Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-00061/USCOURTS-casd-3_11-cv-00061-1/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1331 Fed. Question: Breach of Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SCOTT ROSENDAHL and VERONICA

CLARK, on behalf of themselves and all

others similarly situated

Plaintiffs,

CASE NO. 11cv61 WQH (WVG)

ORDER

vs.

BRIDGEPOINT EDUCATION, INC.,

ASHFORD UNIVERSITY, and

UNIVERSITY OF THE ROCKIES,

Defendants.

HAYES, Judge:

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,

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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

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otherwise. The arbitrator must have knowledge of and actual

experience in the administration and operation of postsecondary

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

nonmonetary 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

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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).

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 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 compel arbitration due to waiver.

B. Federal Arbitration Act

The Federal Arbitration Act “was enacted ... in response to widespread judicial hostility

to arbitration agreements.” Concepcion, 131 S. Ct. at 1745 (citation omitted). Section 2 of the

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FAA states: “A written provision in any ... contract evidencing a transaction involving

commerce to settle by arbitration a controversy thereafter arising out of such contract or

transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at

law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The Supreme Court has

described Section 2 “as reflecting both a liberal federal policy favoring arbitration and the

fundamental principle that arbitration is a matter of contract.” Concepcion, 131 S. Ct. at 1745

(quotations omitted). “In line with these principles, courts must place arbitration agreements

on an equal footing with other contracts, and enforce them according to their terms.” Id. at

1745-46 (citations omitted).

“The final phrase of § 2 ... permits arbitration agreements to be declared unenforceable

‘upon such grounds as exist at law or in equity for the revocation of any contract.’ This saving

clause permits agreements to arbitrate to be invalidated by generally applicable contract

defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to

arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” 

Id. at 1746 (quotation omitted). “When state law prohibits outright the arbitration of a

particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the

FAA.” Id. at 1747 (citation omitted). “But the inquiry becomes more complex when a

doctrine normally thought to be generally applicable, such as duress or ... unconscionability,

is alleged to have been applied in a fashion that disfavors arbitration.” Id. (citation omitted). 

“[A] court may not rely on the uniqueness of an agreement to arbitrate as a basis for a state-law

holding that enforcement would be unconscionable, for this would enable the court to effect

what the state legislature cannot.” Id. (quotation omitted).

“Because the FAA mandates that district courts shall direct the parties to proceed to

arbitration on issues as to which an arbitration agreement has been signed, the FAA limits

courts’ involvement to determining (1) whether a valid agreement to arbitrate exists and, if it

does, (2) whether the agreement encompasses the dispute at issue.” Cox v. Ocean View Hotel

Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (emphasis in original; quotation omitted). “If the

response is affirmative on both counts, then the [FAA] requires the court to enforce the

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arbitration agreement in accordance with its terms.” Chiron Corp. v. Ortho Diagnostic Sys.,

Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).

In this case, it is undisputed that the arbitration agreement encompasses the dispute at

issue. However, Plaintiffs dispute the validity of the arbitration agreement. 

C. Validity of Contract

Plaintiffs contend that Defendants have failed to meet their burden of showing that a

valid arbitration agreement exists. Plaintiffs contends that “no signature appears in the two

purported arbitration agreements submitted by Defendants.” (ECF No. 27 at 15). Plaintiffs

contend that “[o]nly type-written notations ‘signed with E-Signature’ - without the names of

Mr. Rosendahl or Ms. Clark - appear in four signature blocks in each application.” Id. at 16. 

Plaintiffs contend that “[u]nder California law, the purported ‘signatures’ - without even a

print-out of Mr. Rosendahl’s or Ms. Clark’s name - cannot satisfy the mutual assent

requirement of contract formation.” Id. 

Defendants assert that Plaintiffs enrolled at Ashford and The Rockies. Defendants

assert that Ashford and The Rockies have an online application process and that Plaintiffs used

the online application forms to apply for enrollment in 2009. Defendants have submitted a

copy of Plaintiff Rosendahl and Plaintiff Clark’s online application forms. (ECF No. 25-2 at

3-46). Defendants have submitted the declaration of Kirk Morrison, University Registrar and

a Vice President of Ashford who states that “[a]s part of the online application process,

students are required to consent to the execution of the enrollment agreement electronically ....” 

