Bakersfield College, a California community college, operates a varsity football program. In order to participate in intercollegiate football competition, the college is required to be a member of the California Community College Athletic Association (the Athletic Association) and to abide by the Athletic Association’s constitution and bylaws.
The Athletic Association’s constitution authorizes the commissioner of the Southern California Football Association (the Football Association) to impose sanctions and penalties on member colleges. The constitution also states that a member college that objects to a sanction or penalty may appeal the commissioner’s ruling in a process that ends in binding arbitration.
In May 2013, Bakersfield College was penalized and sanctioned for violating the Athletic Foundation’s bylaws because “the College had provided football players with meals and access to work and housing opportunities not available to others students.” The College appealed this decision through the appellate process outlined in the Athletic Association’s constitution, but it declined to submit to binding arbitration. Instead, Bakersfield filed suit against the Athletic Association and the Football Association for breach of contract and breach of the fair procedure doctrine
The two Associations argued that Bakersfield had failed to exhaust its administrative remedies by foregoing the binding arbitration process. Bakersfield responded by arguing that it should be excused from participating in binding arbitration because the arbitration provision was unconscionable under California law. A California trial court sided with the two defendant Associations and ruled that Bakersfield’s lawsuit was barred because the college had not exhausted its administrative remedies.
The California Court of Appeal (Third District) Decision
On appeal, the California Court of Appeal (Third District) reversed the trial court’s decision. In the appellate court’s view, the challenged arbitration agreement was unconscionable under California law and could not be enforced.
The California Court of Appeal began its analysis by stating the law of unconscionability in California. “Unconscionability consists of both procedural and substantive elements,” the court explained. The court then examined whether the arbitration provision in the Athletic Association’s constitution was procedurally unconscionable. “When the weaker party is presented the [arbitration] clause and told to ‘take it or leave it’ without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability,” the court stated.
In the case before it, the court continued, “the College had no ability to individually negotiate the terms of the contract at the time it was made. It could not opt-out of the arbitration provision as drafted by the Athletic Association. The uncontroverted evidence supports a finding of procedural unconscionability.” As the court pointed out, Bakersfield had to accept the Athletic Association’s terms if it wanted to participate in intercollegiate athletics, a matter of considerable importance to the college and its students. “To provide this opportunity to its students, the College had no other alternative -- it had to be a member of the Athletic Association.”
The court went on to consider whether the arbitration provision was substantially unconscionable. In making this assessment, the court stated, the paramount consideration is mutuality. “An arbitration agreement requires a ‘modicum of bilaterality,’ meaning the drafter cannot require another to submit to arbitration to pursue a claim but not accept the same limitation when it would act as the plaintiff, without some reasonable justification for such one-sidedness based on business realities.”
In assessing the Athletic Association’s arbitration provision, the California appellate court found no mutuality. “The binding arbitration procedure applies only to appeals by member colleges of penalty and sanctions decisions. It is not an alternative dispute procedure applied evenhandedly to all disputes between the parties.” In particular, the provision did not require the Athletic Association to submit its disputes with member colleges to binding arbitration, and thus the provision lacked mutuality.
The court pointed out other elements of the arbitration agreement that disfavored member colleges. For example, one subsection authorized the arbitration panel to award costs and attorney fees against a college if the Athletic Association prevailed in arbitration, but there was no parallel language that authorized the panel to award costs against the Association if the college prevailed.
The court was also troubled by the manner in which arbitration panel members were selected. Although colleges could nominate panel members, “in practice, the entire master list was solicited, and appointed, solely by the [Athletic Association’s] Executive Director, with no input from member colleges.” In fact, the court noted, “the Athletic Association unilaterally selected all individuals on the master arbitration panel list and did so in secrecy, precluding the colleges from commenting on or objecting to any potentially biased panel member.” Such a procedure, the court state, “does not achieve the minimum levels of integrity required to enforce an agreement to arbitrate.”
In conclusion, the California Court of Appeal ruled the arbitration agreement that the Athletic Association sought to enforce was both procedurally and substantively unconscionable. “The arbitration agreement is therefore unenforceable,” the court summarized, “and the trial court erred in compelling arbitration of the College’s claims.”
The court’s decision in the Bakersfield College case has important implications for students who attend for-profit colleges. These colleges typically force students to sign mandatory arbitration agreements as a condition of enrollment. A student has no power to negotiate with a for-profit college regarding arbitration provisions—which are offered on a “take it or leave it” basis. Based on the reasoning in the Bakersfield College case, such arbitration agreements are procedurally unconscionable.
Likewise, the terms of a for-profit college’s arbitration agreement may disadvantage students who wish to resolve complaints against their college. For example, in Magno v. College Network, Inc., an arbitration provision forced California students to arbitrate their disputes with a for-profit education provider in Indiana. Such language, a California court ruled, disadvantaged students in a way that made the arbitration agreement substantively unconscionable and unenforceable.
Arbitration agreements have traditionally been favored by the courts. In Dicent v. Kaplan University, an appellate court recently forced a student to arbitrate her claim against a for-profit college rather than litigate. The Bakersfield College provision, which invalidated an arbitration provision as being procedurally and substantively unconscionable, provides strong support for students attending for-profit colleges who want to invalidate a for-profit college’s arbitration agreement and proceed directly to litigation.
Bakersfield Coll. v. Calif. Community Coll. Athletic Assoc., __ Cal.Rptr.3d --, 41 Cal.App.5th 753, 2019 WL 5616682 753 (2019).
Dicent v. Kaplan Univ., 758 Fed. Appx. 311 (3d Cir. 2019) (per curiam).
Magno v. College Network, Inc., 204 Cal.Rptr.3d 829332 Ed. Law Rep. 1028 (Cal. Ct. App. 2016).
Note: A longer version of this article has been published in School Law Reporter, a publication of the Education Law Association.