Facts
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.”
Conclusion
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.
References
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.
