Kentucky Supreme Court Finds No Agreement to Arbitrate Disputes; Document Architecture Matters

Kentucky Supreme Court Finds No Agreement to Arbitrate Disputes;
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.