KOUREMBANAS et al v. INTERCOAST COLLEGES

Filing 36

ORDER ON MOTION TO COMPEL AND DISMISS granting 7 Motion to Compel; granting 7 Motion to Dismiss By JUDGE JOHN A. WOODCOCK, JR. (CCS)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
STEPHANIE KOUREMBANAS, et al.,
Plaintiffs,
v.
INTERCOAST COLLEGES,
Defendant.

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No. 2:17-cv-00331-JAW

ORDER ON MOTION TO COMPEL AND DISMISS
The 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.). 1 On September 28, 2018, the Plaintiffs filed their
response to InterCoast’s motion to compel arbitration. Pls.’ Resp. in Opp’n to Def.’s
Mot. to Compel Arbitration and Dismiss the Case (ECF No. 23) (Pls.’ Opp’n).
InterCoast replied on November 15, 2018. Def.’s Reply to Resp. to Mot. to Compel
Arbitration and Dismiss the Case (ECF No. 32) (Def.’s Reply).
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). 2

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).
2
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.
1

2

B.

Factual Background 3

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.
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., 642 F.3d 67, 72 n.2 (1st Cir. 2011) (a motion to compel
arbitration is made pursuant to the Federal Arbitration Act, 9 U.S.C. § 4, and is not controlled by
Federal Rules of Civil Procedure 12(b)(6) or 12(c)).
3

3

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 its 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
4

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., 873 F. Supp. 2d 409, 412 (D. Me. 2012) (internal quotation marks
omitted)). InterCoast maintains that “[t]here is nothing to mandate revocation of the
contracts” because the Enrollment Agreements set forth and explained InterCoast’s
policies, the arbitration clauses were conspicuous, and Maine law favors the
enforcement of arbitration provisions. Id. at 5-6.
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.,
133 F.3d 141, 148 (1st Cir. 1998), and contends that Bercovitch is factually similar to
this case and the First Circuit’s analysis in Bercovitch “is instructive.” Id. Lastly,
InterCoast asserts that it has not waived its right to arbitrate and that the Plaintiffs
do not assert otherwise. Id. at 8. InterCoast argues consequently that because the

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issues before the Court are arbitrable, the Court should dismiss the case and that
dismissal is advantageous on various grounds. Id. (citing Boulet v. Bangor Sec. Inc.,
324 F. Supp. 2d 120, 127 (D. Me. 2004) (quoting Bangor Hydro-Electric Co. v. New
England Tel. and Tel. Co., 62 F. Supp. 2d 152, 161 n.9 (D. Me. 1999))).
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 that either InterCoast Career
Institute or the entity for which it claims to have been a d/b/a, InterCoast Colleges []

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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, 2:14cv-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

7

exists ‘is to be decided with reference to state contract law principles.’” Id. (quoting
Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 19 (1st Cir.
1999)). Under Maine law, the Plaintiffs assert, the central issue is whether there was
a mutual understanding by both parties to arbitrate. Id. (emphasis omitted) (citing
Roy v. Davis, 553 A.2d 663, 664 (Me. 1989)).

The Plaintiffs maintain that the

arbitration clauses do not contain the necessary material terms or “the rights [the
Plaintiffs] purportedly waived []” or reasonably communicate the material terms
encompassed within the clause.

Id. at 8-9.

The Plaintiffs also argue that the

arbitration clauses are not conspicuous, which suggests that InterCoast sought “to
deceive and mislead students into waiving their rights without understanding
material terms.” Id. at 9. According to the Plaintiffs, because InterCoast’s “motion
to dismiss the case rests on the fate of its motion to compel,” which they say the Court
should deny, the Court should similarly deny InterCoast’s motion to dismiss. Id. at
10.
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, 827 F. Supp. 2d 1010, 1015-16 (S.D. Iowa 2011)).
InterCoast contends that the Plaintiffs clearly understood this difference and it
points to the fact that the Plaintiffs “affirmatively allege . . . that they each entered

8

into a contract—i.e., their respective Enrollment Agreements—with the InterCoast
corporate entity []” to support this contention. Id. at 8.
InterCoast 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., 2006 ME 58, 897
A.2d 803, where the Law Court found the arbitration clause unambiguous and that
it required binding arbitration; the Champagne arbitration clause provided that
“[a]ny dispute or claim arising out of this agreement or the property addressed in this
agreement shall be decided by arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration Association.”

