Deck et al v. Miami Jacobs Business College Company et al

Filing 27

ORDER: (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS OR STAY ACTION PENDING ARBITRATION (Doc. 14 ); (2) DENYING DEFENDANT GRYPHON'S MOTION TO DISMISS (Doc. 15 ) AS MOOT; AND (3) STAYING THIS CASE PENDING ARBITRATION. Signed by Judge Timothy S. Black on 1/31/2013. (mr1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
HALEY DECK, et al.,
Plaintiffs,

Case No. 3:12-cv-63

vs.
Judge Timothy S. Black
MIAMI JACOBS BUSINESS COLLEGE
COMPANY, et al.,
Defendants.
ORDER: (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS’
MOTION TO DISMISS OR STAY ACTION PENDING ARBITRATION (Doc. 14);
(2) DENYING DEFENDANT GRYPHON’S MOTION TO DISMISS (Doc. 15) AS
MOOT; AND (3) STAYING THIS CASE PENDING ARBITRATION
This civil action is before the Court on: (1) Defendants’ 1 motion to dismiss or stay
action pending arbitration (Doc. 14) and the parties’ responsive memoranda (Docs. 22,
25); and (2) Defendant Gryphon’s motion to dismiss for lack of personal jurisdiction
(Doc. 15) and the parties’ responsive memoranda (Docs. 20, 24). 2
I.

FACTUAL BACKGROUND

Miami-Jacobs is a private college or “career school” with its principal place of
business in Dayton, Ohio. (Doc. 16, Ex. 2 at ¶ 6). At various times between 2005 and
1

Defendants include Miami-Jacobs Business College Company (“Miami-Jacobs”), Delta Career
Education Corporation, Delta Educational Systems, Inc., and Gryphon (collectively,
“Defendants”).

2

The United States declined to intervene in this civil action. (Doc. 6). However, the Government did file a limited statement of interest with respect to Defendants’ motion to dismiss. (Doc.
19). Specifically, the Government notes that “[b]ecause an FCA claim under 31 U.S.C. § 3729
may not be settled without the consent of the Attorney General, the United States respectfully
asserts that any arbitration ruling as to such a claim must necessarily be deemed a non-binding
recommendation.” (Id. at 2).

2009, Plaintiffs enrolled as students of Miami-Jacobs. Plaintiffs claim that they paid
tuition, incurred significant debt, lost wages or earning capacity in order to pursue and
obtain what was falsely represented as accredited marketable degrees, certifications,
education, and/or careers by Miami-Jacobs. Each Plaintiff signed an enrollment
agreement detailing this purchase of services. In turn, each enrollment agreement
contained the following identical language, in most instances separately initialed by each
student above their signatures:
ARBITRATION
Arbitration - Exclusive Remedy. You and Miami-Jacobs Career College agree that any
dispute arising out of or relating to this enrollment agreement, your enrollment or your
attendance at Miami-Jacobs Career College, whether such dispute arises during or after
your attendance and whether the dispute is based on contract, tort, statute, or otherwise,
shall be resolved by binding arbitration in the Dayton, Ohio area in accordance with the
Commercial Rules of the American Arbitration Association. You and Miami-Jacobs
Career College each further agrees that this arbitration provision provides each party with
its exclusive remedy for redress of any grievance or resolution of any dispute arising our
[sic] of this Agreement, AND EACH PARTY EXPRESSLY WAIVES ANY RIGHT,
INCLUDING WITHOUT LIMITATION THE RIGHT TO TRIAL BY JURY, IT
MIGHT HAVE TO SEEK REDRESS IN ANY FEDERAL, STATE OR LOCAL
COURT OR OTHER FORUM, except for an action to enforce in court an arbitration
award rendered pursuant to this Agreement.
(Emphasis in original). (Doc. 16, Ex. 1 at ¶ 2).
On February 28, 2012, Plaintiffs filed this putative class action against MiamiJacobs, along with two of Miami-Jacobs’ successive corporate companies and a
California investment company with an ownership interest in the successive corporate
companies. The Complaint seeks a jury trial for the following claims: (1) breach of
contract (¶¶ 146-152); (2) violation of federal statutes, including RICO (¶¶ 145-55) and
False Claims Act (for which the United States has declined to intervene) (¶¶ 162-176);
2