(ECF No. 28-1, Decl. Morrison ¶ 3). Defendants have submitted the declaration of Erik

Gaskill, University Registrar of The Rockies who states that The Rockies uses the same

process as Ashford. (ECF No. 28-2, Decl. Gaskill ¶ 3). The application forms contain the

arbitration provision and an “Acknowledgment and Signature” paragraph which states: “My

signature on this application certifies that I have read, understood, and agreed to my rights and

responsibilities as set forth in this Application ....” (ECF No. 25-2 at 21, 43). The Ashford

application’s “Acknowledgment and Signature” section states: “Student name: Scott Andrew

Rosendahl ... Signed with E-Signature [January 21, 2009.]” Id. at 21. The Rockies

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application’s “Acknowledgment and Signature” section states: “Student name: Veronica Lois

Clark ... Signed with E-Signature [July 1, 2009.]” Id. at 43. Morrison and Gaskill state that

“[i]n order for an applicant to proceed with the application they must read a disclosure and

consent form and affirmatively take action by clicking an electronic box which reads ‘I

consent’ at the end of the process.” (ECF No. 28-1, Decl. Morrison ¶ 3; ECF No. 28-2, Decl.

Gaskill ¶ 3). Morrison and Gaskill state that “[th]e phrase ‘Signed with E-Signature,’ is used

to acknowledge assent to the enrollment agreement in lieu of the student’s name, which

appears in other places in the application and enrollment agreement.” Decl. Morrison ¶ 4;

Decl. Gaskill ¶ 4. Morrison and Gaskill state that “[t]he student clicking ‘I consent’ generates

the legend ‘Signed with E-Signature’ automatically.” Id. 

The Supreme Court has held that an arbitration agreement may be challenged “upon

such grounds as exist at law or in equity for the revocation of any contract” Buckeye Check

Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46 (2006) (quotation omitted). The issue of

whether an arbitration agreement exists should be decided by the district court prior to

compelling arbitration. See Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., Inc., 925

F.2d 1136, 1140-41 (9th Cir. 1991) “([A] party who contests the making of a contract

containing an arbitration provision cannot be compelled to arbitrate the threshold issue of the

existence of an agreement to arbitrate. Only a court can make that decision.”). The Court

applies state contract law to determine whether an arbitration agreement to arbitrate exists. See

Pokorny v. Quixtar, 601 F.3d 987, 994 (9th Cir. 2010). The party seeking to enforce

arbitration must show by a preponderance of the evidence that the arbitration agreement “was

a product of a meeting of the minds between the parties.” Bridge Fund Capital Corp. v.

Fastbucks Franchise Corp., 622 F.3d 996, 1005 (9th Cir. 2010) (citing Engalla v. Permanente

Medical Group, Inc., 15 Cal. 4th 951, 972 (1997) (“The [party seeking arbitration] bears the

burden of proving the existence of a valid arbitration agreement by the preponderance of the

evidence, and a party opposing the [arbitration] bears the burden of proving by a

preponderance of the evidence any fact necessary to its defense.”)). 

 In this case, Defendants have submitted a copy of Plaintiff Rosendahl and Plaintiff

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Clark’s online application forms which contain the arbitration agreement and were signed with

e-signature. Plaintiffs have not submitted any evidence that they did not assent to the

enrollment agreements. The Court finds that Defendants have proven the existence of a valid

arbitration agreement. 

D. Unconscionability of Arbitration Provision

Plaintiffs contend that the arbitration provision in the enrollment agreement is

procedurally and substantively unconscionable. 

“[I]n assessing whether an arbitration agreement or clause is enforceable, the Court

should apply ordinary state-law principles that govern the formation of contracts.” Davis v.

O’Melveny & Myers, 485 F.3d 1066, 1072 (9th Cir. 2007) (quotation omitted). Under

California law, a contractual clause is unenforceable if it is both procedurally and substantively

unconscionable. See id. (citing, inter alia, Armendariz v. Found. Health Psychcare Servs.,

Inc., 24 Cal. 4th 83, 114 (2000)). “Courts apply a sliding scale: ‘the more substantively

oppressive the contract term, the less evidence of procedural unconscionability is required to

come to the conclusion that the term is unenforceable, and vice versa.’” Id. (quoting

Armendariz, 24 Cal. 4th at 114). “Still, ‘both [must] be present in order for a court to exercise

its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’” 

Id. at 1072-73 (quoting Armendariz, 24 Cal. 4th at 114). “[T]he party opposing arbitration has

the burden of proving the arbitration provision is unconscionable.” Higgins v. Superior Court,

140 Cal. App. 4th 1238, 1249 (2006) (quotation omitted).

A court determination that “the arbitration agreement contains ... flawed provisions does

not necessarily mean that the entire [arbitration agreement] is substantively unconscionable.” 

