Kevin Ferguson v. Corinthian Colleges, Inc. , 733 F.3d 928 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
KEVIN FERGUSON, on behalf of No. 11-56965
himself and all others similarly
situated; SANDRA L. MUNIZ, on D.C. Nos.
behalf of herself and all others 8:11-cv-00127-
similarly situated, DOC-AJW
Plaintiffs-Appellees, 8:11-cv-00259-
DOC-AJW
v.
CORINTHIAN COLLEGES, INC.; OPINION
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.
Appeal from the United States District Court
for the Central District of California
David O. Carter, District Judge, Presiding
Argued and Submitted
August 8, 2013—Pasadena, California
2 FERGUSON V. CORINTHIAN COLLEGES
Filed October 28, 2013
Before: Richard C. Tallman, Richard R. Clifton,
and Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Clifton
SUMMARY*
Arbitration
The panel reversed the district court’s partial denial of the
motion of Corinthian Colleges, Inc., and related entities,
which own and operate for-profit academic institutions, to
compel arbitration in a 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. The 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.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
FERGUSON V. CORINTHIAN COLLEGES 3
The panel held that the Broughton-Cruz rule was
preempted by the Federal Arbitration Act. The panel
concluded that prior circuit authority, Davis v. O’Melveny &
Myers, 485 F.3d 1066 (9th Cir. 2007) (applying Broughton-
Cruz rule), was not controlling because it was clearly
irreconcilable with subsequent United States Supreme Court
decisions concerning the FAA. The panel held that under
AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011),
and Marmet Health Care Center, Inc. v. Brown, 132 S. Ct.
1201 (2012) (per curiam), the Broughton-Cruz rule was
preempted because it prohibits outright arbitration of a
particular type of claim.
The panel rejected the plaintiffs’ alternative argument that
they should not be required to arbitrate their public injunction
claims because those claims did not fall within the scope of
their arbitration agreements. The panel remanded with the
instruction that the district court direct all of the plaintiffs’
claims to arbitration and stay the action pending arbitration.
COUNSEL
Peter W. Homer (argued) and Christopher King,
HomerBonner P.A., Miami, Florida; Paul D. Fogel and
Felicia Yu, Reed Smith LLP, San Francisco, California;
Kevin P. Jacobs, Herron, Jacobs, & Ortiz, Miami, Florida, for
Defendants-Appellants.
Francis A. Bottini, Jr. and Albert Y. Chang (argued), Chapin
Fitzgerald Sullivan & Bottini LLP, San Diego, California, for
Plaintiffs-Appellees.
4 FERGUSON V. CORINTHIAN COLLEGES
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.
OPINION
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
FERGUSON V. CORINTHIAN COLLEGES 5
court’s ruling. The district court is instructed to direct all of
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.
6 FERGUSON V. CORINTHIAN COLLEGES
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
FERGUSON V. CORINTHIAN COLLEGES 7
sent Plaintiffs’ requests for damages under those statutes to
arbitration. Corinthian appealed that ruling.
II. Discussion
We review de novo a district court’s denial of a motion to
compel arbitration. Kilgore v. KeyBank, Nat’l Ass’n,
718 F.3d 1052, 1057 (9th Cir. 2013) (en banc).
A. The Federal Arbitration Act
The Federal Arbitration Act (“FAA”) provides that
agreements to arbitrate are “valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” 9 U.S.C. § 2. That
statute reflects an “emphatic federal policy” in favor of
arbitration. Marmet Health Care Ctr., Inc. v. Brown,
132 S. Ct. 1201, 1203 (2012) (per curiam) (citation omitted).
Its purpose is to “ensur[e] that private arbitration agreements
are enforced.” Mortensen v. Bresnan Commc’ns, LLC,
722 F.3d 1151, 1159 (9th Cir. 2013) (quoting AT&T Mobility
LLC v. Concepcion, 131 S. Ct. 1740, 1748 (2011)).
Pursuant to the Supremacy Clause of the United States
Constitution, “the FAA preempts contrary state law.” Id. at
1158. In enacting the FAA, Congress “withdrew the power
of the states to require a judicial forum for the resolution of
claims which the contracting parties agreed to resolve by
arbitration.” Southland Corp. v. Keating, 465 U.S. 1, 10
(1984). We are thus prohibited from applying any state
statute that invalidates an arbitration agreement. Allied-Bruce
Terminix Cos., Inc. v Dobson, 513 U.S. 265, 272 (1995). Nor
may we apply any other state law that “prohibits outright the
8 FERGUSON V. CORINTHIAN COLLEGES
arbitration of a particular type of claim.” Concepcion,
131 S. Ct. at 1747.
Corinthian argues that the FAA preempts California’s
Broughton-Cruz rule. We agree.
