The U.S. District Court for the Southern District of New York decided recently Fensterstock v. Education Finance Partners, Inc., No. 08-CV-3622, 2009 U.S. Dist. LEXIS 30457 (S.D.N.Y. 2009). Plaintiff Fensterstock claims, on behalf of a class, that defendants Education Finance Partners (“EFP”) and Affiliated Computer Services (“ACS”) improperly applied an undisclosed fee to his law student loans. EFP and ACS filed a motion to compel arbitration, on the basis of the arbitration clause found in the Promissory Note. The court, pursuant to a choice-of-law clause, applied California law to determine whether the arbitration provision is unconscionable. Citing Discover Bank v. Superior Court, 113 P.3d 1100 (2005), the court set out a three prong test to decide when an arbitration clause requires a consumer to waive the right to bring claims on behalf of a class, that waiver is unconscionable: The waiver is found in a contract of adhesion. In a setting in which disputes between the contracting parties predictability involve small amounts of damages. It is alleged that the party with the superior bargaining party has carried out a scheme to deliberately cheat large number of consumers out of individually small sums of money. The court concluded that the arbitration clause is unconscionable under California law, thus, leaving an open door for a class action suit against the student loan providers EFP and ACS. Related Posts: Federal Court Bars Arbitration Over Student Loan Terms, Mark Hamblett, New York Law Journal. Houston Lawyer Loses License Because of Failure to Pay Debts, Debra Cassens Weiss, ABA Journal. Technorati Tags: law, arbitration, ADR

Last week, a Rhode Island federal court ordered Microsoft Corp. to pay $388 million to Uniloc USA Inc. for willful infringement of software patents. Uniloc USA Inc., et al. v. Microsoft Corp., No. 03-440, (D. R.I. 2009). The verdict is said to be one of the largest patent infringement jury awards in U.S. history. Related Posts: Oh Microsoft, Microsoft , Moderation Please: Rhode Island Seemingly Applies Frye in Microsoft Patent Infringement Trial, Colin Miller, EvidenceProf Blog. Will Microsoft’s Latest IP Loss Stick?, Zusha Elinson and Alison Frankel, Incisive Media. Microsoft Gets Slammed in Yet Another Patent Suit, Ashby Jones, Wall Street Journal. Technorati Tags: law, Uniloc v. Microsoft, software patent infringement

Today, the Second Circuit decided ReliaStar Life Ins. Co, of N.Y. v. EMC Nat’l Life Co., No. 07-0828 (2nd Cir. Apr. 9, 2009). The court held that inclusion in an arbitration agreement of a broad statement that each party will bear the expenses of its own arbitrator and attorney’s fees does not deprive the arbitration panel of authority to award those expenses as a sanction against a party whom the panel determines failed to arbitrate in “good faith.” The court explained that an arbitrators’ finding of bad faith gives rise to an exception to the general rule that each party bears their own expenses. Thus, the arbitration panel did not exceed its authority in awarding attorney’s and arbitrator’s fees. Technorati Tags: arbitration, ADR, law, Second Circuit, attorney’s fees, arbitrator’s fees

As the U.S. Supreme Court and consumer studies on arbitration praise the benefits of arbitration, the 111st Congress is advancing a bill that would ban arbitration in consumer mortgage contracts. H.R. 1728 proposed by Rep. Miller (D- NC), titled the “Mortgage Reform and Anti-Predatory Lending Act of 2009,” would Amend the Truth in Lending Act of 1968. The bill provides, among other things, that “[n]o residential mortgage loan and no extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer, other than a reverse mortgage may include terms which require arbitration of any other nonjudicial procedure as the method for resolving any controversy.” Status: Referred to the house Committee on Financial Services on 03/26/2009. See related posts: Plaintiffs Bar Pushes Capitol Hill Agenda (Mar. 31, 2009) by David Ingram, Legal Times. Conversations about Studies Regarding Arbitration (Apr. 1, 2009), National Arbitration Forum Blog. Consumers Won More than Half of Arbitrations Studied (Mar. 12, 2009) by Debra Cassens Weiss, ABA Journal. Technorati Tags: arbitration, ADR, law, legislation, consumer, Mortgage Reform and Anti-Predatory Lending Act of 2009, Truth in Lending Act of 1968