Davis, 485 F.3d at 1084. The court must next consider whether it is “possible to sever the

[unconscionable] provision.” Id. (citation omitted).

1. Procedural Unconscionability

Plaintiffs contend that the arbitration provision is procedurally unconscionable because

the enrollment agreement is a contract of adhesion. Plaintiffs further contend that the

arbitration provision is procedurally unconscionable because the arbitration provision refers

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to the rules of the American Arbitration Association, but there is no evidence that Plaintiffs

were provided with the rules. 

Defendants contend that adhesion contracts are not unconscionable per se. Defendants

contend that “Plaintiffs have not, and cannot, contend they were rushed or pressured during

the enrollment process, the arbitration provision was hidden in the Enrollment Agreement, or

there exists some other indicia of procedural unconscionability—and they have provided no

evidence to support such a theory.” (ECF No. 28 at 6). Defendants contend that the rules of

the American Arbitration Association are readily available online. 

The “[p]rocedural unconscionability analysis focuses on ‘oppression’ or ‘surprise.’” 

Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1280 (9th Cir. 2006) (quoting Flores v.

Transamerica HomeFirst, Inc., 93 Cal. App. 4th 846, 853 (2001)). “‘Oppression arises from

an inequality of bargaining power that results in no real negotiation and an absence of

meaningful choice,’ while ‘[s]urprise involves the extent to which the supposedly agreed-upon

terms are hidden in a prolix printed form drafted by the party seeking to enforce them.’” Id.

(quoting Flores, 93 Cal. App. 4th at 853). 

“The term [contract of adhesion] signifies a standardized contract, which, imposed and

drafted by the party of superior bargaining strength, relegates to the subscribing party only the

opportunity to adhere to the contract or reject it.” Armendariz v. Foundation Health Psychcare

Services, Inc., 24 Cal.4th 83, 113 (2000) (quotation omitted) (“Unconscionability analysis

begins with an inquiry into whether the contract is one of adhesion.”). A contract of adhesion

is procedurally unconscionable when it is “presented on a take-it-or-leave-it basis and [is]

oppressive due to ‘an inequality of bargaining power that result[ed] in no real negotiation and

an absence of meaningful choice.’” Nagrampa, 469 F.3d at 1281 (quoting Flores v.

Transamerica HomeFirst, Inc., 93 Cal. App.4th 846, 853 (2001); see also Circuit City Stores,

Inc. v. Adams, 279 F.3d 889, 893 (9th Cir.2002) (“The [agreement] is procedurally

unconscionable because it is a contract of adhesion: a standard-form contract ....”). However,

in Conception, the contract at issue was a contract of adhesion. The Supreme Court held that

California’s prohibition on class action waiver in arbitration agreements is preempted by the

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Federal Arbitration Act in part because “[t]he rule [against class action waivers] is limited to

adhesion contracts, but the times in which consumer contracts were anything other than

adhesive are long past.” Conception, 131 S. Ct. at 1750. In light of Conception, the Court

does not find that the adhesive nature of the agreement weighs strongly in favor of procedural

unconscionability. 

Procedural unconsionability may be found when an arbitration provision refers to

arbitration rules but a copy of those rules are not provided to the individual. See Zullo v.

Superior Court, 197 Cal. App. 4th 477, 485 (2011) (“The absence of the AAA (American

Arbitration Association) arbitration rules adds a bit to the procedural unconscionability.”); see

also Trivedi v. Curexo Technology Corp., 189 Cal. App. 4th 387, 393 (2010) (holding that

failure to attach arbitration rules added to the procedural unconscionability). In this case, the

arbitration provision provides that arbitration would be conducted “in accordance with the

Commercial Arbitration Rules of the American Arbitration Association in effect or in

accordance with procedures that the parties agree to in the alternative.” (ECF No. 25-2 at 20).

Plaintiffs were not provided a copy of the rules of the American Arbitration Association. The

Court finds that the absence of the rules of the American Arbitration Association “adds” to 

the procedural unconscionability. Zullo, 197 Cal. App. 4th at 485.

The Court finds that the arbitration agreement contains elements of procedural

unconscionability. 