B. The Broughton-Cruz Rule
The Broughton-Cruz rule began with the California
Supreme Court’s decision in Broughton v. Cigna Healthplans
of California, 988 P.2d 67 (Cal. 1999). Broughton involved
claims by a minor and his mother against a health care
company, Cigna Healthplans of California. Id. at 71. The
minor plaintiff suffered severe injuries at birth, which the
plaintiffs alleged were caused by substandard prenatal
medical care and the denial of a medically necessary cesarean
delivery. Id. In addition to asserting a medical malpractice
claim, the plaintiffs alleged that Cigna had violated the CLRA
by deceptively and misleadingly advertising the quality of its
medical services. Id. They sought damages and an order
enjoining Cigna’s deceptive practices. Id.; see also Kilgore,
718 F.3d at 1059–60 (summarizing Broughton).
The CLRA, which is intended to “protect consumers
against unfair and deceptive business practices and to provide
efficient and economical procedures to secure such
protection,” gives private parties the right to seek an order
enjoining practices that violate it. Broughton, 988 P.2d at 74(citations omitted); see also Cal. Civil Code §§ 1760, 1780.
When a plaintiff exercises that right, it functions as a “private
attorney general, enjoining future deceptive practices on
behalf of the general public.” Broughton, 988 P.2d at 76.
FERGUSON V. CORINTHIAN COLLEGES 9
Because of an “inherent conflict” between arbitration and
the purposes of the CLRA, the California Supreme Court held
that arbitration could not be compelled for such claims for a
“public injunction.” Id. at 77, 78. The California court
identified two factors that create the conflict. First, public
injunctions under the CLRA are “for the benefit of the
general public rather than the party bringing the action,” and,
second, the “judicial forum has significant institutional
advantages over arbitration in administering a public
injunctive remedy, which as a consequence will likely lead to
the diminution or frustration of the public benefit if the
remedy is entrusted to arbitrators.” Id.The California Supreme Court adopted the “inherent
conflict” analysis from the United States Supreme Court. Id.at 73–74. The United States Supreme Court had earlier
explained that some statutory claims are not “suitable” for
arbitration, and that suitability depends on congressional
intent. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 627–28 (1985). Identifying an “‘inherent
conflict’ between arbitration and the [statute’s] underlying
purposes” is one way of demonstrating that Congress did not
intend for claims brought under that statute to be arbitrated.
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26
(1991) (quoting Shearson/Am. Express Inc. v. McMahon,
482 U.S. 220, 227 (1987)).
In Cruz v. PacifiCare Health Systems, Inc., 66 P.3d 1157,
1164–65 (Cal. 2003), the California Supreme Court extended
its holding in Broughton to requests for public injunctive
relief under the UCL and FAL. Under the UCL, “any person
engaged in unfair competition may be enjoined,” and an
action to enforce that statute may be “brought by a public
prosecutor or by any person acting for the interests of itself,
10 FERGUSON V. CORINTHIAN COLLEGES
its members or the general public.” Id. at 1164 (internal
quotation marks and citations omitted); see also Cal. Bus. &
Prof. Code §§ 17203, 17204. The FAL, which makes
unlawful “untrue or misleading statements” designed to
induce the purchase of goods and services, similarly
authorizes the enjoining of such statements by members of
the public. Cruz, 66 P.3d at 1164 (citations omitted); see also
Cal. Bus. & Prof. Code §§ 17500, 17535.
This court applied the Broughton-Cruz rule in Davis v.
O’Melveny & Myers, 485 F.3d 1066 (9th Cir. 2007). Davis
involved an employee’s claims against her employer under
various federal and California statutes, including the UCL.
Id. at 1070. We held, among other things, that the arbitration
agreement at issue could not “prohibit—i.e., require
arbitration of—judicial actions seeking such public injunctive
relief.” Id. at 1082. To the extent it did so, the agreement
was unenforceable. Id. We did not, however, analyze
whether that rule contravened the FAA.
