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Corinthian Colleges, Inc. v. McCague

March 4, 2010

CORINTHIAN COLLEGES, INC., PETITIONER,
v.
SHERI MCCAGUE, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, RESPONDENT.



The opinion of the court was delivered by: Matthew F. Kennelly United States District Judge

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge

Pursuant to an arbitration agreement, Sheri McCague made a demand for arbitration on behalf of herself and others similarly situated, claiming that Corinthian Colleges made misrepresentations in connection with her enrollment in a dental assistant program. On May 11, 2009, an arbitrator issued a "partial final clause construction award" in which he found that the arbitration agreement permits class arbitration. The arbitrator has not yet decided, however, whether to actually certify a class. The case is before the Court on Corinthian's petition to vacate the partial final clause construction award. For the reasons stated below, the Court dismisses the petition as unripe.

Facts

In June 2008, McCague filed a demand for arbitration pursuant to the arbitration agreement that she signed as a condition of her enrollment with Corinthian. She alleged that Corinthian misrepresented that its dental program was accredited, completing the curriculum would allow a student to become an extended function dental assistant, and upon completing the dental program, a student would be certified under the Health Insurance Portability and Accountability Act (HIPAA). McCague filed her demand on behalf of herself and all others similarly situated.

The arbitration agreement states that "[b]oth the student and the institution irrevocably agree that any dispute between them shall be submitted to Arbitration." It makes no reference one way or the other to the possibility of arbitration on a classwide basis. Pet. Ex. A at 5. McCague read the agreement's silence on this point to permit class arbitration, while Corinthian read it to preclude class arbitration.

On May 11, 2009, the arbitrator issued a "partial final clause construction award" in which he addressed whether the arbitration agreement permits the arbitration to proceed on behalf of a class. Pet. Ex. B. The arbitrator started out with American Arbitration Association (AAA) Supplementary Rule 3, which states, "[u]pon appointment, the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether applicable arbitration clause permits the arbitration to proceed on behalf of or against a class." Id. at 3. The arbitrator stated that under Green Tree Financial Corp. v. Bazzle, 593 U.S. 444, 452 (2003), the question of "what kind of arbitration the parties agreed to," specifically whether the arbitration agreement allows class arbitration, is a decision for the arbitrator. Id. The arbitrator engaged in an extended analysis of Illinois law, which both sides had cited, and concluded that the agreement between McCague and Corinthian permits the arbitration to proceed on a class basis. Id. at 6-10. The arbitrator did not actually certify a class; he left that for later proceedings.

On August 10, 2009, Corinthian filed a petition with this Court to vacate the partial final clause construction award.

Discussion

"Judicial review of arbitration awards is extremely limited." Johnson Controls, Inc. Systems & Servs. Div. v. United Ass'n of Journeymen & Apprentices of Plumbing & Pipefitting Ind. of U.S. & Canada, AFL-CIO, 39 F.3d 821, 824 (7th Cir. 1994). A court may vacate an arbitration award, however, "where the arbitrators exceeded their powers." 9 U.S.C. § 10(a)(4). A court will not enforce an award that is "clearly beyond the arbitrator's power" but will not "overturn an award [simply] because [it] disagrees with the decision's legal or factual basis." Carpenter Local No. 1027, Mill Cabinet-Indus. v. Lee Lumber & Bldg. Material Corp., 2 F.3d 796, 798 (7th Cir. 1993).

1. Timely Service of Notice

In opposing Corinthian's petition, McCague argues that Corinthian failed to timely serve her or her counsel notice of the motion to vacate. Under the FAA, "[n]notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered." 9 U.S.C. § 12.

The arbitrator's partial final clause construction award was delivered electronically to the parties on May 13, 2009. Under 9 U.S.C. ยง 12, Corinthian had until August 13, 2009 to serve notice on McCague or her counsel of its motion to vacate. On August 11, 2009, Corinthian's counsel e-mailed the petition to the AAA and included a cover letter providing notice of the filing. Corinthian copied McCague's counsel on this e-mail. Resp. Ex. B. On August 12, 2009, ...


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