Court Holds That Arbitrator, In The First Instance, Must Determine Party’s Obligation To Pay Arbitrator’s Fees

In Croasmun v. Adtalem Global Education, Inc., an Illinois District Court addressed claims brought by former students of DeVry University (renamed Adtalem) , who are seeking to recover in arbitration damages arising our of claims of consumer fraud and breach of contract. Their agreements with DeVry required arbitration before the American Arbitration Association, but counsel for the parties entered into a stipulation that, among other things, modified the arbitration tribunal from AAA to JAMS, and provided that the university owner would pay the costs of arbitration.

The students’ counsel–who apparently represents 300 individuals with claims–sought to require the university to proceed contemporaneously with all claims, which would require it to advance $450,000 in filing fees. The university refused, repudiating the stipulation.

Eight of the students filed with the court a motion to compel arbitration in accordance with the stipulation. The court determined, in the first instance, that the issue of fees is one for the arbitrator to decide, and thus denied the motion to compel. As to the students’ argument that they could be left without a forum if the university failed to pay, the court explained as follows:

“Petitioners assert that Adtalem’s refusal to pay the filing fees blocks the door to the arbitrator and thus is a breach of the agreement to arbitrate. So far, there is no indication that JAMS will not resolve the fees issue if asked. If, however, JAMS declines to take jurisdiction without payment of its fees, petitioners should not face checkmate. Rather, the parties may return to this court for resolution of the meaning of the Stipulation.”

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