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Dixon v. Daymar Colleges Group, LLC

Supreme Court of Kentucky

April 2, 2015

BRITTANY DIXON; PATRICIA TABER; MARTHA ELIZABETH WATHEN-COLLIER; MONICA SYKES; CANDACE WILLIAMS; TASHA ALLEN; JESSICA GORDAN; DARENA PRESCOTT; TINA CAIN; KIMBERLY MILAN; AND AMY LEE APPELLANTS
v.
DAYMAR COLLEGES GROUP, LLC; DAYMAR LEARNING OF PADUCAH, INC.; DAYMAR LEARNING OF OHIO, INC.; MARK GABIS (NOW DECEASED); AND DAYMAR LEARNING, INC. APPELLEES

ON REVIEW FROM COURT OF APPEALS CASE NO. 2010-CA-002039-MR MCCRACKEN CIRCUIT COURT NO. 10-CI-00132

COUNSEL FOR APPELLANTS: Kenneth L. Sales Leslie Metcalf Cronen Bubalo Goode Sales 85 Bliss, PLC Mark P. Bryant Emily M. W. Roark Ben Elliott Stewart Bryant Law Center, P.S.C. David G. Bryant Jones Ward, PLC

COUNSEL FOR APPELLEES: Caroline Lynch Pieroni Robert Kenyon Meyer Stephen Joseph Mattingly Dinsmore 85 Shohl, LLP

COUNSEL FOR AMICUS CURIAE, KENTUCKY JUSTICE ASSOCIATION: Kevin Crosby Burke

OPINION OF THE COURT

MINTON CHIEF JUSTICE

A group of students[1] challenges Daymar College's enrollment process as both procedurally and substantively unconscionable. Specifically, the Students challenge the incorporation of an arbitration provision on the reverse side of the Student Enrollment Agreement. Despite this arbitration provision, the Students filed a lawsuit in circuit court.

The trial court refused to compel arbitration, finding the arbitration provision both procedurally and substantively unconscionable. Daymar appealed and the Court of Appeals reversed the trial court. We reverse the Court of Appeals and hold, instead, that the trial court was correct but for reasons different from those identified by the trial court. Because Daymar's attempted incorporation was unsuccessful, the Students were not subject to the arbitration provision; as a result, arbitration was rightly denied.

I. FACTUAL AND PROCEDURAL BACKGROUND.

Daymar is a for-profit institution offering degrees in such areas as Graphic Design, Pharmacy Technology, and Business Administration. Founded in 1963 in Owensboro, Kentucky, Daymar has grown considerably over the past fifty years and now operates campuses under various names in Kentucky, Ohio, and Tennessee, with a strong online-education presence as well. In Kentucky alone, Daymar has a presence in seven locations. All the students represented in this action attended the location in Paducah, Kentucky.

It is not difficult to understand the appeal of Daymar as a higher-education option for many. Generally speaking, Daymar offers the opportunity to obtain a degree in a specialized field with, according to Daymar, high employment possibilities-all within a more condensed timeline than traditional higher-education institutions. But, according to the Students, Daymar's self-promotion and attractive promises to students amounted to deception. Facing unemployment or low wages in jobs unrelated' to their fields of study, the Students commenced the instant suit against Daymar in 2010.[2]

Primarily, the Students' suit revolved around the harried admissions process they underwent and the promises or representations made during that experience. Upon arriving at Daymar's campus, the Students began the enrollment process by filling out a prospective-student questionnaire. The Students then met with an admissions representative for approximately thirty minutes to an hour. During this meeting, the Students were required to complete an interview, view a PowerPoint presentation on available academic programs, and complete a 12-minute Wonderlic Cognitive Ability Test. Additionally, the Students were given the option to take a tour of the campus if they desired. After completing all these tasks, the Students were directed to meet with an enrollment counselor, during which they were expected to sign at, least twelve pages of documents. The Student Enrollment Agreement (Agreement)-the contract at issue in this case-was presented to the Students at this time.

The Students claim they were not able to ask any questions about the documents they were signing and were actually told not to read the documents but, instead, to read them at home after signing. Daymar disputes this allegation and claims the Students were directed to "read the document, front and back." Each student received a carbon copy of the Agreement to take home immediately after signing. Some of the Students allege this process was so abridged and pressure-filled they enrolled without having any intention of doing so or knowledge that they, in fact, did enroll.[3]

The Agreement is a single page, front and back. Notably, the Students only signed the front of the Agreement. As a prerequisite to attend Daymar, the Students were required to fill out and sign the Agreement. The Students were unable-actually not allowed-to amend or negotiate any of the terms of the Agreement. Essentially, the Agreement provides an account of what program the student is registering for; how many credits are required for that degree; an estimation of how long it will take to achieve those credits; and how much the program will cost with tuition, books, and fees. Directly above the signature line, the Students were required to initial in a blank space next to a provision indicating they had read all the terms of the Agreement. Also located above the Students' signature, in plain type, is the following incorporation language:

This Agreement and any applicable amendments, which are incorporated herein by reference, are the full and complete agreement between me and the College.

On the reverse page of the Agreement, the Students encountered a sea of plain-type provisions dealing with tuition refunds, curriculum changes, Daymar's permission to contact the Students or their employer, and arbitration. Located at the bottom of the reverse page, the arbitration provision, again in plain type, specified that "[a]ny dispute, controversy, or claim arising out of or relating to my enrollment at the College, this Agreement, or the breach thereof, ... be resolved by arbitration[.]" Of note in the terms of the arbitration provision: (1) the Students are required to split the costs of arbitration with Daymar; (2) the Students are responsible for their own attorneys' fees; (3) the validity or enforceability of the arbitration provision is a question for the arbitrator, not a court; and (4) Kentucky law shall govern the validity, interpretation, and performance of the Agreement.

The Students claim they were entirely unaware of the arbitration provision's existence, let alone its meaning. Even if the Students were aware of the arbitration provision's existence and had the perceptiveness to ask an admissions counselor about it, Daymar admits that no admissions counselor could have explained what it meant or how it operates. Indeed, Daymar representatives testified students had never been notified that the arbitration provision existed in the document or that by signing it they were waiving their constitutional right to a jury. Curiously enough, enrollment counselors were ready and able to explain every other portion of the Agreement except the arbitration provision.

Relying on the Agreement each of the Students signed during this admissions process, Daymar petitioned the trial court to dismiss the suit to arbitration. The Students argued the arbitration provision was both procedurally and substantively unconscionable. At the hearing on the matter, in addition to evidence regarding the admission process, the Students presented a great deal of evidence pertaining to their current economic station and the high cost associated with arbitration. In summary, the trial court's findings of fact provide a consistent theme of large amounts of student debt and low, often near-minimum wage, earnings. The trial court also heard expert testimony regarding the high costs associated with arbitration.[4] In the end, the trial court found the ...


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