Kevin Ferguson v. Corinthian Colleges, Inc.
2013 U.S. App. LEXIS 21961
9th Cir.2013Background
- Ferguson and Muniz, former students at Corinthian-owned Everest/Heald schools, sue for deception in enrollment and recruitment across U.S. and Canada.
- Plaintiffs allege misrepresentations about education quality, accreditation, career prospects, costs, and inappropriate targeting of veterans for aid.
- Enrollment agreements contain arbitration clauses; Ferguson also signed an Enrollment Addendum and Muniz signed a Binding Arbitration agreement.
- District court partially granted arbitration but refused to compel injunctive-relief claims under UCL, FAL, and CLRA, citing California’s Broughton-Cruz rule.
- The district court’s ruling relied on California law creating a public-injunction exception to arbitration for those statutes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAA preempts Broughton-Cruz rule | Ferguson argues FAA preempts state rule prohibiting arbitration of public-injunctive relief | Corinthian contends Broughton-Cruz remains valid state-law bar | FAA preempts Broughton-Cruz; rule overturned |
| Whether public-injunctive claims fall within arbitration agreements | Claims arise from enrollment and are within broad arbitration terms | Claims are outside the agreements’ scope as public-injury relief | Claims fall within the scope of arbitration agreements |
| Whether district court correctly reserved injunctive relief for court if arbitrator lacks authority | Arbitrator may grant injunction if authorized by agreement | If arbitrator cannot grant, relief might be obtained in court | Arbitrator’s authority governs; court relief possible only if arbitrator lacks authority |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (Supreme Court 2011) (FAA preempts state rules prohibiting arbitration in class actions)
- Marmet Health Care Ctr., Inc. v. Brown, 132 S. Ct. 1201 (Supreme Court 2012) (FAA preempts state rules displacing arbitration for certain claims)
- Davis v. O'Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007) (Davis applied Broughton-Cruz to public injunctive relief but not FAA preemption)
- Kilgore v. KeyBank, Nat’l Ass’n, 718 F.3d 1052 (9th Cir. 2013) (en banc; Broughton-Cruz recognized prior authority; later superseded by FAA decisions)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (Supreme Court 1985) (inherent-conflict approach for arbitration suitability (federal context))
- Italian Colors Restaurant v. Harris, 133 S. Ct. 2304 (Supreme Court 2013) (disagreed with effective-vindication in state statutes; FAA supremacy)
- Garrity v. Lyle Stuart, Inc., 353 N.E.2d 793 (N.Y. 1976) (illustrative of public-principle remediable under state law)
- Concepcion, 131 S. Ct. 1740 (Supreme Court 2011) (FAA preempts Discover Bank rule; enforce arbitration agreements)