United States District Court, D. Maine
ORDER ON MOTION TO COMPEL AND DISMISS
A. WOODCOCK, JR. UNITED STATES DISTRICT JUDGE
plaintiffs are four former students who signed enrollment
agreements with the defendant, a for-profit college; the
enrollment agreements contained arbitration provisions. The
students filed a suit against the defendant alleging unfair
and deceptive trade practices, breach of contract, fraudulent
inducement to contract, as well as intentional and negligent
misrepresentation. The defendant moved to compel arbitration
and to dismiss the lawsuit, and the plaintiffs responded that
the defendant was barred from compelling arbitration, raising
certain corporate and contract law defenses. Although
disquieted by the result, the Court concludes that Supreme
Court and First Circuit authority requires the Court to grant
the motion to dismiss and compel arbitration in accordance
with the enrollment agreement.
August 29, 2017, the Plaintiffs initiated a class action
lawsuit against InterCoast Colleges (InterCoast), alleging
under various theories that InterCoast engaged in fraud by
inducing students to borrow money through federally-funded
financial aid programs to pay for a Licensed Practical
Nursing (LPN) program that InterCoast operated in Maine, when
the quality of the education in the InterCoast LPN program
was deficient and deceptively below its advertised quality.
Class Action Compl. (ECF No. 1) (Compl.).
On November 7, 2017, InterCoast moved to compel arbitration
and to dismiss the lawsuit. Def.'s Mot. to Compel
Arbitration and Dismiss the Case (ECF No. 7)
(Def.'s Mot.). On September 28, 2018, the
Plaintiffs filed their response to InterCoast's motion to
compel arbitration. Pls.' Resp. in Opp'n to
Def.'s Mot. to Compel Arbitration and Dismiss the
Case (ECF No. 23) (Pls.' Opp'n).
InterCoast replied on November 15, 2018. Def.'s Reply
to Resp. to Mot. to Compel Arbitration and Dismiss the
Case (ECF No. 32) (Def.'s Reply).
October 3, 2018, the Plaintiffs moved for oral argument,
Mot. for Oral Argument (ECF No. 24), which the Court
granted on November 16, 2018. Order (ECF No. 33). On
February 4, 2019, the Court held oral argument concerning the
pending motion to compel arbitration and to dismiss the case.
Min. Entry (ECF No. 35).
Factual Background 
operates for-profit programs in several jurisdictions across
the United States; most in California. Compl. ¶
24. From approximately October 2005 until early March 2016,
InterCoast operated practical nursing education programs in
Maine (InterCoast LPN Program). Id. ¶ 25.
Students who enrolled in the InterCoast LPN Program signed an
enrollment agreement entitled “InterCoast Career
Enrollment Agreement” (the Enrollment Agreement).
Def.'s Mot. Attach. 1. Decl. of Kelly
Michaud, ¶ 7 (ECF No. 7) (Kelly Michaud
Decl.). Each Enrollment Agreement contained a provision
requiring arbitration of disputes between the student and
InterCoast. Id. The Plaintiffs-Stephanie
Kourembanas, Caridad Jean Baptiste, Cathy Mande, and
Catharine Valley-all enrolled in the InterCoast LPN Program.
Compl. ¶¶ 1-5. Each Plaintiff signed the
InterCoast Enrollment Agreement. Kelly Michaud Decl.
¶¶ 10, 15, 20, 29; Def.'s Mot.
Attachs. 2-6 (ECF No. 7) (Pls.' Enrollment
signed Enrollment Agreements provide:
Any dispute arising from enrollment at InterCoast Career
Institute, other than grades and no matter how described,
pleaded, or styled, shall be resolved by binding arbitration
under the Federal Arbitration Act conducted by the American
Arbitration Association (‘AAA'), under its
Commercial Rules. The award rendered by the arbitration may
be entered in any court having jurisdiction. This provision
incorporates the Arbitration provision found elsewhere in
InterCoast Career Institute enrollment materials.
