Give Arbitration the Old College Try

Students of a for-profit college chain that operates Heald and Everest schools must arbitrate their complaints over allegedly deceptive schemes to entice students to enroll in high-priced degree programs.

The 9th U.S. Circuit Court of Appeals ruled Monday that Corinthian Colleges, owner of a chain of professional schools, could compel the current and former students to arbitrate their request for an injunction under California’s unfair competition, false advertising and consumer legal remedies laws.

Kevin Ferguson, a graduate of Everest Institute of Miami’s Medical Assistant program, and Sandra Muniz, a former paralegal student of HealdCollege in California, both sued claiming the Corinthian chain “systematically misled prospective students in order to entice enrollment.”

The allegations include that the firm lied about accreditation, the quality of education and career potential for graduates.  The suit alleges the schools target veterans and military personnel so that the schools receive funding from federal financial aid programs.

In addition, the suit alleged students were misinformed about financial aid, creating student loans many could not repay.

Each enrollment agreement also included an arbitration clause and waiver of jury trial.

The appeals court said it was required to follow recent U.S. Supreme Court rulings expanding arbitration in many areas, including this case.

The panel found the Federal Arbitration Act preempts California’s limits on arbitration clauses that waive the right of consumers to bring class actions.

A Congressional report in 2012 found a much higher tuition cost to receive a diploma at a for-profit school than a public program.  Among 30 schools surveyed, the student found a California medical assistant diploma at Heald College in Fresno cost over $22,000, while a comparable program at Fresno City College costs $1,650.  A paralegal associate degree cost $41,000 at Everest College in Ontario, while the same degree at Santa Ana College costs $2,400.

Case: Ferguson v. Corinthian Colleges Inc., No. 11-56965


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