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The Second U.S. Circuit Court of Appeals held a class arbitration waiver in a law student loan contract was unconscionable under California law, and invalidated the arbitration agreement.

But in light of an April U.S. Supreme Court decision, the panel noted that it could not authorize the plaintiff, a practicing attorney who filed suit over misallocation of his student loan payments, to proceed with a class arbitration.

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Posted in: Clauses
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The U.S. Supreme Court, in a 5-4 opinion today by Associate Justice Antonin Scalia, ruled that an enforceability challenge to an agreement to arbitrate under the Federal Arbitration Act (9 U.S.C. § 1, et seq.) must be specific before a district court can hear the dispute.

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The scenario is all too familiar. The deal is done, the contract is signed, and no sooner than the ink is dry, the fighting starts. Disagreements begin innocently enough. A simple misunderstanding starts with little more than a few testy emails. Tensions escalate. Meetings are called, but nothing is resolved. Both sides bring in their litigators. Everything begins to dissolve, except of course, for the costs of litigation.

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AIG, former CEO Maurice R. Greenberg, and former CFO Howard I. Smith agree to arbitrate a chunk of the claims involved in the fight over liability over accounting irregularities that led in part to a government bailout of the insurer. 

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