Eakins v. Corinthian Colleges CA4/2 ( 2015 )

Filed 2/23/15 Eakins v. Corinthian Colleges CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
ANNA EAKINS,
Plaintiff and Respondent, E058330
v. (Super.Ct.No. CIVRS1207685)
CORINTHIAN COLLEGES, INC. et al., OPINION
Defendants and Appellants.
APPEAL from the Superior Court of San Bernardino County. Keith D. Davis,
Judge. Reversed and remanded with directions.
Payne & Fears, Jeffrey K. Brown, and Matthew J. Cute; Homer Bonner Jacobs
and Christopher King for Defendants and Appellants.
Law Offices of Carlin & Buchsbaum, Gary R. Carlin, Brent S. Buchsbaum, and
Roger E. Haag for Plaintiff and Respondent.
1
When plaintiff Anna Eakins enrolled at a college owned and operated by
defendant Corinthian Colleges, Inc. (Corinthian), she signed an enrollment agreement
requiring the submission of disputes to arbitration pursuant to the “Consumer Rules” of
the American Arbitration Association (AAA). Thus, when she sued Corinthian and
others, alleging discrimination based on sexual orientation, the defendants moved to
compel arbitration.
The trial court refused to compel arbitration; it ruled that the arbitration provisions
were unconscionable because (1) it was not clear what the “Consumer Rules” referred to
and Eakins was not given a copy of them, (2) the Consumer Rules limited discovery, and
(3) the enrollment agreement made Eakins liable for defendants’ attorney fees.
Defendants appeal, contending:
1. The trial court erred by reaching the issue of unconscionability, because this
was consigned to the arbitrator.
2. The trial court erred by ruling that the arbitration provisions were
unconscionable.
We will hold that the trial court could properly decide whether the arbitration
provisions were unconscionable, because they did not clearly and unmistakably provide
that issues of enforceability were reserved for the arbitrator. However, we will also hold
that the trial court erred by ruling that the arbitration provisions were unconscionable.
Accordingly, we will reverse and remand with directions to compel arbitration.
2
I
FACTUAL BACKGROUND
The following facts were shown by the declarations in support of and in
opposition to the petition to compel arbitration.
Corinthian owns and operates Everest College (Everest), which has multiple
locations in California. Eakins enrolled in Everest, at its Ontario Metro campus, twice —
once in 2010, when she started an associate’s degree program, and again in 2011, when
she started a bachelor’s degree program. Each time, she signed one document entitled
“Application” (capitalization altered) (Application) and a second document entitled
“Addendum & Disclosures” (Addendum). We will refer to the Application and the
Addendum collectively as the “Enrollment Agreement.” The relevant provisions of the
2010 Enrollment Agreement and the 2011 Enrollment Agreement were identical, except
as noted below.
The Application was six pages long. It provided:
“Acknowledgement of Waiver of Jury Trial and Availability of AAA Rules
“ . . . I acknowledge that . . . both I and The School are irrevocably waiving rights
to a trial by jury, and are selecting instead to submit any and all claims to the decision of
an arbitrator instead of a court.[1] I also acknowledge that I may at any time, before or
1 At this point, the 2011 version of the Application added the words, “per the
terms detailed in the Addendum.”
3
after my admission, obtain a copy of the Consumer Rules of the American Arbitration
Association, at no cost, from The School President.”
The Application incorporated the Addendum by reference. The Addendum was
five pages long. Eakins had to initial separately every provision of the Addendum that
applied to her. These included the following:
“GENERAL RELEASE OF CLAIMS
“I hereby release and hold this School harmless from and against any and all
claims of any kind whatsoever, including allegations related to needle sticks, allied
health and automotive practice and techniques, slips and falls and quality of equipment
and instruction[] (collectively, ‘Claims’), against the School (including its present and
former parent companies, insurers, representatives and all persons acting by or through
them), which I may have for any reason arising out of or relating to my education. I am
aware of the risks involved with my education and knowingly assume those risks
following my investigation into possible injuries and the nature and quality of my
education. I further agree that if I bring any Claim against the School, I shall reimburse
the School for its attorney’s fees and costs incurred as a result thereof. I may opt out of
this general release of Claims provision by delivering a written statement to that effect
received by the School within 30 days of my first execution of an Enrollment
Agreement with the School.”