(3) violation of Ohio statutes, including the Ohio Consumer Sales Practices Act (¶¶ 12338), Ohio Pattern of Corrupt Activity Act (¶¶ 156-61), and Ohio Deceptive Trade
Practices Act (¶¶ 199-203); (4) common law torts, including fraud (¶¶ 139-145),
negligence (¶¶ 177-81), civil conspiracy (¶¶ 204-209), and public policy (¶¶ 210-13); and
(5) equitable claims, including estoppel (¶¶ 182-94) and unjust enrichment (¶¶ 195-8).
Defendants seek to dismiss this action, requiring Plaintiffs to arbitrate their
respective individual claims pursuant to the arbitration clause (“Agreement”).
II.

STANDARD OF REVIEW

Under the Federal Arbitration Act (the "FAA"), a written agreement to arbitrate
disputes which arise out of a contract involving transactions in interstate commerce "shall
be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity
for the revocation of any contract." Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir.
2000) (citing 9 U.S.C. § 2). The FAA was designed to override judicial reluctance to
enforce arbitration agreements, to relieve court congestion, and to provide parties with a
speedier and less costly alternative to litigation. 3 Id.
When asked by a party to compel arbitration under a contract, a federal court must
determine whether the parties agreed to arbitrate the dispute at issue. Stout, 228 F.3d at
719. Courts are to examine the language of the contract in light of the strong federal
policy in favor of arbitration. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24 (1983) (the FAA “is a congressional declaration of a liberal federal policy
3

The arbitration agreement at issue in this case clearly falls within the scope of the FAA which
applies whenever there is an agreement to arbitrate contained in “a contract evidencing a
transaction involving commerce.” 9 U.S.C. § 2.
3

favoring arbitration agreements, notwithstanding any state substantive or procedural
policies to the contrary”). Any ambiguities in the contract or doubts as to the parties’
intentions should be resolved in favor of arbitration. Stout, 228 F.3d at 714. The
“primary purpose” of the FAA is to ensure “that private agreements to arbitrate are
enforced according to their terms.” Volt Info. Sciences, Inc. v. Bd. of Tr. of Leland
Stanford, Jr. Univ., 489 U.S. 468, 479 (1989). 4
Section 3 of the FAA provides as follows:
If any suit or proceeding be brought in any of the courts of the United
States upon any issue referable to arbitration under an agreement in
writing for such arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such suit or proceeding is
referable to arbitration under such agreement, shall on application of one
of the parties, stay the trial of the action until such arbitration has been
had in accordance with the terms of the Agreement, provided the
applicant for the stay is not in default in proceeding with such
arbitration.
9 U.S.C. § 3. Section 3 thus “requires” a court in which suit has been brought “‘upon any
issue referable to arbitration under an agreement in writing for such arbitration’ to stay
the court action pending arbitration once it is satisfied that the issue is arbitrable under
the agreement.” Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 400
(1967). 5

4

See also Moses H. Cone Mem’l Hosp., 460 U.S. at 24 (the FAA expresses Congress’ intent “to
mandate enforcement of all covered arbitration agreements”).
5

See also Santos v. Am. Broad. Co., 866 F.2d 892, 894 (6th Cir. 1989) (“[w]here the parties to a
contract that provides for arbitration have an arbitrable dispute, it is crystal clear that Congress
has mandated that federal courts defer to contractual arbitration”).
4

