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California Association of Private Postsecondary Schools

Appeals Court Sends Students’ Claims Against Corinthian to Arbitration

10/31/2013

The Chronicle of Higher Education.  October 29, 2013.  A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit has unanimously ruled that students who accused Corinthian Colleges Inc. of deceiving them about the cost and quality of its programs must take their claims to arbitration.

The appellate panel’s opinion, issued on Monday, reverses a lower court’s ruling that had denied Corinthian’s motion to compel arbitration of the students’ claims, as stipulated in the enrollment agreements they signed. The lower-court judge, David O. Carter of the U.S. District Court in Santa Ana, Calif., had based his October 2011 ruling on a California legal doctrine known as the Broughton-Cruz Rule, under which claims seeking injunctive relief “for the benefit of the general public rather than the party bringing the action” are exempt from arbitration.

But the Ninth Circuit panel held that the Federal Arbitration Act pre-empts the California rule, citing U.S. Supreme Court decisions issued before and after Judge Carter’s ruling to support its opinion. The panel remanded the case to the district court, with instructions for it to grant the motion to compel arbitration and to stay the students’ lawsuit pending the outcome of the arbitration process.

According to the San Francisco Chronicle, the ruling could raise the stakes for a similar suit filed by the State of California against Corinthian. That suit, filed on October 10 by the state’s attorney general, accuses the company and the colleges it operates of misrepresenting job-placement information and other deceptive practices. The attorney general is not bound by agreements like those the students signed requiring arbitration.

The company said in response to the state’s lawsuit that it was committed to regulatory compliance and had “robust processes in place to correctly record and disclose the job-placement information we receive from our graduates and their employers.”