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Former Students Are Subject To Arbitration Agreement Parents Signed
Saint Mary’s Hall is a private school located in San Antonio, Texas. Jonathan Eades was the Head of School at Saint Mary’s when Jane Doe 1, a former student, filed suit against the School and Eades for intentional infliction of emotional distress, negligence, gross negligence, and conspiracy. Doe 1 alleged a host of claims including harassment, assault, fraud, and breach of contract. Shortly thereafter, Jane Doe 2 and John Doe 2 joined the suit.
The School and Eades answered the lawsuit and argued, among other things, that the venue should be in Bexar County because the enrollment contracts contained arbitration clauses that provided for mandatory arbitration in San Antonio, Texas. The case was ultimately transferred to Bexar County in January 2022. In June 2022, the trial court denied the School’s and Eades’ motion to compel arbitration, but the trial court did not specify a reason for the denial. The School and Eades appealed.
A party seeking to compel arbitration must establish two elements: (1) the existence of a valid and enforceable arbitration agreement; and (2) that the disputed claims fall within the scope of the agreement.
The Students did not dispute that there is a binding and enforceable arbitration agreement, nor do they dispute that the claims fall within the scope of the agreement. However, the Students argued that they could not be compelled to arbitration because they did not sign the arbitration agreement, their parents did.
The Court concluded that arbitration agreements may be enforced against third party beneficiaries if the parties to the contract intended to secure a benefit to that third party and the parties entered the contract directly for the third party’s benefit. Here, the enrollment agreement was entered into by the parents on behalf of their children, to secure them the benefit of an education. The Court ruled that the Students were bound by the arbitration agreements.
Alternatively, the Students argued that the School and Eades waived their rights to arbitration by substantially invoking the litigation process.
To establish whether a party has substantially invoked the judicial process depends on a totality of circumstances, including considering a variety of factors, including, but not limited to: whether the movant was a plaintiff (who chose to file in court) or a defendant (who merely responded); how long the party moving to compel arbitration waited to do so; and the reasons for the movant’s delay.
The Students argued, among other things, that the School and Eades substantially invoked the judicial process because they waited 20 months to move to compel arbitration.
The Court found that the School’s and Eades’ delay in filing for arbitration was due to the Students actions or delays created by the courts. For example, the original petition did not include the identities of students, meaning that the School could not produce the appropriate arbitration agreement and enrollment contract until it could identify the students filing the lawsuit. As another example, hearings were delayed due to the parties agreeing to continuances and weather conditions such as snowstorms.
The Court of Appeals determined that the totality of the circumstances showed that the School and Eades did not invoke the litigation process and therefore did not waive their rights to arbitration. The Court of Appeals reversed the trial court’s ruling denying arbitration.
Note: This case established that arbitration agreements can bind former students into adulthood, even if parents signed the arbitration agreement on behalf of students when the students were minors. Though this case was decided in Texas, and therefore not binding in California, it can be helpful guidance on how these issues would be interpreted under the Federal Arbitration Act.
Eades v. Doe (Tex.Ct.App.2023) 2023 Tex. App. LEXIS 9689.