As prior circuit authority, Davis is controlling absent any
clearly irreconcilable intervening higher authority.1 See
Miller v. Gammie, 335 F.3d 889, 893 (9th Cir. 2003) (en
banc) (“[W]here the reasoning or theory of our prior circuit
authority is clearly irreconcilable with the reasoning or theory
of intervening higher authority, a three-judge panel should
consider itself bound by the later and controlling authority,
1
We reject Corinthian’s contention that Davis’s application of the
Broughton-Cruz rule was dicta and therefore non-binding. That we
ultimately reached the same conclusion on a “more important[]” ground
makes our ruling one in the alternative rather than dicta. See Davis,
485 F.3d at 1082–83. Moreover, we explained en banc in Kilgore v.
KeyBank, National Ass’n, 718 F.3d 1052, 1055 (9th Cir. 2013), that the
Broughton-Cruz rule was “recognized” in Davis.
FERGUSON V. CORINTHIAN COLLEGES 11
and should reject the prior circuit opinion as having been
effectively overruled.”); see also Rodriguez v. AT&T Mobility
Servs. LLC, — F.3d —, 2013 WL 4516757, at *3–4 (9th Cir.
Aug. 27, 2013). We conclude that the portion of Davis
applying the Broughton-Cruz rule2 is clearly irreconcilable
with subsequent United States Supreme Court decisions
concerning the FAA.3
C. Preemption by the Federal Arbitration Act
We turn first to AT&T Mobility LLC v. Concepcion,
131 S. Ct. 1740 (2011). In Concepcion, the Supreme Court
held that the FAA preempted a California rule—known as the
Discover Bank rule—which invalidated most class action
waivers in adhesion contracts, including arbitration
agreements, as unconscionable. Id. at 1746, 1753. Of
particular significance to this case is the Court’s statement
that “[w]hen state law prohibits outright the arbitration of a
2
Only this portion of our decision in Davis has been superseded. The
portions not affected by the later United States Supreme Court decisions
remain valid precedent.
3
Corinthian’s argument that the FAA preempts the Broughton-Cruz rule
was raised by the appellants in Kilgore. On rehearing en banc, we did not
reach the appellants’ argument, however, because we concluded that the
injunction sought was not a public injunction. Kilgore, 718 F.3d at
1060–61. It would have benefitted only the class members, as it “relate[d]
only to past harms suffered by the members of the limited putative class,”
not the general public. Id. at 1061. By contrast, Plaintiffs in this case seek
to enjoin Corinthian from continuing to engage in a purported scheme to
entice prospective students through misrepresentations. Such an
injunction would have no benefit for Plaintiffs, as they have already
enrolled in Corinthian’s schools, but may prevent others from enrolling in
a Corinthian school based on any misrepresentations.
12 FERGUSON V. CORINTHIAN COLLEGES
particular type of claim, the analysis is straightforward: The
conflicting rule is displaced by the FAA.” Id. at 1747.
This principle was reiterated in Marmet Health Care
Center, Inc. v. Brown, 132 S. Ct. 1201 (2012) (per curiam),
one of the decisions handed down after the district court’s
order in this case. Marmet involved a West Virginia rule that
invalidated any predispute agreement to arbitrate a personal
injury or wrongful death claim against a nursing home. Id. at
1202. That rule arose from three state-court negligence
lawsuits each alleging the wrongful death of a nursing home
patient. Id. In a decision concerning all three cases, the West
Virginia Supreme Court of Appeals had held that “Congress
did not intend for the FAA to be, in any way, applicable” to
those particular types of lawsuits, as they only “collaterally
derive” from a contract and “involve[] a service that is a
practical necessity for members of the public.” Brown ex rel.
Brown v. Genesis Healthcare Corp., 724 S.E.2d 250, 291 (W.
Va. 2011), vacated sub nom. Marmet, 132 S. Ct. 1201. The
United States Supreme Court held the West Virginia court’s
interpretation of the FAA to be “both incorrect and
inconsistent with clear instruction” in its precedent. Marmet,
132 S. Ct. at 1203. It stated: “As this Court reaffirmed last
Term, ‘[w]hen state law prohibits outright the arbitration of
a particular type of claim, the analysis is straightforward: The
conflicting rule is displaced by the FAA.’ That rule resolves
these cases.” Id. (alteration in Marmet) (quoting
Concepcion, 131 S. Ct. at 1747).
That rule also resolves this case. By exempting from
arbitration claims for public injunctive relief under the
CLRA, UCL, and FAL, the Broughton-Cruz rule similarly
prohibits outright arbitration of a particular type of claim.