When considering a motion to stay proceedings and compel arbitration under the
FAA, a court has four tasks: (1) it must determine whether the parties agreed to arbitrate;
(2) it must determine the scope of the arbitration agreement; (3) if federal statutory claims
are asserted, it must consider whether Congress intended those claims to be
nonarbitrable; and (4) if the court concludes that some, but not all, of the claims in the
action are subject to arbitration, it must determine whether to stay the remainder of the
proceedings pending arbitration. Stout, 228 F.3d at 714.
The Sixth Circuit applies "the cardinal rule that, in the absence of fraud or willful
deceit, one who signs a contract which he has had an opportunity to read and understand,
is bound by its provisions." Allied Steel & Conveyors, Inc. v. Ford Motor Co., 277 F.2d
907, 913 (6th Cir. 1960). It is settled authority that doubt regarding the applicability of
an arbitration clause should be resolved in favor of arbitration. Id. Indeed, “any doubts
are to be resolved in favor of arbitration unless it may be said with positive assurance that
the arbitration clause is not susceptible of an interpretation that covers the asserted
dispute.” Nestle Waters North America, Inc. v. Hollman, 505 F.3d 498, 504 (6th Cir.
2007). If parties contract to resolve their disputes in arbitration rather than in the courts,
a party may not renege on that contract absent the most extreme circumstances. Allied
Steel & Conveyors, Inc., 277 F.2d at 913. Furthermore, a district court’s duty to enforce
an arbitration agreement under the FAA is not diminished when a party bound by the
agreement raises claims arising from statutory rights. Id. 6

6

This Court routinely enforces arbitration provisions and compels arbitration. See, e.g., Crown
Equip. Corp. v. Fla. Lift Sys., No. 3:04cv7, 2005 U.S. Dist. LEXIS 23112, at *2-3 (S.D. Ohio
5

III.

ANALYSIS

A. Res Judicata/Stare Decisis/Collateral Estoppel
In Singleton v. Miami-Jacobs Career Coll., Montgomery County Court of
Common Pleas, Case No. 2008-cv-1562, Judge Tucker held in two decisions (one staying
the multi-plaintiff litigation pending arbitration on July 15, 2008 (“Singleton I”); the
other denying opposing counsel’s motion to reconsider on October 14, 2008 (“Singleton
II”)), that the Miami-Jacobs arbitration clause is enforceable under Ohio law. Judge
Tucker’s decisions were rendered on the same facts after argument by the same counsel
as in the instant case.
The Singleton decisions, which held that the Agreement mandates arbitration,
is not unconscionable, and does not violate public policy, are binding in this action.
Plaintiffs argue that “the analysis provided in [Singleton I and II] was incomplete, and
incorrect in conclusion as a result…The previous decision is not law of the case and is
not stare decisis.” (Doc. 22, n. 3).
Stare decisis is of “fundamental importance” to the rule of law, and any departure
therefrom demands “special justification.” Wampler v. Higgins, 752 N.E.2d 962, 972
(Ohio 2001). Additionally, the Supreme Court of Ohio has adopted the doctrine of

Dept. 26, 2005) (Rice, J.) (holding that parties must arbitrate the breach of contract dispute
arising out of an agreement containing a valid arbitration provision); Robert Lamb Hart Planners
& Architects v. Evergreen, Ltd., 787 F. Supp. 753, 757 (S.D. Ohio 1992) (Spiegel, J.) (granting
motion to compel arbitration provision where the firm’s contract with the defendant corporation
for a construction project contained a valid arbitration clause); Eagle-Picher Indus. Inc., v.
Asbestos Claims Facility, Inc., No. C-1-88196, 1988 U.S. Dist. LEXIS 11208, at *5 (S.D. Ohio
June 23, 1988) (Rubin, J.) (upholding a stay of proceedings request in a breach of contract case
between a company and its insurers pending the outcome of arbitration pursuant to a signed
agreement between the parties).
6

