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Scott Rosendahl and Veronica Clark, On v. Bridgepoint Education

February 28, 2012

SCOTT ROSENDAHL AND VERONICA CLARK, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED
PLAINTIFFS,
v.
BRIDGEPOINT EDUCATION, INC., ASHFORD UNIVERSITY, AND UNIVERSITY OF THE ROCKIES, DEFENDANTS.



The opinion of the court was delivered by: Hayes, Judge:

ORDER

The matter before the Court is the Petition to Compel Arbitration and to Stay Case Pending Arbitration filed by Defendants Bridgepoint Education, Inc., Ashford University, and University of the Rockies. (ECF No. 25).

I. Procedural Background

On January 11, 2011, Plaintiffs initiated this action by filing the Complaint. (ECF No. 1). On March 15, 2011, Defendants Bridgepoint Education, Inc., Ashford University, and University of the Rockies filed a Motion to Dismiss and a Motion to Strike the Complaint. (ECF Nos. 10-11). On October 17, 2011, the Court issued an Order granting in part and denying in part the Motion to Dismiss. (ECF No. 21).

On November 14, 2011, Defendants filed an Answer and a Petition to Compel Arbitration and to Stay Case Pending Arbitration. (ECF Nos. 24-25). On December 5, 2011, Plaintiff filed an Opposition to the Petition to Compel Arbitration. (ECF No. 27). On December 12, 2011, Defendants filed a Reply. (ECF No. 28).

II. Allegations in the Complaint

Plaintiff Scott Rosendahl alleges that he spoke with an online enrollment advisor at Ashford University ("Ashford"), enrolled in online courses, and completed five online courses by 2009. (ECF No. 1). Plaintiff Rosendahl alleges that the "enrollment advisor misleadingly claimed that Ashford offered 'one of the cheapest undergraduate degree programs in the country[,]'" but it does not. Id. at ¶ 23. Plaintiff Veronica Clark alleges that she spoke with an enrollment advisor at the University of the Rockies ("The Rockies"), enrolled in the doctor of psychology program, and completed nearly one year of the program. Plaintiff Clark alleges that the enrollment advisor told her that the doctor of psychology program "would qualify [Clark] for licensure as a clinical psychologist in the U.S. military" and that "the total cost of her Doctor of Psychology ('PsyD') degree program would be $53,000," but those statements were false. Id. at ¶¶ 58, 60. Plaintiffs assert claims for violation of the Unfair Competition Law, for violation of the False Advertising Act, for violation of the Consumer Legal Remedies Act, for negligent misrepresentation, and for fraud.

III. Factual Background

On January 21, 2009, Plaintiff Rosendahl entered into an enrollment agreement with Ashford. (ECF No. 25-2 at 21). On June 1, 2009, Plaintiff Clark entered into an enrollment agreement with The Rockies. Id. at 43. The enrollment agreements contained an arbitration agreement which states:

Any disputes or controversies between the parties to this Agreement arising out of or relating to the student's recruitment, enrollment, attendance, education, billing, financial aid, financing options, student finance agreement, disbursement of funds, excess funds and other payments or career service assistance by [Defendants] or to this Agreement shall be resolved ... by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association the in effect or in accordance with procedures that the parties agree to in the alternative. ... Any such arbitration shall be the sole remedy for the resolution of any dispute or controversies between the parties to this agreement. Any such arbitration shall take place before a neutral arbitrator in a local near [Defendants] unless the Student and [Defendants] agree otherwise. The arbitrator must have knowledge of and actual experience in the administration and operation of post-secondary educational institutions unless the parties agree otherwise.... The arbitrator shall have the authority to award monetary damages measured by the prevailing party's actual damages and may grant any non-monetary remedy or relief that the arbitrator deems just and equitable .... The arbitrator shall not have any authority to award punitive damages, treble damages, consequential or indirect damages, ... or to award attorney's fees....

The parties shall bear their own costs and expenses. The parties also shall bear an equal share of the fees and costs of the arbitration ... unless the parties otherwise agree .... You and [Defendants] may bring claims against the other in your or its individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding (including but not limited to, class actions and class arbitrations).

Id. at 20, 42.

IV. Contentions of the Parties

Defendants seek an order compelling Plaintiffs to arbitrate their claims. Defendants contend that each of Plaintiffs' claims are subject to the arbitration agreement. Defendants contend that the United States Supreme Court's recent decision in AT&T Mobility LLC v. Concepcion, __U.S.__, 131 S.Ct. 1740 (2011) affirmed the validity of class action arbitration waivers. Defendants contend that they have not waived their right to seek arbitration.

