Court Opinion

ID: 1022098
Source: CourtListenerOpinion
Date Created: 2013-07-04 23:17:00.557286+00
Date Added: 2024-06-11T09:19:32.621225
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 05-2122

ALVIN DAVIS, JR.; DEANA CORNWELL; ERIC CASH;
RHONDA KAREN CAMPBELL; MATTHEW BROWN; RAFAEL
CABRAL; THOMAS LEE BRADLEY; LAURA ANKERSON;
CALISHA ALEXANDER; STEVEN L. FOWLER; JAMES B.
FLOWERS; OHAZI FARHAN; ROBERT DALE EDWARDS;
DARLENE BARGLE; RICHARD DOTSON, JR.; STEPHEN
DEBRUNNER; ROBERT PHILLIPS; KEVIN QUICK;
IKEISHA ROBERTS; PRISCILLA SAMPLES; JEREMY
SCHULTS; KAREN SEWELL; PAUL SPRINGER; DANIEL
BRITT SURLES; JOSH TWEED; MARY WALLACE; GEORGE
ANTHONY WILLIAMS; KATRINA WILLIAMS; JAMES
BRIAN WINGARD; JAMES MONTGOMERY; KYLE NORRIS;
MEGAN NORRIS; ANGELA PETERSON; JOHN HIGMAN,
JR.; PAUL HOLLAND; JAMES HOOD; CHRISTOPHER
BRUCE HOUSER; KENDRICKS LOTT; JASON MAZYCK;
ARMONDO GARCIA; JASON BLAKE GODFREY; CRYSTAL
HICKS; TIM HENEGAR; DAVID HAROLD; LAURA
MERRELL; DON MONCRIEF; JAMES MCGONNELL; NANCY
COBB; BRADLEY WILLIAM WATERS,

                                            Plaintiffs - Appellees,

           versus

ECPI COLLEGE OF TECHNOLOGY, L.C.,

                                             Defendant - Appellant.

Appeal from the United States District Court for the District of
South Carolina, at Greenville. G. Ross Anderson, Jr., District
Judge. (CA-05-2034)

Argued:   December 1, 2006                 Decided:   March 20, 2007
Before MICHAEL and GREGORY, Circuit Judges, and Gerald Bruce LEE,
United States District Judge for the Eastern District of Virginia,
sitting by designation.

Reversed by unpublished per curiam opinion.

ARGUED: John Michael Bredehoft, KAUFMAN & CANOLES, P.C., Norfolk,
Virginia, for Appellant. Gary W. Poliakoff, POLIAKOFF, POOLE &
ASSOCIATES, Spartanburg, South Carolina, for Appellees. ON BRIEF:
Burt H. Whitt, Heather A. Mullen, Kevin D. Holden, KAUFMAN &
CANOLES, P.C., Richmond, Virginia; Thomas A. Bright, NELSON,
MULLINS, RILEY & SCARBOROUGH, Greenville, South Carolina, for
Appellant.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

           The defendant, an educational institution, required its

students to sign an enrollment agreement containing an arbitration

clause. The plaintiffs (and former students) sued the defendant in

U.S. District Court, claiming that the collective action waiver in

the arbitration clause is unconscionable.           The district court

agreed and issued a preliminary injunction preventing the defendant

from proceeding in forty-seven separate arbitrations that are

pending before the American Arbitration Association (AAA).           We

reverse.   Because the plaintiffs concede that the basic agreement

to arbitrate is valid, the issue of whether the collective action

waiver is unconscionable must be decided in arbitration.

                                I.

           ECPI College of Technology, L.C. (ECPI) is a for-profit

educational institution offering associate degrees in the fields of

technology, business, and health sciences. The school has campuses

in North Carolina, South Carolina, and Virginia.         The plaintiffs

were formerly enrolled at the Greenville, South Carolina, campus.

           ECPI requires students to sign an enrollment agreement

prior to matriculation. A clause in the agreement states that “any

dispute arising out of or in any way related to [the] agreement”

that is not resolved under informal procedures must be submitted to

the AAA for binding arbitration.       J.A. 54.   The arbitration clause

                                   3
contains a collective action waiver, which provides that the

arbitration “shall not include any party other than the College and

Student, and shall not be joined or consolidated with any other

arbitration.”      Id.

