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Fallo v. High-Tech Institute

March 24, 2009

JAN FALLO; PAMELA EPPERSON; LAURA MUEHLAN; VERNE ANDERSON; AMY CLARK; YULANDA DIAMOND; MONICA LICKLIDER; LATONYA LOVE; MARY MCNURLIN; JESSICA RICHARDSON; KISHA ROBINSON; PATRICIA STUTEVILLE; ZACH GREEN; DENE BECK; CARRIE BOYER; JAMIKA BREWER; YULANDA BOYD; KELLY BREWSTER; KRISTEENA CLOUD; JENNA EDELEN; LATOYA HARDIN; TAMEILA HARDLEY; TYNESHA HOOKER; LUCTOINE JEAN-PHILIPPE; BARBARA JOHNSON; DEANDRE JOHNSON; ALONZO JONES; MARGIE KELLEY; DIANE MITCHELL; MARINA PALTSMAKHER; LECTURA SANDERS; DEANNIA SHERMAN; LINDSAY SIMS; TAMMY SIMSHEUSER; MARY SURRIDGE; DAWN WILLIAMS- KLEOPPEL; PEGGY WILSON; LINDA WOMACK, APPELLEES,
v.
HIGH-TECH INSTITUTE, APPELLANT.



Appeal from the United States District Court for the Western District of Missouri.

The opinion of the court was delivered by: Gruender, Circuit Judge.

Submitted: January 13, 2009

Before BYE, COLLOTON and GRUENDER, Circuit Judges.

Thirty-eight current and former students filed suit against High-Tech Institute ("High-Tech"). High-Tech moved to compel arbitration, arguing that an arbitrator should determine whether the students' tort claims were within the scope of the arbitration provision in the students' enrollment agreements. The district court held that it had the authority to determine the question of arbitrability, that the arbitration provision did not cover the students' tort claims, and that High-Tech's motion to compel arbitration should be denied. High-Tech appeals, and for the reasons discussed below, we reverse.

I. BACKGROUND

On October 25, 2007, thirteen current and former students filed suit against High-Tech, a for-profit vocational school, in the Circuit Court of Jackson County, Missouri. The complaint alleged that High-Tech engaged in fraudulent misrepresentation, violated the Missouri Merchandising Practices Act, negligently trained and supervised employees, and breached the enrollment agreement it had entered into with each student. High-Tech removed the case to federal district court under 28 U.S.C. § 1332. High-Tech then moved to compel arbitration pursuant to the arbitration clause contained in the enrollment agreement and to stay the judicial proceedings. The arbitration clause in the enrollment agreement states:

Any controversy or claim arising out of or relating to this Agreement, or breach thereof, no matter how pleaded or styled, shall be settled by arbitration in accordance with the Commercial Rules of the American Arbitration Association at Kansas City, Missouri, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction.

The enrollment agreement also contains a separate provision concerning governing law, which provides:

The laws of the State of Missouri shall govern this Agreement. Should the School institute proceedings for monies due from the Student for services provided, the Student shall pay all costs, including reasonable attorneys fees, court costs and collection fees, incurred by the School.

The district court granted in part and denied in part High-Tech's motion to compel arbitration, finding that the arbitration clause was not unconscionable and that the arbitration provision required only the students' breach of contract claim to be submitted to arbitration. The district court also stayed judicial proceedings pending the outcome of arbitration on the breach of contract claim. The students then voluntarily dismissed their breach of contract claim and filed an amended complaint, which added twenty-five plaintiffs and included only the three tort claims. High-Tech filed a second motion to compel arbitration and to continue the stay of judicial proceedings. High-Tech argued that the question of arbitrability should be determined by an arbitrator, rather than the district court, and, alternatively, that the arbitration provision requires arbitration of the tort claims.

The district court denied High-Tech's second motion, holding that it had the authority to decide the question of arbitrability because the parties did not clearly agree to leave the arbitrability issue to an arbitrator. The court then found that the arbitration provision did not compel arbitration of the students' three tort claims. High-Tech appeals, arguing that the district court erred in determining that it had the authority to decide the question of arbitrability. High-Tech also argues that even if the district court correctly answered the question of arbitrability, it erred in finding that the arbitration provision did not cover the students' tort claims.

II. DISCUSSION

We first address High-Tech's argument that the district court erred by determining that it had the authority to decide the threshold question of arbitrability of the students' tort claims. We review de novo a district court's decision to deny a motion to compel arbitration. EEOC v. Woodmen of the World Life Ins. Soc'y, 479 F.3d 561, 565 (8th Cir. 2007). "Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, so the question 'who has the primary power to decide arbitrability' turns upon what the parties agreed about that matter." First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943 (1995) (internal citations omitted). Courts should not find that parties agreed to arbitrate the question of arbitrability "[u]nless the parties clearly and unmistakably provide otherwise." AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986). Thus, we must determine whether the parties to the enrollment agreement "clearly and unmistakably" intended for an arbitrator to determine the question of arbitrability.

The arbitration provision in the enrollment agreement states that disputes arising out of the enrollment agreement "shall be settled by arbitration in accordance with the Commercial Rules of the American Arbitration Association ['AAA Rules']." High-Tech argues that the provision's incorporation of the AAA Rules clearly and unmistakably demonstrates that the parties intended to arbitrate the question of ...


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