Michael Schnuerle v. Insight Communications Company, L.P.
376 S.W.3d 561
Ky.2012Background
- Appellants Schnuerle, Gilbert, and Wolff (class representatives) sue Insight in Jefferson Circuit Court for Kentucky claims.
- Service Agreement contains an arbitration clause and a class-action ban; small claims are allowed for claims under $1,500.
- Circuit Court granted arbitration and dismissed the class action; Court of Appeals affirmed.
- Court grants review to address enforceability of arbitration clause, class-action waiver, confidentiality, and choice-of-law provisions.
- Court concludes FAA preempts state law to enforce the class-action waiver; Kentucky law governs review; confidentiality provision is void and severable; general arbitration clause is enforceable; remands for final judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of the class-action waiver under FAA Concepcion | Schnuerle argues waiver is unconscionable under state law | Insight argues FAA preempts state-law unconscionability in class waivers | Waiver enforceable under FAA preemption |
| Choice-of-law governing the arbitration agreement | Kentucky law should apply due to Breeding; NY law chosen | NY law governs the contract as chosen | Kentucky law governs review; NY choice-of-law provision unenforceable for this issue |
| Enforceability of the general arbitration clause (non-class) | Arbitration clause is unconscionable adhesion contract | Clause is consistent with Kentucky policy favoring arbitration; not unconscionable | General arbitration clause not unconscionable and enforceable |
| Confidentiality provision in arbitration | Confidentiality unfairly advantages Insight as repeat participant | Concepcion does not compel invalidation of confidentiality | Confidentiality provision void and severable from arbitration agreement |
| Severability of challenged provisions from remaining arbitration agreement | If waiver invalid, remaining provisions may be enforced | Severability clause should preserve others if invalidity found | Severability applied; remaining provisions enforceable |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (preempts state rules invalidating class action waivers in FAA contracts)
- Discover Bank v. Superior Court, 30 Cal.Rptr.3d 76; 113 P.3d 1100 (Cal. 2005) (California rule invalidating class-action waivers pre-Concepcion (overruled))
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (U.S. 1985) (arbitration can be used to vindicate statutory rights; limits of arbitration)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010) (silence on class procedures cannot be interpreted to allow class arbitration)
- Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000) (arbitration costs may preclude vindication of rights; costs matter)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) (class action purpose to aggregate small recoveries)
- Perry v. Thomas, 482 U.S. 483 (1987) (valid choice-of-law principles in FAA context)