Brumley v. Commonwealth Business ColLege Education Corp.
945 N.E.2d 770
| Ind. Ct. App. | 2011Background
- Plaintiffs signed Enrollment Agreements and separate Arbitration forms with identical arbitration clauses.
- Alleged misrepresentations about Brown Mackie College accreditation induced enrollment.
- Plaintiffs filed suit alleging breach of contract, misrepresentation, and fraud; Brown Mackie moved to compel arbitration.
- Trial court denied; subsequent order granted arbitration as to Plaintiffs based on enrollment documents.
- Court concludes the action challenges the contract as a whole, not just the arbitration clause, so arbitration remains for all claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fraudulent inducement defeats arbitration. | Brumley argues inducement voids the contract and arbitration should be avoided. | Brown Mackie contends Prima Paint allows arbitration if the contract as a whole is attacked but the arbitration clause remains valid. | Fraudulent inducement of entire contract remains arbitrable. |
| Whether unconscionability defeats arbitration. | Unconscionability renders the contract unenforceable or voids arbitration. | Unconscionability attacks on the contract as a whole should be arbitrated. | Unconscionability of the contract as a whole is an arbitrator issue; arbitration remains. |
| Whether fraud in execution undermines arbitration. | Hilligoss-like fraud in execution voids the contract and arbitration. | No fraud in execution shown; misrepresentation relates to terms, not execution. | No fraud in execution; case falls within ordinary fraudulent inducement to enroll, not to the arbitration clause itself. |
| Whether cross-appeal can alter the arbitration ruling. | Brown Mackie seeks broader arbitration ruling on all plaintiffs. | Cross-appeal should extend to non-parties; this is improper. | Cross-appeal rejected; arbitration order affirmed as to Brumley plaintiffs. |
Key Cases Cited
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (fraud in inducement of entire contract arbitrable; fraud in execution separate)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 130 (U.S. 2010) (arbitrability of unconscionability and contract terms under FAA)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) (arbitrability of contract as a whole vs. specific arbitration clause)
- Goebel v. Blocks & Marbles Brand Toys, Inc., 568 N.E.2d 552 (Ind.Ct.App.1991) (fraud in execution and arbitrability; contract formation questions for court)
- Hilligoss v. A.G. Edwards & Sons, Inc., 597 N.E.2d 1 (Ind.Ct.App.1991) (fraud in execution distinct from fraudulent inducement; misrepresentation about contract terms)