Jeffrey Reed brought a putative class action case against his alma mater, “on-line” school, Florida Metropolitan University, Inc. (“FMU”), in Texas state court, alleging that FMU solicited students in violation of certain provisions of the Texas Education Code. FMU removed to federal court, and moved to compel arbitration under the parties’ agreement. The court granted the motion to compel, and also refused to address the issue of whether class arbitration was allowable, which Reed had raised, finding it should be decided by the arbitrator. At arbitration, Reed moved for a “Clause Construction Award” allowing the arbitration to proceed on a class basis. Over FMU’s objection, the arbitrator ruled in Reed’s favor. Reed moved to confirm and FMU moved to vacate the ruling. The district court vacated the award, finding it exceeded the scope of the arbitrator’s power under the Federal Arbitration Act. Reed appealed. The Fifth Circuit Court of Appeals affirmed, based on the U.S. Supreme Court’s holdings in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct 1758 (2010) and AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), emphasizing that the arbitrator forced the parties into class arbitration without a contractual basis for doing so. Reed v. Florida Metropolitan Univ., Inc., No. 11-50509 (5th Cir. May 18, 2012).
This post written by John Pitblado.
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