LAND OF LAND, INC. v. PAYPAL, INC.

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

LAND OF LAND, INC.

Plaintiff,

No. 1:22-cv-00261-NLH-EAP

v.

OPINION

PAYPAL, INC.

Defendant.

APPEARANCES

Wolfgang Heimerl, Esq.

Robert J. Kinney, Esq.

Heimerl Law Firm

32 Dumont Road, P.O. Box 964

Far Hills, New Jersey 07931

Attorneys for Plaintiff.

Kelly Lloyd Lankford, Esq.

Dentons U.S. LLP

101 JFK Parkway

Short Hills, New Jersey 07078

Deborah Renner, Esq.

Dentons U.S. LLP

1221 Avenue of The Americas

New York, NY 10020-1089

Attorneys for Defendant.

HILLMAN, District Judge

This matter is presently before the court by way of PayPal,

Inc.’s Motion to Compel Arbitration or in the Alternative, to

Dismiss Plaintiff’s Amended Complaint (ECF No. 15). For the

reasons expressed below, Defendant’s Motion to Compel

Arbitration will be granted.

BACKGROUND

Plaintiff is in the business of buying and selling land

across the United States. (Am. Compl. ¶ 4.) On May 18, 2020,

Plaintiff entered into a User Agreement for the use of

Defendant’s services for Plaintiff’s business-related

transactions. (Am. Compl. ¶ 5.) Within the User Agreement was

an “Agreement to Arbitrate” provision, which read as follows:

Agreement to Arbitrate

You and PayPal agree that any claim or dispute at law

or equity that has arisen or may arise between us will

be resolved in accordance with the Agreement to

Arbitrate provisions set forth below. Please read this

information carefully. Among other things it:

• Affects your rights and will impact how claims

you and we have against each other are resolved.

• Includes a Prohibition of Class and

Representative Actions and Non-Individualized

Relief pursuant to which you agree to waive your

right to participate in a class action lawsuit

against us.

• Requires you to follow the Opt-Out Procedure to

opt-out of the Agreement to Arbitrate by mailing

us a written notice and the opt-out notice must

be postmarked no later than 30 days after the

date you accept this user agreement for the first

time.

If a dispute arises between you and PayPal, acting as

either a buyer or a seller, our goal is to learn about

and address your concerns. If we are unable to do so

to your satisfaction, we aim to provide you with a

neutral and cost effective means of resolving the

dispute quickly. Disputes between you and PayPal

regarding the PayPal services may be reported to

customer service online through the PayPal Help Center

at any time, or by calling (888) 221-1161 from Mon-Fri

5:00 AM to 10:00 PM PT and Sat-Sun 6:00 AM to 8:00 PM

PT.

* * * *

You and PayPal each agree that any and all disputes or

claims that have arisen or may arise between you and

PayPal, including without limitation federal and state

statutory claims, common law claims, and those based

in contract, tort, fraud, misrepresentation or any

other legal theory, shall be resolved exclusively

through final and binding arbitration, rather than in

court, except that you may assert claims in small

claims court, if your claims qualify and so long as

the matter remains in such court and advances only on

an individual (non-class, nonrepresentative) basis.

This Agreement to Arbitrate is intended to be broadly

interpreted. The Federal Arbitration Act governs the

interpretation and enforcement of this Agreement to

Arbitrate.

(ECF No. 15-3 at 48-50) (emphasis added).1

The Opt-Out Procedure provided for in the Agreement to

Arbitrate reads as follows:

Opt-Out Procedure If you are a new PayPal customer,

you can choose to reject this Agreement to Arbitrate

by mailing us a written opt-out notice. The opt-out

notice must be postmarked no later than 30 days after

the date you accept this user agreement for the first

time.

You must mail the opt-out notice to PayPal, Inc.,

Attn: Litigation Department, 2211 North First Street,

San Jose, CA 95131. For your convenience, we are

providing an opt-out notice form you must complete

1 Defendant has attached the User Agreement to its motion. A

court may consider “an undisputedly authentic document that a

defendant attaches as an exhibit to a motion to dismiss if the

plaintiff’s claims are based on the document.” Pension Benefit

Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196

(3d Cir. 1993). The User Agreement further provides “the laws

of the State of Delaware, without regard to principles of

conflict of laws, will govern this user agreement and any claim

or dispute that has arisen or may arise between you and PayPal.”

(ECF No. 15-3 at 58.) Accordingly, this Court will apply

Delaware law.

and mail to opt out of this Agreement to Arbitrate.