Id. ¶ 3.

InterCoast says its arbitration language is “nearly identical,” and so the Court should
grant its motion to compel arbitration. Def.’s Reply at 10.
III.

LEGAL STANDARD
The FAA, 9 U.S.C. §§ 1 et seq., provides that “a contract evidencing a

transaction involving commerce to settle by arbitration a controversy thereafter
arising out of such contract . . . 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 FAA embodies a “liberal federal policy favoring arbitration agreements.” Foss v.
Circuit City Stores, Inc., 477 F. Supp. 2d 230, 232-33 (D. Me. 2007) (quoting Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991); Campbell v. General
Dynamics Gov't Sys. Corp., 407 F.3d 546, 551 (1st Cir. 2005)).

9

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., 493 A.2d 1048,
1050 (Me. 1985) (quoting § 5927).
“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, 2019 U.S. App. LEXIS 4058, at *8-9, 2019
WL 516534, at *4 (1st Cir. Feb. 11, 2019) (quoting InterGen N.V. v. Grina, 344 F.3d
134, 142 (1st Cir. 2003)). “When deciding whether the parties agreed under the FAA
to arbitrate a certain matter, courts generally . . . should apply ordinary state-law
principles that govern the formation of contracts.” Awuah v. Coverall N. Am., Inc.,
703 F.3d 36, 42 (1st Cir. 2012) (internal quotation marks omitted) (quoting Rosenberg,
170 F.3d at 19). This means that common contract defenses “like fraud, duress, or
unconscionability” are applicable. AT&T Mobility LLC v. Concepcion, 563 U.S. 333,
339 (2011). Under Maine law:
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.

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Gove v. Career Sys. Dev. Corp., 689 F.3d 1, 4 (quoting Sullivan v. Porter, 861 A.2d
625, 631 (Me. 2004)).
IV.

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, 2019 U.S. App. LEXIS
4058, at *8, 2019 WL 516534, at *4. As a party to the agreement, InterCoast is
“entitled to invoke the arbitration clause.” Id. The students are also signatories to
the Enrollment Agreement, including the arbitration clause, and are therefore bound
to the terms of the contract. Patton, 2019 U.S. App. LEXIS 4058, at *8-9, 2019 WL
516534, at *4. Finally, the terms of the arbitration clause are broad enough to
encompass the dispute between the students and the school. Patton, 2019 U.S. App.
LEXIS 4058, at *9; 2019 WL 516534, at *4. There is no evidence in the record that
InterCoast waived its right to proceed to arbitration. Gove, 689 F.3d at 4.
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 InterCoast International Training, Inc., and which was not previously registered as a d/b/a

11

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, 737 F.3d 819,
822–23 (1st Cir. 2013). “Deciding whether the parties agreed to arbitrate a dispute
about the validity of the underlying agreement requires the Court to walk the fine
line between issues of contract formation that it is required to decide and issues of
contract interpretation that it must leave to the arbitrator.” Local Union 1253, Int'l
Bhd. of Elec. Workers, AFL-CIO v. S/L Const., Inc., 217 F. Supp. 2d 125, 133 (D. Me.
2002) (emphasis in original). The Supreme Court “has consistently held that parties
may delegate threshold arbitrability questions to the arbitrator, so long as the
parties' agreement does so by ‘clear and unmistakable’ evidence.” Henry Schein, Inc.
v. Archer & White Sales, Inc., 139 S. Ct. 524, 530 (2019) (quoting First Options of Chi.,
Inc., v. Kaplan, 514 U.S. 938, 944 (1995)); see also Patton, 2019 U.S. App. LEXIS
4058, at *12, 2019 WL 516534, at *5.
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In Prima Paint Corporation v. Flood & Conklin Manufacturing Company, 388
U.S. 395 (1967), the United States Supreme Court differentiated between challenges
to the validity of the entire contract and challenges only to the existence of an
agreement to arbitrate within the contract. Id. at 403-04. Before Prima Paint,
Circuit Court of Appeals were divided as to whether “a claim of fraud in the
inducement of the entire contract is to be resolved by the federal court, or whether
the matter is to be referred to the arbitrators.” Id. at 402. The Supreme Court
considered the Court of Appeals for the Second Circuit approach, where unless parties
intended otherwise, arbitration clauses were “separable” from the larger contract if
there was no claim of fraud to the arbitration clause itself and if the claim of fraud in
the inducement was within the scope of the arbitration clause. Id. (citation omitted).
The Supreme Court also considered the Court of Appeals for the First Circuit’s
approach, which, in contrast to the Second Circuit, took “the view that the question
of ‘severability’ is one of state law, and that where a State regards such a clause as
inseparable a claim of fraud in the inducement must be decided by the court.” Id. at
402-03.
Based on its reading of the text of the FAA, the Prima Paint Court sided with
the Second Circuit. Id. at 403-404. The Prima Paint Court concluded:
[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.

13

Id. (citations omitted); see also Rent-A-Ctr., West, Inc. v. Jackson, 561 U.S. 63, 70
(2010) (“[B]ecause § 2 states that a ‘written provision’ ‘to settle by arbitration a
controversy’ is ‘valid, irrevocable, and enforceable’ without mention of the validity of
the contract in which it is contained . . . a party's challenge to the contract as a whole,
does not prevent a court from enforcing a specific agreement to arbitrate”); Consigli
Const. Co., 873 F. Supp. 2d at 415 (citation omitted) (“The separability doctrine as
developed in Prima Paint and Rent–A–Center requires arbitration unless the
objecting party can demonstrate that the arbitration clause itself was either
fraudulently induced or unconscionable”); Sleeper Farms v. Agway, Inc., 211 F. Supp.
2d 197, 200 (D. Me. 2002), aff'd, 506 F.3d 98 (1st Cir. 2007) (addressing arguments
concerning the “existence” of the contract and whether the arbitration clause in
dispute was fraudulently induced or unconscionable but leaving whether a contract
was “illegal, unconscionable or fraudulently induced” to the arbitrator because those
questions deal with “the validity of the contract as a whole”) (emphasis in original);
Stenzel v. Dell, Inc., 2005 ME 37, ¶ 15, 870 A.2d 133 (rejecting defendant’s argument
that the lower court improperly considered the plaintiffs’ claim that arbitration
clause was illusory under Prima Paint because plaintiffs’ claim targeted the clause
itself “even though the question necessarily blends into the larger question of whether
the entire agreement is illusory”).
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:

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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 that 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., 561 U.S. at 71 (“[Even] where the alleged
fraud that induced the whole contract equally induced the agreement to arbitrate
which was part of that contract—we nonetheless require the basis of challenge to be
directed specifically to the agreement to arbitrate before the court will intervene”);
Dialysis Access Center, LLC., v. RMS Lifeline, Inc., 638 F.3d 367, 380-82 (1st Cir.
2011) (concluding that “any dispute” within agreement at issue was sufficiently broad
in scope to include party’s fraudulent inducement claim); Irwin v Pinetree Ret.
Planning, No. cv-10-645, 2011 WL 2423365 (Me. Super. Apr. 28, 2011) (“[T]he
plaintiffs' claim for fraud in the inducement of the Agreement as a whole does not
prevent the action from being submitted to an arbitrator”).
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

15

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, 546 U.S. 440, 446 (2006).
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
Contracts

Legal

Entity

and

Enforceability

of

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. 4
a.

The Parties’ Positions

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, 2005 ME 37, ¶ 7, 870 A.2d 133 (where a contract involves
interstate commerce, the FAA ordinarily preempts state law; however, in deciding whether an
arbitration clause is enforceable in the first place, courts apply state contract law principles”).
Moreover, as a federal court sitting in diversity, this Court must provide its “best guess” as to open
questions of state law. See Noonan v. Staples, Inc., 556 F.3d 20, 30 (1st Cir. 2009) (citing Liberty
Mutual Ins. Co. v. Metro. Life Ins. Co., 260 F.3d 54, 65 (1st Cir. 2001)). However, the Court is also
cognizant that it “must tread lightly in offering interpretations of state law where controlling
precedent is scarce.” Id. (citing Gill v. Gulfstream Park Racing Ass'n, Inc., 399 F.3d 391, 402 (1st Cir.
2005)).
4

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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,
827 F. Supp. 2d at 1015-16). InterCoast says while the Plaintiffs may have incorrectly
named “InterCoast Colleges” and not “Inter-Coast International Training, Inc.” as
the Defendant, they understood that they were dealing with a corporate entity and
that “InterCoast Career Institute” was its trade name.

