by: Dr. Michael A. S. Guth, Ph.D., J.D.

Consumers who have experienced unfair business practices from eBay and Paypal, e.g., where the companies refuse to live up to their buyer protection programs, may have recourse in a court of law. Typically unsatisfied consumers have bought a product on eBay or pay for it using Paypal only to find that the article is not as represented, is a different color or size than pictured, or arrives in a broken and unusable condition. When the consumer complains to eBay and Paypal and asks for a refund, both of these eBay-owned companies disavow any responsibility owed to the consumer.

This article will present a guide for consumers to prosecute eBay and Paypal for deceptive business practices that harmed them and what they can expect from eBay and Paypal in terms of defenses. At the outset, note that eBay and Paypal have managed to insulate themselves from damages claims through creative wording of their user agreements, which all consumers must agree to accept as a condition for using either eBay or Paypal.

Paypal, Inc., is a subsidiary of eBay, Inc., and the two companies are intertwined for purchasers of goods sold on eBay.com to complete payments to sellers using Paypal.com. The Defendants Paypal, Inc. and eBay, Inc., may be served with process (summons and a complaint) using the long arm statute of the consumer's state. The long arm statute most likely provides for service of out-of-state corporations through the state's Secretary of State. eBay's may be served with process at the following address: eBay Inc.; Attn: Corporate Counsel; 2145 Hamilton Avenue; San Jose, CA 95125.

Upon receiving the consumer's lawsuit, the defendants eBay and Paypal will advise the consumer that his or her user agreements with these two firms require the consumer to file disputes against the firms either with a court in Santa Clara County, CA, or with the National Arbitration Forum. If the consumer does not voluntarily withdraw his suit, then eBay will threaten to seek its lawyer fees to have the case dismissed. At this point, most consumers then drop their suits.

However, the arbitration clauses in the user agreements exclude claims for equitable or declaratory relief. Accordingly, if the consumer files his suit from the outset seeking equitable or declaratory relief, then the eBay user agreement defense will NOT prevent the lawsuit from going forward. With the lawsuit proceeding forward, the consumer can send eBay or Paypal interrogatories to seek discovery. Interrogatories are written questions sent to a party to a lawsuit that must be answered in writing, usually within 30 days. With interrogatories, the consumer can get access to information about the seller, as well as the frequency with which consumers have complained about items being delivered that were materially different from the item pictures on eBay.

The consumer's local state court will have personal jurisdiction over the eBay and Paypal to hear claims for equitable and declaratory relief, because these firms have established substantial contacts the consumer's state. The following non-exhaustive list of activities and contacts by the eBay and Paypal in and with the consumer's state make it fair, equitable, and convenient for eBay and Paypal to defend these causes of action in the consumer's state:

(1) The controversy arose out of the consumer's purchase of some item on eBay.com, which was shipped to him or her at the consumer's address, and which arrived damaged and unusable. The funds used to pay for this transaction were drawn from a bank in the consumer's hometown, and payment for this transaction occurred in the consumer's hometown. The contract to purchase the item and pay for shipping was most likely formed in the consumer's hometown.

(2) For more than 10 years, eBay and Paypal have systematically and continuously advertised their services to the consumer and other Internet users in the consumer's state via advertising and electronic mail. Over the years, eBay and Paypal have collected fees on scores of millions of dollars in payments and seller fees from businesses and residents in the consumer's state.

For circumstances in which a seller refuses to take back damaged merchandise and issue a refund, the consumer can seek equitable relief to bar that seller from any and all further transactions on the eBay and Paypal platforms. The consumer can seek declaratory relief that eBay and Paypal's Buyer Protection Plan submission forms are riddled with computer errors and will not allow users to properly submit claims.

The consumer should also seek declaratory relief that eBay and Paypal's fraud violated the state Consumer Protection Act, which thus gives the consumer a statutory right to prosecute eBay and Paypal independent of any breach of contract claim he or she may have related to the user agreement.

The consumer can also challenge in his local state court the validity of the arbitration clause as unconscionable. A claim that the arbitration provision is unconscionable is a matter to be decided by the courts and not the arbitrator, because it specifically challenges the validity of the agreement to arbitrate irrespective of the validity of the whole contract. If the state trial court determines that the arbitration clause is unconscionable, then the consumer will be entitled to pursue monetary damages against eBay and Paypal. However, it is unlikely that a state court will find the arbitration clauses unconscionable, due to the pro-business tilt of the U.S. court system.

For more information and free legal advice for cases against eBay and Paypal, please contact the author through web page http://michaelguth.com/prose.htm