RUTGERS, THE STATE UNIVERSITY v. AMERICAN ATHLETIC CONFERENCE
3:12-cv-07898
D.N.J.Oct 31, 2013Background
- Rutgers (member since 1995) sued the Big East Conference alleging selective enforcement of withdrawal provisions in the Conference Bylaws and seeking declaratory relief and breach-of-contract damages related to withdrawal fees and a lost home game.
- The Conference amended its Bylaws at a November 13, 2012 meeting to add a forum-selection/arbitration provision requiring arbitration in the state where the Conference’s primary executive offices are located (Rhode Island) and permitting court enforcement there.
- Rutgers contends it never validly consented to the arbitration clause (its president did not attend the meeting), argues the clause is procedurally and substantively unconscionable, and asserts some claims (e.g., TCU game loss) fall outside the Bylaws’ scope.
- The Conference argues the Bylaws (properly amended under their amendment procedure) are a binding contract that mandates arbitration of any claim “which relates in any way to or arises out of these Bylaws,” and asks dismissal or transfer to the District of Rhode Island.
- The district court applied Third Circuit arbitrability standards, concluding the complaint and submitted documents show a valid arbitration/forum-selection clause covering Rutgers’ claims, rejected Rutgers’ unconscionability and vested-rights arguments, denied dismissal, and transferred the case to the District of Rhode Island so that court can address enforcement/compulsion of arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a valid agreement to arbitrate exists | Rutgers: never validly assented; president absent; clause imposed after vested rights; procedurally unconscionable | Conference: Bylaws properly amended per their procedures; advance notice given; bylaws are contractual | Valid arbitration/forum-selection clause exists based on complaint and bylaws' amendment process |
| Whether the dispute falls within arbitration scope | Rutgers: some claims (TCU game loss) do not arise from Bylaws and thus are outside arbitration | Conference: clause covers “any claim” relating in any way to or arising out of the Bylaws; broad scope | Claims—including TCU loss—are at least related to the Bylaws and therefore arbitrable |
| Whether arbitration clause is unconscionable | Rutgers: procedurally unconscionable (no meaningful choice) and substantively one-sided (Conference controls arbitrator/rules) | Conference: sufficient notice/approval; clause not limiting remedies; uses AAA rules; not unusual | Unconscionability arguments rejected; clause not shown to be procedurally or substantively unconscionable |
| Proper remedy by this Court (compel, dismiss, or transfer) | Rutgers: court should not force forum it never consented to; if transfer, Rhode Island should resolve enforceability | Conference: dismissal or transfer to Rhode Island so arbitration can be compelled there | Denied dismissal; granted transfer to District of Rhode Island so that forum can address enforcement of arbitration |
Key Cases Cited
- Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013) (explains two-step arbitrability inquiry and when discovery/summary-judgment approach is required)
- Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529 (3d Cir. 2005) (two-step inquiry: validity of arbitration agreement and whether dispute falls within its scope)
- Battaglia v. McKendry, 233 F.3d 720 (3d Cir. 2000) (broad arbitration clauses covering disputes “arising from” an agreement are interpreted expansively)
- Meshel v. Ohev Sholom Talmud Torah, 869 A.2d 343 (D.C. 2005) (bylaws construed as contractual agreements binding members to internal dispute-resolution processes)
- Quilloin v. Tenet HealthSystem Philadelphia, Inc., 673 F.3d 221 (3d Cir. 2012) (defines procedural and substantive unconscionability standards)
- Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995) (forum-selection clauses receive substantial consideration in transfer analysis)
- Shaffer v. Graybill, [citation="68 F. App'x 374"] (3d Cir. 2003) (district court may not compel arbitration outside its district; transfer may be appropriate)