Curtis represents e-commerce retailer in its fight to recover monies withheld by PayPal, the global payment giant

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May 15, 2023, New York – Curtis has filed an application for discovery in the U.S. District Court for the Northern District of California seeking to depose a senior legal counsel of merchant payment processor, PayPal, Inc. The case is Ex Parte Application of DNG FZE, Case No. 5:23-mc-80136 (N.D.Cal.) (filed May 12, 2023).

Curtis filed the application for discovery in the United States on behalf its client, an e-commerce company that sells personal electronic items, that used PayPal for payment processing services for two months during the Covid-19 pandemic in 2020. After processing 17,000 consumer transactions, PayPal abruptly terminated its contract with the online merchant and has refused to release $1.4 million in revenue to the merchant.

The merchant sued PayPal for breach of contract in the General Division of the High Court of the Republic of Singapore in 2021 for failing to release the funds in violation of the User Agreement between the parties. See DNG FZE v. PayPal PTE LTD, (No. HC/S/758/2021). The application for discovery in the U.S. is made under Title 28 United States Code Section 1782, which allows an “interested party” to a foreign proceeding to obtain discovery in the United States for use in the foreign proceeding.

In the Singapore commercial litigation, PayPal submitted three affidavits from a senior legal counsel of its California-based PayPal, Inc. Curtis has sought a Section 1782 discovery order to depose this senior legal counsel of PayPal Inc. (U.S. affiliate) to develop further evidence in support of its claim that PayPal has wrongfully withheld its $1.4 million in revenue.

Lead counsel and Curtis disputes partner, Jason Wright states: “We are proud of DNG FZE, a modern-day David, taking the fight directly to PayPal. Our client is giving a voice to small businesses around the world that have had their funds frozen or seized by PayPal. But, just don’t take my word for it, just look at the other voices. PayPal has a 1.3 star rating on Trustpilot with over 25,000 posted comments by merchants and others who have been harmed by PayPal.”

The Curtis team is led by litigation partner Jason Wright and associate Kaitlyn Devenyns.

The Singapore team is led by Desmond Ong and Terence Hua of Solitaire LLP, an independent Singaporean law firm.

Prior Reported Cases

This civil lawsuit in Singapore appears to be the first reported case against PayPal for wrongfully withholding a merchant’s funds that has not been referred to arbitration.

Last year, a class action complaint was lodged against PayPal, Inc. in the United States District Court of the Northern District of California that sought to redress PayPal’s widespread business practice of unilaterally seizing funds from its clients’ accounts without cause. According to a news article reporting on this case, “[t]he plaintiffs argue PayPal has a widespread business practice of seizing client funds by placing a hold on the clients PayPal accounts as it did to the plaintiffs. Further, the plaintiffs purport that the only reason PayPal has provided for the seizure of funds is an alleged violation of its Acceptable Use Policy.” The case is Evans et al. vs. PayPal, Inc., No. 22-cv-00248-SVK (N.D. Cal., filed Jan. 13, 2022). On February 14, 2023, Evans was reassigned to a different district court judge who was presiding over another case against PayPal, Inc: Cheng v. PayPal, Inc., No. 21-cv3608 (N.D. Cal., filed May 13, 2021). The subject matter of these cases is substantially the same in that they both claim PayPal, Inc. improperly seized its funds after it determined transactions violated the Acceptable Use Policy. In both these cases, PayPal Inc. moved for (and the court granted) an order compelling arbitration.

A lawsuit had also been filed in the Los Angeles Superior Court alleging that PayPal, Inc. withdrew client funds without any notice, citing to the AUP for its authorization. The case is Gary Nezri vs. PayPal, Inc., C.A. No. 22STCV05187 (Los Angeles Superior Court 2022). According to a statement from Mr. Nezri’s lawyer, “[t]his is a corrupt and unconscionable practice by PayPal to first freeze, and then take for its own use, its customers’ funds without notice, reason, or recourse. It is hard to fathom how any of its customers could trust PayPal to safely and securely hold its funds.” The case was removed to federal court on March 30, 2022 and on June 13, 2022 the court granted PayPal, Inc.’s motion to compel arbitration.

PayPal’s pattern and practice of seizing client funds has been reported by various news outlets as well. According to Bloomberg, this “practice has drawn the ire of some well-known users, including Chris Moneymaker, the winner of the 2003 World Series of Poker, who had threatened to sue [on Twitter] after he said PayPal placed a hold on $12,000 of his money.” Apparently less than 10 days after tweeting the tweet, PayPal “mysteriously returned” the money. Other news outlets have reported lawsuits against PayPal for similar conduct stemming back to at least 2010 that resulted in multimillion-dollar settlements between PayPal and its users.