2. Substantive Unconscionability

Plaintiffs contend that the arbitration provision is substantively unconscionable on the

grounds that it contains “one-sided terms – favoring only Defendants” including: (1) locating

the arbitration near Defendants; (2) requiring the arbitrator to have knowledge and experience

in postsecondary education administration; (3) requiring students to bear their own costs and

split the costs of arbitration; (4) prohibiting an award of punitive damages, treble damages,

consequential or direct damages, and attorney’s fees; and (5) barring class actions. (ECF No.

27 at 20). 

Defendants contend that the arbitration provisions are not one-sided on the grounds that

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the provisions bind Defendants as well as Plaintiffs. 

“Substantive unconscionability relates to the effect of the contract or provision. A lack

of mutuality is relevant in analyzing this prong. The term focuses on the terms of the

agreement and whether those terms are so one-sided as to shock the conscience.” Davis, 485

F.3d at 1075 (quotation omitted) (emphasis in original). “A determination of substantive

unconscionability involves whether the terms of the contract are unduly harsh or oppressive.” 

Id. (quotation omitted).

a. Location of the Arbitration 

Plaintiffs contend that the arbitration provision requiring the location of the arbitration

to be near Defendants is a one-sided term favoring only Defendants. 

Defendants contend that the forum selection clause is not unconscionable because it

allows the parties to agree upon a location and Defendants agree to hold the arbitrations “either

in San Diego, or near [Rosendahl and Clark’s] place of residence.” (ECF No. 28 at 8).

 The arbitration agreement states: “Any such arbitration shall take place before a

neutral arbitrator in a local near [Defendants] unless the Student and [Defendants] agree

otherwise.” (ECF No. 25-2 at 21). 

The Court finds that the clear terms of arbitration provision provide that the parties can

agree on the location of the arbitration. By filing suit in this Court, Plaintiff has effectively

chosen San Diego. Defendants have agreed to San Diego as the location for arbitration or a

location near Plaintiffs’ places of residence. The Court finds that Plaintiff has failed to

demonstrate that the arbitration agreement is substantively unconscionable because of the

location provision in the arbitration agreement.

b. Arbitrator with Knowledge and Experience in Postsecondary

Education Administration

Plaintiffs contend that the arbitration provision requiring the arbitrator to have

knowledge and experience in postsecondary education administration is a one-sided term

favoring only Defendants. 

Defendants contend that the requirement for the arbitrator to have knowledge and

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experience in postscondary education administration is not unconscionable and the parties may

agree to an arbitrator without that experience. 

The arbitration agreement states: “The arbitrator must have knowledge of an actual

experience in the administration and operation of postsecondary educational institutions unless

the parties agree otherwise.” (ECF No. 25-2 at 20). 

Plaintiffs have failed to state any reason that requiring the arbitrator to have knowledge

and experience in postscondary education administration favors only Defendants. The terms

of the arbitration provision provide that the parties can agree on an arbitrator without

knowledge and experience in postscondary education administration. The Court finds that

Plaintiffs have failed to demonstrate that the arbitration agreement is substantively

unconscionable because of the requirement for the arbitrator to have knowledge and experience

in postscondary education administration unless the parties agree otherwise.

c. Costs 

Plaintiffs contend that the arbitration provision requiring students to bear their own

costs and split the costs of arbitration is a one-sided term favoring only Defendants. 

Defendants contend that the fee-splitting provision is not unconscionable on the grounds

that it allows the parties to agree to a different division and Defendants agree to pay for “any

fees and costs in arbitration that Plaintiffs would not otherwise incur in court.” (ECF No. 28

at 8). Defendants also contend that the rules of the American Arbitration Association allows

for fee waivers. 

The arbitration agreement states: “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 ....” (ECF No. 25-2 at 20). 

An arbitration provision may be unconscionable when it requires an individual “to bear

any type of expense that the [individual] would not be required to bear if he or she were free

to bring the action in court.” Armendariz, 24 Cal. 4th at 110-11 (emphasis in original). 

Plaintiffs have failed to identify any fee or cost that they would be required to bear in

arbitration which they would not be required to bear in this case. Even so, Defendants have

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agreed to pay for any fees and costs in arbitration that Plaintiffs would not otherwise incur in

court. The Court finds that Plaintiffs have failed to demonstrate that the arbitration agreement

is substantively unconscionable because of the requirement that students bear their own costs

and split the costs of arbitration unless the parties otherwise agree. 

d. Prohibition on Certain Damages

Plaintiffs contend that the arbitration provision prohibiting an award of punitive

damages, treble damages, consequential or direct damages, and attorney’s fees is a one-sided

term favoring only Defendants. 

