## Facts

- Insight sold broadband internet service to Kentucky consumers under a standard-form Service Agreement accepted by signature or online assent.
- The agreement required arbitration of damages claims, barred class actions, and imposed confidentiality prohibiting disclosure of the existence and results of arbitrations.
- After an attempted service upgrade, customers alleged widespread outages, service disruptions, and misleading communications about the problems.
- Customers filed a putative class action in Kentucky state court asserting state-law claims (including breach of contract and consumer-related theories).
- Insight moved to dismiss the lawsuit and compel individual arbitration under the Service Agreement.

## Issues

1. Whether the Service Agreement’s class-action waiver was enforceable in light of the Federal Arbitration Act (FAA).
2. Whether the agreement’s choice-of-law provision selecting another state’s law was enforceable, or whether Kentucky law governed.
3. Whether the agreement’s general arbitration clause was unconscionable and therefore unenforceable.
4. Whether the arbitration confidentiality provision was unenforceable as against public policy, and if so, whether it was severable.

## Decision

- The court affirmed enforcement of the class-action waiver as required by the FAA as construed by controlling federal precedent.
- The court held the choice-of-law clause unenforceable and applied Kentucky law to the contract defenses (subject to FAA preemption where applicable).
- The court upheld the general arbitration agreement as enforceable.
- The court held the confidentiality provision void as against public policy (substantively unconscionable) but severable, leaving the remainder of the arbitration agreement in force.
- The case was remanded for entry of judgment consistent with these rulings.

## Legal Principles

- Under the FAA, state-law rules that condition enforceability of arbitration on the availability of class procedures are preempted; class-action waivers in arbitration agreements must be enforced when invalidation would conflict with the FAA’s objectives.
- A contract of adhesion is not, by itself, unconscionable; invalidation generally requires procedural and substantive unconscionability, including overly harsh or one-sided terms.
- A broad arbitration confidentiality term may be substantively unconscionable when it systematically favors the drafting party by suppressing information about disputes and outcomes, impairing consumers’ ability to identify patterns of misconduct and pursue relief.
- If an unconscionable term is not essential to the parties’ agreement to arbitrate and the contract provides for severability, a court may sever the offending term and enforce the remaining arbitration provisions.
- A contractual choice-of-law provision may be rejected when it would defeat Kentucky’s fundamental policies and Kentucky has a materially greater interest in the dispute.

## Conclusion

The Kentucky Supreme Court required individual arbitration and enforced the class-action waiver under the FAA, refused to apply the agreement’s selected foreign law, and invalidated a one-sided arbitration confidentiality provision while severing it to preserve the remainder of the arbitration agreement.


Schnuerle v. Insight Commc’ns Co., 376 S.W.3d 561 (Ky. 2012)