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Beauty School Runs Out of Time to Raise Arbitration Defense, According to Ninth Circuit Court

Saturday, December, 24, 2016

The Ninth Circuit Court recently ruled in the case Martin v. Yasuda that the Amarillo College of Hairdressing – Milan Institute and the Milan Institute of Cosmetology took too long to seek arbitration. The school must now litigate its students’ wage and hour claims in court.

The ruling stems from a class action lawsuit brought against the college in October 2013. The lawsuit alleges the school and the school’s owner, Gary Yasuda, weren’t paying for work performed by trainees at the school, which is a violation of the Fair Labor Standards Act and California Law.

The beauty school responded it had no liability because the students were not considered employees. The US District Court for the Central District of California denied Amarillo’s motion to dismiss in the summer of 2014, with leave for the plaintiffs to amend their claims, which they did that August. In September of that year, Yasuda claimed the right to arbitrate as his defense, but did not take any action. It wasn’t until March of the following year he moved to compel arbitration.

The court denied the motion, claiming Yasuda’s waiting 17 months to take action waived his right to arbitrate. The court said requiring arbitration would prejudice plaintiffs because it had already ruled in their favor.

The school appeal the ruling, arguing arbitration should decide if the right to arbitrate had been waived, but in July 2015, the Ninth Circuit ruled courts have the right to make this ruling. The court also ruled there must be clear language concerning whether or not parties wish to commit to arbitration and arbitration must begin soon after a lawsuit is filed.