4
“AGREEMENT TO BINDING ARBITRATION AND WAIVER OF JURY
TRIAL
“I agree that any dispute arising from my enrollment, no matter how described,
pleaded or styled, shall be resolved by binding arbitration under the Federal Arbitration
Act conducted by the American Arbitration Association (AAA) under its Consumer
Rules.
“Terms of Arbitration
“1. Both the School and I irrevocably agree that any dispute between us shall be
submitted to Arbitration.
“2. Neither the School nor I shall file or maintain any lawsuit in any court against
the other, and agree that any suit filed in violation of this Agreement shall be dismissed
by the court in favor of an arbitration conducted pursuant to this Agreement. Both the
School and I agree that filing a court action will cause damage to the other party. We
agree that an appropriate measure of this damage includes the costs and attorney’s fees
actually incurred in compelling arbitration. Such damages shall be paid by the party who
has filed an action in court within 30 days of the court’s order compelling arbitration.
“3. The costs of the arbitration filing fee, the arbitrator’s compensation and
facilities fees will be paid by the School, to the extent that these fees are greater than the
applicable Court filing fee. . . .”
5
“Procedure for Filing Arbitration [¶] . . .
“2. If I desire to file Arbitration, I should first contact the School’s President, who
will provide me with a copy of the AAA Consumer Rules. If I desire to file Arbitration, I
should then contact the AAA, which will provide the appropriate forms and detailed
instructions. I should bring this document to the AAA.”
The Enrollment Agreement gave Eakins the right to cancel and to receive a refund
within seven days after enrollment or until attendance at the first class session, whichever
was later.
Eakins was not told that she could negotiate any of the terms in any of the
documents. She was not given a copy of any arbitration rules.
This action was filed in 2012. In 2013, Eakins’s attorney phoned the AAA’s
customer service hotline and spoke to an AAA representative. When he asked for a copy
of the AAA’s “Consumer Rules,” the representative told him there was no such
document.
He then explained that he had an arbitration agreement stating that any arbitration
would be conducted under the AAA’s “Consumer Rules.” The representative suggested
that he might be looking for the AAA’s “Commercial Rules” and helped him find those
rules on the AAA’s website.
Above the Commercial Rules, the attorney noticed a link to “Supplementary
Procedures for Consumer-Related Disputes” (Supplementary Procedures). When he
6
asked the representative about this, she said they “might apply.” He was able to access
and print the Supplementary Procedures.
The Commercial Rules provided:
“R-7. Jurisdiction
“The arbitrator shall have the power to rule on his or her own jurisdiction,
including any objections with respect to the existence, scope or validity of the arbitration
agreement.”
The Commercial Rules also provided:
“R-10. Fixing of Locale
“The parties may mutually agree on the locale where the arbitration is to be held.
If any party requests that the hearing be held in a specific locale and the other party files
no objection thereto within 15 days after notice of the request . . . , the locale shall be the
one requested. If a party objects to the locale requested by the other party, the AAA shall
have the power to determine the locale, and its decision shall be final and binding.”
Finally, the Commercial Rules provided:
“R-21. Exchange of Information.
“(a) At the request of any party or at the discretion of the arbitrator, consistent
with the expedited nature of arbitration, the arbitrator may direct
“(i) the production of documents and other information and
“(ii) the identification of any witnesses to be called.
7
“(b) At least five business days prior to the hearing, the parties shall exchange
copies of all exhibits they intend to submit at the hearing.
“(c) The arbitrator is authorized to resolve any disputes concerning the exchange
of information.”
