Court Opinion

ID: 3190205
Source: CourtListenerOpinion
Date Created: 2016-03-31 14:04:36.741283+00
Date Added: 2024-06-11T14:35:59.700192
License: Public Domain

RENDERED: AUGUST 23, 2012
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MICHAEL SCHNUERLE, AMY GILBERT,                 APPELLANTS/CROSS-APPELLEES
LANCE GILBERT AND ROBIN WOLFF

                    ON REVIEW FROM COURT OF APPEALS
V.                     CASE NO. 2006-CA-002121-MR
                JEFFERSON CIRCUIT COURT NO. 06-CI-004267

INSIGHT COMMUNICATIONS, COMPANY, APPELLEES/CROSS-APPELLANTS
L.P. AND INSIGHT COMMUNICATIONS
MIDWEST, LLC

               OPINION OF THE COURT BY JUSTICE VENTERS

       AFFIRMING IN PART, REVERSING IN PART AND REMANDING

      Appellants Michael Schnuerle, Amy Gilbert, Lance Gilbert, and Robin

Wolff, individually and on behalf of all others similarly situated, filed a class

action complaint in the Jefferson Circuit Court against their Internet service

providers, Appellees Insight Communications Company, L.P., and Insight

Communications Midwest, LLC (collectively, Insight). Insight's Broadband High

Speed Internet Service Agreement (Service Agreement) contained an arbitration

clause that required customers to submit damage claims against Insight to

arbitration, and it also barred class action litigation against Insight by its

customers. The circuit court determined that the class action ban was
enforceable, and therefore it dismissed Appellants' complaint. The Court of

Appeals affirmed. Because of that disposition, neither the circuit court nor the

Court of Appeals addressed other issues, including Appellants' challenge to the

enforceability of the Service Agreement's general arbitration clause. We

granted discretionary review to consider the challenges to the enforceability of

the arbitration agreement, as well as the class action waiver and confidentiality

clauses contained therein. We granted Appellees' cross-petition for

discretionary review to enable a more complete resolution of the whole

controversy, including the disputed choice of law provisions of the agreement

and the effect of severability of the challenged provisions from the remaining

portion of the arbitration agreement.

      For the reasons stated below, we conclude that in cases governed by the

Federal Arbitration Act, the decision of the United States Supreme Court in

AT&T Mobility LLC v. Concepcion,        U.S.     , 131 S. Ct. 1740 (2011)

precludes enforcement of a state policy invalidating upon grounds of

unconscionability, a contractual waiver of class action participation, where the

unconscionability is based solely upon the fact that the dispute involves a large

number of de minimis claims which are unlikely to be individually litigated.

Consequently, in the dispute before this Court, the contractual provision under

which Appellants waived their right to participate in class action litigation is

now enforceable under federal law. We also determine as follows: 1) that the

Service Agreement's choice of law provision is not enforceable, and that

Kentucky law, rather than New York law, is applicable to our review;
2) that the Service Agreement's general arbitration provision is not

unconscionable, that it comports with Kentucky's public policy preference

favoring arbitration, and is therefore enforceable; and 3) that the provision

imposing a confidentiality requirement upon the litigants to arbitration

proceedings is void and is severable from the remaining portions of the

agreement. As such, we affirm in part, reverse in part and remand to the

Jefferson Circuit Court for entry of a final judgment consistent with this

opinion.

               I. FACTUAL AND PROCEDURAL BACKGROUND
      Appellants are all Kentucky residents who entered into the Service

Agreement with Insight for broadband Internet service in the area of Jefferson

County, Kentucky. In order to receive service, the customers were required to

either sign the Service Agreement or manifest their assent to the Service

Agreement via the Internet.

      The Service Agreement contains an arbitration clause. Within the

arbitration clause are provisions under which customers agree not to enter into

a class action lawsuit against Insight and not to divulge the results of any

settlement reached through arbitration. The clause, however, does permit

individual customers to pursue any claim of less than $1,500.00 through small

claims court instead of proceeding to arbitration.

      Insight's 2006 effort to upgrade its high-speed Internet service left many

of its customers, including Appellants, with service outages for varying lengths
of time. Those outages generated a high volume of calls into Insight's customer

service department, which resulted in long wait times for customers to receive

assistance. According to Appellants, once customers did get through, they

received false and misleading information concerning the service interruption.

They further allege that Insight acted improperly by failing to timely inform its

customers about the outage, and by failing to protect customers "from deletion

of information."

      Insight responds that it acknowledged the problem in a timely fashion

and issued credits to 2,595 customers who notified the company of their

particular outage problem. The company later issued a public apology for the

disruptions and set up a voucher system allowing any other dissatisfied

customers to request a credit for the interrupted service. Insight admits to

monetary liability for any service it billed to customers while their Internet

connection was down, and maintains that any dispute would simply require

calculating the actual outage time, which it is willing to do under its customer

service procedures.

      Notwithstanding Insight's efforts to address the problem, Appellants filed

a complaint in Jefferson Circuit Court on behalf of themselves individually,

and, pursuant to CR 23, on behalf of the putative class of all other Insight

customers in Kentucky similarly situated. Causes of action were asserted

based upon violations of the Kentucky Consumer Protection Act, KRS 367.170,

et seq. , breach of contract, and unjust enrichment.

                                         4
      Insight moved to dismiss the action and to compel arbitration pursuant

to the mandatory arbitration clause contained in the Service Agreement. As

noted above, the arbitration clause does not mandate arbitration of every

dispute but, rather, it allows claims less than 1,500.00 to be litigated. There

is no allegation that the claim of any individual customer would exceed

$1,500.00. The typical claim would be in the range of $40.00. Thus, it is

apparent that any member of the putative class would have the options of filing

a suit in small claims court or proceeding to arbitration.

      Appellants argued that the arbitration clause was unenforceable on the

grounds that it was an unconscionable provision of an adhesion contract

imposed upon them by a party with significantly greater bargaining power.

Appellants also argued that the arbitration clause was communicated to

customers in a manner that ensured few, if any, would read it; that they were

forced to use Insight's services because it was the only local broadband cable

Internet provider; that they could not effectively pursue their claims on an

individual basis; and that, because of the small amounts involved, individual

customers would be unable to retain counsel willing to take the case.

      The trial court granted Insight's motion to compel arbitration and it

dismissed the class action with prejudice, requiring claimants to pursue their

remedy individually through arbitration or in small claims court as provided in

the Service Agreement. The Court of Appeals affirmed the circuit court's

decision. We granted discretionary review.

                                         5
      On December 16, 2010, this Court rendered an opinion in this case.

While Appellee's petition for rehearing or modification of our opinion was

pending, the United States Supreme Court rendered its opinion in AT&T

Mobility LLC v. Concepcion, supra, a decision that dealt with a substantially

similar issue: the enforceability of a class action waiver in a contract that also

required arbitration of any disputes arising out of the contract. We ordered

supplemental briefing and heard oral arguments on the applicability of

Concepcion. Having now reconsidered our previous opinion in light of the

United States Supreme Court's decision in Concepcion, we have withdrawn our

earlier rendition and substituted this opinion.

