Arbitration clause in a release is upheld in Mississippi, but only because it was Fair

The larger issue is should you use arbitration and if you should, when?

Daniels v. Virginia College at Jackson; 478 Fed. Appx. 892; 2012 U.S. App. LEXIS 13037

State: Mississippi; UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

Plaintiff: Mississippi, United States Court of Appeals for the Fifth Circuit

Defendant: Virginia College L.L.C.; Education Corporation of America; Willis-Stein and Partners

Plaintiff Claims: negligence, conversion, embezzlement, and unjust enrichment

Defendant Defenses: Mandatory arbitration as found in the release which was part of the enrolment agreement

Holding: for the defendant

Year: 2012

The facts of this case are unknown. What is known is the plaintiff enrolled in the defendant’s college. To enroll she had to sign an Enrollment and Tuition Agreement. The Enrollment and Tuition Agreement (Enrollment form) had a mandatory arbitration clause.

Arbitration is a cross between mediation and a trial. Arbitration is usually done by a member of the American Arbitration Association or by a neutral party picked by both sides. Arbitration is a lot cheaper and faster than going to trial. In many states, an arbitrator cannot award all the types of damages that a jury or judge could. Arbitrators rarely award as much money in damages as a jury does.

Arbitration is supported by state law, which limits damages, compels arbitration, and encourages and forces parties to an arbitration clause to arbitrate.

In this case, the plaintiff objected to the required arbitration required in the contract. That arbitration was required by the trial court, and the plaintiff appealed to the United States Court of Appeals for the Fifth Circuit. The Fifth Circuit Court upheld the mandatory arbitration.

Summary of the case

The discussion in this case is fairly simple. The plaintiff was unhappy about how the defendant’s school had retained portions of the federal financial aid she had received. She sued claiming the arbitration clause was void because it was unconscionable.

Under Mississippi law unconscionability:

…is proven by oppressive contract terms such that there is a one-sided agreement whereby one party is deprived of all the benefits of the agreement or left without a remedy for another party’s nonperformance or breach.

The plaintiff argued that the enrollment agreement was unconscionable because it limited damages, had a jurisdiction and venue clause and awarded the defendant attorney fees if it won its case. To overcome some of the issues, the defendant in its written argument to the appellate court considered the attorney fee clause stating the clause allowed any winning party to recover its attorney fees.

Consequently, the arbitration clause was not found to be unconscionable in this situation applying Mississippi law.

So Now What?

The real issue to look at in this case is, whether should you use arbitration if you run an outdoor recreation business or program and if so when.

Probably, if you are an outdoor recreation activity in a state that supports the use of a release, and you have a well-written release, then no, do not require arbitration. The reason is simple; arbitration does not allow motions for summary judgment, which is a quick and final ending to the litigation.

Arbitration will allow the parties to go to arbitration and allow the plaintiff to have their day in court. Usually, a motion for summary judgment is faster, simpler, and cheaper.

The only places I would consider arbitration in an outdoor recreation business setting would be those states that do not allow the use of a release if those states support mandatory arbitration. At the time of the writing of this article, those states are: Louisiana, Montana, and Virginia (although Virginia attorneys continuously tell me lower courts uphold releases?).

Possibly Alaska, Hawaii, New York, Arizona, New Mexico, and West Virginia for some activities were the state legislature or the courts have held that releases are not valid for those activities. However, in all of those states, you must investigate the statute and make sure arbitration works the way you need as well as limits the damages that can be awarded by an arbitrator.

See States that do not Support the Use of a Release

Arbitration is not a cover-up for having a bad release. If your release is bad, an arbitration clause is not going to provide any greater protection. Besides if you have a bad release, you probably have a bad arbitration clause also.

Of note, is the court looked at the over-all fairness of the agreement and the arbitration clause. Without a finding of fundamental fairness, the court might have voided the arbitration clause. In  

For an article on failed arbitration see: Complicated serious of cases created to defend against a mountaineering death.

AdventureTourism, #AdventureTravelLaw, #AdventureTrav

What do you think? Leave a comment.

Jim Moss

Jim Moss is an attorney specializing in the legal issues of the outdoor recreation community. He represents guides, guide services, and outfitters both as businesses and individuals and the products they use for their business. He has defended Mt. Everest guide services, summer camps, climbing rope manufacturers; avalanche beacon manufacturers, and many more manufacturers and outdoor industries. Contact Jim at Jim@Rec-Law.us

Jim is the author or co-author of eight books about legal issues in the outdoor recreation world; the latest is Outdoor Recreation Insurance, Risk Management,

Outdoor Recreation Insurance, Risk Management, and Law

and Law. To Purchase Go Here:

To see Jim’s complete bio go here and to see his CV you can find it here. To find out the purpose of this website go here.

If you are interested in having me write your release, download the form and return it to me.

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