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In a case where a party argued that an arbitration agreement was unconscionable based on supposedly "high filing fees," the adverse party's payment of those fees rendered the unconscionability argument moot, according to a federal district court in New Jersey.
In Schiano v. MBNA, No. Civ. A. 05-1771(JLL), 2007 WL 2363165 (D. N.J. Aug 14, 2007), Schiano defaulted on two MBNA credit card accounts. MBNA initiated arbitration with the National Arbitration Forum (FORUM) and obtained an award for approximately $35,000. After MBNA filed a court action to enforce the award, MBNA and Schiano reached a settlement on the matter. Pursuant to the settlement agreement, Schiano satisfied the defaulted accounts.
Schiano later sued MBNA and the FORUM, alleging that despite the settlement and subsequent satisfaction, the MBNA accounts still appeared delinquent on his credit report. After dismissing the FORUM on arbitral immunity grounds, the Court granted MBNA's motion to compel arbitration of Schiano's erroneous credit report claims. Schiano then moved to confirm and enforce the original arbitration awards, to ask the court to enter an order declaring the FORUM arbitration fees unconscionable, and, in the alternative, to ask the court to enter a final order as to their claims.
First, the Court rejected Schiano's motion to confirm or enforce the original arbitration award, noting that there was no justiciable controversy before it. Since the award had been settled and satisfied, confirmation or enforcement of that award was moot.
Next, the Court rejected Schiano's motion for a declaration that the FORUM arbitration fees were unconscionable. Schiano alleged an inability to pay the required arbitration fees, but the Court denied the request as moot, since MBNA had already paid the FORUM's requisite filing fee.
Finally, the Court found no legal basis to issue a final order on the erroneous credit report allegations. The Court declared the matter stayed pending the completion of arbitration.
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