Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App.: Students required to arbitrate claims against nursing school, (Oct 3, 2013)

By Jody Coultas, J.D.

Nursing students should have been compelled to arbitrate claims against Action Education Services, Inc. (AES), a California appellate court has held (Merrill v. Action Education Services, Inc., October 2, 2013, Chavez, V.).

The complaining students enrolled in the AES nursing program. As part of their enrollment, the students signed an enrollment agreement (EA) and one or more retail installment sales contracts (RIC). All of the RICs, and the EA signed by one of the students, contained an arbitration provision. The students alleged that the school engaged in deceptive practices that induced them to incur federal student loan debt in order to enroll, but those programs failed to adequately prepare them for employment.

The trial court ordered arbitration of the students’ individual claims under the RICs as well as one student’s claims under the enrollment agreement. Because the other student’s agreement did not contain an arbitration clause, the court declined to order arbitration and held that incorporating the EA into the RIC did not render the EA subject to the arbitration. The trial court also stayed the remainder of the case, including the class claims and the UCL claims.

The order staying the class claims was not appealable, according to the court. The students argued that the order staying the class action claims was not an appealable final order because those claims had not yet been presented to the trial court in a motion for class certification. Because no motion to certify the class was filed, the issues of whether the arbitration agreements permit class arbitration, who should decide whether plaintiffs’ class action claims are arbitrable, and who should certify a proposed class were not properly before the trial court and could not be reviewed by the court.

The trial court erred by denying the petition to compel arbitration of the EA-related claims, according to the court. The RICs signed by the student contained an arbitration provision and incorporated the terms of the EA into the RIC. A party may be bound by an arbitration clause which has been incorporated by reference from another agreement when the reference is clear and unequivocal, the reference calls to the attention of the other party and the party must consent thereto, and the terms of the incorporated document are known and easily available to the contracting parties. Tran’s RICs expressly incorporate by reference the terms of his EA. In this case, the incorporation met these requirements. The express incorporation by reference of the student’s EA into the RICs subjected the student’s EA-related claims to the arbitration provision contained in the RICs.

The court declined to dismiss the trial court’s motion to compel arbitration. An order granting a motion to compel arbitration is generally not appealable. An appellate court may treat a purported appeal from a nonappealable order as a petition for writ of mandate in unusual and extraordinary circumstances. The students failed to present any extraordinary circumstances that would warrant the issuance of a writ in this case.

The case is No. B240202.

Attorneys: Geralyn L. Skapik (Skapik Law Group) for Crystal Merrill. Keith Zakarin (Duane Morris LLP) for Action Education Services, Inc.

Companies: Action Education Services, Inc.

Cases: StateUnfairTradePractices CaliforniaNews