Defendants contend that the prohibition on certain types of damages binds both parties;

however, if the court finds the term to be unconscionable, it could be severed. 

The arbitration agreement states: “The arbitrator shall not have any authority to award

punitive damages, treble damages, consequential or indirect damages, ... or to award attorney’s

fees....” (ECF No. 25-2 at 20).

An arbitration provision that requires an individual to waive remedies that they would

otherwise be entitled to may be substantively unconscionable. See Armendariz, 24 Cal. 4th at

110-11 (holding that an arbitration provision that required an individual to waive their statutory

rights was unenforceable); see also Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1179 (9th

Cir. 2003) (holding that an arbitration agreement was substantively unconscionable “[b]ecause

the remedies limitation improperly proscribes available statutory....”); Circuit City Stores, Inc.

v. Adams, 279 F.3d 889, 894 (9th Cir. 2002) (holding that an arbitration agreement was

unenforceable because it “force[d plaintiff] to arbitrate his statutory claims without affording

him the benefit of the full range of statutory remedies.”).

Plaintiffs have failed to identify any statutory remedies that they are entitled to but are

not available to them in arbitration. However, Plaintiffs have asserted claims for violation of

the Consumer Legal Remedies Act which allows recovery of punitive damages and attorney’s

fees. See Cal. Civ. Code § 1780. The Court finds that the arbitration provision which

proscribes available statutory remedies of punitive damages and attorney’s fees is substantively

unconscionable. 

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A court determination that “the arbitration agreement contains ... flawed provisions does

not necessarily mean that the entire [arbitration agreement] is substantively unconscionable.” 

Davis v. O'Melveny & Myers, 485 F.3d 1066, 1084 (9th Cir. 2007). The court next considers

whether it is “possible to sever the [unconscionable] provision.” Id. (citing Cal. Civ. Code §

1670.5(a) (“If the court as a matter of law finds the contract or any clause of the contract to

have been unconscionable at the time it was made the court may refuse to enforce the contract,

or it may enforce the remainder of the contract without the unconscionable clause, or it may

so limit the application of any unconscionable clause as to avoid any unconscionable result.”)).

In Armendariz, the California Supreme Court stated that “the statute [i.e., Cal. Civ.

Code § 1670.5] appears to give a trial court some discretion as to whether to sever or restrict

the unconscionable provision or whether to refuse to enforce the entire agreement. But it also

appears to contemplate the latter course only when an agreement is permeated by

unconscionability.” Armendariz, 24 Cal. 4th at 122. The Court stated:

Courts are to look to various purposes of the contract. If the central purpose of

the contract is tainted with illegality, then the contract as a whole cannot be

enforced. If the illegality is collateral to the main purpose of the contract, and

the illegal provision can be extirpated from the contract by means of severance

or restriction, then such severance and restriction are appropriate.

Id. at 124; see also Davis, 485 F.3d at 1084 (“The question is whether the offending clause or

clauses are merely ‘collateral’ to the main purpose of the arbitration agreement, or whether the

[entire arbitration agreement] is ‘permeated’ by unconscionability.”) (quoting Armendariz, 24

Cal. 4th at 124). In Davis, the Court of Appeals for the Ninth Circuit decided that, while the

arbitration agreement under consideration had a lesser degree of unconscionability as those

considered in Ingle or in Adams, the agreement nonetheless could not be cured by severance

when the agreement was procedurally unconscionable and contained four substantively

unconscionable terms which “cannot be stricken or excised without gutting the agreement.” 

Id.

In this case, unlike in Davis, the arbitration agreement has an element of procedural

unconscionability and contains one substantively unconscionable provision. The substantively

unconscionable provision in this case has a lower degree of unconscionability than the four

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substantively unconscionable provisions at issue in Davis. Cf. Davis, 485 F.3d at 1082

(holding that the four substantively unconscionable provisions included a “carve out”

provision, a confidentiality provision, an “all-inclusive bar to administrative actions ... [which]

is contrary to U.S. Supreme Court and California Supreme Court precedent,” and a “notice

provision” which functioned as “a substantively-unconscionable shortened statute of

limitations”). The Court finds that, given “the liberal federal policy favoring arbitration,” the

single substantively unconscionable provision may be severed from the agreement. 