The Supplementary Procedures referred to themselves internally as “[t]he AAA’s
Consumer Rules.” They supplemented the Commercial Rules in certain disputes between
businesses and consumers.2
II
PROCEDURAL BACKGROUND
The defendants in this action are Corinthian; Richard Mallow, who was allegedly
the president of Everest; and Denise Greco, who was allegedly one of Eakins’s professors
at Everest. Eakins alleges that defendants discriminated against her based on her sexual
orientation. She asserts causes of action for: (1) violation of Education Code section 220
et seq. [prohibiting discrimination by educational institutions that receive state financial
assistance], (2) violation of the Unruh Act (Civ. Code, § 51 [prohibiting discrimination
by businesses]), (3) intentional infliction of emotional distress, (4) negligent infliction of
emotional distress, and (5) violation of Education Code section 66250 et seq. [prohibiting
discrimination by postsecondary educational institutions].
2 The Supplementary Procedures provided, among other things, that any
hearing would be governed by the “Expedited Procedures” of the Commercial Rules.
Eakins does not cite or discuss the Expedited Procedures and does not claim that the
Expedited Procedures are relevant.
8
Defendants filed a petition to compel arbitration. In her opposition, Eakins argued
that the arbitration agreement was unconscionable because:
1. It did not attach and did not correctly identify the applicable arbitration rules;
2. Eakins could be required to pay defendants’ attorney fees and costs; and
3. Depending on the location of the arbitration, Eakins’s expenses could be
greater than those she would incur in court.
In their reply, defendants argued that:
1. It was up to the arbitrator to decide whether the arbitration agreement was
unconscionable; and
2. The arbitration agreement was not unconscionable.
After hearing argument, the trial court denied the petition. It found that the
arbitration agreement was unconscionable. It explained:
“[T]here really wasn’t any genuine opportunity for there to be some discussion
with regard to what the arbitration rules were, . . . and perhaps most troubling to me, . . . a
copy of the AAA . . . Consumer Rules . . . was available only at the dean’s office and
there had to be either a request made or a trip to the dean’s office in order to actually
obtain those rules. And . . . there really isn’t a set of AAA Consumer Rules, as such, that
exist. . . . [¶] This is a bit troubling because there is uncertainty with regard to what
those rules actually are . . . . [C]ounsel understand those AAA rules to . . . contain some
provisions with regard to fee shifting, and perhaps very limited discovery . . . .”
9
III
THE TRIAL COURT’S AUTHORITY TO DETERMINE UNCONSCIONABILITY
Defendants contend that the arbitration provisions delegated the issue of
unconscionability to the arbitrator.
“‘[A]rbitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.’ [Citations.]” (Howsam v.
Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83.)
“Because the parties are the masters of their collective fate, they can agree to
arbitrate almost any dispute — even a dispute over whether the underlying dispute is
subject to arbitration. However, there is a presumption that they have not agreed to this.
‘The question whether the parties have submitted a particular dispute to arbitration, i.e.,
the “question of arbitrability,” is “an issue for judicial determination [u]nless the parties
clearly and unmistakably provide otherwise.” [Citations.]’ [Citation.]” (Bruni v. Didion
(2008) 160 Cal. App. 4th 1272, 1286 [Fourth Dist., Div. Two].) “[Q]uestions of
arbitrability . . . include whether . . . a given arbitration clause . . . is unenforceable as
unconscionable. [Citation.]” (Independent Assn. of Mailbox Center Owners, Inc. v.
Superior Court (2005) 133 Cal. App. 4th 396, 406.)
“[T]he ‘who (primarily) should decide arbitrability’ question . . . is rather arcane.
A party often might not focus upon that question or upon the significance of having
arbitrators decide the scope of their own powers. [Citation.] And, given the principle
that a party can be forced to arbitrate only those issues it specifically has agreed to submit
10
to arbitration, one can understand why courts might hesitate to interpret silence or
ambiguity on the ‘who should decide arbitrability’ point as giving the arbitrators that
power, for doing so might too often force unwilling parties to arbitrate a matter they
reasonably would have thought a judge, not an arbitrator, would decide. [Citations.]”
(First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 945.)
Following the lead of Rent-a-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 68-
69, courts commonly call an agreement to have the arbitrator determine questions of
arbitrability a “delegation provision” or a “delegation clause.” (E.g., Malone v. Superior
Court (2014) 226 Cal. App. 4th 1551, 1555.)
