Court Opinion

ID: 9498923
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:32:34.438828+00
Date Added: 2024-06-11T17:59:10.174445
License: Public Domain

KAREN NELSON MOORE, Circuit Judge,
concurring in the judgment.
While I do not join the majority opinion’s condemnation of the district court, I agree with the majority that it was reversible error for the district court to apply the cost-deterrent defense to arbitration recognized by this court in Morrison v. Circuit City Stores, Inc., 317 F.3d 646 (6th Cir.2003) (en banc), and Cooper v. MRM Investment Co., 367 F.3d 493 (6th Cir.2004), to the state-law claims in this dispute as a matter of federal common law. I write separately, however, to clarify that the majority opinion’s fervid rejection of the extension of the cost-deterrent defense to state-law disputes as a matter of federal law is immaterial to the issue of whether or not such a defense could be properly recognized as a matter of state law. I believe the question of whether a state court or a federal court sitting in diversity could properly recognize a cost-deterrent defense to arbitration as part of generally applicable contract-defense doctrine is a complicated question deserving of some comment.
The Federal Arbitration Act (“FAA”) states that arbitration agreements are “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. Therefore parties may assert only general contract defenses that exist in law or equity “for the revocation of any contract” in order to avoid enforcement of an arbitration provision, but may not assert statutory defenses unique to arbitration clauses. See Southland Corp. v. Keating, 465 U.S. 1, 16 n. 11, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) (disallowing a state statutory defense to an arbitration clause because to allow the defense “would permit states to override the declared policy requiring enforcement of arbitration agreements.”). State common-law defenses unique to arbitration clauses would appear to be similarly suspect, as they too would run afoul of the FAA’s goal “to place arbitration agreements upon the same footing as other contracts.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). While state-law attempts specifically to undermine arbitration agreements are im*348proper, “generally applicable state-law contract defenses[,] like fraud, forgery, duress, mistake, lack of consideration or mutual obligation, or uneonscionability, may invalidate arbitration agreements.” Cooper, 367 F.3d at 498 (citing, inter alia, Doctor’s Assocs. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)). For instance, a state might determine that in addition to having an interest in enforcing arbitration agreements, it also has an interest in ensuring that residents who can demonstrate that high arbitration costs would deter them from vindicating then* common-law rights can avail themselves of generally applicable equitable contract defenses.
The Stutters may therefore attempt to rely upon Kentucky contract defenses in support of their claim that the up-front costs of arbitration are so prohibitive to vindicating their contractual rights that they should be released from the obligation to arbitrate. For the following reasons, however, I do not believe this is an appropriate case for us to find that a generally applicable principle of state law applies to invalidate the arbitration clause. The Supreme Court of Kentucky has never considered the question of arbitration costs as a defense to arbitration, or a closely analogous question. The key question is, therefore, whether if faced with this issue, the Supreme Court of Kentucky would be likely to recognize the “cost deterrent” defense under one of its generally applicable doctrines of contract defense. See Managed Health Care Assocs., Inc. v. Kethan, 209 F.3d 923, 927 (6th Cir.2000) (“Our role in this diversity of citizenship case is to make [the] best prediction, even in the absence of direct state court precedent, of what the Kentucky Supreme Court would do if it were confronted with this question.”) (internal quotation marks omitted). The most closely analogous case to this one, which comes from the Kentucky Court of Appeals in Conseco Finance Serv. Corp. v. Wilder, 47 S.W.3d 335, 343-44 (Ky.Ct.App.2001), is ambiguous on this specific question. We must look to Conseco because state court of appeals decisions constitute part of the “[Relevant data” that a federal court must look to in predicting how a state supreme court would decide an issue, and decisions of courts of appeals “should not be disregarded unless we are presented with persuasive data that the [Kentucky] Supreme Court would decide otherwise.” Prestige Cas. Co. v. Mich. Mut. Ins. Co., 99 F.3d 1340, 1348 (6th Cir.1996).
Contrary to T.K.’s claim, I do not read Conseco as “[rjejeeting a party’s argument of excessive cost” under Green Tree Financial Corp.Alabama v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). Appellant Reply Br. at 13. Nor does Conseco explicitly approve of a Green Tree cost-related defense, because the parties in Conseco did not make such a claim. Instead, in Conseco, which involved the exact same arbitration clause at issue in Green Tree, the Kentucky Court of Appeals explained the Supreme Court’s cost-related holding in Green Tree, and then relied upon Green Tree’s reasoning to hold that the plaintiffs analogous contention that the arbitration clause was unconscionable must similarly be rejected on the plaintiffs existing level of proof. The Conseco court stated that, like the Green Tree plaintiffs cost-related claim, the plaintiffs argument that the arbitration clause was “unfairly one-sided rests similarly on a presumption that arbitration will not afford them an adequate opportunity to vindicate their substantive claims.” Conseco, S.W.3d at 344. The court concluded, “Under both the FAA and Kentucky’s UAA, such a presumption is not a proper basis for refusing enforcement of an arbitration clause.” Id. Like in Green Tree, the Ken-*349tueky Court of Appeals required that the plaintiff meet some unspecified level of proof before the plaintiff could be relieved of the duty to arbitrate. The Conseco court continued:
Should it transpire, however, that the unspecified details of Conseco’s arbitration procedure prevent or unfairly hinder the [plaintiffs] from meaningfully presenting their case, the arbitration clause consigning them to that procedure would appear in a different light. In that event, our ruling today would not preclude the [plaintiffs] from renewing their objection to the arbitration clause in circuit court on the ground that the clause had proved unconscionable in practice. On the record before us, however, there is no basis for such a conclusion.
Id. Thus at the same time that Conseco rejected the attempt to avoid an arbitration clause based on a mere presumption of unconscionability, Conseco implied that Kentucky law might allow a plaintiff who believes that the costs of arbitration “prevent or unfairly hinder” them from making a meaningful presentation of their claims to attack the arbiteation clause either pre- or post-arbitration if that plaintiff can meet some level of proof about the hindrance caused by the costs of the arbitration procedure. While I therefore believe that Conseco leaves the door open to the possibility of recognizing a cost-related claim of unconscionability, the ambiguity of Kentucky law makes this an inappropriate case in which to conclude that generally applicable state law invalidates the arbitration clause because of the Stutters’ cost-related concerns. I concur in the judgment.