    II. OUR REVIEW IN THIS CASE IS GOVERNED BY PRINCIPLES OF
               KENTUCKY LAW RATHER THAN NEW YORK LAW

      Among the provisions contained in the Dispute Resolution section of the

Service Agreement is a choice of law clause which provides that "New York Law,

(excluding its choice of law rules) will apply to the construction, interpretation,

and enforcement of the Service Agreement. Citing to Breeding v.

Massachusetts Indem. and Life Ins. Co., 633 S.W.2d 717 (Ky. 1982), the circuit

court declined to apply the Service Agreement's choice of law provision, and

instead applied Kentucky law in determining whether the arbitration

agreement was enforceable.' Because the choice of law is a threshold question

        1 Despite a choice of law provision calling for application of New York law, the
circuit court held that Kentucky law applied. Without discussion, the Court of
Appeals decision applied Kentucky law and thus, by implication, affirmed the circuit
court upon this issue.

                                             6
in our review and was raised by Insight in its cross-petition, we first address

the enforceability of the Service AgreeMent's choice of law provision.

      Breeding, upon which the circuit court relied, addressed the. issue as

follows:

      The traditional choice of law rules in the field of contracts dictated
      that matters bearing upon the execution, interpretation and
      validity of a contract were determinable by the internal law of the
      place where the contract was made. Babcock v. Jackson, 12
N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (1963).

      However, such a mechanical approach is no longer favored. This
      court in Lewis v. Family Group, Ky., 555 S.W.2d 579 (1977)
      abrogated the traditional rule of lex loci contractus stating:

             Traditionally the rule has been that the validity of a contract
             is to be determined by the laws of the state in which it was
             made . . . . The modern test is which state has the most
             significant relationship to the transaction and the parties.
             Restatement Second of Conflicts, Sec. 188 (1971).[ 2 ] Lewis,
             supra, pp. 581-582.

       Increasingly, states have adopted the grouping of contacts
       doctrine. Justice, fairness and the best practical result may best
       be achieved by giving controlling effect to the law of the jurisdiction
       which, because of its relationship or contact with the occurrence or
       the parties, has the greatest concern with the specific issue raised
       in the litigation. Babcock v. Jackson, 240 N.Y.S.2d 743, at 749,
       191 N.E.2d 279, at 283, supra.

       The merit of the doctrine followed in Babcock, supra, is that it gives
       to the forum having the most interest in the problem paramount

        2 Section 188 provides, in relevant part: "(1) The rights and duties of the parties
with respect to an issue in contract are determined by the local law of the state which,
with respect to that issue, has the most significant relationship to the transaction and
the parties . . . . (2) In the absence of an effective choice of law by the parties (see §
 187), the contacts to be taken into account . . . to determine the law applicable to an
issue include: (a) the place of contracting, (b) the place of negotiation of the contract,
(c) the place of perfomiance, (d) the location of the subject matter of the contract, and
(e) the domicile, residence, nationality, place of incorporation and place of business of
the parties . . . ."
      control over the legal issues arising out of a particular factual
      context.

Id. at 719; see also Harris Corp. v. Comair, Inc., 712 F.2d 1069, 1071 (6th

Cir. 1983) and Wallace Hardware Co., Inc. v. Abrams, 223 F.3d 382 (6th

Cir. 2000). The Breeding decision held that Kentucky law should apply

because Kentucky had the greater interest in, and the most significant

relationship to, the, transaction and the parties.

      Upon application of Breeding, we agree with the circuit court's

conclusion that Kentucky law governs our evaluation of the Service Agreement.

Appellants, the other members of the putative class, the Internet equipment,

the Internet service provided, and the relevant operating area are all located in

Kentucky. The customers executed the agreements in Kentucky, and Kentucky

has a substantial interest in the protection of its residents in the area of

commercial transactions. Moreover, one of the principal claims arises under

the Kentucky Consumer Protection Act. New York, on the other hand, has no

discernible connection or interest at all in the subject matter of this litigation.

Thus, there can be no doubt that Kentucky has "the greater interest and the

most significant relationship to the transaction and the parties."

      We accordingly base our review of the Service Agreement on relevant

Kentucky law. We further note, however, that the parties do not dispute that

the Federal Arbitration Act (FAA) is applicable to the arbitration clause, and we

accordingly apply its provisions as appropriate.
      III. THE SERVICE AGREEMENT'S COMPREHENSIVE BAN ON CLASS
            ACTION LITIGATION IS ENFORCEABLE UNDER FEDERAL
                            ARBITRATION LAW

      The principal issue in this appeal is whether the Service Agreement's ban

on class action litigation is enforceable against Appellants and the members of

the putative class they would represent. The ban on class actions found in

Insight's Service Agreement in this case is comprehensive and absolute,

prohibiting the joining of disputes of different claimants, in lawsuits and in

arbitration, in all situations and in all forums. 3

      Appellants contend that Insight's prohibition on class action litigation

effectively immunizes it from liability for wrongful conduct resulting in many

small claims, because it removes the only viable and economically effective

remedy available for the redress of such clairns. 4 They argue that because it is

      3   Provision 5(e) of the Service Agreement provides as follows:

              No Class Action or Consolidated Proceedings. NO DISPUTE MAY BE
      JOINED WITH ANOTHER LAWSUIT, OR IN AN ARBITRATION WITH A DISPUTE
      OF ANY OTHER PERSON. All parties to the arbitration must be individually
      named. THERE SHALL BE NO RIGHT OR AUTHORITY FOR ANY CLAIMS TO
      BE ARBITRATED ON A CLASS ACTION OR CONSOLIDATED BASIS OR ON
      BASES INVOLVING CLAIMS BROUGHT IN A PURPORTED REPRESENTATIVE
      CAPACITY ON BEHALF OF THE GENERAL PUBLIC (SUCH AS A PRIVATE
      ATTORNEY GENERAL), OTHER SUBSCRIBERS, OR OTHER PERSONS
      SIMILARLY SITUATED. Customer understands and acknowledges that by
      consenting to submit claims to arbitration pursuant to this Agreement,
      Customer may be forfeiting his or her right to share in any class action awards.
      This Section will not apply to any individual claims filed by Customer in a
      lawsuit prior to the effective date of this Agreement, nor to the claims of a class
      certified prior to the effective date of this Agreement. This Section will apply to
      all other claims, including class claims where a class has not yet been certified,
      even if the facts and circumstances upon which the claims are based occurred
      or existed before the effective date of this Agreement.

      4 The Attorney General of Kentucky, AARP, and the Kentucky Justice
Association filed amicus curiae briefs supporting Appellants on this issue. The Pacific
Legal Foundation filed a brief in support of upholding the class action ban provision.

