As many people are well aware, Microsoft banned several users (some estimates put the number at over a million) from its XBox Live service a few months ago. They did this by banning the consoles and not the Gamertags. If you want you can buy another 360 and happily resume giving them money on a non-modified console. 
 
There is a law firm named Abington IP investigating the possibility of pursuing a class action law suit against MS for some of the peripheral effects of the banning. I haven't heard anything about the case since November, but being largely ignorant of legal proceedings, I don't know if that means it's dead in the water or not. My understanding is that the firm is looking at the effects of the ban that don't have anything to do with XBox Live, for instance the removed ability to install games to the hard drive. 
 
I was (perhaps incorrectly) under the impression that making changes to a person's 360 wasn't legal, but Microsoft didn't have any problems doing it to possibly a million people. The corporation has definitely demonstrated in the past that it is willing to push the boundaries of the law, as evidenced by the anti-trust ruling against them and the recent MS Word patent ruling. I'm really curious if they actually broke the law in doing what they did. Obviously they can restrict people's access to their service, but it seems to me that they did much more than that.