Cohen et al v. Career Education Corporation et al

Filing 32

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

DAVID COHEN, et al..
Plaintiffs.
v.

CASE NO. 8:13-cv-00125-EAK-TGW

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. 15), and Defendants' Reply to Plaintiffs'
Response in Opposition to Defendants' Motion to Compel Arbitration and Stay
Proceedings (Doc. 31). For the reasons set forth below, Defendants' motion is
GRANTED.

PROCEDURAL HISTORY

Plaintiffs, David Cohen 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"), filed the Motion to
Compel Arbitratoin and Stay Proceedings (Doc. 10) on Feb. 11, 2013. Plaintiffs filed the

Response in Opposition to Defendants' Motion to Compel Arbitration and Stay
Proceedings (Doc. 15) on Mar. 15, 2013. Defendants filed the Reply to Plaintiffs'

Response in Opposition to Defendants' Motion to Compel Arbitration and Stay
Proceedings (Doc. 31) on June 21, 2013.
STATEMENT OF THE FACTS

Plaintiffs are current and former students of IADT, a for-profit educational
institution that offers degree programs in fashion design, interior design, graphic design,
photography, audio production, and web design and development. IADT 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, breach of fiduciary duty, and civil conspiracy. Defendants now move
to compel arbitration on all claims based on arbitration provisions in the students'
enrollment agreements. Plaintiffs signed one of two enrollment agreements, referred to as
either the 2005 Agreement or 2009 Agreement. The 2005 Agreement contained the
following arbitration provision:

Any disputes or controversies between the parties to this Agreement
arising out of or relating to the student's recruitment, enrollment,
attendance, education or career service assistance by IADT or to this
Agreement shall be resolved first through the grievance policy
published in the catalog. If not resolved in accordance with the
procedures outlined in the school catalog to the satisfaction of the
student, then the dispute shall be resolved by binding arbitration in
accordance with the Commercial Arbitration Rules of the American

Arbitration Association then in effect or in accordance with procedures
that the parties agree to in the alternative.
Dkt. 10-1.

The 2009 Agreement contained the following arbitration provision:

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; (iii) financial aid or career service assistance by IADT; (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 IADT, its employees, or with cxtemship sites or their employees;
or (v) any objection to arbitrability or the existence, scope, validity,
construction, or enforceability of this Arbitration Agreement shall be
resolved pursuant to this paragraph (the "Arbitration Agreement").
Dkt. 10-1.

The 2009 Agreement further provides that arbitration shall be administered by the
American Arbitration Association ("AAA") or the National Arbitration Forum ("NAF").

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 arbitration 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 hit 7 Co. v. Palmer Ranch Ltd. P 'ship, 432 F.3d 1327,
1332 (1 lth 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 2005 and 2009 Agreements provide 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 arbitration and all other pending
motions shall be terminated but may be renewed if later appropriate.

DONE and ORDERED in Chambers, in Tampa, Florida, this^jday oftune
2013.

Copies to: All Parties and Counsel of Record