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Salem International University, LLC v. Taylor Bates

Salem International University, LLC v. Taylor Bates

Case No. 
15-0948
Opinion Date: 
11/16/2016
Opinion Author: 
Justice Brotherton
Decision 
Reversed
Vote: 
Unanimous
Facts 

This is a class action case involving students enrolled in the nursing program at Salem International University.  In February, 2012, the nursing program lost its accreditation and was ordered to be suspended.  Respondents are students who were affected by this suspension.

In August, 2013, Respondents filed a case on a class wide basis alleging that Petitioner, Salem International University, was guilty of negligence, breach of contract, breach of the duty of good faith and fair dealing, and also violated provisions of the West Virginia Consumer Credit Protection Act, W.Va. Code 46A-1-101 et seq. Petitioner filed a motion to compel arbitration, citing language in the enrollment agreement requiring arbitration of any disputes.  Respondents opposed the motion.

After briefing and oral argument, the trial court concluded that the arbitration provision was ambiguous regarding the arbitrability of class action cases.  The specific language read as follows:

“The arbitrator shall have no authority to arbitrate claims on a class action basis, and claims brought by or against you may not be joined or consolidated with claims brought by or against any other person.”

Even though this language prohibited the arbitrator from hearing claim on a classwide basis or from joining or consolidating claims, the trial court found that there was no language affirmatively waiving Respondent’s right to proceed via a class action.  Accordingly, the court concluded that the arbitration provision was ambiguous.

Issue 

Is class action language contained in an arbitration agreement between a student and a public university ambiguous?

Analysis 

Respondents argue in their briefs and at oral argument that the arbitration agreement itself was invalid.  However, the Supreme Court found that any challenges to the validity of the arbitration agreement had to be raised by Respondents through a cross assignment of error.  Because Respondents failed to cross assign any error, then, under Rule 10 of the Rules of Appellate Procedure, the issue was not properly before the Court and would not be considered.

The Court next addressed the question of whether the arbitration language itself was ambiguous.  Writing for the Court, Justice Benjamin emphasized the strong “presumption favoring arbitration” under the Federal Arbitration Act.   See, e.g., Local Division No. 812 v. Transit Authority, 179 W.Va. 31, 365 S.E.2d 76 (1987).  The Court had little trouble finding that the language was not ambiguous.  There was express language prohibiting the arbitrator from hearing class cases.  There was also explicit language prohibiting any aggrieved party from joining or consolidating claims with those “brought by any other party.”  Elsewhere, the agreement stated that all claims had to be submitted on an “individual” basis.  Reading all of these provisions together, the court concluded that “the arbitration agreement acts as a class action litigation waiver barring the respondents from seeking judicial relief as a class.”

Justice Workmen concurred.  Her opinion candidly acknowledged that the outcome was “manifestly unfair” and that the Respondents were “left holding the bag with no degree, no nursing careers, and student loans that are collecting interest and weighing them down financially.”  However, none of this could overcome the “formidable pro-arbitration policy expressed by Congress and repeatedly upheld by the United States Supreme Court.”

 

Commentary 

To begin with, this case provides a procedural warning:  Respondents must be careful to cross assign any errors they wish to raise.  Otherwise, they will be deemed to have waived those errors for purposes of appeal.

The Court’s decision on the merits is not surprising.  Federal arbitration law governs, and it is, as Justice Workmen says, quite “formidable.”  Lawyers faced with arbitration agreements must make an honest assessment:  Can this agreement be successfully challenged?  There are still viable methods for attacking an arbitration agreement, but they are limited.  The take away here is that unfairness or emotional appeal alone is simply not enough.  The pro-arbitration policy embodied by the Federal Arbitration Act is still going to win the day.  As lawyers, we must begin evaluating arbitration issues in light of that harsh reality.

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