collateral estoppel. Grava v. Parkman Twp., 653 N.E.2d 226, 228 (Ohio 1994) (“The
doctrine of res judicata involves both claim preclusion (historically called estoppel by
judgment in Ohio) and issue preclusion (traditionally known as collateral estoppel)).
Under the Restatement, the critical factors for applying collateral estoppel are whether
the current and previous litigation both involve: (1) “essentially” the same issues, and
(2) the same parties “or their privies.” Restatement 2d of Judgments § 27, comment c.
These requirements are met in this case. The factual allegations before the Court –
whether the arbitration clause in the same Agreement is enforceable, unconscionable, or
contrary to Ohio public policy – are not just similar to the issues adjudicated in Singleton,
they are identical in every relevant respect. Therefore Plaintiffs cannot avoid the
Singleton decisions, and this Court is compelled to prevent inconsistent outcomes in
different forums.
While the Court finds that it is bound by the Singleton decisions, it will
nonetheless undertake an independent analysis.
B. Unconsionability
Plaintiffs argue that this Court should not enforce the arbitration agreement
because the provision is unconscionable. Under Ohio law, the unconscionability doctrine
has two components: (1) substantive unconscionability, i.e., unfair and unreasonable
contract terms, and (2) procedural unconscionability, i.e., individualized circumstances
surrounding each of the parties to a contract such that no voluntary meeting of the minds
was possible. Both elements must be present to find a contract unconscionable. “The
party asserting unconscionability of a contract bears the burden of proving that the
7

agreement is both procedurally and substantively unconscionable.” Crouse v. LaGrange
Junction Ltd., 973 N.E.2d 822 (Ohio App. 2012).
1. Procedural Unconscionability
“Procedural unconscionability refers to the individualized circumstances
surrounding each of the parties to a contract such that no voluntary meeting of the minds
was possible.” Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 666 (6th Cir. 2003).
To determine whether an arbitration clause is procedurally unconscionable, courts have
considered factors such as whether: (1) the arbitration clause was presented on a “take-itor-leave-it basis;” (2) a disparity in bargaining power exists between the parties; (3) the
arbitration clause was hidden in small print within the document; and (4) one of the
parties could unilaterally modify the agreement. Stachurski v. DirecTV, Inc., 642
F.Supp.2d 758, 767 (N.D. Ohio July 13, 2009).
First, Plaintiffs claim that the Agreement is procedurally unconscionable because
they are “relatively uneducated and in low-paying jobs [and] unsophisticated consumers.”
(Doc. 22 at 9). However, Plaintiffs were adults and high school graduates who could
read and write before signing the Agreements. “Ordinarily, one of full age in the
possession of his faculties and able to read and write, who signs an agreement and
remains acquiescent to its operative effect for some time, may not thereafter escape the
consequences by urging that he did not read it or that he relied upon the representations
of another as to its contents or significance.” Garcia v. Wayne Homes, 2002-Ohio-1884,
2002 Ohio App. LEXIS 1917, at ¶ 43 (Ohio App. Apr. 19, 2002). Plaintiffs also argue
that their inexperience and unfamiliarity with arbitration justifies their attempt to avoid
8

the effect of the arbitration provision. However, courts have also rejected this argument.
“[L]ack of sophistication and lack of legal counsel do not render the Arbitration
Agreement unenforceable.” Anderson v. Delta Funding Corp., 316 F. Supp. 2d 554, 566
(N.D. Ohio 2004). 7
Second, Plaintiffs argue that the Agreements are unconscionable because they
were “not told that [they] could change or negotiate any of the terms in the application
and [they] did not understand or think that [they] could do so.” (Doc. 21, Exs. 1-7 at ¶ 8).
Plaintiffs do not state, however, that they made any attempt to negotiate the Agreement or
to challenge any of its terms. Plaintiffs have not shown that they were prevented from
challenging the arbitration clause or any other term in the Agreement. Moreover, even if
Plaintiffs had tried and failed to negotiate the Agreement, that would not make it
unconscionable. “An arbitration clause may be enforceable notwithstanding a disparity
in bargaining power or the fact that the contract had not been subject to negotiation.”
Garcia, 2002 Ohio App. LEXIS 1917 at ¶ 61. 8 Moreover, Miami-Jacobs had no
obligation to explain the arbitration clause. “[T]here is no requirement that an arbitration

7

See also Mazera v. Varsity Ford Mgmt. Servs., 565 F.3d 997 (6th Cir. 2009) (Plaintiff’s
asserted “lack of bargaining power, the absence of an attorney, language problems, and his
degree of understanding…[are immaterial] with respect to the validity of the arbitration
agreement.”).
8