“Where, as here, the evidence is not in conflict, we review the trial court’s denial
of arbitration de novo. [Citation.]” (Pinnacle Museum Tower Assn. v. Pinnacle Market
Development (US), LLC (2012) 55 Cal. 4th 223, 236.)
The Enrollment Agreement provided for arbitration of “any and all claims” and
“any dispute.” However, such broad but general language is not a sufficiently clear and
unmistakable manifestation of the intent to delegate the question of arbitrability to the
arbitrator. (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal. App. 4th 771, 783-788
[agreement to arbitrate “all matters” and “[a]ny disputes, differences or controversies”].)
Defendants therefore argue that the Enrollment Agreement incorporated the AAA
Consumer Rules by reference,3 including the rule giving the arbitrator “the power to rule
3 In part IV.A, post, we will agree with defendants that the Enrollment
Agreement’s incorporation of the Consumer Rules was neither vague nor
unconscionable.
11
on . . . objections with respect to the existence, scope or validity of the arbitration
agreement.” They claim that this supplied the necessary clear and unmistakable evidence
of intent.
We disagree, for the following reasons, as stated in Ajamian v. CantorCO2e, L.P.,
supra, 203 Cal.App.4th at p. 788:
“Some courts have, in fact, held that a reference to the rules of arbitration services,
which rules permit the arbitrator to determine issues of his or her jurisdiction, constitutes
clear and unmistakable evidence that the parties intended to delegate the issue to the
arbitrators. [Citing federal cases.]
“Even California cases have reached a similar conclusion, albeit not with respect
to a claim that an arbitration clause was unconscionable . . . . [Citing Rodriguez v.
American Technologies, Inc. (2006) 136 Cal. App. 4th 1110, 1123 [Fourth Dist., Div.
Three]; Dream Theater, Inc. v. Dream Theater (2004) 124 Cal. App. 4th 547, 550 [Second
Dist., Div. Four].]
“Other reported decisions, however, hold to the contrary, in keeping with the
concern of the United States Supreme Court . . . that there be a sufficient showing that the
parties focused and agreed upon the issue. For example, several federal circuit courts
hold that the incorporation of NASD rules is insufficient to show a clear and
unmistakable agreement to have arbitrators decide their own jurisdiction. [Citations.]
“In our view, while the incorporation of AAA rules into an agreement might be
sufficient indication of the parties’ intent in other contexts, we seriously question how it
12
provides clear and unmistakable evidence that [they] intended to submit the issue of the
unconscionability of the arbitration provision to the arbitrator, as opposed to the court.
There are many reasons for stating that the arbitration will proceed by particular rules,
and doing so does not indicate that the parties’ motivation was to announce who would
decide threshold issues of enforceability.
“Moreover, the reference to AAA rules does not give an employee, confronted
with an agreement she is asked to sign in order to obtain or keep employment,[4] much of
a clue that she is giving up her usual right to have the court decide whether the arbitration
provision is enforceable. Assuming that [a party] reads the arbitration provision in the
proposed agreement, notes that disputes will be resolved by arbitration according to AAA
rules, and even has the wherewithal and diligence to track down those rules, examine
them, and focus on the particular rule . . . , the rule merely states that the arbitrator shall
have ‘the power’ to determine issues of its own jurisdiction, including the existence,
scope and validity of the arbitration agreement. This tells the reader almost nothing,
since a court also has power to decide such issues, and nothing in the AAA rules states
that the AAA arbitrator, as opposed to the court, shall determine those threshold issues,
or has exclusive authority to do so, particularly if litigation has already been commenced.
“Again, we must be mindful of what the United States Supreme Court has
emphasized unflinchingly for decades: notwithstanding the public policy favoring
4 While Ajamian happened to involve an employer-employee contract, in our
view identical considerations apply to the school-student contract here.
13
arbitration, arbitration can be imposed only as to issues the parties agreed to arbitrate;
given the slim likelihood that the parties actually contemplated who would determine
threshold enforceability issues, as well as the default presumption that such issues would
be determined by the court, those threshold issues must be decided by the court absent
clear and unmistakable proof to the contrary. . . . ‘[I]t is not enough that ordinary rules
of contract interpretation simply yield the result that arbitrators have power to decide
their own jurisdiction. Rather, the result must be clear and unmistakable, because the law
is solicitous of the parties actually focusing on the issue. Hence silence or ambiguity is
not enough.’” (Ajamian v. CantorCO2e, L.P., supra, 203 Cal.App.4th at pp. 789-791.)
