 8, 2013.

Defendants filed the Reply to Plaintiffs' Response in Opposition (Doc. 33) on June 21,
2013.

STATEMENT OF THE FACTS

Plaintiffs are former students of IADT Online, a for-profit educational institution
that offers online courses to students via a virtual campus in fields such as graphic design,

web design and development, retail merchandise management, Internet marketing, and
digital media production. IADT Online is a wholly owned subsidiary of CEC. Plaintiffs
brought this action alleging violations of Florida's Deceptive and Unfair Trade Practices
Act ("FDUPTA"), the Federal Racketeer Influenced and Corrupt Organizations Act

("RICO"), along with common law claims of unjust enrichment and breach of fiduciary
duty. Defendants now move to compel arbitration on all claims based on the arbitration
provision in the Enrollment Agreement. The Enrollment Agreement contains the
following provisions:
Agreement to Arbitrate - Any disputes, claims, or controversies
between the parties to this Enrollment Agreement arising out of or
relating to (i) this Enrollment Agreement; (ii) the Student's
recruitment, enrollment, attendance, or education; (iv) any claim, no
matter how described, pleaded or styled, relating, in any manner, to
any act or omission regarding the Student's relationship with
Academy, its employees, or with externship sites or their employees;
or (v) enforceability of this Arbitration Agreement shall be resolved
pursuant to this paragraph (the ''Arbitration Agreement").
Choice of Arbitration Provider and Arbitration Rules -

Unless the

parties agree to an alternative, the arbitration shall be administered by
the American Arbitration Association ("AAA"). The arbitration shall
be before a single arbitrator. The AAA's Commercial Arbitration
Rules, and applicable supplementary rules and procedures of the AAA,
in effect at the time the arbitration is brought, shall be applied.
Dkt. 17-1.

Plaintiffs contest the validity of the arbitration provisions, arguing that they are
unconscionable and violate Florida public policy. Plaintiffs contend this Court, rather
than an arbitrator, should determine whether the provisions are valid.
DISCUSSION

The Federal Arbitration Act ("FAA") provides that written 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." 9 U.S.C. § 2. Although the FAA governs the
applicability of arbitration agreements, state law governs issues "concerning the validity,
revocability, and enforceability of contracts generally." Perry v. Thomas, 482 U.S. 483,
492 n.9 (1987). Whether the parties have a valid arbitration agreement is usually a

question for the court to decide. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444,452
(2003). Where the parties "clearly and unmistakably" defer decisions of validity to the
arbitrator, the court shall compel arbitration without assessing the arbitration agreement's
validity. First Options ofChicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
The Eleventh Circuit has held that an agreement to follow AAA rules is a clear

and unmistakable delegation of authority to the arbitrator to determine the validity of the
arbitration agreement. Terminix Int'l Co. v. Palmer Ranch Ltd. P'ship, 432 F.3d 1327,
1332 (11th Cir. 2005). The court indicated that, by incorporating the AAA rules into the

arbitration agreement, the parties had contracted out of the default rule that would have
the court assessing the arbitration agreement's validity. Id. at 1333.
The Enrollment Agreement in the present case provides that arbitration shall
proceed in accordance with AAA rules. AAA Rule 7(a) gives the arbitrator "the power to
rule on his or her own jurisdiction, including any objections with respect to the existence,

scope, or validity of the arbitration agreement." Under Terminix, this "clearly and
unmistakably" delegates the issue of validity to the arbitrator. Terminix, 432 F.3d at
1332.

Accordingly, it is ORDERED that Defendants' Motion to Compel Arbitration
and Stay Proceedings (Doc. 10) is GRANTED. The Clerk of Court is directed to
administratively close this case pending outcome of arbitration and all other pending
motions shall be terminated but may be renewed if later appropriate.

«£

DONE and ORDERED in Chambers, in Tampa, Florida, thi^^aay of June
2013.

Copies to: All Parties and Counsel of Record