Bauer and Del Rose are counting on an Education Department rule finalized by the Obama administration that prohibits schools receiving federal funds from relying on forced arbitration agreements with their students. This “Borrower Defense” rule will ensure that Bauer and Del Rose have their day in court, but a trade group has filed suit against the Education Department to block the rule. Shortly after the lawsuit was filed, the Trump administration announced it would delay key parts of the rule until the litigation is over and begin a new rulemaking to reconsider the rule.
Forced arbitration clauses require students to submit any dispute that might later arise between the students and the institution to binding arbitration, a private process with little right to appeal, instead of a court of law. Students typically cannot band together to bring their claims jointly in arbitration, and they often are forbidden from publicly discussing the arbitration process.