Plaintiff Joshua Fensterstock brings this claim on behalf of a class, alleging that defendants Education Finance Partners ("EFP") and Affiliated Computer Systems ("ACS") improperly apply an undisclosed fee to his student loan.
Shortly after the case was filed in 2008, defendants moved to compel arbitration and to stay the action pending the outcome of arbitration. In 2009, the court denied defendants' motion on the ground that the arbitration agreement was unconscionable under California law, which applies to this case pursuant to a choice-of-law provision. In coming to this conclusion, the court relied on Discover Bank v. Superior Court and its progeny. ACS appealed. The Second Circuit affirmed this court's decision, and ACS appealed to the Supreme Court. In 2011, the Supreme Court decided the case of AT&T Mobility LLC v. Concepcion, which overturned Discover Bank. In accordance with that opinion, the Supreme Court vacated the judgment in this case and remanded it for further consideration.
On remand, ACS again moves to compel arbitration and to stay the proceedings in this court pending the outcome of that arbitration. Plaintiff opposes the motion on the ground that ACS lacks standing to compel arbitration and that the arbitration clause is unconscionable.
The court grants the motion to compel arbitration and the motion to stay this action pending the outcome of that proceeding.
The following facts are taking from the complaint and from the parties' submissions on the motion to compel arbitration. For the purposes of the current motion, they are presumed to be true.
Plaintiff is an attorney who graduated from law school in 2003. EFP is a California corporation headquartered in California, specializing in private student loans and was the original holder of plaintiff's consolidated loan.*fn1 ACS is a corporation that services loans, including loans of EFP.
The agreement between EFP and ACS provides that ACS's offices in Utica, New York, would provide the following services, among others, to EFP with respect to consolidation loans: loan origination, loan servicing, billing of loan payments, receipt of loan payments, processing of loan payments, including the application of payments to interest and principal, and communications with borrowers.
In or about June 2006, plaintiff received a solicitation from EFP regarding private consolidation loans. The solicitation did not reference ACS. On or about August 8, 2006, plaintiff executed a Loan and Promissory Note (the "Note") for a consolidation loan from EFP. When plaintiff applied for his loan and signed the Note, he sent the application and the Note to ACS, which then processed his application and originated his loan.*fn2 However, ACS is not a party to the Note.
Pursuant to the Note, plaintiff received a consolidation loan in the amount of $52,915.49 with a fixed interest rate of 9.32%. Over the nearly thirty-year repayment period of the loan, plaintiff would be required to make 348 monthly payments of $440.74, for a total of approximately $153,377.52, with one final payment of $361.92 to be made in the year 2035.
On August 29, 2006, ACS sent Fensterstock details about his loan and advised him that ACS would be servicing the loan on EFP's behalf; ACS notified plaintiff that ACS "provides a Student Loan Billing Service to [EFP]," and would be "working with" EFP and plaintiff as plaintiff repays his loan. The notification provided plaintiff with his account information and advised him to remit payment to ACS at the address indicated and to contact ACS if he had any questions.
Beginning on October 14, 2006, and through the present, plaintiff has made timely payments on his loan and has not been charged any late fee nor declared in default under the terms of the Note.
On August 27, 2007, plaintiff sent a letter to ACS, asking to see the legal documentation governing ACS's relationship with EFP and asking whether ACS was a legal Holder of the Note. In response, ACS ...