Limitation of Liability help...

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I was going over the PayPal User Agreement again, and found an exculpatory clause:

Quote:

2.6 Limitation of Liability. IN NO EVENT SHALL WE, OUR PARENT, SUBSIDIARIES, EMPLOYEES OR OUR SUPPLIERS BE LIABLE FOR LOST PROFITS OR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH OUR WEB SITE, OUR SERVICE, OR THIS AGREEMENT (HOWEVER ARISING, INCLUDING NEGLIGENCE). Some states do not allow the exclusion or limitation of incidental or consequential damages so the above limitation or exclusion may not apply to you.

OUR LIABILITY, AND THE LIABILITY OF OUR PARENT, SUBSIDIARIES, EMPLOYEES AND SUPPLIERS, TO YOU OR ANY THIRD PARTIES IN ANY CIRCUMSTANCE IS LIMITED TO THE ACTUAL AMOUNT OF DIRECT DAMAGES.

My question is, does this protect them from wanton or reckless acts? Such as, if PayPal breaches the User Agreement on several occasions, does this clause put up a "wall" for which PayPal may hide behind? What are the odds that this clause would hold up in court, particularly a California court?

There are several things I am looking at:

1) It was an adhesion contract, it was take it or leave it
2) PayPal could be considered a public service, as it has nearly 30 million customers/members
3) The section was found about halfway through the contract, though it is in bold
4) It appears to be an attempt to shield themselves from all liability

It basically looks like they are trying to put up a "wall" to shield themselves from any damages that result from reckless or wanton behavior...

PayPal terminated my account stating I had complaints from buyers, and that I had an unacceptable credit report, neither of which is true. What I find really absurd is the fact that PayPal knew I didn't have complaints, but they were using this as a "default message". I notified my buyers of this, and they were very upset at the fact that PayPal was essentially making up lies about them. I take my business seriously, and the thought of complaints made me feel as though I was the one doing something wrong. As a result, they converted my funds in the account ($1,700) for 180 days. The contract states they may hold the funds for that amount of time to shield them from credit card chargeback risks. The thing is, none of my buyers used credit cards, so there is NO RISK to PayPal. I told the PayPal employee this, and she said they could issue a refund on the risk free funds, and that she would notify the correct department to get things going, and that they would contact me in a few days. After several weeks, nothing happened, and I wrote them an e-mail message telling them about the situation. They just recited the fact that they hold funds for 180 days to prevent chargeback risks....

After getting a response from the Attorney General, PayPal changed their reason to "the items you were selling are considered high-risk" - Let me remind everyone, I was selling desktop computers. A quick search on eBay reveals 8000 such items, with 90% of the auctions accepting PayPal. They also stated that they limited the account because of an "unusual increase in the number of payments received into the account" - Again, the User Agreement gives strict limitations on what valid reasons may be used for account limitation - This is not one of them.

I had a Business Account with PayPal, and was bringing in $500/week through that account... This was my job. The $1,700 that they withheld was all the money that I had, and given that it is in their possession, this limits me from going elsewhere to do business. The loss of profit is a direct result of PayPal's wanton and very reckless behavior, with disregard to others emotional health and economical health. They should not be shielded by such a clause.

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Check out the following case law information on this website:

http://www.wrf.com/publication.cfm?publication_id=12010

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Compare to this case:

LEWIS JORGE CONSTRUCTION MANAGEMENT, INC., Plaintiff and Respondent, v. POMONA UNIFIED SCHOOL DISTRICT et al., Defendants and Appellants.

S112624

SUPREME COURT OF CALIFORNIA

34 Cal. 4th 960;102 P.3d 257;22 Cal. Rptr. 3d 340;2004 Cal. LEXIS 12220;2004 Cal. Daily Op. Service 11267;2004 Daily Journal DAR 15217

December 23, 2004, Filed

http://www.lexisone.com/

(You can subscribe for free to access recent case law.)

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Thanks....

The more I read, the more I am thinking that the limitation of liability will not be enforced. Section 1668 of the California Code also leads me to similar thinking. While that clause in PayPal's agreement may limit general negligence such as the occasional computer glitch (on their website), it probably doesn't protect them from tort claims or wanton negligence. I am still unsure about general breach of contract though, and what about a tort arising from a contract, such as conversion? PayPal's breach of contract lead to the tort of conversion, would that be struck down if it's found that PayPal isn't liable for breach of contract cases?

Similarly, I am thinking about adding a claim for "wanton negligence". This is defined as:

Quote:

Wanton is often used in conjunction with willful in settings standards of liability. Willful or wanton conduct implies knowledge and consciousness that injury will result from the act done.Willful and wanton negligence is action undertaken in conscious disregard of another's rights or with reckless indifference to consequences with the defendant aware, from his knowledge of existing circumstances and conditions, that his conduct probably would cause injury to another.

PayPal fails to pre-screen members who apply for a Business Account, and it states right on the website that a Business Account is for individuals or companies who plan on doing a high volume of transactions. When I ask PayPal regarding pre-screening, and state that it could alleviate alot of customer's financial injuries, PayPal states that they just chose not to do business in that manor. PayPal is well aware that persons with "unacceptable" credit gain access to the Business Account, yet they fail to prevent this from happening. As such, when those users register and attain a balance within their account, PayPal can limit/terminate the account based upon a credit check, leaving the member financially injured/deprived of their funds for 180 days. Nearly 99% of other online merchants perform credit checks and background checks PRIOR to allowing potential customers/members access to the service. PayPal, being the corporation that it is, has a right to choose how to do their business, but when their business injures a customer, financially and/or emotionally, that said business has an obligation to fix things to prevent such from happening.

