Wednesday, April 17, 2013

Court backs arbitration in helicopter school bankruptcy

A case involving Silver State helicopter school’s bankruptcy ends with a ruling endorsing arbitration over jury trials

BY JACK KATZANEK, The Press Enterprise
April 16, 2013; 11:03 AM

A case that started more than five years ago at small airports all over the country, including one in Inland Southern California, has evolved into a federal appeals court ruling that will probably favor employers and corporations in future cases.

The case, Kilgore vs. Key Bank, began when Silver State Helicopters, a national string of flight schools that was based in Las Vegas, abruptly went out of business in February 2008.

The school closed after thousands of people, mostly young people in their 20s, took out hefty loans to pay $70,000 in tuition to learn to be helicopter pilots.

One of the academies was at Chino Airport. More than 100 people from San Bernardino and Riverside counties were enrolled in the school, and most found out about the closing from telephone calls they received while watching the 2008 Super Bowl game.

Several legal challenges arose from the closing by students who claimed that lenders who gave tuition loans should have known that Silver State was on shaky financial ground.

Some of the lenders forgave the student loans, but Cleveland-based Key Bank insisted the loans in dispute should be subject to arbitration.

A Ninth Circuit judge last year refused to honor Key Bank’s request to compel the plaintiff to force the dispute to be settled via arbitration.

However, last week a Ninth Circuit appeals court, in a 10-1 ruling, reversed that decision. It ruled that arbitration should be allowed because it gave students a 60-day window during which they could have opted out of the arbitration agreement and because the provision was “clearly labeled in boldface.”

The case was closely watched in legal circles because employers and corporations prefer to settle workplace law disputes in front of an arbitrator rather than a jury, which might be more likely to side with a plaintiff.


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