                                              9
not economically practical for an individual customer to independently litigate

his or her de minimis claim, the class action prohibition effectively exculpates

Insight from liability for such claims and, correspondingly, it thereby unjustly

enriches the company because it will never have to provide recompense for the

many small claims. 5

      We agree that the purpose of the class action under CR 23 is to provide a

remedy for the very concerns that Appellants raise. The practical effect of de

minimis claims situations has been explained in other cases addressing class

action litigation. "Economic reality dictates that [litigation involving many

small claims] proceed as a class action or not at all." Eisen v. Carlisle &

Jacquelin, 417 U.S. 156, 161 (1974) ("A critical fact in this litigation is that

petitioner's individual stake in the damages award he seeks is only $70. No

competent attorney would undertake this complex antitrust action to recover

so inconsequential an amount."). "The policy at the very core of the class

action mechanism is to overcome the problem that small recoveries do not

provide the incentive for any individual to bring a solo action prosecuting his or

her rights. A class action solves this problem by aggregating the relatively

paltry potential recoveries into something worth someone's (usually an

attorney's) labor." Amchem Products, Inc. v. Windsor, 521 U.S. 591, 617 (1997)

       5 Insight notes that customers in cases of this type could pursue a remedy
through the Attorney General, who is vested with authority under the Kentucky
Consumer Protection Act to pursue litigation against companies who would improperly
overcharge its customers. However, as noted by the Attorney General, "with the
limited resources of the Commonwealth the Attorney General is simply unable to
pursue each and every violator and must limit its case selection to those matters
involving the greatest public interest." Brief of the Attorney General of Kentucky, pg. 4.

                                            10
(quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997));

Carnegie v. Household Intern., Inc., 376 F.3d 656, 661 (7th Cir. 2004) (Posner,

J.) ("The realistic alternative to a class action is not 17 million individual suits,

but zero individual suits, as only a lunatic or a fanatic sues for 8301. 6 7

      Because of the important purpose served by class actions, we would be

inclined to join the jurisdictions, such as those just mentioned, that have

invalidated provisions of consumer adhesion contracts that bar class action

resolution of disputes. Our initial opinion in this case so held. However, upon

application of Concepcion, we are now constrained to conclude that under

contracts like the one now before us, which contain a class action waiver and

also require disputes to be arbitrated under the FAA, the federal policy favoring

arbitration preempts any state law or policy invalidating the class action waiver

as unconscionable based solely upon the grounds that the dispute involves

many de minimis claims which are, individually, unlikely to be litigated. We

are satisfied that Concepcion is dispositive, and therefore, we turn our

discussion to its application in this case.

       6 The holdings in the aforementioned cases would be substantially affected by
the holding in Concepcion.
       7 We note also that the class action is a creation of the courts, not the
legislatures, hence its foundation in this country is in the court-established civil
rules, rather than the statutes. As was the case in England, class actions in the
United States are an outgrowth of the compulsory joinder rule that prevailed in courts
of equity. Shaw v. Toshiba America Information Systems, Inc., 91 F. Supp. 2d 942, 946-
951 (E.D. Tex. 2000) (recounting history of class action litigation). See also Hansberry
v. Lee, 311 U.S. 32, 41 (1940) ("The class suit was an invention of equity to enable it to
proceed to a decree in suits where the number of those interested in the subject of the
litigation is so great that their joinder as parties in conformity to the usual rules of
procedure is impracticable.") As such, courts enjoy wider latitude in determining
public policy regarding class actions and fashioning remedies in this type of litigation.

                                            11
      As a preliminary matter, Appellants argue that Insight has waived the

federal preemption argument of Concepcion, or is judicially estopped from

asserting that defense, by "t[aking] the position that state law governed the

enforceability of its class action ban." Appellant's Supplemental Authority

Brief, pg. 2. Clearly, the arbitration clause in this proceeding specifically

provided that it was to be controlled, as applicable, by the FAA. To our

knowledge, Insight has not contended otherwise. Moreover, we regard Insight's

earlier references to state law analysis as indicating no more than the

unexceptional and well-established rule that the interpretation of an

arbitration agreement is generally a matter of state contract law.       See Arthur

Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009)(State law is applicable to

determine which contracts are binding and enforceable under the FAA "if that

law arose to govern issues concerning the validity, revocability, and

enforceability of contracts generally," quoting Perry v. Thomas, 482 U.S. 483,

493, n. 9 (1987)). Thus, we conclude that Insight's request that we review this

matter under the holding in Concepcion is properly preserved, and we do not

further address Appellants' preservation arguments. 8

       8 In its initial brief as Appellee, under the heading "REGARDLESS OF ANY
RULING ON THE CLASS ACTION WAIVER, THE PARTIES' AGREEMENT TO
ARBITRATE IS ENFORCEABLE," Insight left the clear impression that its fallback
position was that if the class action waiver provision was stricken, upon application of
the agreement's severability clause, the remaining portions of the arbitration
agreement should be upheld, implying that if there were to be class action
proceedings, its preference would be for those proceedings to be in an arbitration
forum rather than in circuit court. Now that Concepcion has exposed the folly of that
position, Insight has quickly adopted the theme of that decision.

                                           12
      We similarly reject Appellants' argument to the effect we should not

accept Justice Thomas's separate opinion in Concepcion as a complete

concurrence, and that therefore the decision is a mere plurality not

commanding five votes. While Justice Thomas did indeed express a separate

interpretation of FAA § 2, he nonetheless made clear his full concurrence with

the majority by saying: "When possible, it is important in interpreting statutes

to give lower courts guidance from a majority of the Court."   Concepcion, 131
S. Ct. at 1754 (Thomas, J., concurring) ("Therefore, although I adhere to my

views on purposes-and-objectives pre-emption [citation omitted] I reluctantly

join the Court's opinion.")

      In Concepcion, the Supreme Court considered a California case in which

the plaintiffs had entered into cellular telephone service agreements with AT&T.

The agreements provided for arbitration of all disputes between the parties,

and further required that claims be brought in the parties' "individual capacity,

and not as a plaintiff or class member in any purported class or representative

proceeding." Id. at 1744.

      When a dispute arose, AT&T moved to compel arbitration under the

terms of its contract. The plaintiffs opposed the motion, contending that the

arbitration agreement was unconscionable and unlawfully exculpatory under

California law because it disallowed class action procedures. Relying on the

rule adopted by the California Supreme Court in Discover Bank v. Superior

Court, 113 P.3d 1100 (2005)(abrogated by Concepcion), the district court denied

AT&T's motion to compel, finding that the arbitration provision was

                                        13
unconscionable because AT&T had not shown that bilateral arbitration

adequately substituted for the deterrent effects of class actions; the Ninth

Circuit affirmed, also finding the provision unconscionable under the Discover

Bank rule. Laster v. AT&T Mobility LLC,    584 F.3d 849, 855 (2009)(reversed by

Concepcion); Concepcion, 131 S. Ct. at 1745. In Discover Bank, the California

Supreme Court considered class action waivers in arbitration agreements in

the context of de minimis claims and held them to be unconscionable and

unenforceable under California law.   Discover Bank at 1110.

