Ferguson, et al. v. Corinthian Colleges, Inc., et al., No. 11-56965 (9th Cir. 2013)
Annotate this CasePlaintiffs filed a putative class action suit on behalf of current and former students, alleging that Corinthian engaged in a deceptive scheme to entice the enrollment of prospective students in violation of California law. Corinthian moved to compel arbitration pursuant to arbitration clauses in plaintiffs' enrollment agreements. The court concluded that the Broughton-Cruz rule, which exempted claims for "public injunctive relief" from arbitration, was preempted by the Federal Arbitration Act (FAA), 9 U.S.C. 2. In the alternative, the court concluded that plaintiffs' claims were within the scope of their arbitration agreements and plaintiffs were required to arbitrate their public injunction claims. Accordingly, the court reversed the district court's order denying Corinthian's motion to compel arbitration and remanded.
Court Description: Arbitration. The panel reversed the district court’s partial denial of the motion of Corinthian Colleges, Inc., and related entities, which own and operate for-profit academic institutions, to compel arbitration in a putative class action on behalf of current and former students, alleging that Corinthian engaged in a deceptive scheme to entice the enrollment of prospective students in violation of California law. Pursuant to arbitration clauses in plaintiffs’ enrollment agreements, Corinthian moved to compel arbitration. The district court granted the motion in part but denied the motion regarding plaintiffs’ claims for injunctive relief under California’s unfair competition law, false advertising law, and Consumer Legal Remedies Act. The court relied on decisions by the California Supreme Court establishing the so-called Broughton-Cruz rule, which exempts claims for “public injunctive relief” from arbitration. The panel held that the Broughton-Cruz rule was preempted by the Federal Arbitration Act. The panel concluded that prior circuit authority, Davis v. O’Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007) (applying Broughton- Cruz rule), was not controlling because it was clearly irreconcilable with subsequent United States Supreme Court decisions concerning the FAA. The panel held that under AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and Marmet Health Care Center, Inc. v. Brown, 132 S. Ct. 1201 (2012) (per curiam), the Broughton-Cruz rule was preempted because it prohibits outright arbitration of a particular type of claim. The panel rejected the plaintiffs’ alternative argument that they should not be required to arbitrate their public injunction claims because those claims did not fall within the scope of their arbitration agreements. The panel remanded with the instruction that the district court direct all of the plaintiffs’ claims to arbitration and stay the action pending arbitration.
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