“[A]n unequal bargaining position is not, in and of itself, a sufficient reason in law or equity to
hold that arbitration agreement unenforceable.” Hawkins v. O’Brien, 2009-Ohio-60, 2009 Ohio
App. LEXIS 73, at *24 (Ohio App. Jan. 9, 2009). The court further stated that, “there must be
some evidence that, in consequence of the imbalance, the party in the weaker position was
defrauded or coerced into agreement to the arbitration clause.” Id. However, there is no
evidence Plaintiffs were coerced into the agreement of the clause. In fact, the evidence
demonstrates that Plaintiffs were required to initial the clause which was printed in bold letters.
9

clause be explained orally to a party prior to signing where the provisions at issue were
not in fine print, were neither hidden nor out of the ordinary, and were not misrepresented
to the signatory.” Id. at ¶ 41. 9
Third, Plaintiffs argue that the arbitration clause is procedurally unconscionable
because it was provided to them on a “take-it-or-leave-it basis” within a standardized
form and thus was an adhesionary clause. 10 “[A] pre-printed sales contract containing an
arbitration clause that is a condition precedent to the final sale, without more, fails to
demonstrate unconscionability of the clause.” Eagle v. Fred Martin Motor Co., 809
N.E.2d 1161, 1179 (Ohio App. Feb. 25, 2004). 11 A contract of adhesion (or an
arbitration clause found in such a contract) is not necessarily unconscionable per se.
Taylor Bldg. Corp. of Am. v. Benfield, 884 N.E.2d 12 (Ohio 2008). “[A]n unequal
bargaining position is not, in and of itself, a sufficient reason in law or equity to hold [an]
arbitration agreement unenforceable.” Stachurski , 642 F.Supp.2d at 768. Instead, “there
must be some evidence that, in consequence of the imbalance, the party in the weaker
position was defrauded or coerced into agreement to the arbitration clause.” Id. Plaintiff
9

See, e.g., Upton v. Tribilcock, 91 U.S. 45, 50 (1875) (“It will not do for a man to enter into a
contract, and, when called upon to respond to its obligations, to say that he did not read it when
he signed it, or did not know what it contained. If this were permitted, contracts would not be
worth the paper on which they are written.”).
10

Suffice it to say, agreements to arbitrate may indeed be “standard.” See George Watts & Son,
Inc. v. Tiffany & Co., 248 F.3d 577, 583 (7th Cir. 2001) (“As a final note, mandatory arbitration
clauses are prevalent in a broad collection of contracts, forcing parties to accept the arbitral
rather than judicial forum to adjudicate their rights.”).
11

Id. at 1175 (holding an automobile dealer’s standard sales contract unconscionable in part
because purchasing a car is a necessity and therefore “transactions involving modern day
necessities such as transportation deserve special scrutiny before an arbitration clause is enforced
by the courts.”)
10

submits no evidence that they were coerced or defrauded into agreeing to the arbitration
clause.
Finally, Plaintiffs make no claim for fraud in the inducement. At most, Plaintiffs
indicate that the admissions process felt “rushed.” (Doc. 21, Exs. 1-7 at ¶ 7). However,
Plaintiffs approached Miami-Jacobs about attending classes, and they uniformly admit
that they “looked into similar programs at other local career schools” before visiting
Miami-Jacobs. (Id. at ¶ 20). Plaintiffs never claim that Miami-Jacobs prohibited them
from reading any of the contracts they signed (which were only two pages long), told
them that they could not seek legal advice, or refused to provide them information
regarding arbitration if asked. Plaintiffs present no facts upon which this Court could
conclude that Miami-Jacobs “made a knowing, material misrepresentation” about the
arbitration clause “with the intent of inducing the [Plaintiffs’] reliance” on that
misrepresentation, which is Ohio’s standard for voiding the agreement. ABM Farms, Inc.
v. Woods, 692 N.E.2d 574, 578 (Ohio 1998). Therefore, Plaintiffs have not demonstrated
that the arbitration clause itself was fraudulently induced and their “meeting of the
minds” argument fails. 12