      The United States Supreme Court accepted certiorari in Concepcion to

consider whether the Discover Bank rule and similar holdings violate Section 2

of the Federal Arbitration Act (FAA), which makes agreements to arbitrate

"valid, irrevocable, and enforceable, save upon such grounds as exist at law or

in equity for the revocation of any contract," 9 U.S.C. § 2; whether the FAA

prohibits States from conditioning the enforceability of arbitration agreements

on the availability of class-wide arbitration procedures; and whether § 2

preempts Discover Bank-type rules classifying class action waivers in consumer

contracts as unconscionable.

      The rationale supporting the Discover Bank rule, and the principal

argument relied upon by the plaintiffs in Concepcion, is that the striking down

of an exculpatory class action waiver derives from common law

unconscionability doctrine and the well-established policy against exculpation

provisions, and that these are well-established grounds that "exist at law or in

equity for the revocation of any contract" under FAA § 2. The Court, however,

                                          14
concluded that the application of doctrines normally thought to be generally

applicable to any contract, such as duress or, as relevant here,

unconscionability, in the context of an arbitration clause, may in practice,

disfavor arbitration in a way that violates § 2 of the FAA .

      The Court noted that while ostensibly these rules would apply equally to

all contracts, litigation, and litigants, in practice, the rules would have a

disproportionate impact on arbitration agreements, concluding that "[r]equiring

the availability of class-wide arbitration interferes with fundamental attributes

of arbitration and thus creates a scheme inconsistent with the FAA."

Concepcion, 131 S. Ct. at 1748. In explaining why this is so, the Court began

by noting that the "principal purpose" of the FAA is to "ensur[e] that private

arbitration agreements are enforced according to their terms."             Id. (citing Stolt-

Nielsen S.A. v. Animal Feeds Int'l Corp.,       130 S. Ct. 1758, 1763 (2010)). 9

      The Court also cited to Preston v. Ferrer, 552 U.S. 346, 358 (2008), which

preempted a state-law rule requiring exhaustion of administrative remedies

before arbitration, where the Court emphasized that "[a] prime objective of an

agreement to arbitrate is to achieve 'streamlined proceedings and expeditious

results,' which objective would be "frustrated" by requiring a dispute to be

      9   In its petition for rehearing, Insight also argues that we failed to give sufficient
attention to Stolt Nielson. We note that Stolt Nielson, however, is not directly
                   -                             -

concerned with the issues we address; rather that decision concerned arbitration
proceedings between sophisticated contract negotiators of equal bargaining power. In
such cases, the unconscionablility analysis is quite distinct from the consumer
adhesion contract situation we address, whereby the relative bargaining power of the
parties is skewed heavily in favor of the commercial entity. To the extent Stolt Nielson
                                                                                     -

is relevant to this proceeding, those points are merged into Concepcion, and thus we
do not undertake a detailed discussion of this case.

                                               15
heard by an agency first, . . . and that such a rule would "at the least, hinder

speedy resolution of the controversy." Analogizing to this case, the Court

concluded that "California's Discover Bank rule similarly interferes with

arbitration," noting that if there is a class action in progress, then "companies

would have less incentive to continue resolving potentially duplicative claims

on an individual basis." Concepcion, 131 S. Ct. at 1750.

      The Court further cited to its holding in Stolt-Nielsen, 130 S. Ct. at 1776,

that agreements which are silent on the question of class procedures could not

be interpreted to allow them because the "changes brought about by the shift

from bilateral arbitration to class action arbitration" are "fundamental."

Concepcion, at 1750-1751.

      The Court also noted that striking down class action waivers contained

in arbitration clauses is detrimental to arbitration in violation of § 2 because

the switch from bilateral to class arbitration sacrifices the principal advantage

of arbitration, its informality, and makes the process slower, more costly, and

more likely to generate a procedural morass than a final judgment.      Id. at

1751. The Court further emphasized the complications created by the

procedural formality associated with class actions, noting, for example the

rigorous due process and Federal Rule of Civil Procedure — based rules

required for a class action money judgment to bind absent class members in

litigation, and noted that it is "unlikely that in passing the FAA Congress

meant to leave the disposition of these procedural requirements to an

arbitrator." Id.

                                         16
      Finally, the Court noted that class arbitration creates a substantial

deterrent to arbitration because a class action greatly increases the risks to

defendants of a devastating arbitration award with a very limited opportunity

for judicial review of the decision. "Arbitration," the Court noted, "is poorly

suited to the higher stakes of class litigation." Id. As such, the Court found it

unlikely that Congress would have intended to allow state courts, by adopting

a Discovery Bank-type rule, to force parties to choose between a high-stakes

arbitration without meaningful appellate review, or litigation in the courts.     Id.

at 1752. Because the Discover Bank rule "stands as an obstacle to the

accomplishment and execution of the full purposes and objectives of Congress"

in favoring arbitration, the Court held that the Discover Bank rule is preempted

by the FAA. Id.

      As can be readily seen, the Discover Bank rule encompasses facts

substantially identical to the facts in this case. More specifically, like the

Discover Bank rule, the present case also includes (1) a class action waiver; (2)

found in a consumer contract of adhesion; (3) involving small amounts of

damages; and (4) it is alleged that the party with the superior bargaining power

is unfairly withholding a small sum of money in damages from each of a large

number of its consumers.

      Appellants seek to distinguish Concepcion, relying upon three principal

grounds: (1) that the Discover Bank rule stricken by the Court was applied

systematically in any de minimis claim situation, and would not prevent the

adoption of a similar rule that was applied only on a case-by-case basis; (2)

                                         17
that the arbitration agreement in issue here is far less consumer-friendly than

the one reviewed in Concepcion; and (3) that the Mitsubishi 10 line of cases

holding that class action waivers may be stricken when consumers are

otherwise unable to vindicate their rights, is unaffected by Concepcion, and

that the clause in this case prevents the injured customers from vindicating

their rights.

      We are not persuaded by Appellants' effort to distinguish Concepcion.

First, assuming that the Appellees are correct that the Discover Bank rule is an

inflexible rule leaving no room for discretion, we are nevertheless unconvinced

that simply re-characterizing the same basic idea as an individualized

determination based upon the facts of each case is sufficient to evade the

Concepcion.holding. Nor do we believe this case is distinguishable by virtue of

the relatively more consumer-friendly arbitration clause contained in

Concepcion in comparison with the clause contained in this case. A careful

reading of Concepcion discloses that the unusually consumer-friendly terms of

the AT&T agreement were not particularly relevant to the Supreme Court's

holding. Rather, what the Court was actually focusing on and condemning in

Concepcion was the chilling effect on arbitration that occurs when courts are

able to invalidate class action waivers in cases involving de minimis claims;

which is precisely what the Appellants request that we do in this proceeding.

We therefore believe that the less favorable terms for consumers provided by

the Insight agreements offer no basis for a departure from Concepcion's

       10   Mitsubishi Motors Corp. v. Soler. Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).

                                              18
holding. That factor simply was not central to the Supreme Court's holding in

the case.

      Finally, we strongly agree with Appellants that Concepcion does not

disturb the basic principle that an arbitration clause is not enforceable if it fails

to provide plaintiffs with an adequate opportunity to vindicate their claims.