Kelly Michaud Decl. ¶¶ 11, 16, 20, 25, 30;
Pls.' Enrollment Agreements. Immediately after
this language, above the student's signature line, the
Enrollment Agreement states:
I understand that this is a legally binding contract. My
signature below certifies that I have read, understood, and
agreed to my rights and responsibilities, and that the
institution's cancellation and refund policies have been
clearly explained to me.
Your signature below on this agreement acknowledges that you
have been given reasonable time to read and understand this
document . . ..
Kelly Michaud Decl. ¶¶ 12, 17, 22, 26, 31;
Pls.' Enrollment Agreements. In the Enrollment
Agreements, the Plaintiffs signed on the line above
“Signature of Student” and initialed each page of
the Enrollment Agreement. Kelly Michaud Decl.
¶¶ 13, 18, 27, 32; Pls.' Enrollment
POSITIONS OF THE PARTIES
argues that the Enrollment Agreements are covered under the
Federal Arbitration Act (FAA) and that the Court should
compel arbitration because: (1) there is an enforceable
written agreement to arbitrate; (2) the disputed issues
between InterCoast and the Plaintiffs fall within the scope
of the arbitration agreement; and (3) InterCoast has not
waived its right to arbitrate these disputed issues.
Def.'s Mot. at 4-7.
says that when each Plaintiff reviewed, signed, and initialed
the Enrollment Agreement, they “entered into a contract
which contained an agreement to arbitrate ‘any dispute
arising from enrollment, other than grades and no matter how
described, pleaded, or styled.'” Id. at 5
(quoting Kelly Michaud Decl. ¶¶ 11, 16,
20, 25, 30 and exhibits A-E thereto). InterCoast maintains
that courts generally apply basic principles of contract law
to arbitration agreements and interpret these agreements as
creating “a presumption of arbitrability which is only
overcome if it may be said with positive assurance that the
arbitration clause is not susceptible of an interpretation
that covers the asserted dispute.” Id.
(quoting United States v. Consigli Constr. Co., 873
F.Supp.2d 409, 412 (D. Me. 2012) (internal quotation marks
omitted)). InterCoast maintains that “[t]here is
nothing to mandate revocation of the contracts” because
the Enrollment Agreements set forth and explained
InterCoast's policies, the arbitration clauses were
conspicuous, and Maine law favors the enforcement of
arbitration provisions. Id. at 5-6.
the second point, InterCoast argues the issues in this case
fall within the arbitration agreement since the clause is
broadly worded in stating “[a]ny dispute arising from
enrollment at InterCoast Career Institute, other than grades
and no matter how described, pleaded, or styled.”
Id. at 6. Because the Complaint asserts claims not
relating to grades the Plaintiffs received but alleges unfair
trade practices, breach of contract, and torts, InterCoast
says their claims fall within the scope of the arbitration
clause. Id. at 7. InterCoast points to
Bercovitch v. Baldwin School, Inc., 133 F.3d 141,
148 (1st Cir. 1998), and contends that Bercovitch is
factually similar to this case and the First Circuit's
analysis in Bercovitch “is instructive.”
Id. Lastly, InterCoast asserts that it has not
waived its right to arbitrate and that the Plaintiffs do not
assert otherwise. Id. at 8. InterCoast argues
consequently that because the issues before the Court are
arbitrable, the Court should dismiss the case and that
dismissal is advantageous on various grounds. Id.
(citing Boulet v. Bangor Sec. Inc., 324 F.Supp.2d
120, 127 (D. Me. 2004) (quoting Bangor Hydro-Electric Co.
v. New England Tel. and Tel. Co., 62 F.Supp.2d 152, 161
n.9 (D. Me. 1999))).
complaining that the arbitration clauses were untitled and in
fine print, the Plaintiffs acknowledge that each individual
Plaintiff executed an Enrollment Agreement with
“InterCoast Career Institute” (ICCI), which
contained an arbitration clause. Pls.' Opp'n
at 1-2. The Plaintiffs say the issue is not whether they
signed the Enrollment Agreements but whether the arbitration
clauses within the Enrollment Agreements are enforceable.