Id. at 8.

Additionally,

InterCoast argues that the Plaintiffs’ allegations show that they entered the
17

Enrollment Agreements with “the InterCoast corporate entity,” illustrating they were
aware with whom they were contracting when they signed the Enrollment
Agreements and brought this suit. Id. at 8-9 (citing Compl. ¶¶ 117-120, 123).
b.

InterCoast’s Prior Corporate Disclosures and InterCoast International Training, Inc.’s Registration

Inter-Coast International Training, Inc., has been a registered and
incorporated corporation under the laws of California since 1994. 5

Inter-Coast

International Training, Inc., is therefore a legal entity capable of entering into a
contract. Moreover, while neither InterCoast Colleges nor the InterCoast Career
Institute was registered to do business in Maine, Inter-Coast International Training,
Inc. was so registered until August 2016, when the Maine Secretary of State revoked
its authority to conduct business as a foreign corporation within Maine. O’Meara
Dec., Ex. B. (ECF No. 23-5); Def.’s Reply at 7 n.4. All the Enrollment Agreements
were entered into before 2016, when Inter-Coast International Training, Inc., was
registered to conduct business in Maine.
The 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,

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. . ..”).
5

18

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 6:
“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-00196JAW, 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-forprofit Vocational Nursing School in Kittery, Maine from approximately December,
2010 to May 2015 . . ..” Decl. of Geeta A. Brown, President of InterCoast Career

“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, 750 F. Supp. 2d 186, 188 (D. Me. 2010) (quoting United States v. Bello,
194 F.3d 18, 23 (1st Cir. 1999)).
6

19

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, 2004 ME
134, ¶ 13, 861 A.2d 625. “For a contract to be enforceable, the parties thereto must
have a distinct and common intention which is communicated by each party to the
other.” Searles v. Trustees of St. Joseph's Coll., 1997 ME 128, ¶ 13, 695 A.2d 1206.
(internal quotation marks omitted) (quoting 17A AM. JUR. 2D CONTRACTS § 27 (1991)).
To support their argument that a nonexistent legal entity cannot enforce a
contract, the Plaintiffs cite International Sport Divers Association v. Marine Midland
Bank, N.A., 25 F. Supp. 2d 101 (W.D.N.Y. 1998). Pls.’ Opp’n at 7. There a court in
the Western District of New York concluded that under Connecticut State law, a
“nonexistent corporation does not have the legal capacity to make a contract,” and
that under New York State law, there must be two determinate parties to have a

20

contract. Int’l Sport Divers Ass’n, 25 F. Supp. 2d at 112.
InterCoast cites South Shore Hellenic Church, Inc. v. Artech Church Interiors,
Inc., 183 F. Supp. 3d 197, 210–11 (D. Mass. 2016), where a district court noted, under
Massachusetts State law, a corporation may use a trade name to enter into contracts,
so long as it does not do so fraudulently. Def.’s Reply at 8. Neither case, however,
speaks to how this question should be resolved under Maine law.
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, 143 Me. 270, 272-74, 61 A.2d 130, 131-32 (1948), the
Maine Law Court discussed 31 M.R.S. §§ 1 et seq.,—which outlines regulations that
sole proprietors and partnerships engaged in mercantile enterprises must follow in
operating in the state of Maine—and stated the purpose of that statute was “to enable
persons dealing with individuals transacting business under a partnership or
21