As defendants note, Ajamian ultimately declined to decide whether incorporation
of the AAA rules would be a sufficiently clear and unmistakable manifestation of intent.
(Ajamian v. CantorCO2e, L.P., supra, 203 Cal.App.4th at p. 791.) Rather, it held that
“the reference to AAA rules . . . was insufficient for another reason: the [underlying
agreement] did not mandate that AAA rules would necessarily apply. Instead, the
arbitration clause stated that the arbitration would be held according to NASD rules,
AAA rules, or the rules of ‘any other alternative dispute resolution organization’ . . . .”
(Ibid.) Thus, when the plaintiff signed the agreement, she had no way of knowing what
rules would apply. (Ibid.)
While we recognize that Ajamian side-stepped the issue, we find its discussion
compelling. As it noted, the AAA rules give the arbitrator the “power” to rule on
objections to the validity of the arbitration agreement. However, they do not provide that
14
the arbitrator’s power in this respect is exclusive. In other words, they permit, but they
do not require the arbitrator to rule on objections to the validity of the arbitration
agreement. At most, incorporating the AAA rules creates an “ambiguity” as to the
“rather arcane” question of who should decide arbitrability; the United States Supreme
Court has held that this is insufficient to overcome the presumption that arbitrability is an
issue for judicial determination. (First Options of Chicago, Inc. v. Kaplan, supra, 514
U.S. at p. 945.)
We therefore conclude that the trial court did not err by proceeding to decide the
issue of unconscionability.
IV
UNCONSCIONABILITY
Defendants also contend that the trial court erred by ruling that the arbitration
agreement was unconscionable.
“An agreement to arbitrate, like any other contract, is subject to revocation if the
agreement is unconscionable. [Citation.]” (Carmona v. Lincoln Millennium Car Wash,
Inc. (2014) 226 Cal. App. 4th 74, 83.) However, in assessing unconscionability, we must
focus solely on the arbitration provisions, rather than on the Enrollment Agreement as a
whole. Under federal law, “courts treat an arbitration clause as severable from the
contract in which it appears and enforce it according to its terms unless the party resisting
arbitration specifically challenges the enforceability of the arbitration clause itself,
[citation], or claims that the agreement to arbitrate was ‘[n]ever concluded,’ [citations].”
15
(Granite Rock Co. v. International Broth. of Teamsters (2010) 561 U.S. 287, 301.)
California law is in accord. (Bruni v. Didion, supra, 160 Cal.App.4th at p. 1285.)
“Unconscionability consists of both procedural and substantive elements. The
procedural element addresses the circumstances of contract negotiation and formation,
focusing on oppression or surprise due to unequal bargaining power. [Citations.]
Substantive unconscionability pertains to the fairness of an agreement’s actual terms and
to assessments of whether they are overly harsh or one-sided. [Citations.] A contract
term is not substantively unconscionable when it merely gives one side a greater benefit;
rather, the term must be ‘so one-sided as to “shock the conscience.”’ [Citation.]
“ . . . Both procedural unconscionability and substantive unconscionability must be
shown, but ‘they need not be present in the same degree’ and are evaluated on ‘“a sliding
scale.”’ [Citation.] ‘[T]he more substantively oppressive the contract term, the less
evidence of procedural unconscionability is required to come to the conclusion that the
term is unenforceable, and vice versa.’ [Citation.]” (Pinnacle Museum Tower Assn. v.
Pinnacle Market Development (US), LLC, supra, 55 Cal.4th at pp. 246-247.) “The party
resisting arbitration bears the burden of proving unconscionability. [Citations.]” (Id. at
p. 247.)
A. Procedural Unconscionability.
“As indicated, procedural unconscionability requires oppression or surprise.