Id. at 2. The Plaintiffs argue the Court should deny
InterCoast's motion to compel arbitration and dismiss the
case, because (1) the arbitration clauses are not enforceable
as ICCI “is not a legally organized entity and lacked
any capacity to contract with the Plaintiffs;” and (2)
the arbitration clauses are unconscionable. Id. At
oral argument, the Plaintiffs also asserted InterCoast
engaged in fraud and fraudulently induced them to enter their
Plaintiffs claim that the arbitration provisions in their
Enrollment Agreements “are unenforceable under common
law principles of corporate and contract law.”
Id. at 6. Specifically, the Plaintiffs aver that the
arbitration clauses are not enforceable because
“[t]here is no evidence that either InterCoast Career
Institute or the entity for which it claims to have been a
d/b/a, InterCoast Colleges  ever has been validly organized
as a corporation” and consequently, InterCoast
“is not a legal entity capable of enforcing rights
under a contract it purports to have entered with
Plaintiffs.” Id. at 7 (internal quotations
omitted). The Plaintiffs contend that in its Corporate
Disclosure Statement (ECF No. 13) (Corporate Disclosure
I), InterCoast claims that it is a corporation and that
“its stock is owned by Inter-Coast International
Training, Inc.” Id. at 6.
the Plaintiffs argue “[t]his representation is at odds
with the corporate disclosure statements that
[InterCoast]” filed previously in this Court.
Id. (internal quotation marks omitted) (citing
Mason v. InterCoast Career Institute,
2:14-cv-0377-JAW and Perez-Webber v. InterCoast Career
Institute, 2:16-cv-0196-JAW). The Plaintiffs contend
that in Mason, Geeta Brown, the CEO, Secretary, CFO,
and President of Inter-Coast International Training, Inc.,
made false representations to this Court. Id. at 7
n.8. The Plaintiffs say “[t]here is no evidence in the
public record that InterCoast Colleges or ICCI ever was
organized as a corporation in California, as Ms. Brown
represents.” Id. The Plaintiffs argue that
InterCoast engaged in a “shell game” and that it
will likely “have to seek to amend their complaint to
name both Inter-Coast International Training, Inc. and Ms.
Brown personally as defendants in this action.”
Id. At oral argument, the Plaintiffs represented
that InterCoast had not started using its d/b/a InterCoast
Colleges until 2017, years after the Enrollment Agreements
the Plaintiffs contend that the arbitration clauses are
unconscionable. Id. at 8. The Plaintiffs claim
“[t]he issue of whether a valid arbitration agreement
exists ‘is to be decided with reference to state
contract law principles.'” Id. (quoting
Rosenberg v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 170 F.3d 1, 19 (1st Cir. 1999)). Under
Maine law, the Plaintiffs assert, the central issue is
whether there was a mutual understanding by both parties to
arbitrate. Id. (emphasis omitted) (citing Roy v.
Davis, 553 A.2d 663, 664 (Me. 1989)). The Plaintiffs
maintain that the arbitration clauses do not contain the
necessary material terms or “the rights [the
Plaintiffs] purportedly waived ” or reasonably
communicate the material terms encompassed within the clause.
Id. at 8-9. The Plaintiffs also argue that the
arbitration clauses are not conspicuous, which suggests that
InterCoast sought “to deceive and mislead students into
waiving their rights without understanding material
terms.” Id. at 9. According to the Plaintiffs,
because InterCoast's “motion to dismiss the case
rests on the fate of its motion to compel, ” which they
say the Court should deny, the Court should similarly deny
InterCoast's motion to dismiss. Id. at 10.
asserts “[t]he fact that the Enrollment Agreements were
signed under Defendant's trade name [InterCoast Career
Institute] instead of its corporate name [Inter-Coast
International Training, Inc] does not render the Enrollment
Agreements and their arbitration provisions invalid.”
Def.'s Reply at 7 (citing Pickering v.