Plaintiffs contend that Defendants have waived their right to arbitration by litigating this case. Plaintiffs contend that Defendants have failed to establish the existence of a valid arbitration agreement. Plaintiffs contend that the arbitration agreement is procedurally and substantively unconscionable. Plaintiffs contend that the Court should refuse to enforce the arbitration agreement with regard to the public injunction claims contained in Plaintiff's claims for violation of the Unfair Competition Law, for violation of the False Advertising Act, and for violation of the Consumer Legal Remedies Act.

V. Discussion

A. Waiver

Plaintiffs contend that Defendants have filed motions to dismiss and to strike the complaint in this case. Plaintiffs contend that the Concepcion case was decided a few weeks after Defendants' motion to dismiss was fully briefed, but Defendants did not assert their claim that the case should be arbitrated until after the Court issued a decision on the motion. Plaintiffs contend that "Defendants' motive is plain: they preferred obtaining dismissal of Plaintiffs' complaint and if their motion to dismiss and to strike failed, they would try their hands at arbitration." (ECF No. 27 at 13). Plaintiffs contend that they have been prejudiced because they were forced to oppose the motion to dismiss and "defendants succeeded in eliminating several of Plaintiffs' claims and narrowing the remaining claims." Id. at 14.

Defendants contend that they have not waived their right to compel arbitration on the grounds that the case is in its early stages. Defendants state that "[n]o discovery has taken place in the case, and the only action taken by Defendants was the filing of a motion to dismiss." (ECF No. 28 at 4). Defendants contend that the Court of Appeals for the Ninth Circuit has found that prejudice is not shown by responding to a motion to dismiss.

In determining whether arbitration has been waived pursuant to California law, the court may consider the following factors:

(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.

Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1124 (9th Cir. 2008) (quoting St. Agnes Med. Ctr. v. PacifiCare of Cal., 31 Cal. 4th 1187, 1196 (2003)). The waiver inquiry "must be conducted in light of the strong federal policy favoring enforcement of arbitration agreements." Id. at 1125 (quoting Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir. 1986)). "Because waiver of the right to arbitration is disfavored, any party arguing waiver of arbitration bears a heavy burden of proof." Fisher, 791 F.2d at 694 (quotation omitted); see also Sobremonte v. Superior Court, 61 Cal. App. 4th 980, 991 (1998) ("Since arbitration is a strongly favored means of resolving disputes, courts must closely scrutinize any claims of waiver. A party claiming that the right to arbitrate has been waived has a heavy burden of proof.") (quotation omitted).

In this case, the Complaint asserts class action claims. The motion to dismiss was filed and briefed prior to the Supreme Court's decision in AT&T Mobility, LLC v. Concepcion, __U.S.__, 131 S. Ct. 1740 (2011) abrogating California court holdings that waivers of class action litigation in arbitration agreements were unenforceable. No other dispositive motions have been filed, no motion for class certification has been filed, and no trial date has been set. The Court finds that the second and third waiver factors (i.e., "whether the litigation machinery has been substantially invoked" and "whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay") do not favor a finding of waiver. Cox, 533 F.3d at 1124 (quotation omitted). Defendants did not file a counterclaim, and there is no showing that Defendants obtained discovery which would not have been available in arbitration. Cf. id. (fourth and fifth waiver factors). The Court finds that Plaintiff has failed to show that Defendants acted inconsistently with a known right to arbitrate. See Fisher, 791 F.2d at 697.

Plaintiffs contend that they have been prejudiced by opposing the motion to dismiss. The Court finds that Plaintiffs have failed to establish that "the delay [in moving to compel arbitration] affected, misled, or prejudiced" Plaintiffs within the meaning of the relevant caselaw. Cox, 533 F.3d at 1124; cf. Fisher, 791 F.2d at 698 ("[T]he [plaintiff]s make the surprising contention that they have been prejudiced because they 'willingly incurred the substantial expense involved in this litigation in order to benefit from a full jury trial.' This wound was self-inflicted. The [plaintiff]s were parties to an agreement making arbitration of disputes mandatory. They violated that agreement by including their arbitrable claims in this action. Any extra expense incurred as a result of the [plaintiffs]' deliberate choice of an improper forum, in contravention of their contract, cannot be charged to [defendant].").

After considering the relevant factors, the Court finds that Defendants are not precluded from seeking to ...


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