‘“Oppression occurs where a contract involves lack of negotiation and meaningful
choice, surprise where the allegedly unconscionable provision is hidden within a prolix
16
printed form.”’ [Citation.]” (Pinnacle Museum Tower Assn. v. Pinnacle Market
Development (US), LLC, supra, 55 Cal.4th at p. 247.)
Here, there was evidence of oppression; the arbitration provisions were part of a
preprinted form, presented on a take-it-or-leave-it basis. However, this “only show[s] a
low level of procedural unconscionability because . . . the elements of surprise or, a
fortiori, misrepresentation [citation] were not present.” (Woodside Homes of Cal., Inc. v.
Superior Court (2003) 107 Cal. App. 4th 723, 730 [Fourth Dist., Div. Two].)
As preprinted forms go, the Enrollment Agreement was neither the best nor the
worst we have seen. It totaled 11 pages. It used typefaces considerably smaller than in
an ordinary book or magazine. The arbitration provisions did not particularly stand out;
they were not in bold or capitals. Eakins had to initial the arbitration provision — but
then, she had to initial every applicable provision of the Addendum.
At the same time, however, Eakins did not testify that she did not read or was not
aware of the arbitration provisions. (Cf. Bruni v. Didion, supra, 160 Cal.App.4th at
p. 1291 [“[F]ailure to read the contract helps ‘establish actual surprise . . . .’
[Citation.]”].)5 The fact that she initialed the applicable paragraph of the Addendum was
evidence that she did read the arbitration provisions. Inasmuch as she had the burden of
5 In her appellate brief, Eakins asserts that “she did not read the arbitrability
clause.” However, this appears to refer to the provision of the Consumer Rules giving
the arbitrator the power to rule on the existence, scope or validity of the arbitration
agreement; it does not appear to refer to the Enrollment Agreement itself. In any case,
the assertion is not cited to any evidence in the record.
17
proving unconscionability, we can only conclude that the arbitration provisions did not
come as a surprise.
The only even arguable surprise was as to the content of the Consumer Rules.
Certainly there is no shortage of California cases holding that the failure to attach a copy
of the applicable arbitration rules is a factor pointing toward unconscionability.
(Carmona v. Lincoln Millennium Car Wash, Inc., supra, 226 Cal.App.4th at pp. 84-85
[Second Dist., Div. Eight]; Samaniego v. Empire Today, LLC (2012) 205 Cal. App. 4th
1138, 1146 [First Dist., Div. Three]; Ajamian v. CantorCO2e, L.P., supra, 203
Cal.App.4th at p. 797 [First Dist., Div. Five]; Zullo v. Superior Court (2011) 197
Cal. App. 4th 477, 485-486 [Sixth Dist.]; Trivedi v. Curexo Technology Corp. (2010) 189
Cal. App. 4th 387, 393 [First Dist., Div. Four]; Suh v. Superior Court (2010) 181
Cal. App. 4th 1504, 1516 [Second Dist., Div. Five]; Harper v. Ultimo (2003) 113
Cal. App. 4th 1402, 1406-1407 [Fourth Dist., Div. Three].)
In more recent cases, however, there is a discernable trend toward analyzing the
failure to provide a copy of applicable arbitration rules on a more fact-sensitive, case-by-
case basis. (See Lane v. Francis Capital Management LLC (2014) 224 Cal. App. 4th 676,
690-691 [Second Dist., Div. Four]; Peng v. First Republic Bank (2013) 219 Cal. App. 4th
1462, 1470-1472 [First Dist., Div. One]; see also Bigler v. Harker School (2013) 213
Cal. App. 4th 727, 737 [Sixth Dist.].) Thus, for example, the fact that the rules are
accessible, on the Internet or otherwise, cuts against unconscionability. (Lane v. Francis
Capital Management LLC, supra, 224 Cal.App.4th at p. 691.) It likewise cuts against
18
unconscionability that the rules themselves are fair. (Peng v. First Republic Bank, supra,
219 Cal.App.4th at p. 1472.)
We disagree with the trial court that there was any uncertainty as to what was the
AAA’s “Consumer Rules” referred to. “The general rule is that the terms of an extrinsic
document may be incorporated by reference in a contract so long as (1) the reference is
clear and unequivocal, (2) the reference is called to the attention of the other party and he
consents thereto, and (3) the terms of the incorporated document are known or easily
available to the contracting parties. [Citations.]” (DVD Copy Control Assn., Inc. v.
