Shnayderman v. PayPal, Inc.

Background

Anthony Shnayderman sued PayPal, Inc., alleging that PayPal wrongfully retained funds in his suspended PayPal account. The complaint asserted two breach-of-contract claims, breach of the implied covenant of good faith and fair dealing, trespass to personal property, unjust enrichment, deceptive business practices under New York General Business Law § 349, negligence, and declaratory judgment.

Shnayderman opened his PayPal account on February 17, 2017. He alleged that PayPal froze an account containing roughly $20,000 in 2018, later reinstated the account, and released the funds. He further alleged that PayPal permanently limited the account on July 15, 2021, when it held roughly $130,000. PayPal later stated that the remaining balance would be available by January 10, 2022, but Shnayderman alleged that the funds were not returned. On February 1, 2022, he alleged that PayPal informed him that $89,922.91 had been debited as recovery for liquidated damages arising from alleged violations of PayPal’s Acceptable Use Policy.

PayPal’s Arbitration Agreement

PayPal moved to compel arbitration under the Federal Arbitration Act. It submitted evidence that users had to accept the User Agreement by checking a box before creating an account. The User Agreement in effect when Shnayderman opened his account stated that all disputes or claims between the user and PayPal—including statutory, common-law, contract, tort, fraud, and misrepresentation claims—would be resolved exclusively through final and binding arbitration. The agreement also allowed a new user to opt out by mailing written notice within 30 days of opening the account.

PayPal’s records indicated that Shnayderman opened his account, did not mail an opt-out notice, and used the account until approximately July 2021. The complaint also stated that Shnayderman accepted the User Agreement’s terms and based his contract claims on the User Agreement and Acceptable Use Policy.

The Court’s Analysis

The court first considered whether the parties formed a valid agreement to arbitrate. Applying New York law to contract formation, the court rejected Shnayderman’s argument that the User Agreement’s arbitration provision was not sufficiently noticeable. The provision was labeled “Agreement to Arbitrate,” occupied nearly four pages, and appeared in a document that users accepted through a checkbox and could review through a hyperlink. The court stated that Shnayderman could not avoid the agreement by saying he had not read it.

The court also rejected Shnayderman’s challenge to the declaration of PayPal Legal Specialist Heather Mangiameli. The court found that the declaration showed sufficient reliability and personal knowledge. It concluded that Mangiameli was familiar with PayPal’s recordkeeping system and qualified to authenticate the attached records even though she was not necessarily the records’ custodian.

The court next held that the arbitration provision was broad and covered Shnayderman’s claims. The provision applied to “all disputes” and expressly covered statutory and common-law claims based on contract, tort, or other legal theories. Because Shnayderman’s claims arose from PayPal’s alleged closure of his account and retention of funds, the court found them arbitrable.

Disposition

The court GRANTED PayPal’s motion to compel arbitration. It DISMISSED the case without prejudice because no party had requested that the court stay the case instead. The Clerk of Court was directed to terminate the motion and close the case.