            In early 2005 a group of current and former ECPI students

(plaintiffs here) concluded that they had state law claims against

ECPI,   including      claims    that    the   school       provided    substandard

educational services and that it had misrepresented various facts

regarding     credit      transferability       and     job     placement      after

graduation.      The plaintiffs were interested in recovering tuition,

interest, and punitive damages.           In March 2005 forty-seven of the

plaintiffs submitted their claims jointly to the AAA and requested

class arbitration.         The AAA rejected the class treatment request

pursuant    to   the     enrollment     agreement     and    the   AAA’s     internal

policies.    The plaintiffs then filed separate claims with the AAA,

and the AAA began to appoint arbitrators to hear the individual

claims.     In July 2005 the plaintiffs asked the AAA to reconsider

their request for class arbitration.             The plaintiffs argued that

individual    proceedings       would   “massively      compound       and   increase

difficulty in presenting claims, costs, efforts, and time involved

in these cases, all of which thwarts all of the stated purposes of

arbitration.”       J.A. 60.      The AAA again denied the plaintiffs’

request and informed them that it would not consolidate any of the

arbitrations absent agreement by the parties or court order.

                                          4
             The plaintiffs, including two students bringing claims

for the first time, then sued ECPI in U.S. District Court, seeking

a preliminary injunction to prevent the institution from proceeding

in the individual arbitrations.               The plaintiffs claimed that the

collective action waiver was unconscionable under South Carolina

contract    law   and     that   they   would    suffer   irreparable     harm    if

required to conduct forty-seven different arbitration proceedings.

The   district     court    granted     the     preliminary    injunction.        In

considering the factors set out in Blackwelder Furniture Co. v.

Seilig, 550 F.2d 189 (4th Cir. 1977), the court concluded that the

hardship to the plaintiffs of arbitrating forty-seven separate

cases significantly outweighed any potential harm that ECPI would

suffer if required to proceed in a consolidated arbitration.                     The

court     then   added,    “given   the    South    Carolina    Supreme   Court’s

statement in Bazzle[1] and the case law regarding unconscionability

of contracts, the Plaintiffs have an apparent likelihood of success

on the merits.”           J.A. 179.       ECPI now appeals the preliminary

injunction.

      1
      In Bazzle v. Green Tree Fin. Corp., 569 S.E.2d 349 (S.C.
2002), the South Carolina Supreme Court said:       “Although this
present case does not raise this question, we note that preclusion
of class-wide or consolidated arbitration in an adhesion contract,
even if explicit, undermines the principle favoring expeditious and
equitable case disposition absent demonstrated prejudice to the
drafter of the adhesive contract.” Id. at 360 n.21.       The state
court opinion was vacated by the Supreme Court of the United States
in Green Tree Fin. Corp., v. Bazzle, 539 U.S. 444 (2003).

                                          5
                                         II.

             ECPI argues that the preliminary injunction was improper

for two reasons. First, ECPI says that the Federal Arbitration Act

(FAA), 9 U.S.C. §§ 1-16, does not authorize courts to resolve

disputes concerning the procedures employed in an arbitration.

Second, it says that the district court erred in concluding that

the plaintiffs would suffer irreparable harm absent an injunction.

We reverse the preliminary injunction because the plaintiffs only

raise claims about the procedures to be used in arbitrating their

claims.

                                        A.

             Congress passed the FAA to “reverse the longstanding

judicial      hostility       to   arbitration          agreements,”       Gilmer   v.

Interstate/Johnson          Lane   Corp.,       500   U.S.   20,   24   (1991),     and

“eliminate[] any bias in favor of judicial resolution of disputes,”

Dockser v. Schwartzenberg, 433 F.3d 421, 425 (4th Cir. 2006).