assumed name to know or be able to ascertain from a public record, the name or
names of those with whom they are dealing and the nature of the business in which
they are engaged.” In Lipman, the Law Court wrote:
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 statue 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.”
143 Me. at 274, 61 A.2d at 132 (quoting Segal v. Fylar, 89 Conn. 293, 296, 93 A. 1027
(1915)); see also In re Reben, 342 A.2d 688, 694 (Me. 1975) (citing Lipman, 143 Me. at
272, 61 A.2d at 131) (recognizing that a business may adopt an assumed name and
may legally obligate itself into agreements binding on other parties).
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 InterCoast Career Institute/InterCoast Colleges
(neither of which was formally registered or incorporated in Maine) and the Plaintiffs
is unenforceable as a matter of law. 7 See 8 RICHARD LORD, WILLISTON ON CONTRACTS
§ 19:68 (4th ed. 2000) (summarizing that many states have trade name statutes
requiring businesses to register their trade names before conducting business in that

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, 318 F.R.D. 652, 679 (M.D. Ala.
2016).

7

22

respective state, and that states either expressly deny unregistered businesses the
right to enforce contracts “but [that] the great weight of authority supports” the
business’s right to enforce the contract).
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, 211 F. Supp. 2d at 201 (citing Large v. Conseco Fin. Servicing Corp., 292 F.3d
49, 53 (1st Cir. 2002)). The Plaintiffs argue the arbitration clauses in the Enrollment
Agreements are unconscionable because: (1) of being “inconspicuously split between
page 5 and the top of page 6” of the Enrollment Agreements; (2) the lack of notice to
the material terms and waiver of rights within the arbitration provision; (3) the
clauses incorporate arbitration provisions from other enrollment materials not
brought to the attention of the Plaintiffs. Pls.’ Opp’n at 8-9. Collectively, these
arguments contend the arbitration clauses are substantively unconscionable. At oral
argument, the Plaintiffs also raised the prospect that the arbitration clauses are
procedurally unconscionable because the Plaintiffs were allegedly targeted and that
for some of the Plaintiffs, English is their second language.
While it is InterCoast’s burden to compel arbitration, the Plaintiffs have the
burden to establish unconscionability. Bose Corp. v. Ejaz, 732 F.3d 17, 23 (1st Cir.
2013) (“Unconscionability is an affirmative defense”) (citing E.H. Ashley & Co., Inc.

23

v. Wells Fargo Alarm Servs., 907 F.2d 1274, 1278 (1st Cir. 1990)). 8 Maine recognizes
“a broad presumption in favor of arbitration.” Barrett v. McDonald Invs., Inc., 2005
ME 43, ¶ 15, 870 A.2d 146. The Law Court “has not ruled on an unconscionability
challenge to an . . . arbitration provision under Maine law.”

Brackett v. Gen.

Dynamics Armament, No. CIV. 10-176-P-H, 2010 WL 2628525, at *2 (D. Me. Jun. 25,
2010) (citing Barrett, 2005 ME 43, ¶ 21 n.4, 870 A.2d 146); see also Garcia v.
MaineGeneral Health, 1:18-cv-00019-NT, 2018 U.S. Dist. LEXIS 197437, at *9-10 (D.
Me. Nov. 20, 2018). Yet, “[t]he Maine cases on contractual unconscionability outside
of arbitration. . . set a high hurdle to overcome.” Brackett, 2010 WL 2628525, at *2,
(quoting Bither v. Packard, 98 A. 929, 933 (Me. 1916) (unconscionability equates to
“fraud,” or when the contract is “grossly against conscience,” “or grossly unreasonable
and oppressive”)).
There are two different types of unconscionability: procedural and substantive.
Blanchard v. Blanchard, 2016 ME 140, ¶ 19, 148 A.3d 277 (citing Barrett, 2005 ME
43, ¶¶ 32–33, 870 A.2d 146 (Alexander, J., concurring)). The former looks at the
circumstances in which the contract was entered into and generally concerns unequal
bargaining power between the parties. Id. (citation omitted). The latter looks at the
terms of the contract and inequity to one party. Id. (citation omitted). Here, the
Plaintiffs primarily make a substantive unconscionability challenge as they complain
about the terms—or the lack thereof—and the location of the arbitration clause
within the Enrollment Agreements. However, at oral argument, the Plaintiffs also

8

At oral argument, the Plaintiffs conceded that it is their burden to establish unconscionability.