12

Plaintiffs argue that the arbitration agreement is invalid because there was no meeting of the
minds or manifestation of mutual assent. However, in Ohio, a valid arbitration clause does not
fail for lack of mutuality, as long as consideration supports the contract. Anderson v. Delta
Funding Corp., 316 F. Supp.2d 554, 566-67 (2004). The Court finds that valid consideration
requires that the parties bargain for performances or return promises. Harmon v. Philip Morris,
Inc., 697 N.E.2d 270 (1997). Valid consideration supports the agreement. Plaintiff cites Walker
v. Ryan’s Family Steakhouses, Inc., 400 F.3d 370, 383-84 (6th Cir. 2005), for the proposition
that a “meeting of the minds” is required for any valid contract. Plaintiffs attempt to avoid the
presumption of arbitrability by alleging that they “did not know, understand, or agree to binding
arbitration upon signing the enrollment application.” (Doc. 22 at 4). However, the portion of
Walker cited by Plaintiffs was actually expressly based on an interpretation of Tennessee law.
11

2. Substantive Unconscionability
“A contract is substantively unconscionable when its terms unreasonably favor
one party over another.” Gilchrist v. Inpatient Med. Servs., Inc., No. 5:09cv2345, 2010
U.S. Dist. LEXIS 86199, at *9 (N.D. Ohio Aug. 23, 2010). “No set of general factors
governs commercial unreasonableness; instead, considerations vary case by case.” Id.
Plaintiffs argue that the arbitration clause is substantively unconscionable because
it is cost-prohibitive. As the parties seeking to invalidate the arbitration clause, Plaintiffs
“bear[] the burden of showing the likelihood of incurring such costs.” Garcia, 2002 Ohio
App. LEXIS 1917 at ¶ 69 (quoting Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 92
(2000)). Plaintiffs cannot simply reply on “generic information contained in AAA
Commercial Rules and unsupported statements.” Id. Instead, they must provide
evidence regarding their “ability to pay the arbitration fees and costs, the expected cost
differential between arbitration and litigation in court, and whether that cost differential is
so substantial as to deter the bringing of claims or cause arbitration to be an unreasonable
alternative to the judicial forum.” Id. at ¶ 70. Assuming Plaintiffs’ summary of
arbitration fees is accurate, Miami-Jacobs has committed to paying any arbitration fees

As the district court stated, “Tennessee courts have at times refused to hold parties to contracts
they have not read…There is strong evidence…that potential employees were given
misinformation about the Agreement and the arbitration process and never told they were
waiving their right to a trial when the Agreement was explained to them.” Walker v. Ryan’s
Family Steak Houses, Inc., 289 F. Supp. 2d 916, 935 (M.D. Tenn. 2003), affirmed citing
Tennessee law, 400 F.3d at 383-84. Conversely, the arbitration agreement in the instant case is
governed by Ohio law, which presumes that an adult who signs a contract has read it and is
conclusively bound by its terms. See, e.g., Garcia, 2002 Ohio App. LEXIS 1917 at ¶ 43.
Although Ohio recognizes an exception for fraud in the inducement (similar to the Tennessee
exception described in Walker where a party was given misinformation before signing),
Plaintiffs do not allege sufficient facts here to support such a claim.
12

incurred in excess of $375.00. (Doc. 22 at 5, n.4 and Singleton I at 5). As noted by the
state court in Singleton, this “eliminates any claim of substantive unconscionability.”
Singleton I at 5. Arbitration is simply not cost-prohibitive.
Plaintiffs have demonstrated neither procedural unconscionability nor substantive
unconscionability and therefore Plaintiffs’ unconscionability argument fails as a matter of
law. 13
C. False Claims Act

Next, Plaintiffs argue that because they asserted claims under the False Claims Act
(“FCA”), the Court must determine whether Congress intended for the claims to be
subject to arbitration.
The Supreme Court has repeatedly recognized that federal statutory claims can be
appropriately resolved through arbitration, and it has enforced agreements to arbitrate
such claims. Green Tree Fin. Corp., 531 U.S. at 79. “Even claims arising under a statute
designed to further important social policies may be arbitrated because ‘so long as the
prospective litigant effectively may vindicate [his or her] statutory cause of action in the
arbitral forum,’ the statute serves its functions.” Id. at 90. The Supreme Court has held
13