FERGUSON V. CORINTHIAN COLLEGES 13
We reject the argument that because an injunction is
technically a remedy rather than a cause of action, the
Broughton-Cruz rule is insulated from the FAA. We do not
think the Supreme Court intended such a technical reading of
the word “claim.” As we have recognized en banc, recent
Supreme Court decisions “have given broad effect to
arbitration agreements.” Kilgore, 718 F.3d at 1057. Just a
few months ago, the Supreme Court reiterated that “courts
must ‘rigorously enforce’ arbitration agreements according to
their terms.” Am. Express Co. v. Italian Colors Rest.,
133 S. Ct. 2304, 2309 (2013) (quoting Dean Witter Reynolds
Inc. v. Byrd, 470 U.S. 213, 221 (1985)).
Indeed, this argument appears to be foreclosed by
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52(1995). In Mastrobuono, 514 U.S. at 63–64, 66, the Supreme
Court found that a contract including an arbitration agreement
and indicating that it was “governed by the laws of the State
of New York” did not incorporate New York’s rule
prohibiting punitive damages awards in arbitration. The New
York rule was premised upon the New York Court of
Appeals’ conclusion that punitive damages is a “social
exemplary ‘remedy’” to address “public penal wrongs” that
evoked “strong public policy” concerns precluding its
application in a purely private setting. Garrity v. Lyle Stuart,
Inc., 353 N.E.2d 793, 795–96 (N.Y. 1976). In rejecting the
argument that the arbitration agreement incorporated the rule,
the Supreme Court accepted the premise that the rule would
be preempted in the absence of an agreement that
incorporated it. See Mastrobuono, 514 U.S. at 58 (indicating
that the Court’s prior decisions “make clear that if contracting
parties agree to include claims for punitive damages within
the issues to be arbitrated, the FAA ensures that their
agreement will be enforced according to its terms even if a
14 FERGUSON V. CORINTHIAN COLLEGES
rule of state law would otherwise exclude such claims from
arbitration”). The Supreme Court has since stated that
Mastrobuono stands for the proposition that the “FAA
pre-empts state law[s] requiring judicial resolution of claims
involving punitive damages.” Marmet, 132 S. Ct. at 1204
(citing Mastrobuono, 514 U.S. at 56). Moreover, a rule that
precludes an arbitrator from fashioning injunctive relief is
similar to the Supreme Court’s illustrative list of preempted
state rules in Concepcion, 131 S. Ct. at 1747. These include
rules that would prohibit enforcement of arbitration
agreements that failed to provide for “judicially monitored
discovery,” “fail[ed] to abide by the Federal Rules of
Evidence,” or “disallow[ed] an ultimate disposition by a
jury.” Id. This all strongly suggests even where a specific
remedy has implications for the public at large, it must be
arbitrated under the FAA if the parties have agreed to
arbitrate it.
Moreover, in applying the Broughton-Cruz rule, the
district court in this case apparently intended to determine for
itself in the first instance whether Corinthian was liable under
the UCL, FAL, and CLRA, and then, if it found liability, to
consider whether an injunction was warranted. Under those
circumstances, the effect of the Broughton-Cruz rule is to
prohibit outright arbitration of three particular types of
claims, so long as the plaintiff seeks a public injunction under
those causes of action. This violates the FAA.
Subsequent decisions of the United States Supreme Court
have made clear that the Broughton-Cruz rule is flawed in
other ways as well. To begin with, the California Supreme
Court relied on the inherent conflict analysis drawn from
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 627–28 (1985), but, as observed in the Italian
FERGUSON V. CORINTHIAN COLLEGES 15
Colors dissent, that analysis does not apply to state statutes
such as those that form the basis of Plaintiffs’ request for a
public injunction in this case. The “effective vindication”
exception, which permits the invalidation of an arbitration
agreement when arbitration would prevent the “effective
vindication” of a federal statute, does not extend to state
statutes. See Italian Colors, 133 S. Ct. at 2320 (Kagan, J.,
dissenting).
The effective vindication and inherent conflict exceptions
are two sides of the same coin—the former turning on the
ability to vindicate a statute, and the latter turning on the
underlying purposes of a statute. Both exceptions are
reserved for claims brought under federal statutes. They rest
on the principle that other federal statutes stand on equal
footing with the FAA. In both Mitsubishi Motors and Italian
Colors the claims at issue were under the federal antitrust
laws, and the argument was that the federal antitrust statutes
modified the FAA. “In [the] all-federal context, one law does
not automatically bow to the other.” Id. In contrast, as
bluntly stated by Justice Kagan in her dissent in Italian
Colors, “We have no earthly interest (quite the contrary) in
vindicating” a state law. Id. Plaintiffs in this case, like the
plaintiffs in the Broughton and Cruz cases, are pursuing state
statutory claims.
