Few things, again from a person with a long history of MMO development and CS policies:
1) Yes, it's true that the Terms of Service agreement specified no prorated reimbursed for the month in which you get banned, and yes you do agree to that. Yes, this is legal, as long as they don't
continue to charge you for the months after your ban.
2) This doesn't make it binding. Contracts are not absolute, and if you have a good enough lawyer, you can argue that the contract itself is illegally worded, meaning your implicit agreement meant nothing. Terms of Service agreements have been challenged and overturned in court before, although very rarely, and not on this point.
3) This lawsuit is nothing new, and actually quite yawn-inducing. Banned players have tried this exact lawsuit, nearly verbatim, in early MUDs, in Ultima Online, Everquest, Asheron's Call, Everquest II, Anarchy Online, World of Warcraft... etc. Every single time, it's been thrown out of court without a hearing. No federal or state judge has ever bought the notion that these were innocent victims of predatory contracts.