Even if it is found that my credit was "unacceptable", the fact that PayPal is holding my funds in excess (breaching the injunctive relief) still warrants a case. And, the wanton negligence could play a role as well, as I sincerely believe that they had an obligation to check my credit prior to allowing me access. They put me under the impression that my credit wasn't "unacceptable" - They granted me access to the debit card service and allowed me to register as a business, as well as send me a few credit card offers - All of which lead me to believe my account was in good standing, and not in jeopardy of getting terminated. I mean, my credit report only has one credit card on it, but it states that I "pay as agreed", and there are no negative strikes on it that would have lead me, or any reasonable person, to believe that my credit was bad.

Also, something real quick... When the court orders an injunction on behalf of a plaintiff, is that considered an injunctive relief? The Business and Professions Code 17207 states this:

Quote:

17207. (a) Any person who intentionally violates any injunction
prohibiting unfair competition issued pursuant to Section 17203 shall
be liable for a civil penalty not to exceed six thousand dollars
($6,000) for each violation. Where the conduct constituting a
violation is of a continuing nature, each day of that conduct is a
separate and distinct violation. In determining the amount of the
civil penalty, the court shall consider all relevant circumstances,
including, but not limited to, the extent of the harm caused by the
conduct constituting a violation, the nature and persistence of that
conduct, the length of time over which the conduct occurred, the
assets, liabilities, and net worth of the person, whether corporate
or individual, and any corrective action taken by the defendant.

Would a violation of an injunction be the same as a violation of the injunctive relief agreement, which the plaintiffs in a previous class action suit put into place? What I mean is; are the two terms interchangable? Now I just need to figure out what they mean by "intentionally violates" (i.e. gross negligence, very reckless behavior, actual intent, etc..).

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I understand you anger with respect to PayPal holding your funds for 180 days. But you're talking about $1700 and you have to choose your battles wisely.

In order to prepare a case against PayPal, you will have to overcome extreme odds, spend hundreds of hours to research and properly apply the law to your facts, draft a complaint that can survive a motion to dismiss, conduct sufficient discovery to bolster your claims sufficiently to survive a motion for summary judgment, prepare for trial, etc., etc., etc.

In the end, you might not win after investing two to three years of your time in a battle over $1700. Choose your battles wisely. Consult with an attorney.

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Debra_Law wrote:

I understand you anger with respect to PayPal holding your funds for 180 days. But you're talking about $1700 and you have to choose your battles wisely.

In order to prepare a case against PayPal, you will have to overcome extreme odds, spend hundreds of hours to research and properly apply the law to your facts, draft a complaint that can survive a motion to dismiss, conduct sufficient discovery to bolster your claims sufficiently to survive a motion for summary judgment, prepare for trial, etc., etc., etc.

In the end, you might not win after investing two to three years of your time in a battle over $1700. Choose your battles wisely. Consult with an attorney.

Hey, don't forget the lost profits :wink:

It's not really about the money for me - It's more about the fact that they continue to operate in an unethical manor, harming people. Even if I didn't win the case, at least I tried and gave it my very best. I just want to see their conduct put into the light, where everyone can see what really happens, and so that people may think/choose wisely when determining whether or not to use that service, and possibly risk their business...

PayPal has had a tendency to try and "pay people off" to drop lawsuits and keep their mouths shut when people win in small claims court against them (one notable case, I know a guy who one a small claims case of only $300... PayPal offered an additional $500 if he agreed to keep his mouth shut about the whole thing - He turned them down).

My only fear is, that I won't be able to do anything with small compensantory damages - That's why I bring up cases like Mathia V. Accor Economy Lodging, where there were almost no compensantory damages, but the conduct warranted punitive damages. The best thing going is probably the injunctive relief violations, and the hefty penalty that goes along with that, since punitive damages often mirror civil fines/sanctions.

I am trying to get the best and most unbiased view I can get on this situation, but since it happened to me, there is obviously going to be a bias.

I greately appreciate all the help you have given me...

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I have kind of switched routes now... I know a few other people in a very similar situation, and we are going to try and "band together", in hopes of forming a stronger case. I don't know how that will work, if you can list three plaintiffs, or if that has to be a class action suit Question

In one of those situations, PayPal has limited a business account (an account which performs nearly 5,000 transactions) stating that it's "linked" to another account. PayPal states that until that business resolves the issues with that "linked" account, their business account will remain locked.

The truth is, this person/business has no relation to that "other" account... PayPal has also been known to "hold funds hostage" until a "linked account" pays off a debt that it owed to PayPal, even if there is really no "link", as PayPal alleges. Don't know if that's extortion, or what, as I haven't really researched the laws on something like that.

I/we may lose, but at least we're going down while fighting...

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I called and talked to the law firm that handled the first class action case against PayPal. They said the injunvtive agreement was set into action back in October of 2004. I discussed my issues with them, and it does appear that the injunctive agreement was violated. They have set me up with a conference call later this week to discuss things further with the firms other lawyers.

They seem to be very interested, but I hope they don't try to take my case and run with it or something, like turn it into a multi-state class action, where everyone get's like $10.00. I would really like to be compensated for my damaged business.

Also, PayPal released the funds, which interested them as well - Could it be a sign that PayPal has indeed made a mistake, and they're trying to cover their behind?

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