Additionally, Plaintiffs argue that Miami-Jacobs waived its right to arbitration because it sued
other students in small claims court for unpaid tuition in the past. However, waiver must be
determined on a individualized basis, and is therefore inapplicable in the instant case. See, e.g.,
Bhole, Inc. v. D&A Plumbing & Heating, Inc., 2007-Ohio-3635, 2007 Ohio App. LEXIS 3323,
at *3 (Ohio App. July 16, 2007). A waiver of a contract term with respect to one counterparty
has no effect on enforcement of the same term in a different contract with a different
counterparty. Chesner v. Stewart Title Guar. Co., No. 1:06cv476, 2009 U.S. Dist. LEXIS 22453,
at *30 (N.D. Ohio Jan. 9, 2009) (citing ISI Sys., Inc. v. Equifax, Inc., No. 93-12186, 1996 U.S.
Dist. LEXIS 882 at *6 (D. Mass. Jan. 12, 1996) (failure to insist upon contractual notice as to
unrelated third party did not waive notice requirement as to claim by plaintiff under same
agreement)).
13

that “having made the bargain to arbitrate, the party should be held to it unless Congress
itself has evinced an intention to preclude a waiver of judicial remedies for the statutory
rights at issue.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991).
Plaintiffs cite Ngyuen v. City of Cleveland, 120 F. Supp. 2d 643, 647 (N.D. Ohio
2000), for the proposition that “arbitration conflict[s] with the underlying purpose” of the
FCA. Plaintiffs also argue that the United States has “not…given” its consent to arbitrate
this non-class claim brought by three of the individual Plaintiffs. (Doc. 22 at 19).
First, the Ngyuen decision has been rejected by this Court. As summarized in
United States ex rel. Cassidy v. KBR, Inc., 590 F.Supp.2d 850, 862-63 (S.D. Texas 2008)
(citing this Court’s decision in Orcutt v. Kettering Radiologists, Inc., 199 F. Supp. 2d 746
(S.D. Ohio 2002)):
[T]o the extent Cassidy relies upon Ngyuen…in support of his
position that an inherent conflict exists, other courts have uniformly
rejected Ngyuen’s reasoning. See United States ex rel. Wilson v.
Kellogg Brown & Root, Inc., 525 F.3d 370, 381 (4th Cir. 2008)
(noting that other courts “have not found Nguyen persuasive”);
McBride, 2007 U.S. Dist. LEXIS 48112, at *4-5 (finding that the
reasoning of Nguyen is “unpersuasive”); Orcutt, 199 F. Supp. 2d at
753-56 (rejecting Nguyen). Indeed, the Nguyen court is the only
court to find FCA retaliation claims are not arbitrable because an
inherent conflict exists between arbitration and the underlying
purposes of the FCA.
Second, the United States indicated that it “is not a party to the arbitration
agreement asserted by Defendants’ in the Motion, and is not bound by any such
arbitration clause.” (Doc. 19). Contrary to Plaintiffs’ argument, the United States has not
withheld its consent to arbitration of the claim, but rather indicated that “any arbitration
ruling as to such a claim must necessarily be deemed a non-binding recommendation.”
14

