In Schnuerle v. Insight Communications (pdf), the Kentucky Supreme Court joins a number of other courts in rejecting a key argument that the plaintiffs’ bar has been making in the wake of AT&T Mobility LLC v. Concepcion (pdf)—that arbitration agreements with class waivers should not be enforced whenever the plaintiff is able to persuade a court that it would not be feasible to vindicate his or her statutory claims on an individual basis because of the alleged cost of proving those claims.
Ever since Concepcion, in which the U.S. Supreme Court held that the Federal Arbitration Act bars states from refusing to enforce arbitration agreements that forbid class proceedings, plaintiffs have been searching for a rule-swallowing exception to that decision. They appear to have settled on the so-called “vindication of statutory rights” theory: Based on out-of-context dicta in a number of Supreme Court decisions involving the arbitrability of federal claims, plaintiffs argue that the Supreme Court has a long-standing rule that courts need not enforce arbitration agreements when they are persuaded that the plaintiff would be unable to vindicate his or her claims under the arbitration clause at issue and that Concepcion left that rule undisturbed.
The courts are divided as to the viability of the vindication-of-statutory-rights theory when the plaintiff has raised federal claims. So far, my colleagues and I have won this fight in the Ninth Circuit in Coneff v. AT&T Corp. (pdf), 673 F.3d 1155 (9th Cir. 2012). The Second Circuit came to a different conclusion in In re American Express Merchants Litigation, 667 F.3d 204 (2d Cir. 2012) (pdf). (We’ve previously reported (pdf) on the Second Circuit’s decision and its denial of a petition for rehearing en banc.) But virtually all courts have rejected the notion that the vindication-of-statutory-rights theory has any validity when the plaintiff raises only state-law claims. The Kentucky Supreme Court joined the club in Schnuerle. See more below the fold.