Concepcion, 131 S. Ct. at 1745. The Court finds that the entire arbitration agreement is not

“permeated by unconscionability.” Davis, 485 F.3d at 1084 (quotation omitted). The

substantively unconscionable provision that “[t]he arbitrator shall not have any authority to

award punitive damages, treble damages, consequential or indirect damages, ... or to award

attorney’s fees....” which would otherwise be available is severed from the arbitration

agreement pursuant to California Civil Code § 1670.5. (ECF No. 25-2 at 20). 

The Court finds that, after the substantively unconscionable provision is severed, the

arbitration agreement is enforceable.

E. California Private Attorney General Act Claims

Plaintiffs contend that arbitration would deny Plaintiffs of their right to seek injunctive

relief pursuant to California’s Private Attorney General Act on behalf of the public. Plaintiffs

contend that the ruling in Concepcion is “no impediment” to Plaintiffs’ Private Attorney

General Act claims. (ECF No. 27 at 23 n.5). 

Defendants contend that Plaintiff’s Private Attorney General Act claims are arbitrable

pursuant to Concepcion. Defendants contend that California’s exemption for claims seeking

public injunctive relief was invalidated by Concepcion. 

Prior to Concepcion, California courts held that claims pursuant to California’s Private

Attorney General Act seeking public injunctive relief cannot be sent to arbitration. See

Broughton v. Cigna Healthplans of Cal., 21 Cal.4th 1066 (1999) (holding that public

injunction claim pursuant to the Consumer Legal Remedies Act are not arbitrable); Cruz v.

PacifiCare Health Sys., Inc., 30 Cal.4th 303 (2003) (holding that public injunction claims

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pursuant to California’s Unfair Competition Law and False Advertising Law are not

arbitrable). 

In Concepcion, the United States Supreme Court stated that a state “cannot require a

procedure that is inconsistent with the Federal Arbitration Act, even if it is desirable for

unrelated reasons,” Concepcion, 131 S. Ct. at 1753, nor can a state “prohibit[] outright the

arbitration of a particular type of claim,” id. at 1747. After Concepcion, some courts continue

to hold that claims seeking public injunctive relief cannot be sent to arbitration. See Ferguson

v. Corinthian Colleges, Case Nos. SACV 11–0127 DOC (AJWx), SACV 11–0259 DOC

(AJWx), 2011 WL 4852339 at 7 (C.D. Cal. Oct. 6, 2011); In re DirecTV Early Cancellation

Fee Marketing & Sales Practices Lit., Case No. 2011 WL 4090774 at 10 (C.D. Cal. Sept. 6,

2011). However, the majority of cases have held that state law rules set forth in Broughton and

Cruz are the type of state laws that Concepcion found to be preempted by the Federal

Arbitration Act. See Grabowski v. Robinson, Case No. 10cv1658–WQH–MDD, 2011 WL

4353998 at *19 (S.D. Cal. Sept. 19, 2011); Kaltwasser v. AT & T Mobility LLC, Case No. C

07–00411, 2011 WL 4381748 at *7 (N.D. Cal. Sept. 20, 2011); Nelson v. AT&T Mobility, LLC,

No. C10-4802, 2011 WL 3651153 at *4 (N.D. Cal. Aug. 18, 2011); In re Gateway LX6810

Computer Prods. Litig., No. SACV 10–1563–JST (JEMx), 2011 WL 3099862 at *3 (C.D. Cal.

July 21, 2011); Arellano v. T–Mobile USA, Inc., No. C 10–05663 WHA, 2011 WL 1842712

at *2 (N.D. Cal. May 16, 2011).

Plaintiffs assert representative claims pursuant to the California Private Attorney

General Act. Although there is a split in holdings regarding whether the Federal Arbitration

Act preempts California law that claims pursuant to California’s Private Attorney General Act

seeking public injunctive relief cannot be sent to arbitration, the Court finds the reasoning of

the majority following Concepcion to be more persuasive. The Court finds that Plaintiffs’

claims seeking public injunctive relief pursuant to California Private Attorney General Act

claims are arbitrable and that the arbitration agreement’s provision barring Plaintiffs from

bringing those claims on behalf of others is enforceable.

VI. Conclusion

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IT IS HEREBY ORDERED that 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) is GRANTED, as discussed above. The Clerk of the

Court shall administratively close this case without prejudice to any party moving to have the

case reopened for good cause.

DATED: February 28, 2012

WILLIAM Q. HAYES

United States District Judge

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