(Id.) Even if mandatory arbitration of the Plaintiffs’ FCA claim is not binding on the
United States, arbitration is appropriate given the substantive and procedural posture.
Moreover, as the United States has affirmatively elected not to intervene, it cannot
prevent the arbitration of Plaintiffs’ FCA claims against the Defendants.
The FCA states that any actions by a “private person” under the statute are “for the
person and for the United States Government.” 31 U.S.C. § 3730(b). While the FCA
action was necessarily “brought in the name of the Government” (id.), it still represents a
claim belonging to the Plaintiffs themselves. Because the FCA dispute is a “dispute
arising out of or relating to this enrollment agreement,” it falls within the broad scope of
the arbitration clause Plaintiffs signed.
D. Public Policy
Plaintiffs alternatively argue that they should not be required to arbitrate their
Ohio Consumer Sales Practices Act (“CSPA”) claim because: (1) the high costs of
arbitration will prevent them from pursuing their claims; (2) the lack of a public record
helps to further the alleged fraud; (3) the nature of their claims requires the discovery
process available in a court action; and (4) the evidence in a consumer fraud case should
be evaluated by a jury rather than a commercial arbitrator. However, Ohio courts have
rejected these arguments. Gustavus v. Eagle Investments, 2012-Ohio-1433, 2012 Ohio
App. LEXIS 1229, at ¶¶ 26-27, 31 (Ohio App. Mar. 30, 2012) (no impediment to
arbitration under CSPA, the Ohio Corrupt Activities Act, or RICO: “The trial court
rejected Gustavus’s public policy defense [because] the FAA trumps a state statute and
any policy against arbitration…as an obstacle to the accomplishment of Congress’s
15

objectives in enacting the FAA. We agree.”). Therefore, Plaintiffs’ public policy
arguments fail.
E. Class Allegations
Finally, Plaintiffs argue that it would be improper to preclude class action
litigation by requesting them to arbitrate their claims individually.
When an agreement to arbitrate encompasses claims asserted in court, dismissal is
appropriate under Fed. Rule Civ. P. 12(b)(1) for lack of subject matter jurisdiction or
under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be
granted. 14 An arbitration agreement that is silent on the question of class procedures
cannot be interpreted to allow class-wide arbitration. AT&T v. Concepcion, __ U.S. __,
131 S. Ct. 1740, 1750 (2011) (“[T]he ‘changes brought about by the shift from bilateral
arbitration to classwide arbitration are fundamental.’ Classwide arbitration includes
absent parties, necessitating additional and different procedures and involving higher
stakes. Confidentiality becomes more difficult. The conclusion follows that class
arbitration, to the extent it is manufactured…rather than consensual, is inconsistent with
the FAA.”). In the instant case the parties agreed to arbitration, but not class arbitration.
Therefore, each Plaintiff “abandoned his [or her] right to enforce those claims as part of a

14

See, e.g., Simon v. Pfizer Inc., 398 F.3d 765, 773 (6th Cir. 2005) (“[A] compulsory arbitration
provision divests the District Court of jurisdiction.”); Stachurski, 642 F. Supp. 2d at 774-75
(N.D. Ohio 2009) (dismissing case pursuant to Rule 12(b)(1) because plaintiffs’ claims were
referable to binding arbitration and “there is ‘nothing left for the district court to do but execute
judgment.’”).
16

class action.” Hornstein v. Mort. Mkt., Inc., 9 Fed. Appx. 618, 619 (8th Cir. 2001). 15
Accordingly, Plaintiffs waived their class action claims.
IV.

CONCLUSION

Accordingly, for the foregoing reasons, Defendants’ motion to compel
arbitration and dismiss this case (Doc. 14) is hereby GRANTED IN PART and
DENIED IN PART. Specifically, the Court dismisses all claims except those claims
asserted under the False Claims Act. Plaintiffs shall arbitrate all claims, including claims
asserted under the False Claims Act. After arbitration on all claims, the parties shall
either request that the Attorney General consent to the resolution of the FCA claims as
determined at arbitration or resume litigation on the FCA claims in this Court. The Court
hereby STAYS this case pending arbitration. The parties shall notify the Court promptly
upon conclusion of the arbitration with respect to how they intend to proceed.
Defendant Gryphon’s motion to dismiss for lack of personal jurisdiction (Doc.
15) is DENIED without prejudice, subject to refilling upon completion of arbitration, if
required.
IT IS SO ORDERED.
Date: 1/31/13

s/ Timothy S Black
Timothy S. Black
United States District Judge

15

See also Fitzhugh v. Am. Income Life Ins. Co., Case No. 1:11cv5330 (N.D. Ohio Nov. 3, 2011)
(“following the guidance of Concepcion, Plaintiff’s class/collective action claims must be
dismissed while the remainder of the case is referred to arbitration”).
17