Section 2 of the FAA provides that arbitration agreements “shall be

valid, irrevocable, and enforceable,” placing them “upon the same

footing as other contracts.” Dean Witter Reynolds, Inc., v. Byrd,

470   U.S.    213,    219    (1985)    (internal        quotations   and    citations

omitted).       By agreeing to arbitrate, a party does not forgo any

common    law    or   statutory       rights;     “it    only   submits     to   the[]

resolution [of claims] in an arbitral, rather than a judicial,

forum.”      Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, 473

                                            6
U.S.    614,       628    (1985).     Thus,        when    a    contract    contains    an

arbitration clause, the “merits of the underlying dispute . . .

[and]    the       procedural    aspects      of    the     arbitration     itself”     are

presumptively for the arbitrator to decide.                      Dockser, 433 F.3d at

425.

               Judicial review under the FAA is available, however, on

the    limited       “question      whether       the   parties      have   submitted    a

particular dispute to arbitration,” that is, the question of

arbitrability.           Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79,

84 (2002).         A question of arbitrability exists

        in the kind of narrow circumstances where parties would
        likely have expected a court to decide [a] gateway
        matter, where they are not likely to have thought that
        they had agreed that an arbitrator would do so, and where
        reference of the gateway dispute to the court avoids the
        risk of forcing parties to arbitrate a matter that they
        may well not have agreed to arbitrate.

Id. at 83-84.        In other words, a court should intervene only “where

there    is    a    question    regarding         whether      the   parties   should   be

arbitrating at all.”            Dockser, 433 F.3d at 426; see also Pro Tech

Indus. Inc. v. URS Corp., 377 F.3d 868, 871 (8th Cir. 2004)

(stating that a court’s role is limited to deciding “whether a

valid agreement to arbitrate exists”).

                                           B.

               The       plaintiffs   have        not     raised     the    question     of

arbitrability.            They concede that their claims are properly in

arbitration.         The issue, according to them, is “not whether the

                                              7
claims    should    be   arbitrated,   but    rather     how   they   should   be

arbitrated.”       Appellee’s Br. at 7 (emphasis in original); see also

J.A. 123 (plaintiffs’ counsel stating that:               “We’ve asked for a

class     arbitration,     or    in   the    alternative,      a   consolidated

arbitration.        We’ve made that clear not only in the pleadings

before this court, but repeatedly in our requests to the AAA.”).

The question of “what kind of arbitration proceedings” are required

under the arbitration clause is not a gateway issue for a court to

decide.     Green Tree Fin. Corp., v. Bazzle, 539 U.S. 444, 452

(2003).    Once it is clear that the parties agreed to arbitration,

the validity and meaning of particular provisions within the

arbitration clause are for the arbitrator to determine.                        See

Employers Ins. Co. of Wausau v. Century Indem. Co., 443 F.3d 573,

578 (7th Cir. 2006) (holding that arbitrator should decide whether

arbitration clause permits consolidated proceedings); Ciago v.

Ameriquest Mortg. Co., 295 F. Supp. 2d 324 (S.D.N.Y. 2003) (holding

that    unconscionability       challenge   to   forum   selection    provision

within arbitration clause was not a gateway issue).

            We conclude that the district court erred in granting a

preliminary injunction.         The plaintiffs have not alleged that the

basic agreement to arbitrate is unconscionable.                The arbitration

clause provides that all disputes arising out of or relating to the

enrollment agreement, which includes the arbitration clause, must

be decided in arbitration. The plaintiffs must therefore assert in

                                       8
arbitration their claim that the collective action waiver is

unconscionable.2

          For the foregoing reasons, the district court’s order

granting a preliminary injunction is

                                                        REVERSED.

     2
      A   claim   that   an  arbitration    agreement  itself   is
unconscionable is a gateway issue that a court would decide. See,
e.g., Pro Tech Indus. v. URS Corp., 377 F.3d 868, 872-73 (8th Cir.
2004); Snowden v. Checkpoint Check Cashing, 290 F.3d 631, 639 (4th
Cir. 2002). Here, the plaintiffs’ claim that the collective action
waiver provision is unconscionable is asserted as an objection to
procedure, not as an objection to arbitration. For that reason the
plaintiffs have not raised a gateway issue.

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