Harnisch v. College of Legal Arts, Inc.
243 Or. App. 16
Or. Ct. App.2011Background
- Plaintiffs were students at the College of Legal Arts who signed enrollment agreements; four signed on the front and initialed the arbitration clause on the back, while Lee signed but did not initial the arbitration clause.
- The back of the enrollment agreements contained an arbitration clause stating disputes would be resolved by binding arbitration under the FAA with AAA in Portland, OR.
- Plaintiffs filed suit alleging breach of contract, breach of warranties, and misrepresentation; defendant moved to compel arbitration as to those with arbitration clauses and to stay others pending arbitration.
- The trial court found the arbitration agreements enforceable as to all but Lee, determining Lee did not assent because she did not initial below the clause.
- The court stayed the claims of those compelled to arbitrate but denied a stay for Lee and the nonarbitrating plaintiffs; the court also severed and stayed claims where appropriate.
- On appeal, the court affirmed as to Lee, holding that an absence of Lee’s initials supported a finding of non-assent, and denied the stay for nonarbitrating plaintiffs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Lee assent to the arbitration clause? | Lee assented by signing the enrollment agreement. | Initials are not required; reading the notice suffices for assent. | No assent; Lee did not initial and thus the clause not enforceable against her. |
| Is the FAA applicable to this dispute? | FAA applies because there is interstate commerce involvement. | FAA applies; arbitration clause enforceable under FAA and Oregon law. | FAA applies; governs enforceability of the arbitration clause. |
| Should the nonarbitrating plaintiffs' actions be stayed? | Nonarbitrating claims should not be stayed to avoid prejudicing those arbitrating. | Stay all actions involving issues referable to arbitration to avoid preclusion or interference. | Court did not abuse discretion; stay denied for nonarbitrating plaintiffs. |
| What is the controlling analysis for assent to an arbitration provision embedded in a signed contract? | Assent can be inferred from signing the overall enrollment agreement. | Assent to the arbitration clause requires separate initialing or explicit agreement. | Assent requires more than mere signing; absence of initials can negate assent to the arbitration clause. |
Key Cases Cited
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (federal policy favoring arbitration; FAA applies to interstate commerce)
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995) (FAA's proarbitration policy not to override contracting parties' wishes)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (state contract law governs formation of arbitration clause)
- Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1 (1983) (stay and arbitration tools under FAA; court controls docket)
- Allied-Bre Terminix Cos. v. Dobson, 513 U.S. 265 (1995) (FAA policy and enforcement considerations)
- Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (2003) (federal loans and commerce considerations in arbitration)
- Industra/Matrix Joint Venture v. Pope & Talbot, 341 Or. 321 (2006) (questions of scope of arbitration and whether parties agreed to arbitrate)
- Andrews v. Sandpiper Villagers, Inc., 215 Or. App. 656 (2007) (contract interpretation and ambiguity in written agreements)
- Valenti v. Hopkins, 324 Or. 324 (1996) (contract interpretation rules; construing ambiguous written agreements)