A federal judge from the District of New Jersey has rebuffed the American Athletic Conference (AAC), formerly The Big East Conference, which moved to dismiss a lawsuit brought by Rutgers University over the $10 million exit fee and the required notice that the AAC imposes on schools that leave the conference.
The court, however, did grant the conference’s “alternative” request of transferring the case to the District of Rhode Island, where the ACC can file a motion to compel arbitration.
Rutgers joined the conference as a full member in 1995. The rights and obligations of the Conference members are governed by the Bylaws, which were amended several times, including an October 17, 2011 amendment that provided for a $10 million exit fee for a football school. Central to Rutgers’ claim was its contention that the conference was selective in the imposition of the fee as well as the amount of required notice.
But that argument will have to wait for the change of venue.
The court wrote that Rutgers acknowledges that the “forum selection clause makes arbitration the mechanism for resolving ‘any claim a Member or Members may have against the Conference, which relates in any way to or arises out of these Bylaws.’”
The operative phrase is “any claim,” which applies “broad construction” and “expansive language” to “the controlling arbitration clause.”
“Here, it is clear from a review of the complaint and the bylaws that plaintiff’s claims are subject to an enforceable forum selection clause,” wrote the court.
The judge was also unmoved by the plaintiff’s arguments that the arbitration provision was procedurally and substantively unconscionable.
The court noted that a contract “is procedurally unconscionable where ‘there was a lack of meaningful choice in the acceptance of the challenged provision.’ Quilloin v. Tenet HealthSystem Philadelphia, Inc., 673 F.3d 221, 235 (3d Cir. 2012).
“The plaintiff’s asserted lack of meaningful choice in the present case is not persuasive because the arbitration provision resulted from the amendment of the bylaws.”
Here, “the conference bylaws constituted a contractual agreement between the parties and contained an explicit amendment provision.”
Rutgers also “received ample notice of the November 12-13 meeting and the proposed changes to the bylaws,” which “further undermines the plaintiff’s argument of procedural unconscionability. As such, Rutgers’s argument as to procedural unconscionability fails.
“The plaintiff’s allegations of substantive unconscionability are similarly unpersuasive. ‘A contract or provision is substantively unconscionable where it “unreasonably favors the party asserting it.”’ Quilloin, 673 F.3d at 230. The plaintiff did not demonstrate that the forum selection provision unreasonably favors the defendant. Rather, the merits of the plaintiff’s claims are simply subject to the agreed upon, contractually determined, venue of arbitration. The court is also not persuaded by the plaintiff’s argument that it has a vested right to its preferred choice of forum. While the plaintiff cited case law for the proposition that bylaw revisions cannot strip away a vested right, the plaintiff failed to cite a single case in which a court held that the amendment of bylaws to include an arbitration provision constitutes the deprivation of a vested right.”
Moving next to the question of venue, the court decided that “a transfer to Rhode Island is particularly appropriate under the facts of the present case because this court does not have the authority to compel arbitration under 9 U.S.C. § 4. The court, therefore, will transfer venue to the District of Rhode Island, where the defendant may file a motion to compel arbitration.”
Rutgers, The State University v. American Athletic Conference; D.N.J.; Civil Action No. 12-7898 (MAS) (LHG), 2013 U.S. Dist. LEXIS 157244; 10/31/13 0020
Attorneys of Record: (for plaintiff) David W. Field, Lowenstein, Sandler LLP, Roseland, NJ. (for defendant) Craig A. Domalewski, Lead Attorney, Dughi, Hewit & Domalewski, P.C., Cranford, NJ; Russell Lyle Hewit, Lead Attorney, Dughi & Hewit, PC, Cranford, NJ.
