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Sellers Have No Claim Against PayPal Based On 180-Day Buyer Protection Policy—C.A.
By a MetNews Staff Writer
The First District Court of Appeal yesterday affirmed the dismissal of a putative class action against PayPal brought by sellers who claim that policies of the company—including a 180-day period within which buyers can demand their money back—are unconscionable and void.
Justice James Richman of Div. Two wrote the opinion. It affirms a judgment of Alameda Superior Court Judge Winifred Y. Smith.
The complaint brought by Theo Chen and others alleges, that under the “PayPal Buyer Protection Policy,” which it termed “unconscionable,” is violative of the Unfair Competition Law. Under the policy, a buyer has 180 in which to file a protest that the product paid for through PayPal either did not arrive or was “Significantly Not as Described (SNAD).”
It was alleged that the policy is “more than generous” to buyers because “a buyer would know in very short order if he did not receive his purchased item,” adding:
“Furthermore, a buyer would know immediately if he received an item that was significantly not as described in the seller’s listing on the eBay website. The 6 month PayPal return policy allows buyers to have free use of the purchased items for 6 months after which time said buyers could fabricate a story which would allow said buyers to return the merchandise under the 6 month PayPal return policy.”
It notes that “when the item was returned to the seller, the seller would no longer be able to sell the item as a new product.”
Richman remarked:
“[N]othing about the buyer protection policy shocks the conscience. A 180-day period in which to dispute a transaction on the ground that an item was either not received or not significantly as described is not overly harsh, unduly oppressive, or unreasonably favorable to PayPal. In essence, appellants dislike the revised buyer protection policy because the more time a buyer has to initiate a SNAD dispute, the less favorable it is to appellants as sellers.”
He continued:
“But appellants’ dislike of this policy does not make it unconscionable. They argue that the 180-day policy is substantively unconscionable because ‘the buyer would have free use of the item purchased for six months, and when the item was returned to the seller, the seller would no longer be able to sell the item as a new product.’ The same could be said of any retailer’s return policy, but that certainly does not render the policy unconscionable.”
Aiding, Abetting Fraud
The plaintiffs also alleged that PayPal is aiding and abetting the defrauding of sellers because it resolves “almost every case” in favor of the buyer. This, it was pled, enables “a substantial number of unscrupulous buyers” to cheat sellers.
“At best,” Richman wrote, “this amounts to a claim that unscrupulous buyers have found a way to take advantage of PayPal’s allegedly buyer-friendly dispute resolution practices, and that PayPal is aware of this.”
He pointed out that it is not alleged “that PayPal implements its dispute resolution practices in a manner intended to aid buyers in defrauding sellers,” adding:
“Indeed, appellants’ aiding and abetting theory is nonsensical: what would PayPal stand to gain from assisting buyers in defrauding sellers when the fraud is contrary to PayPal’s interest?”
PayPal services funds by taking a percentage of the purchase price.
Breach of Contract
The complaint also alleged a breach of contract. This came in the form, of PayPal invoking a provision in its agreement with sellers by a 21-day hold on funds it collects from buyers where a transaction appears to it to have a high risk.
Richman quoted the California Supreme Court’s 1883 decision in Cox v. McLaughlin as saying that “a party cannot commit a breach of contract by exercising a right secured to him by the contract.”
Rejecting the sellers’ contention that PayPal imposed holds on their funds in bad faith, the jurist noted that their reliability ratings, based on complaints from buyers, had been lowered.
“PayPal is only required to place the holds in good faith,” he said, observing that specific allegations in the complaint as to the ratings being reduced “undermine the general allegation that PayPal acted in bad faith in placing the holds” which “defeats appellants’ breach of contract cause of action.”
Richman declared that a term in the agreement under which PayPal earns interest on funds it is holding “is not overly harsh or unduly oppressive.”
The case is Chen v. PayPal, A158118.
Copyright 2021, Metropolitan News Company