‘Loser Pays’ Provision in Arbitration Agreement is Unconscionable, N.Y. Federal Judge Rules

NEW YORK — A “loser pays” provision in an arbitration agreement is unconscionable and must be severed but it does not render the entire agreement unenforceable, a New York federal judge has ruled in sending a banking fees dispute to arbitration.

On Jan. 30, Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York found the “loser pays” provision is unfair because the risk of the plaintiff paying a large amount of fees "serves as an obvious and onerous deterrent" to her ability to pursue her claims. However, the arbitration agreement is still enforceable …