The Italian Colors majority would agree with Justice
Kagan’s dissent on this point. The central premise of the
Supremacy Clause is that federal law is superior to state law.
U.S. Const. art. VI, cl. 2. (“[T]he Laws of the United States
. . . shall be the supreme Law of the Land.”). The Supreme
Court has therefore long recognized that any state law that
“stands as an obstacle to the accomplishment and execution
of the full purposes and objectives of Congress” is preempted.
16 FERGUSON V. CORINTHIAN COLLEGES
Hines v. Davidowitz, 312 U.S. 52, 67 (1941); see also
Mortensen v. Bresnan Commc’ns, LLC, 722 F.3d 1151, 1157
(9th Cir. 2013).
There is no reason to think that this principle does not
apply to state rules that conflict with the FAA. “When a state
rule allegedly conflicts with the FAA, we apply standard
preemption principles, asking whether the state law frustrates
the FAA’s purposes and objectives. If the state rule does so
. . . the Supremacy Clause requires its invalidation.” Italian
Colors, 133 S. Ct. at 2320 (Kagan, J., dissenting). That there
may be an inherent conflict is irrelevant. Cf. Nitro-Lift
Technologies, LLC v. Howard, 133 S. Ct. 500, 504 (2012)
(per curiam) (rejecting the argument that the FAA did not
preempt an Oklahoma statute because that statute was more
specific than the FAA, and explaining that the “interpretive
principle that the specific governs the general . . . applies only
to conflict between laws of equivalent dignity,” but when a
specific state statute conflicts with a general federal law, “the
latter governs”).
The California Supreme Court’s reliance in Broughton,
988 P.2d at 77, on the institutional advantages of the judicial
forum is also inconsistent with AT&T Mobility LLC v.
Concepcion. In Concepcion, 131 S. Ct. at 1747, the United
States Supreme Court explained that state rules prohibiting
enforcement of arbitration agreements that fail to provide for
the judicial advantages of monitored discovery, evidence
rules, or disposition by a jury would be impermissible under
the FAA, as such rules disfavor arbitration. Simply put,
“States cannot require a procedure that is inconsistent with
the FAA, even if it is desirable for unrelated reasons.” Id. at
1753.
FERGUSON V. CORINTHIAN COLLEGES 17
Moreover, in creating the Broughton-Cruz rule, the
California court was motivated by its conclusion that the
public injunction sought by the plaintiffs was “beyond the
arbitrator’s power to grant.” Broughton, 988 P.2d at 76. But
that premise is not necessarily true. Corinthian concedes, and
we agree, that an arbitrator generally has the authority to
enter injunctive relief against a party that has entered into an
arbitration agreement. Corinthian’s caveat, however, is that
an arbitrator may do so only if the arbitration agreement at
issue permits it. Whether, in this case, Plaintiffs’ arbitration
agreements do so will need to be determined by the arbitrator.
See Coast Trading Co. v. Pac. Molasses Co., 681 F.2d 1195,
1197–98 (9th Cir. 1982) (describing an arbitrator’s role as the
“interpretation and application of the parties’ agreement,” and
stating that its award is “legitimate only so long as it draws its
essence from the . . . agreement” (alteration in Coast Trading)
(quoting United Steelworkers of Am. v. Enter. Wheel & Car
Corp., 363 U.S. 593, 597 (1960))).
We decline to resolve in advance the question of what, if
any, court remedy Plaintiffs might be entitled to should the
arbitrator determine that it lacks the authority to issue the
requested injunction. That is beyond the scope of this appeal.
If the arbitrator comes to that conclusion, Plaintiffs may
return to the district court to seek their public injunctive
relief. We express no opinion on any question that might
arise at that time. Similarly, we decline to resolve now
questions that could arise if a motion is brought in court to
confirm an arbitration award that includes injunctive relief, or
whether it might be necessary for a court to enforce a public
injunction awarded by an arbitrator. Those questions can be
better addressed in the context of an actual case, with
arguments directed more specifically to the questions raised
in that case.
18 FERGUSON V. CORINTHIAN COLLEGES
We therefore hold that the FAA preempts the
Broughton-Cruz rule. To the extent Davis v. O’Melveny &
Myers, 485 F.3d 1066 (9th Cir. 2007), held otherwise, it is
clearly irreconcilable with intervening Supreme Court
authority and has been overruled.