Urbantus, LLC, 827 F.Supp.2d 1010, 1015-16 (S.D. Iowa
2011)). InterCoast contends that the Plaintiffs clearly
understood this difference and it points to the fact that the
Plaintiffs “affirmatively allege . . . that they each
entered into a contract-i.e., their respective Enrollment
Agreements-with the InterCoast corporate entity ” to
support this contention. Id. at 8.
is also unconvinced by the Plaintiffs' unconscionability
argument because, as InterCoast sees it, the argument stems
from the lack of “special notice” in the
arbitration clause, but they cite no Maine caselaw to support
this requirement. Id. at 9. InterCoast points to
Champagne v. Victory Homes, Inc., 2006 ME 58, 897
A.2d 803, where the Law Court found the arbitration clause
unambiguous and that it required binding arbitration; the
Champagne arbitration clause provided that
“[a]ny dispute or claim arising out of this agreement
or the property addressed in this agreement shall be decided
by arbitration in accordance with the Construction Industry
Arbitration Rules of the American Arbitration
Association.” Id. ¶ 3. InterCoast says
its arbitration language is “nearly identical, ”
and so the Court should grant its motion to compel
arbitration. Def.'s Reply at 10.
FAA, 9 U.S.C. §§ 1 et seq., provides that
“a contract evidencing a transaction involving commerce
to settle by arbitration a controversy thereafter arising out
of such contract . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.”
Id. § 2. The FAA embodies a “liberal
federal policy favoring arbitration agreements.”
Foss v. Circuit City Stores, Inc., 477 F.Supp.2d
230, 232-33 (D. Me. 2007) (quoting Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991);
Campbell v. General Dynamics Gov't Sys. Corp.,
407 F.3d 546, 551 (1st Cir. 2005)).
has an analogous statute, the Maine Uniform Arbitration Act,
14 M.R.S. §§ 5927-49, which Maine courts have
interpreted in a fashion similar to federal court
interpretations of the FAA. The Maine Uniform Arbitration Act
applies “where there is ‘[a] written agreement to
submit any existing controversy to arbitration or a provision
in a written contract to submit to arbitration any
controversy thereafter arising between the
parties.'” J.M. Huber Corp. v. Main-Erbauer,
Inc., 493 A.2d 1048, 1050 (Me. 1985) (quoting §
compel arbitration, the movant must demonstrate ‘that a
valid agreement to arbitrate exists, that [he] is entitled to
invoke the arbitration clause, that the other party is bound
by that clause, and that the claim asserted comes within the
clause's scope.'” Patton v. Johnson,
No. 18-1750, 2019 U.S. App. LEXIS 4058, at *8-9, 2019 WL
516534, at *4 (1st Cir. Feb. 11, 2019) (quoting InterGen
N.V. v. Grina, 344 F.3d 134, 142 (1st Cir. 2003)).
“When deciding whether the parties agreed under the FAA
to arbitrate a certain matter, courts generally . . . should
apply ordinary state-law principles that govern the formation
of contracts.” Awuah v. Coverall N. Am., Inc.,
703 F.3d 36, 42 (1st Cir. 2012) (internal quotation marks
omitted) (quoting Rosenberg, 170 F.3d at 19). This
means that common contract defenses “like fraud,
duress, or unconscionability” are applicable.
AT&T Mobility LLC v. Concepcion, 563 U.S. 333,
339 (2011). Under Maine law:
A contract exists if the parties mutually assent to be bound
by all its material terms, the assent is either expressly or
impliedly manifested in the contract, and the contract is
sufficiently definite to enable the court to ascertain its
exact meaning and fix exactly the legal liabilities of each
Gove v. Career Sys. Dev. Corp., 689 F.3d 1, 4
(quoting Sullivan v. Porter, 861 A.2d 625, 631 (Me.
the four First Circuit criteria in Patton for
determining whether to compel arbitration, the arbitration
clauses in the Plaintiffs' Enrollment Agreements appear
on their face to meet the First Circuit's requirements.
Each Enrollment Agreement contains a “valid agreement
to arbitrate.” Patton, 2019 U.S. App. LEXIS
4058, at *8, 2019 WL 516534, at *4. As a party to the
agreement, InterCoast is “entitled to invoke the
arbitration clause.” Id. The students are also
signatories to the Enrollment Agreement, including the
arbitration clause, and are therefore bound to the terms of
the contract. Patton, 2019 U.S. App. LEXIS 4058, at
*8-9, 2019 WL 516534, at *4. Finally, the terms of the
arbitration clause are broad enough to encompass the dispute