24

argued that the clauses are procedurally unconscionable.
a.

Substantive Unconscionability

The Plaintiffs cite Cullinane v. Uber Technologies, Inc., 893 F.3d 53 (1st Cir.
2018) to support their claim that the arbitration clauses are unconscionable and that
InterCoast has not met its burden to compel arbitration. In Cullinane, the First
Circuit looked to Massachusetts law to determine whether an online arbitration
clause was enforceable. 893 F.3d at 61-62. In that case, Uber made its “Terms and
Conditions”—the agreement in dispute—available during the registration process
through a series of hyperlinks. Id. at 59. Getting to the agreement was quite tedious
and inconspicuous for users. The user had to click on one “Terms of Service & Privacy
Policy” hyperlink to get to two more hyperlinks entitled “Terms & Conditions” and
“Privacy Policy” and then click the “Terms & Conditions” hyperlink itself to read the
agreement. Id. Uber also did not require users to access the agreement before
completing their registration. Id. The First Circuit followed the reasoning of Ajemian
v. Yahoo!, Inc., 83 Mass. App. Ct. 565, 987 N.E.2d 604 (2013), where the issue was
the validity of a forum selection clause as part of an online contract. Id. at 61. The
Ajemian Court placed the burden on Yahoo! to show that the forum selection clause
was reasonably communicated and accepted. 83 Mass. App. Ct. at 574, 987 N.E. 2d
at 611.
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 &

25

Privacy Policy button.” 893 F.3d at 62 (internal quotation marks omitted). Rather,
Uber argued the plaintiffs acquiesced to the arbitration clause because they had been
given notice and a link to arbitration terms. Id. Here, InterCoast contends the
Plaintiffs read the Enrollment Agreements as confirmed by their respective
signatures. Def.’s Reply at 10; see Def.’s Mot. Attach. 2, Kourembanas Enrollment
Agreement at 1-6 (Kourembanas Agreement); Attach. 3, Baptiste Enrollment
Agreement at 1-6 (Baptiste Enrollment Agreement); Attach. 4, Mande Enrollment
Agreement at 1-6 (First Mande Enrollment Agreement); Attach. 5, Mande Enrollment
Agreement at 1-5 (Second Mande Enrollment Agreement); 9 and Attach. 6, Valley
Enrollment Agreement at 1-6 (Valley Enrollment Agreement). Each Plaintiff signed
the Enrollment Agreement on the last page and initialed each page at the bottom and
specifically initialed certain provisions within the Enrollment Agreement. Id.
Under Maine law, “parties to a contract are deemed to have read the contract
and are bound by its terms.” BlueTarp Fin., Inc. v. Melloul Blamey Const. S.C., Ltd.,
846 F. Supp. 2d 307, 313 (D. Me. 2012) (quoting Francis v. Stinson, 2000 ME 173, ¶
42, 760 A.2d 209).

Although the First Circuit analyzed arbitration clauses in

Cullinane, it did not evaluate the clauses for unconscionability, but whether there
was assent to the terms of the arbitration clause. 893 F.3d at 61, 64.
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

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.

9

26

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, 2005 ME 43, ¶ 36, 870 A.2d 146 (Alexander, J., concurring)
(“Substantive unconscionability or unfairness focuses on the terms of the agreement
and whether those terms are so one-sided as to shock the conscience”). The fact that
the arbitration clause also incorporates the “Arbitration provision found elsewhere in
InterCoast Career Institute enrollment materials,” see Pls.’ Enrollment Agreements,
does not show the clause is grossly oppressive. While the Plaintiffs say InterCoast
has not demonstrated that it made them aware of this additional information, it is
the Plaintiffs’ burden to show unconscionability.

Although the inclusion of this

language undercuts InterCoast’s contention that this arbitration “is nearly identical”
to the arbitration clause to the arbitration clause in Champagne, 2006 ME 58, ¶ 3,
897 A.2d 803, its inclusion does not conversely render it unconscionable. The Court
concludes the arbitration clause contained in the Enrollment Agreements is not
substantively unconscionable.
b.