Kaleidescape, Inc. (2009) 176 Cal. App. 4th 697, 713.)
Eakins made much of the fact that an AAA representative (mis)informed her
counsel that there was no such thing as AAA Consumer Rules. However, the same
representative, in the same phone call, guided her counsel to the Commercial Rules,
which in turn guided him to the Supplementary Procedures. These, taken together,
constituted the AAA’s Consumer Rules.6
Eakins could have obtained a copy of the Consumer Rules simply by asking for
them. Indeed, even after she signed the Enrollment Agreement, she could still have
asked for a copy of the rules; then, if they were disagreeable, she could have canceled the
Enrollment Agreement at any time within seven days after signing it. Eakins suggests
that a student who asked for a copy of the rules might be viewed as litigious and
6 Eakins’s counsel claims “[i]t is still unclear” what the “Consumer Rules”
actually are. This is somewhat disingenuous.
19
subjected to intimidation. However, there is no evidence of this. Eakins did not testify
that this was why she did not ask for a copy of the rules. Most important, this assumes
the student waits until a dispute has arisen before asking for a copy of the rules. If a
student asks for a copy of the rules at or near the time of signing the contract, these fears
would seem groundless. In any event, Eakins also could have obtained a copy via the
Internet.
Eakins argues that the Consumer Rules were unfair in certain respects. We will
discuss these arguments as a matter of substantive unconscionability below. For now, we
conclude that Eakins has shown only minimal procedural unconscionability.
B. Substantive Unconscionability.
Eakins argues that three aspects of the Consumer Rules — and hence the
arbitration provisions incorporating them — were substantively unconscionable: (1) Rule
R-7, giving the arbitrator the power to rule on the existence, scope or validity of the
arbitration agreement; (2) Rule R-21, limiting discovery; and (3) Rule R-10, letting the
arbitrator set the place of the hearing. Eakins additionally argues that the attorney fee
provision of the Enrollment Agreement was substantively unconscionable.7
7 The attorney fee provision was contained in a very broad release of claims.
Eakins, however, does not argue that the release of claims itself is unconscionable or
even relevant.
20
1. The delegation provision.
As we already held in part III, ante, Rule R-7 merely allows the arbitrator to reach
arbitrability issues in an appropriate case, when there is the necessary clear and
unmistakable evidence that the parties actually agreed to have the arbitrator do so.
Because there is no such evidence here, Eakins is not subject to this provision of the
rules.
2. Location-dependent expenses.
Eakins argues that, if the arbitrator chooses an inconvenient location for the
arbitration, she could incur costs greater than she would incur in a court proceeding.
However, “[w]e assume that the arbitrator will operate in a reasonable manner in
conformity with the law. [Citations.]” (Dotson v. Amgen, Inc. (2010) 181 Cal. App. 4th
975, 984.) Thus, we must presume that the arbitrator will set the hearing in a reasonable
and mutually convenient location.
3. Limitations on discovery.
In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th
83, the California Supreme Court held that an employee cannot be required to arbitrate
statutory claims against an employer under the Fair Employment and Housing Act
(FEHA) unless (among other things) the arbitration procedure provides for “adequate
discovery.” (Id. at pp. 104-106.) The court further held, however, “that when parties
agree to arbitrate statutory claims, they also implicitly agree, absent express language to
the contrary, to such procedures as are necessary to vindicate that claim. [Citation.] . . .
21
[I]t is undisputed that some discovery is often necessary for vindicating a FEHA claim.
Accordingly, . . . the employees in this case . . . are at least entitled to discovery sufficient
to adequately arbitrate their statutory claim, including access to essential documents and
witnesses, as determined by the arbitrator(s) . . . .” (Id. at p. 106.) It concluded that
“although the employees are correct that they are entitled to sufficient discovery as a
means of vindicating their sexual discrimination claims, we hold that the employer, by
agreeing to arbitrate the FEHA claim, has already impliedly consented to such discovery.
