COURT COMPELS ARBITRATION NOTWITHSTANDING STATE “COST-PROHIBITIVENESS” DEFENSE, APPLYING CONCEPCION
Current and former students filed a putative class action against an institution alleging that the institution misrepresented the quality of its education and the prospects for post-graduation employment. When the institution moved to compel arbitration, the students sought to challenge the enforceability of the arbitration clause in court, notwithstanding a delegation provision that provided for arbitrability to be decided by the arbitrators. The court initially refused to enforce the delegation clause, holding that the students presented a valid defense that arbitration would be cost-prohibitive for them. On reconsideration, however, the court compelled arbitration even on the issue of arbitrability, relying on Concepcion. The court explained, after reviewing the origins of the cost-prohibitiveness defense in state precedent, that the defense is a doctrine created in the specific context of arbitration agreements, and is therefore preempted by the FAA. Dean v. Draughons Junior College, Inc., Case No. 3:12-cv-0157 (USDC M.D. Tenn. Jan. 16, 2013).
This post written by Michael Wolgin.
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