See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637

(1985) ("[Slo long as the prospective litigant effectively may vindicate [his]

statutory cause of action in the arbitral forum, the statute will continue to

serve both its remedial and deterrent function."); Green Tree Financial Corp.-

Alabama v. Randolph, 531 U.S. 79, 81 (2000) ("the existence of large arbitration

costs may well preclude a litigant . . . from effectively vindicating such rights");

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991); 14 Penn Plaza

LLC v. Pyett, 556 U.S. 247 (2009). Accordingly, arbitration clauses certainly

may continue to be struck down as unconscionable if their terms strip

claimants of a statutory right, which cannot be vindicated by arbitration,

because, for example, the arbitration costs on the plaintiff are prohibitively

high; or the location of the arbitration is designated as a remote location. But

again, simply the impracticality of pursuing a single, small dollar claim is not

regarded as an impediment to vindicating one's rights.

       Finally, it would be inaccurate to conclude that the consumers in this

case cannot adequately vindicate their rights as contemplated in Mitsubishi for

the reason that the arbitration clause in this case specifically reserves for

Insight customers the same avenue of recovery available to any other plaintiff

                                          19
with a $40.00 claim, that is, the right to go to small claims court. The cost of

going to small claims is a 20.00 filing fee, CR 3.03(1)(a), plus the cost of

service of process, all of which would be recoverable as part of the successful

small claims judgment. And while most, if not all, consumers may well choose

to forgo recovery because it is just not worth the trouble, by the Supreme

Court's calculus in Concepcion, it is preferable for the public to suffer the

unjust enrichments that defendants may occasionally gain than to burden the

arbitration process favored by federal law with a Discover Bank-type rule. We,

of course, yield as we must to the United States Supreme Court's interpretation

of federal law.

      In summary, we conclude that Concepcion is dispositive of this issue. A

decision to invalidate or otherwise disregard the anti-class action provision of

Insight's Service Agreements on grounds of unconscionability would undermine

the federal policy favoring arbitration, and would offend the preemption

provisions of the Federal Arbitration Act, as interpreted in Concepcion. We

accordingly conclude that the Court of Appeals properly affirmed the trial

court's dismissal of the putative class action claim.

    IV. THE GENERAL ARBITRATION CLAUSE IS NOT UNCONSCIONABLE

      In addition to their arguments relating to the class action waiver,

Appellants argue that the arbitration clause is unenforceable in its totality as

an unconscionable adhesion contract term. For the reasons explained below,

                                         20
we conclude that the general arbitration provisions are neither procedurally or

substantively unconscionable, and remain enforceable.

   A. The Arbitration Clause

      Section 5 of the Service Agreement, contains the following general

provisions relevant to our review of the enforceability of the arbitration clause:

      (a) Arbitration for Resolution of Disputes. IT IS IMPORTANT
      THAT YOU READ THIS ENTIRE SECTION CAREFULLY. THIS
      SECTION PROVIDES FOR RESOLUTION OF DISPUTES THROUGH
      FINAL AND BINDING ARBITRATION BEFORE A NEUTRAL
      ARBITRATOR INSTEAD OF IN A COURT BY A JUDGE OR JURY
      OR THROUGH A CLASS ACTION. YOU continue to have CERTAIN
      RIGHTS TO OBTAIN RELIEF FROM a federal or state
      REGULATORY agency.

      (b) BINDING ARBITRATION. The arbitration process established
      by this section is governed by the Federal Arbitration Act ("FAA"), 9
      U.S.C. §§ 1-16. The FAA, not state law, shall govern the
      arbitrability of all disputes between Insight regarding this
      Agreement and the Service. You have the right to take any dispute
      that qualifies to small claims court rather than arbitration.
      However, all other disputes arising out of or related to this
      Agreement (whether based in contract, tort, statute, fraud,
      misrepresentation or any other legal or equitable theory) must be
      resolved by final and binding arbitration, unless provided
      otherwise in this Agreement. This includes any dispute based on
      any product, service or advertising having a connection with this
      Agreement and any dispute not finally resolved by a small claims
      court. The arbitration will be conducted by one arbitrator using
      the procedures described by this Section. If any portion of this
      Dispute Resolution Section is determined to be unenforceable,
      then the remainder shall be given full force and effect. The
      provisions of this section shall survive termination, amendment or
                         ,

      expiration of this Agreement.

      As discussed below, we discern nothing unconscionable, or

unenforceable about this arbitration clause.

                                         21
  B. Kentucky Law Favors Arbitration

      We begin by noting that in Kentucky, unlike most jurisdictions,

arbitration enjoys the imprimatur of our state Constitution. Section 250 of the

Kentucky Constitution provides "It shall be the duty of the General Assembly to

enact such laws as shall be necessary and proper to decide differences by

arbitrators, the arbitrators to be appointed by the parties who may choose that

summary mode of adjustment." Similar provisions were contained in Article

VI, Section 10, of Kentucky's Second Constitution adopted in 1799, and in

Article 8, Section 10, of Kentucky's Third Constitution adopted in 1850.       See

Dutschke v. Jim Russell Realtors, Inc., 281 S.W.3d 817, 823 (Ky. App. 2008).

      Clearly, it has long been the public policy of Kentucky that arbitration is

a favored method of dispute resolution. "Arbitration has always been favored

by the courts." Poggel v. Louisville Ry. Co., 225 Ky. 784, 10 S.W.2d 305, 310

(1928). "Kentucky law favors the enforcement of arbitration agreements."

Medcom Contracting Services, Inc. v. Shepherdsville Christian Church Disciples

of Christ, 290 S.W.3d 681, 685 (Ky. App. 2009) (citing Kodak Mining Co. v.

Carrs Fork Corp., 669 S.W.2d 917 (Ky. 1984)); see also, Ally Cat, LLC v.

Chauvin, 274 S.W.3d 451, 458 (Ky. 2009).

      Further, our legislature has statutorily recognized a public policy

preference favoring arbitration. Subject to exceptions not relevant here, KRS

417.050 provides that "[a] written agreement to submit any existing

controversy to arbitration or a provision in written contract to submit to

arbitration any controversy thereafter arising between the parties is valid,

                                        22
enforceable and irrevocable, save upon such grounds as exist at law for the

revocation of any contract." Similarly, the Federal Arbitration Act, 9 U.S.C.A. §

2 (FAA), which is applicable to arbitration provisions involving interstate

commerce, 11 provides that "[a] written provision in any . . . contract evidencing

a transaction involving commerce to settle by arbitration a controversy

thereafter arising out of such contract or transaction, or the refusal to perform

the whole or any part thereof, or an agreement in writing to submit to

arbitration an existing controversy arising out of such a contract, transaction,

or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds

as exist at law or in equity for the revocation of any contract."

      In light of our clear constitutional and statutory authorities favoring

arbitration "[t]he party seeking to enforce an agreement has the burden of

establishing its existence, but once prima facie evidence of the agreement has

been presented, the burden shifts to the party seeking to avoid the agreement.