D. Plaintiffs’ Claims Are Within the Scope of Their
Arbitration Agreements
Plaintiffs argue in the alternative that they should not be
required to arbitrate their public injunction claims because
those claims do not fall within the scope of their arbitration
agreements. We disagree.
We first reject Corinthian’s attempt to characterize
Plaintiffs’ argument as an improper cross-appeal. Because
the district court rejected Plaintiffs’ scope argument in the
section of its order compelling arbitration, Corinthian takes
the position that Plaintiffs’ argument should be treated as a
separate appeal that is both untimely and in violation of the
FAA, which precludes the appeal of an order compelling
arbitration. See 9 U.S.C. § 16(b)(2) (“[A]n appeal may not be
taken from an interlocutory order . . . directing arbitration to
proceed under section 4 of this title.”). But Plaintiffs are not
asking us to reverse the ruling compelling arbitration. Rather,
they have raised their scope argument as an alternative
ground on which the panel may affirm the district court.
They are entitled to do so. See, e.g., Atel Fin. Corp. v.
Quaker Coal Co., 321 F.3d 924, 926 (9th Cir. 2003) (per
curiam).
Turning to the merits of Plaintiffs’ argument, because the
scope of an arbitration agreement is a matter of contract, we
must look to the express terms of the agreements at issue to
FERGUSON V. CORINTHIAN COLLEGES 19
determine whether Plaintiffs and Corinthian intended that
public injunction claims be arbitrated. See Chiron Corp. v.
Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.
2000). Keeping in mind that “any doubts concerning the
scope of arbitrable issues should be resolved in favor of
arbitration,” we conclude that Plaintiffs’ claims do fall within
the scope of their arbitration agreements. Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25
(1983).
Plaintiff Ferguson’s enrollment agreement states: “I
understand that both I and The School are irrevocably
waiving rights to a trial by jury, and are selecting instead to
submit any and all claims to the decision of an arbitrator
instead of a court.” His “Enrollment Agreement Addendum”
further states: “I agree that any dispute arising from my
enrollment, no matter how described, pleaded or styled, shall
be resolved by binding arbitration under the Federal
Arbitration Act.” Each of Plaintiff Muniz’s enrollment
agreements provides: “Any dispute arising from enrollment
at Heald College, no matter how described, pleaded or styled,
shall be resolved by binding arbitration.” And her separate
“Agreement to Binding Arbitration and Waiver of Jury Trial”
states: “I, Sandra L. Muniz agree that any dispute arising
from my enrollment at Heald College . . . no matter how
described, pleaded or styled, shall be resolved by binding
arbitration.” Those terms are sufficiently broad to cover
Plaintiffs’ public injunction claims.
Plaintiffs’ reliance on Tracer Research Corp. v. National
Environmental Services Co., 42 F.3d 1292 (9th Cir. 1994), is
misplaced. Although Plaintiffs correctly point out that in
Tracer Research we narrowly interpreted the phrase “arising
under the Agreement” as covering only contract disputes
20 FERGUSON V. CORINTHIAN COLLEGES
related to the agreement itself, id. at 1295, the terms in
Plaintiffs’ agreements are broader than that, as they refer to
“any disputes,” “all claims,” and disputes “arising from my
enrollment.”
Plaintiffs’ argument that their public injunction claims are
collateral to, rather than arising from, their enrollment
because they pertain to recruiting is no more persuasive.
Plaintiffs’ central complaint in this lawsuit is that Corinthian
misrepresented the value and cost of an education at Heald
and Everest schools. That complaint is directly related to
enrollment.
III. Conclusion
The FAA preempts California’s Broughton-Cruz rule that
claims for public injunctive relief cannot be arbitrated. We
therefore reverse and remand the district court’s order
denying Corinthian’s motion to compel arbitration of
Plaintiffs’ claims for public injunctive relief. The district
court is directed to grant the motion as to all claims, including
Plaintiffs’ injunctive relief claims, and to stay the lawsuit
pending arbitration.
In the event that the arbitrator concludes that Corinthian
has violated the UCL, FAL, or CLRA, and that entry of an
injunction might be appropriate, but further determines that
it lacks the authority under the agreements at issue to grant
the requested injunction, Plaintiffs may seek the requested
injunction in court. We express no opinion about the merits
of such action.
REVERSED and REMANDED.