Therefore, lack of discovery is not grounds for holding a FEHA claim inarbitrable.”
(Ibid.)
We may assume that Eakins’s claims arising under antidiscrimination statutes
similar to FEHA are similarly nonwaivable. (See Civ. Code, § 3513 [“a law established
for a public reason cannot be contravened by a private agreement.”].) But if so, then the
Enrollment Agreement must be similarly construed as including an implicit agreement to
provide sufficient discovery, even in an arbitration. Rule R-21 gives the arbitrator the
power to direct “the production of documents and other information . . . .” Thus, “the
absence of express provisions . . . allowing discovery does not render the arbitration
agreement unconscionable. Rather, those terms are implied as a matter of law as part of
the agreement. [Citation.]” (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172
Cal. App. 4th 154, 177; accord, Lane v. Francis Capital Management LLC, supra, 224
Cal.App.4th at p. 693.)
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4. Fee-shifting.
Defendants argue that the trial court erred by even considering whether the
attorney fee provision was unconscionable, because it was severable from the arbitration
agreement itself. We agree.
As already mentioned, under the doctrine of severability, “if the party resisting
arbitration is claiming that the arbitration clause itself is unconscionable, a court must
decide this claim. [Citations.] However, provided the court concludes that the arbitration
clause itself is not unconscionable, it must compel arbitration, leaving it up to the
arbitrator to determine whether the contract as a whole is unconscionable. [Citation.]”
(Bruni v. Didion, supra, 160 Cal.App.4th at p. 1290.)
Here, even assuming the attorney fee provision was, in fact, unconscionable, that
would not detract from the validity or enforceability of the arbitration provisions. Under
similar circumstances, federal appellate courts have held that it is up to the arbitrator to
decide whether an attorney fee provision is unconscionable. (Bob Schultz Motors, Inc. v.
Kawasaki Motors Corp., U.S.A. (8th Cir. 2003) 334 F.3d 721, 726-728; Boomer v. AT&T
Corp. (7th Cir. 2002) 309 F.3d 404, 418, fn. 6; Thompson v. Irwin Home Equity Corp.
(1st Cir. 2002) 300 F.3d 88, 91-92.)
We recognize that some California appellate courts have refused to compel
arbitration because the agreement between the parties included an unconscionable
attorney fee provision; in each of these cases, however, the court also found additional
unconscionable provisions, and it determined that the unconscionable provisions could
23
not be severed. (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24
Cal.4th at pp. 103-104, 120-127; Carmona v. Lincoln Millennium Car Wash, Inc., supra,
226 Cal.App.4th at pp. 88-90; Samaniego v. Empire Today, LLC, supra, 205 Cal.App.4th
at pp. 1147, 1149; Ajamian v. CantorCO2e, L.P., supra, 203 Cal.App.4th at pp. 799-800,
802-804; Pinedo v. Premium Tobacco Stores, Inc. (2000) 85 Cal. App. 4th 774, 780-781.)
In this case, by contrast, the only even arguably unconscionable provision is the attorney
fee provision,8 and it can readily be severed from the arbitration provisions. (Cf. Serpa v.
California Surety Investigations, Inc. (2013) 215 Cal. App. 4th 695, 709-710 [compelling
arbitration after severing unconscionable attorney fee provision].)
We therefore conclude that the arbitration provisions themselves were not
substantively unconscionable.
V
DISPOSITION
Eakins has never disputed that, if Corinthian is entitled to compel arbitration, then
the other defendants are likewise entitled to compel arbitration. (See generally Ronay
Family Limited Partnership v. Tweed (2013) 216 Cal. App. 4th 830, 837-840 [some
nonparties, including agents and third-party beneficiaries, can enforce arbitration
agreement].)
8 We emphasize that we are not deciding whether the attorney fee provision
is, in fact, unconscionable.
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Thus, the order denying the petition to compel arbitration is reversed. The matter
is remanded with directions to enter an appropriate order granting the petition to compel
arbitration. Defendants are awarded costs on appeal against Eakins.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
RAMIREZ
P. J.
We concur:
HOLLENHORST
J.
MILLER
J.
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