The party seeking to avoid the arbitration agreement has a heavy burden."

Louisville Peterbilt, Inc. v. Cox, 132 S.W.3d 850, 857 (Ky. 2004) (citation

omitted). As such, we begin our review with a strong presumption that the

general arbitration clause is not unconscionable.

        11 The parties do not dispute that the FAA is applicable to the arbitration clause
under consideration. The contract for Internet service which is the subject matter of
the contract clearly involves an interstate (indeed worldwide) service, and, moreover,
the arbitration clause itself specifically provides that "[t]he arbitration process
established by this section is governed by the [FAA]." Thus, without objection of the
parties, we apply FAA provisions as appropriate.

                                            23
   C. The Arbitration Clause is not Unconscionable

      Appellants contend that the general arbitration clause should be held

unenforceable upon the grounds that the provision is unconscionable. "A

fundamental rule of contract law holds that, absent fraud in the inducement, a

written agreement duly executed by the party to be held, who had an

opportunity to read it, will be enforced according to its terms."   Conseco

Finance Servicing Corp. v. Wilder, 47 S.W.3d 335, 341 (Ky. App. 2001) (citing

Cline v. Allis-Chalmers Corp., 690 S.W.2d 764 (Ky. App. 1985)).

      The doctrine of unconscionability has developed as a narrow exception to

this fundamental rule. The doctrine is used by the courts to police the

excesses of certain parties who abuse their right to contract freely. It is

directed against one-sided, oppressive and unfairly surprising contracts, and

not against the consequences per se of uneven bargaining power or even a

simple old-fashioned bad bargain. Id. (citing Louisville Bear Safety Service, Inc.,

v. South Central Bell Telephone Company, 571 S.W.2d 438, 440 (Ky. App.

1978)). An unconscionable contract is "one which no man in his senses, not

under delusion, would make, on the one hand, and which no fair and honest

man would accept, on the other." Id. at 342 ((quoting Black's Law Dictionary,

1694 (4th ed. 1976)).

      In Conseco, the Court of Appeals noted that review of arbitration clauses

for unconscionability involves a two step process -- first, a review focused on

the procedures surrounding the making of the arbitration clause (procedural

unconscionability) and second, a review of the substantive content of the

                                         24
arbitration clause (substantive unconscionability). Id. at 343 n. 22. In their

arguments, the parties have applied this two-step process. In light of Conseco,

and because the parties have placed much emphasis upon this framework, we

likewise review the argument using the procedural/ substantive

unconscionability structure. 12

   1. Procedural Unconscionability

      Procedural, or "unfair surprise," unconscionability "pertains to the

process by which an agreement is reached and the form of an agreement,

including the use therein of fine print and convoluted or unclear language .. .

[It] involves, for example, 'material, risk-shifting' contractual terms which are

not typically expected by the party who is being asked to 'assent' to them and

often appear [ ] in the boilerplate of a printed form." Conseco, 47 S.W.3d at

343 n. 22 (citing Harris v. Green Tree Financial Corp., 183 F.3d 173, 181 (3rd

Cir. 1999). Factors relevant to the procedural unconscionability inquiry

include the bargaining power of the parties, "the conspicuousness and

comprehensibility of the contract language, the oppressiveness of the terms,

and the presence or absence of a meaningful choice." Jenkins v. First American

Cash Advance of Georgia, LLC., 400 F.3d 868, 875-876 (11th Cir. 2005).

    12 The parties raise the issue of whether a finding of unconscionability requires

both procedural and substantive unconscionability. In our view, for the reasons
reflected herein, there need not be both. Substantive unconscionability, alone, is
grounds for a determination that an arbitration clause, or an individual provision
thereof, is unenforceable. Similarly, the converse is true. If the arbitration clause is
written in "legalese" and disguised in the "fine print," the provision may be
unenforceable even though not substantively unconscionable.

                                            25
      Appellants argtie that the arbitration clause is procedurally

unconscionable because it is contained in a non-negotiable, take it or leave it,

adhesion contract. They also argue that the arbitration clause is procedurally

unconscionable because it is not readily visible to customers contracting for

service via the Internet who must navigate to a separate page in order to see it.

"A contract of adhesion is a standardized contract, which, imposed and drafted

by the party of superior bargaining strength, relegates to the subscribing party

only the opportunity to adhere to the contract or reject it." Patterson v. ITT

Consumer Financial Corp., 18 Cal. Rptr. 2d 563, 565 (Cal. App. 1993) (citation

and internal quotation marks omitted). Adhesion contracts are not per se

improper. On the contrary, they are credited with significantly reducing

transaction costs in many situations. See Hill v. Gateway 2000, Inc., 105 F.3d
1147 (7th Cir. 1997). However, adhesion contracts are subject to abuse.

Oppressive terms ancillary to the main bargain can be concealed in fine print

and couched in vague or obscure contractual language. "In consumer

transactions in particular, courts have been willing to scrutinize such contracts

and have refused to enforce egregiously abusive ones."    Conseco, 47 S.W.3d at

342 n. 20. (citing Jones v. Bituminous Casualty Corp., 821 S.W.2d 798 (Ky.

1991)).

      Upon review of the general provisions of the arbitration clause, we cannot

conclude that it is procedurally unconscionable. The clause was not concealed

or disguised within the form; its provisions are clearly stated such that

purchasers of ordinary experience and education are likely to be able to

                                        26
understand it, at least in its general import; and its effect is not such as to

alter the principal bargain in an extreme or surprising way. As noted by the

trial court "[t]he provision is in clear and concise language. The title is in bold

print. The method of referring the reader to a different screen is a common

practice in most web sites, and even in many written contracts (usually by

reference to an addendum)." In summary, we do not find the arbitration clause

to be procedurally unconscionable.

      In light of Concepcion, we are constrained to further note that in future

cases closer scrutiny of the positioning and prominence of class action waiver

provisions will likely be necessary. Future application of Concepcion may be

expected to limit the ability of consumers to band together under state law in a

class action to vindicate important rights. It therefore follows that heightened

attention should be afforded to providing a full and clear disclosure when those

limitations are placed in adhesion contracts. It is fundamental that the

prominence of the disclosure should be commensurate with the importance of

the right being taken away.

   2. Substantive Unconscionability

      Substantive unconscionability "refers to contractual terms that are

unreasonably or grossly favorable to one side and to which the disfavored party

does not assent." Conseco, 47 S.W.3d at 343 n. 22 (citation omitted). As for

substantive unconscionability, courts consider "the commercial reasonableness

of the contract terms, the purpose and effect of the terms, the allocation of the

                                         27
risks between the parties, and similar public policy concerns."   Jenkins, 400
F.3d at 876.

      The arbitration clause in this case is a basic arbitration clause

permitting either side to compel arbitration. It has no unique characteristics to

distinguish it from any other standard arbitration clause. Indeed, for the de

minimis individual claims of this case, the customer is deprived of no right at

all by the arbitration clause. With or without the arbitration clause, he is free

to take his cause of action to small claims court, which would be the normal

forum in Kentucky's court system for the individual's claim to be filed in any

event. In summary, the general arbitration clause is not substantively

unconscionable.

