Cost-Prohibitive State Law Claims Compelled While Federal Claims Stay In Court?
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A recent decision from a federal district court in Tennessee raises a discrepancy in how the courts treat arbitration agreements that hinder a plaintiff’s state law and federal law claims. Cases under the FAA state that arbitration agreements cannot be enforced if enforcement means plaintiffs will not be able to effectively vindicate their federal statutory rights (as the DOJ argued recently). But what happens if plaintiffs cannot effective vindicate their rights under state statutes in arbitration? That is the situation that the court addressed in Dean v. Draughons Junior College, Inc., __ F. Supp. 2d __, 2013 WL 173249 (M.D. Tenn. 2013).
In Dean, a class of students at affiliated junior colleges alleged the colleges violated state statutes by making false representations about their record of placing students in jobs. The colleges moved to compel arbitration, based on an arbitration agreement with all of the students that included a delegation clause (authorizing the arbitrator to determine even the validity of the arbitration agreement). The class of students argued that the delegation clause itself was unenforceable, because it was prohibitively expensive for the students to arbitrate the validity of the arbitration agreement. (There was no class action waiver.)
Read original articleTags: arbitration agreement, arbitration agreements, Draughons Junior College, Inc.
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