Procedural Unconscionability

27

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, 2016 ME 140, ¶ 19, 148 A.3d 277. Courts consider such factors
as “the exploitation of unequal bargaining power between the parties,” id. (citing Am.
Airlines v. Wolens, 513 U.S. 219, 249 (1995)), as well as whether sharp practices were
employed, the use of fine print and complex language, and the lack understanding of
one party.

Id. (citing Barrett, 2005 ME 43, ¶ 32, 870 A.2d 146 (Alexander, J.,

concurring)); see also Bordetsky v Charron, No. BCD-RE-10-8, 2011 WL 4528211, at
*4 (Bus. & Consumer Ct. Aug. 16, 2011, Horton, J.) (procedural unconscionability
means “such unconscionableness or inadequacy in a bargain as to demonstrate some
gross imposition or some undue influence”).
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
record 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

28

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, 2016 WL

4919884, at *8 (D. Me. Sept. 14, 2016) (internal quotation marks omitted) (quoting
Wausau Mosinee Paper Corp. v. Magda, 366 F. Supp. 2d 212, 221 (D. Me. 2005)). The
Court concludes that the arbitration clauses are not procedurally unconscionable.
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. 10

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
10

29

D.

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, 2018 U.S. Dist. LEXIS 197437, at *16 (citing Baker v.

Securitas Sec. Servs. USA, Inc., 432 F. Supp. 2d 120, 127 (D. Me. 2006) (citing
Bercovitch, 133 F.3d at 156 n.21 (1st Cir. 1998))). This Court previously observed
that “dismissal has several advantages.” Baker, 432 F. Supp. 2d at 127. The Boulet
Court summarized the advantages of dismissal:
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, 138 S. Ct. 1612 (2018), the United
States Supreme Court enforced an arbitration agreement between an employer and its employees and
ruled that the employees could not bring collective or class actions against the employer. See Am.
Express Co. v. Italian Colors Rest., 570 U.S. 228 (2013) (merchants compelled to individually arbitrate
claims against a credit card company and were not allowed to pursue class action); Rivera-Colón v.
AT&T Mobility P.R., Inc., 913 F.3d 200 (1st Cir. 2019).
There are just a few exceptional situations where a district court may “loosen the iron grip of
stare decisis.” United States v. Reveron Martinez, 836 F.3d 684, 687 n.2 (1st Cir. 1988). One is where
the district court concludes that there has been “considerable landscaping” that has changed the
“contours of the law,” since the latest pronouncements of the Supreme Court or First Circuit. Gately
v. Massachusetts, 811 F. Supp. 26, 31 (D. Mass. 1992), aff’d 2 F.3d 1221 (1st Cir. 1993). But this is not
the case here.
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, 136 S. Ct.
463, 471-78 (2015) (Ginsburg J., dissenting); Judith Resnik, Fairness in Numbers: A Comment on
AT&T v. Concepcion, Wal-Mart v. Dukes, and Turner v. Rogers, 125 HARV. L. REV. 78, 112 (2011)
(quoting Discover Bank v. Superior Court, 36 Cal. 4th 148, 163, 113 P.3d 1100, 1110 (2005), abrogated
by AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (“[I]n a consumer contract of adhesion
[when] . . . disputes . . . involve small amounts of damages . . . the waiver [of a class action] becomes
in practice the exemption of the party ‘from responsibility for [its] own fraud’”)). Class-action suits are
premised partly on the hope of “facilitat[ing] access to courts for those who lacked the resources or the
knowledge that they had possibly been harmed.” Resnik, supra note 10, at 134 (discussing 1966
amendments to FED. R. CIV. P. 23). In light of recent interpretations of the FAA and Rule 23, the Court
must rule based on the law as it is, not what it thinks the law should be.

30

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, 324 F. Supp. 2d at 127 (quoting Bangor Hydro-Electric Co., 62 F. Supp. 2d at
161 n.9). The Plaintiffs have not raised a potential statute of limitations issue that
could recommend against dismissal. Baker, 432 F. Supp. 2d at 127 (staying action
pending arbitration because the parties raised a potential statute of limitations
question).

Consistent with district precedent, the Court concludes dismissal is

appropriate.
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.
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 28th day of February, 2019

31