   D. Conclusion

      As noted above, our state Constitution and statutes favor the

enforceability of arbitration agreements. Moreover, the purpose of the FAA

"was to reverse the longstanding judicial hostility to arbitration agreements

that had existed at English common law and had been adopted by American

courts, and to place arbitration agreements upon the same footing as other

contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991).

The FAA's provisions "manifest a 'liberal federal policy favoring arbitration

agreements."' Id. at 25 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 24, (1983)). The Supreme Court has "rejected generalized

attacks on arbitration that rest on 'suspicion of arbitration as a method of

weakening the protections afforded in the substantive law to would-be

                                        28
complainants."' Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 89-90 (2000)

(quoting Rodriguez de Quijas v. Shearson/ Am. Express, Inc., 490 U.S. 477, 481,

(1989)); Jenkins, 400 F.3d at 874. In light of such long-standing public policy,

we see no basis to disturb this contractual term.

          V. THE CONFIDENTIALITY PROVISION IS . UNENFORCEABLE

      Finally, the Appellants contend that the confidentiality provision

contained in the arbitration agreement should be deemed unenforceable

because it gives the company "an unyielding advantage over individual

customers." They argue that as a repeat participant in the arbitration

proceedings, the company is able to gather a body of information relating to

precedent and rulings arising from within the dispute resolution process, to

which customers involved in separate proceedings would have no access. 13

      Insight responds that, by extension, Concepcion prevents state courts

from disturbing confidentiality agreements included within arbitration

agreements. We disagree.

      First, the subject matter of Concepcion is far removed from the issue of

confidentiality agreements. 14 Further, the potential obstacles to arbitration

       13 As noted above, the arbitration agreement includes a severability provision
which provides that "If any portion of this Dispute Resolution Section is determined to
be unenforceable, then the remainder shall be given full force and effect. The
provisions of this section shall survive termination, amendment or expiration of this
Agreement." Accordingly, in striking down the confidentiality term, the remainder of
the arbitration agreement remains unaffected.
       14 Concepcion does mention that with class-wide arbitration "[c]onfidentiality
becomes more difficult." 131 S. Ct. at 1750. However, that certainly does not
represent an indication that confidentiality agreements are likewise protected under
the holding.

                                           29
presented by the forbidding of class action waivers are simply not present in

the case of confidentially provisions. While it is well-established that

confidentially agreements may be enforceable to protect, for example, personal

information or trade secrets; in situations like here, where such concerns are

not present, the provision is wholly one-sided, protecting only the company

that prepared the contract with no reciprocal benefit to the consumers. As

such, we are not persuaded that Concepcion compels that we uphold the

confidentiality agreement in this case. Accordingly, for the reasons explained

below, and upon application of the substantive unconscionability principles as

discussed above, we hold that the confidentiality agreement in this case is

substantively unconscionable, and accordingly unenforceable against

customers who opt for arbitration as a result of the internet outage.

      Subsection (g) of the Dispute Resolution provisions, titled Arbitration

Information and Filing Procedures, provides, in relevant part, that "[n]either

you nor Insight may disclose the existence, content or results of any arbitration

or award, except as may be required by law, to confirm and enforce an award,

or to the party's attorneys and/or accountants." Although facially neutral,

confidentiality provisions usually favor companies over individuals.       Ting v.

AT&T, 319 F.3d 1126, 1151 (9th Cir. 2003). It is generally recognized that

because companies continually arbitrate the same claims, the arbitration

process tends to favor the company.    Cole v. Burns Intern. Sec. Services, 105
F.3d 1465, 1476 (D.C. Cir. 1997). In Cole, the D.C. Circuit held that because

of plaintiffs' lawyers and arbitration appointing agencies like the American

                                        30
Arbitration Association, who can scrutinize arbitration awards and accumulate

a body of knowledge on a particular company, there was little likelihood of any

harm occurring from the "repeat player" effect.   Id. at 1486.

      In Ting, however, the Ninth Circuit concluded that if a "company

succeeds in imposing a gag order, plaintiffs are unable to mitigate the

advantages inherent in being a repeat player."    Ting, 319 F.3d at 1152. Ting

concluded that such confidentiality clauses were unenforceable because it

permitted the company to "place[] itself in a far superior legal posture by

ensuring that none of its potential opponents have access to precedent while,

at the same time, [the company] accumulates a wealth of knowledge on how to

negotiate the terms of its own unilaterally crafted contract[,]" and because "the

unavailability of arbitral decisions may prevent potential plaintiffs from

obtaining the information needed to build a case of intentional misconduct or

unlawful discrimination[.]" Id.

      Further, "the secrecy provisions of the arbitration agreements both affect

the outcomes of individual arbitrations and clearly favor Defendants. They do

so by reinforcing the advantages Defendants already possess as repeat

participants in the arbitration process." Acorn v. Household Intern., Inc., 211
F. Supp. 2d 1160, 1173 (N.D. Cal. 2002). "[S]everal studies have found and

several courts have held that a party's repeated appearance 'before the same

group of arbitrators conveys distinct advantages over the [one-time

participant].' Mercuro v. Superior Court, 116 Cal. Rptr. 2d 671, 678 (Cal. App.

2002)." See also Sprague v. Household Intern., 473 F. Supp. 2d 966, 975 (W.D.

                                        31
Mo. 2005) (company has not explained why confidentiality agreements provide

any real benefit, much less a comparable benefit, to the consumer and, as

repeat players, the company is the obvious beneficiary of any attempt to

obscure the process); Luna v. Household Finance Corp. III, 236 F. Supp. 2d 1166,

1180 (W.D. Wash. 2002) ("The advantages repeat participants possess over

"one time" participants in arbitration proceedings are widely recognized in legal

literature and by federal courts."); Annendariz v. Foundation Health Psychcare

Services, Inc., 6 P.3d 669, 690 (Cal. 2000) (size of employee award in

arbitration is lower when employer is a repeat participant); Bingham,

"Employment Arbitration: The Repeat Player Effect," 1 Emp. Rts.

Employment Poly. J. 189, 213 (1997) (potential reasons for the repeat player

advantage in arbitrations include: "unequal information in arbitrator selection,"

"unequal representation at the hearing," a repeat participant's ability to screen

out and settle meritorious cases, and the arbitrator's incentive to satisfy repeat

customers). Consequently, although facially neutral, the confidentiality

provision of the arbitration agreement, in effect, favors Insight.

      Insight directs us to Iberia Credit Bureau, Inc. v. Cingular Wireless, LLC,

379 F.3d 159, 175 (5th Cir. 2004) (while the confidentiality requirement is

probably more favorable to the cellular provider than to its customer, the

plaintiffs have not persuaded us that the requirement is so offensive as to be

invalid.); Parilla v. L4P Worldwide Services, VI, Inc., 368 F.3d 269, 280 (3rd Cir.

2004) (each side has the same rights and restraints under those provisions and

there is nothing inherent in confidentiality itself that favors or burdens one

                                         32
party vis-a-vis the other in the dispute resolution process.); and Monroe v.

