Kentucky Supreme
Court Finds No Agreement to Arbitrate Disputes;
Document Architecture Matters
Document Architecture Matters
In a decision rendered last
month, the Kentucky Supreme Court held that students enrolling at Daymar
College did not agree to arbitrate their disputes with the college. In part this decision was based on the
curious architecture of the agreement at issue.
Dixon v. Daymar College Group, LLC,
__ S.W.3d ___, 2012-SC-000687-DG, 2015 WL 1544450 (Ky. April 2, 2015).
Certain students brought action
against Daymar based on allegations of fraud in the enrollment process, breach
of contract, etc. They also sought class
action status. Daymar sought to refer
the complaints to arbitration. In
opposition to their efforts the students asserted, inter alia, that there was no agreement to arbitrate.
Students enrolling at Daymar
completed a variety of forms. One of
those forms contained, on its reverse side, an “agreement” to arbitrate all
disputes. The signature block appeared,
however, on the front of the document, and it never provided above the
signature that the language on the reverse was incorporated by reference.
The trial court denied
arbitration. On appeal, the Court of
Appeals reversed that decision. That
ruling is reviewed HERE IS A LINK. The Supreme
Court would reverse the Court of Appeals and affirm the decision of the trial
court. Ergo, no enforceable agreement to
arbitrate.
Kentucky has a statute, KRS §
446.060, which provides that the signature of a party to an agreement must
appear at or near the end of the agreement, a requirement applicable only to
agreements which must be in a signed writing.
While an agreement to arbitrate need not be in a signed writing, the programs
for which the students enrolled all exceeded a year in length. As such the enrollment documents needed to
satisfy the Statute of Frauds (KRS § 371.010(7)). From there KRS § 446.060 was applicable, and
the agreement to arbitrate on the reverse of the signed document would be
effective only if it was incorporated by reference above the signature
block. The Supreme Court found there to
be no such incorporation. Further, each
student’s acknowledgement that they had read the reverse could not be extended
into an agreement to be bound by the terms set forth on the reverse.
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