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Ferguson v. Corinthian Colleges, Inc.

United States Court of Appeals, Ninth Circuit

October 28, 2013

Kevin FERGUSON, on behalf of himself and all others similarly situated; Sandra L. Muniz, on behalf of herself and all others similarly situated, Plaintiffs-Appellees,
CORINTHIAN COLLEGES, INC.; Corinthian Colleges, Inc., dba Everest College; Corinthian Colleges, Inc., dba Everest University; Corinthian Colleges, Inc., dba Everest Institute; Corinthian Colleges, Inc., dba Everest College of Business; Technology and Health Care; Heald College, LLC; Heald Capital, LLC, Defendants-Appellants.

Argued and Submitted Aug. 8, 2013.

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[Copyrighted Material Omitted]

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Peter W. Homer (argued) and Christopher King, HomerBonner P.A., Miami, FL; Paul D. Fogel and Felicia Yu, Reed Smith LLP, San Francisco, CA; Kevin P. Jacobs, Herron, Jacobs, & Ortiz, Miami, FL, for Defendants-Appellants.

Francis A. Bottini, Jr. and Albert Y. Chang (argued), Chapin Fitzgerald Sullivan & Bottini LLP, San Diego, CA, for Plaintiffs-Appellees.

Kate Comerford Todd and Tyler R. Green, National Chamber Litigation Center, Inc., Washington, D.C.; Andrew J. Pincus, Evan M. Tager, Archis A. Parasharami, and Richard B. Katskee, Mayer Brown LLP, Washington, D.C., for Amicus Curiae Chamber of Commerce of the United States.

Appeal from the United States District Court for the Central District of California, David O. Carter, District Judge, Presiding. D.C. Nos. 8:11-cv-00127-DOC-AJW, 8:11-cv-00259-DOC-AJW.



CLIFTON, Circuit Judge:

Defendants Corinthian Colleges, Inc., and related entities appeal the district court's partial denial of their motion to compel arbitration. Plaintiffs, former students at for-profit schools owned by Corinthian, brought this putative class action on behalf of current and former students, alleging that Corinthian engaged in a deceptive scheme to entice the enrollment of prospective students in violation of California law. Pursuant to arbitration clauses in Plaintiffs' enrollment agreements, Corinthian moved to compel arbitration. The district court granted the motion in part but denied the motion regarding Plaintiffs' claims for injunctive relief under California's unfair competition law, false advertising law, and Consumer Legal Remedies Act. In doing so, the district court relied on decisions by the California Supreme Court establishing the so-called Broughton - Cruz rule, which exempts claims for " public injunctive relief" from arbitration.

Based on decisions of the United States Supreme Court, including some rendered after the district court entered its order in this case and after the California Supreme Court decisions establishing the Broughton - Cruz rule, we conclude that the Broughton - Cruz rule is preempted by the Federal Arbitration Act. We reverse that portion of the district court's ruling. The district court is instructed to direct all of

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Plaintiffs' claims to arbitration and to stay the action pending arbitration.

I. Background

Kevin Ferguson is a graduate of Everest Institute of Miami's Medical Assistant Program. He enrolled in the program in June 2009 and attended Everest for approximately one year. He allegedly financed his education through federal student loans and, despite graduating with a strong academic record, was unable to find employment in the medical assistant field.

Sandra Muniz attended Heald College in California in 2007, 2008 and 2009. After completing a business skills certificate, she enrolled in a paralegal program that she did not complete. She later enrolled in a criminal justice program. Like Ferguson, Muniz alleged that she financed her education through student loans and was unable to find meaningful employment.

Ferguson and Muniz brought two separate putative class actions against Corinthian, the parent company of the schools they attended. Corinthian also owns and operates a number of other for-profit academic institutions nationwide, many operating under the names " Everest" and " Heald." Plaintiffs' proposed class included all students in the United States and Canada who enrolled in an Everest school after approximately January 24, 2005, or a Heald school after approximately January 24, 2009. The district court consolidated Ferguson's and Muniz's cases into the present action.

The thrust of Plaintiffs' complaints was that Corinthian systematically misled prospective students in order to entice enrollment. Corinthian allegedly misrepresented the quality of its education, its accreditation, the career prospects for its graduates, and the actual cost of education at one of its schools. Students were also allegedly misinformed about financial aid, which resulted in student loans that many could not repay. Corinthian also allegedly targeted veterans and military personnel specifically, so that it could receive funding through federal financial aid programs available to those people.

Plaintiffs asserted seven claims under California law. At issue in this appeal are Plaintiffs' claims under California's unfair competition law (" UCL" ), California Business and Professions Code § 17200 et seq. ; false advertising law (" FAL" ), California Business and Professions Code § 17500 et seq. ; and Consumer Legal Remedies Act (" CLRA" ), California Civil Code § 1750 et seq. Plaintiffs sought both money damages and injunctive relief under those statutes.

Plaintiffs' enrollment agreements each contained an arbitration clause. Additionally, Ferguson signed an " Enrollment Agreement Addendum" containing an arbitration clause, and Muniz signed an " Agreement to Binding Arbitration and Waiver of Jury Trial." Based on those agreements, Corinthian moved to compel arbitration of the entire action.

The district court granted the motion with respect to most of Plaintiffs' claims and stayed those claims pending arbitration. Applying California's Broughton- Cruz rule, the court declined to compel arbitration of Plaintiffs' requests for injunctive relief under the UCL, FAL, and CLRA, though it sent Plaintiffs' requests ...

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