A federal judge has dismissed a Pennsylvania prep school from a lawsuit alleging it breached its contract with a Pennsylvania man aiming to boost his academic credentials to get into college by not rendering the educational services it promised in an enrollment agreement.
Plaintiff Daniel Ochman, along with his parents, sued the Wyoming Seminary preparatory school in the U.S. District Court for the Middle District of Pennsylvania, invoking diversity of jurisdiction. But the court dismissed the breach of contract claim because it was clear, as a matter of law, that the lawsuit would not reach the $75,000 amount in controversy required for federal jurisdiction.
The parents, Danielle and Joseph Ochman Jr., had sued for close to $30,000 in tuition they paid to the school for the three months Daniel Ochman attended before dropping out.
Daniel Ochman had also argued Wyoming Seminary breached its implied-in-fact contract with him (through his parents), seeking compensatory, economic, consequential and delayed income damages exceeding $75,000.
But that argument failed because the court declined to endorse Daniel Ochman’s theory that the school’s enrollment agreement was a contract of adhesion. In so holding, the court rejected his argument that the agreement was an implied-in-fact contract into which the plaintiffs said they had “no input, choice or discussion” about its terms.
U.S. District Chief Judge Yvette Kane of the Middle District of Pennsylvania noted the plaintiffs needed to prove both procedural unconscionability and substantive unconscionability in order for the court to find a contract provision unenforceable.
However, Kane said a reading of the plaintiffs’ second amended complaint showed it only focused on the procedural aspect, and they did, in fact, meet the threshold for advancing the contract of adhesion case on procedural grounds. She concluded the plaintiffs did not sufficiently plead substantive unconscionability, but even if they had made such allegations, that claim would fail as a matter of law.
Citing decisions of the U.S. Court of Appeals for the Third Circuit, Kane said a contract of adhesion takes place where the parties are of unequal bargaining power. Substantive unconscionability occurs when the terms of an arbitration provision or contract “‘unreasonably favor’” the party with more bargaining power.
According to Kane, the plaintiffs’ argument that the enrollment agreement met both types of unconscionability focused on its arbitration clause, to which the plaintiffs said they never agreed.
Kane said the plaintiffs failed to make factual allegations and instead made conclusory statements.
“As the court does not have to accept a complaint’s legal conclusions, plaintiffs have failed to allege that the enrollment agreement was substantively unconscionable,” Kane said in a 13-page opinion in Ochman v. Wyoming Seminary.
Kane reasoned that because the language in the agreement was clear and unambiguous in stating any disputes shall be subject to arbitration, the plaintiffs would have failed in proving substantive unconscionability, anyway.
In sum, the agreement, the existence of which precluded the existence of an implied-in-fact contract, was enforceable.
Kane dismissed the breach of implied-in-fact contract count with prejudice.
That was enough to dismiss Daniel Ochman’s count.
Turning to the breach of express contract count, Kane said the parents’ claim for $29,212 did not meet the jurisdiction requirement of her court.
“Even if every factual allegation in count two is true, the court must dismiss the second amended complaint for lack of subject-matter jurisdiction because the case fails to meet the $75,000 amount-in-controversy requirement” of federal court.
Kane granted the prep school’s motion to dismiss the plaintiffs’ amended complaint. While she denied as moot the plaintiffs’ motion to stay arbitration, she also denied the defendants’ bid to compel arbitration, apparently because of her decision that she lacked jurisdiction over the matter.
Reached for comment, the seminary’s attorney said he was pleased with Kane’s reasoning and decision.
Richard S. Bishop, of Hourigan, Kluger & Quinn, said Kane properly limited her analysis to the fact that the only plaintiffs left in the case were the parents by noting they weren’t pleading enough to meet the court’s jurisdictional requirement.
He called the argument that Daniel Ochman was due more than $75,000 in damages in delayed income “pure speculation.”
“Here they say, ‘We’re going to blame the school for him not going to class,’” Bishop said. “That’s really what it amounted to.”
The Ochmans’ attorney disagreed.
Carbondale attorney Harry T. Coleman said his clients were disappointed but not “lessened in their resolve” to pursue the matter in arbitration.
Coleman called the enrollment agreement, with its “small-print” arbitration provision, a “classic contract of adhesion” that was “one-sided in favor of the institution.”
Coleman noted that Ochman has since found academic success at a different post-graduate institution, which is in New Jersey.
“He found the academic traction that Wyoming Seminary promised him, and is doing quite well,” Coleman said.
(Copies of the 13-page opinion in Ochman v. Wyoming Seminary, PICS No. 12-2260, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •