PayPal Adds Class Action Arbitration Waiver To Its Contract

One of the more pernicious trends in consumer law is the increasing use of surreptitious mandatory arbitration clauses by corporations. Unwilling or unable to defend their misdeeds in a court of law, many companies have added arbitration clauses in consumer contracts following the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), in which the Supreme Court struck down a state law prohibiting such clauses.

Even more disappointing is the recent trend by Internet companies who are trying to change the terms of their bargain with their customers well after it has been consummated. The most recent offender is PayPal, who recently altered the terms and conditions every user “agrees” to when they use the site; those terms now include an arbitration clause with a class action waiver. As written, and assuming any court upholds it, this arbitration clause appears to preclude any future class action suits.

Current members have until December 1, 2012 to opt-out of the arbitration clause, and we encourages all PayPal users to do so. It remains to be seen whether any court will enforce such an ex-post facto arbitration clause that is foisted on consumers with little or no meaningful choice and no commensurate consideration. If you or someone you know has an issue with PayPal that might be appropriate for class action treatment, please contact us to discuss your legal options.