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CRAIG COMB and ROBERTA TOHER, on behalf of themselves and all others
similarly situated and on behalf of the general public of the United States, Plaintiffs,
v. PAYPAL, INC., Defendant. JEFFREY RESNICK, on behalf of himself and all
others similarly situated and on behalf of the general public of the United States,
Plaintiffs, v. PAYPAL, INC., Defendant.
Case Number C-02-1227 JF (PVT), C-02-2777 JF (PVT), [Docket No. 23, 5]
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
CALIFORNIA, SAN JOSE DIVISION
; 2002 U.S. Dist. LEXIS 16364
August 30, 2002, Decided
Motions to compel individual arbitration DENIED.
Plaintiffs, consumers, sought injunctive relief and related remedies on behalf of a
purported nationwide class for alleged violations of state and federal law by defendant internet transaction-payment
service. The service moved to compel individual arbitration pursuant to the arbitration clause contained in its standard
user agreement and the Federal Arbitration Act (FAA), 9 U.S.C.S. § 1 et seq.
One of the consumer's claims were not subject to arbitration because he had not entered a user
agreement with the service. Other consumers argued that even if they did enter into the user agreement, the contract and
in particular its arbitration clause were unconscionable. The court held that it satisfied the criteria for procedural
unconscionability under California law, since the average transaction was $ 55.00, most customers were unsophisticated
private individuals, and there was at least a factual dispute whether competitors' services required customers to enter
into arbitration agreements. The court questioned the agreement's mutuality, the practical effects of the arbitration
clause with respect to consolidation of claims, the costs of arbitration, and venue. The service unilaterally froze
customer accounts and retained funds that it alone determined were subject to dispute without notice, under the
agreement. The arbitration clause expressly prohibited consolidating claims. The service seemed to try to insulate itself
contractually from any meaningful challenge to its alleged practices. The court held the arbitration clause was also
The motions to compel individual arbitration were denied.
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