Citigroup, Inc., 2003 U.S. Dist. LEXIS 26316 (N.D. Fla. Aug. 5, 2003).

Nevertheless, Insight has failed to identify any practical social utility to the

provision. In light of the substantial potential adverse consequences of the

confidentiality provisions and the absence of countervailing benefits, we join

those jurisdictions that hold that such provisions are unconscionable and

unenforceable.

                                    VI. CONCLUSION

         For the foregoing reasons, the decision of the Court of Appeals is affirmed

in part, and reversed in part, and this matter is remanded to the Jefferson

Circuit Court for entry of a final judgment consistent with this opinion.

         Minton, C.J., Abramson, Cunningham and Scott, JJ., concur. Schroder,

J., concurs in part and dissents in part by separate opinion, in which Noble, J.,

joins.

         SCHRODER, J., CONCURRING IN PART AND DISSENTING IN PART: I

concur with the well-reasoned opinion of the majority on all of the issues

except as to the enforceability of the general arbitration clause and, by

extension, as to the applicability of AT&T Mobility LLC v. Concepcion,         U.S.

   , 131 S. Ct. 1740 (2011). While I recognize the federal and state authorities

favoring arbitration (including Kentucky Constitution Section 250), I believe

that Insight's arbitration agreement is so procedurally unconscionable that the

arbitration clause itself should be held invalid.

                                          33
      The majority accurately sets out the factors relevant to the procedural

unconscionability inquiry - "the conspicuousness of the terms and

comprehensibility of the contract language, the oppressiveness of the terms,

and the presence or absence of a meaningful choice."     Jenkins v. First American

Cash Advance of Georgia, LLC, 400 F.3d 868, 875-76 (11th Cir. 2005).

However, the Court's opinion does not address the last factor - whether the

Appellants had a meaningful choice - which I see as critical to the analysis of

unconscionability in this case.

      The record established that Insight was the only provider of high-speed

broadband cable internet services in Louisville at the time Appellants entered

into the service agreements. Although there may have been other options to

obtain internet access, the record indicates the service agreements for these

companies had similar binding arbitration clauses or they did not provide high-      .

speed broadband cable service. In the digital age in which we now live, internet

access is becoming more and more of a necessity for personal communication,

as well as for business and commerce purposes. The service agreement in this

case was a "take it or leave it" adhesion contract that customers, who had no

bargaining power, were forced to submit to if they wanted high-speed cable

internet access. Unlike the appellees in Conseco Finance Servicing Corp. v.

Wilder, 47 S.W.3d 335, 343 n.24 (Ky. App. 2001), who did not allege that there

was not another reasonably available source for mobile home financing,

Appellants in the present case have shown they had no meaningful choice in

obtaining the high-speed internet service they sought.

                                        34
      The fact that the arbitration portion of the service agreement was not in

the portion of the agreement asking for the customer's assent was further proof

of its procedural unconscionability. Customers had to navigate to a separate

page to see that portion of the agreement. While the majority notes that this is

a common practice, it certainly cannot be characterized as conspicuous.

      I would therefore hold that the arbitration agreement as a whole was

procedurally unconscionable; given that conclusion, I do not believe this case

falls under Concepcion. The issue in Concepcion was the Discover Bank rule,

which essentially required the availability of classwide arbitration and

invalidated arbitration agreement provisions to the contrary. The Supreme

Court concluded that the Discover Bank rule "interferes with fundamental

attributes of arbitration and thus creates a scheme inconsistent with the FAA."

Concepcion, 131 S. Ct. at 1748. Such interference is not present when, as here,

a particular arbitration agreement is unconscionable under the unique facts of

that particular case.

      The "saving clause" of the Federal Arbitration Act

            permits arbitration agreements to be declared
            unenforceable "upon such grounds as exist at law or
            in equity for the revocation of any contract." This
            saving clause permits agreements to arbitrate to be
            invalidated by "generally applicable contract defenses,
            such as fraud, duress, or unconscionability," but not
            by defenses that apply only to arbitration or that
            derive their meaning from the fact that an agreement
            to arbitrate is at issue.

Concepcion, 131 S. Ct. at 1746 (quoting Doctor's Associates, Inc. v. Casarotto,

517 U.S. 681, 687 (1996)) (emphasis added). Insight's arbitration agreement is

                                        35
unconscionable due to the absence of meaningful choice. As such, it is invalid

under "generally applicable contract defenses," id., and this conclusion is not

the type of "state-law rule[] that stand[s] as an obstacle to the accomplishment

of the FAA's objectives" decried in Concepcion. 131 S. Ct. at 1748 (citing Geier

v. American Honda Motor Co., 529 U.S. 861, 872, (2000); Crosby v. National

Foreign Trade Council, 530 U.S. 363, 372-73 (2000)).

      For the above reasons, I would allow the class action suit in the Jefferson

Circuit Court to go forward.

      Noble, J., joins.

COUNSEL FOR APPELLANTS/CROSS-APPELLEES:
H. Philip Grossman
Jennifer Ann Moore
Grossman & Moore, PLLC
401 West Main Street, Suite 1810
Louisville, Kentucky 40202

Leslie A. Bailey
Public Justice
555 12th Street, Suite 1620
Oakland, California 94607

 Frank Paul Bland, Jr.
 Public Justice
.1825 K Street NW, Suite 200
 Washington, D.C. 20006

COUNSEL FOR APPELLEES/CROSS-APPELLANTS:
Laurence John Zielke
Nancy Jane Schook
Janice M. Theriot
David N. Hise
Zielke Law Firm, PLLC
Suite 1250
462 South Fourth Street
Louisville, Kentucky 40202

                                        36
COUNSEL FOR AMICUS CURIAE - PACIFIC LEGAL FOUNDATION:
Bryon Edward Leet
Wyatt, Tarrant 86 Combs, LLP
500 West Jefferson Street
Louisville, Kentucky 40202-2898

Deborah Lafetra
Pacific Legal Foundation
3900 Lennane Drive, Suite 200
Sacramento, California 95834

COUNSEL FOR AMICUS CURIAE - AARP FOUNDATION LITIGATION:
Kenneth W. Zeller
AARP Foundation Litigation
601 E. Street, N.W.
Washington, D.C. 20049

COUNSEL FOR AMICUS CURIAE - THE KENTUCKY JUSTICE ASSOCIATION:
Kevin Crosby Burke
125 South 7th Street
Louisville, Kentucky 40202

John E. Spainhour, Jr.
•Susan Shimp Torok
 Givhan 86 Spainhour, PSC
 Professional Building, Suite One
 200 South Buckman Street
 Shepherdsville, Kentucky 40165

COUNSEL FOR THE COMMONWEALTH OF KENTUCKY:
Jack Conway
Attorney General

Lisa Kathleen Lang
Craig Fletcher Newbern, Jr.
Assistant Attorney General
Office of the Attorney General
700 Capitol Avenue, Suite 118
Frankfort, Kentucky 40601

                                    37