You must complete this form by providing all the

information it calls for, including your name,

address, phone number, and the email address(es) used

to log in to the PayPal account(s) to which the opt-

out applies. You must sign the opt-out notice for

it to be effective. This procedure is the only way you

can opt out of the Agreement to Arbitrate. If you opt

out of this Agreement to Arbitrate, all other parts of

the user agreement will continue to apply. Opting out

of this Agreement to Arbitrate has no effect on any

previous, other, or future arbitration agreements

that you may have with us.

(ECF No. 15-3 at 54-55.)

On March 11, 2021, Defendant began limiting Plaintiff’s

ability to send and withdraw money from its account. On May 2,

2021, Defendant ultimately terminated its business relationship

with Plaintiff, stating via email:

After a review, we decided to permanently limit your

account as there was a change in your business model

or your business model was considered risky. This

could be due to how and when items or services were

sold and delivered and your inventory management.

(Am. Compl. ¶ 9.)

At the time Plaintiff’s account was blocked by Defendant,

Plaintiff had a balance of $95,766.50 “available” to it.

(Am. Compl. ¶ 12.) Plaintiff has since been unable to access

any of the balance. (Am. Compl. ¶ 12.)

DISCUSSION

I. Subject Matter Jurisdiction

This matter is before the Court pursuant to 28 U.S.C. §

1332(a)(1) as there is complete diversity between the parties.

Defendant and Plaintiff are both corporations and are citizens

of Delaware and California, and Wyoming and New Jersey,

respectively. (ECF No. 6 at 2.)

II. Standard of Review

The Federal Arbitration Act (FAA) provides that a written

arbitration provision contained in a "contract evidencing a

transaction involving commerce . . . shall be valid, irrevocable

and enforceable, save upon such grounds as exist at law or in

equity for the revocation of any contract." 9 U.S.C. § 2. Under

the FAA, a private arbitration agreement is enforceable if: (1)

a valid arbitration agreement exists between the parties; and

(2) the dispute before it falls within the scope of the

agreement. Flintkote Co. v. Aviva PLC, 769 F.3d 215, 220 (3d

Cir. 2014); see also Johnson v. Ace Cash Express, Inc., C.A. No.

13-1186, 2014 U.S. Dist. LEXIS 100857, at *5 (D. Del. July 24,

2014) (same).

“[C]ourts apply a ‘presumption of arbitrability’ when

construing the scope of arbitration clauses.” Lloyd v. MBNA Am.

Bank, N.A., 27 F. App’x 82, 85 (3d Cir. 2002). Similarly,

Public policy favors the broad enforcement of

arbitration provisions and courts, in deciding the

question of arbitration, should follow the advice that

any doubts concerning the scope of arbitrable issues

must be resolved in favor of arbitration, and once it

is determined that a claim is arbitrable, the Court

may not delve any further into the dispute[.]

Douty v. Nationwide Mut. Ins. Co., Civil Action No. 85-27, 1987

U.S. Dist. LEXIS 4921, at *6 (D. Del. June 4, 1987).

Depending on the circumstances, a court considering a

motion to compel arbitration may apply a motion to dismiss or

motion for summary judgment standard. If, as is the case here,

the face of the Complaint and any documents relied on in the

Complaint clearly show that a party's claim is subject to an

enforceable arbitration clause, the court will use a "Rule

12(b)(6) standard without discovery's delay." Guidotti v. Legal

Helpers Debt Resolution, L.L.C., 716 F.3d 764, 777 (3d Cir.

2013)(cleaned up).

III. Analysis

Plaintiff herein seeks to avoid arbitration by arguing the

arbitration provision contained within the User Agreement

constitutes an unenforceable contract of adhesion. (ECF No. 16

at 4.) Specifically, Plaintiff asserts the provision was not

“bargained for” and is unconscionable. (ECF No. 16 at 4-7.)

It is well established that:

“An adhesion contract is a standardized contract

written entirely by a party with superior bargaining

power, leaving the weaker party in a ‘take-it-or-

leave-it’ position.” Cubic Corp. v. Marty, 185 Cal.

App. 3d 438, 449, 229 Cal. Rptr. 828 (Ct. App. 4th

Dist. 1986). “In the characteristic adhesion contract,

the stronger party has drafted the contract and given

the weaker party no opportunity to negotiate its term

and the weaker party may have no realistic opportunity

to look elsewhere for a more favorable contract, but

must adhere to the standardized agreement.” Id.

However, a contract is not adhesive when the party

claiming adhesion had the requisite experience in

dealing in this type of contract, and was free to walk

away from it and not deal with the other party to the

contract, or was free to bargain for better terms.

Progressive Int'l Corp. v. E.I. du Pont de Nemours &

Co., 2002 Del. Ch. LEXIS 91, 2002 WL 1558382 (July 9,

2002).

Yellow Book United States v. Sullivan, C.A. No. 1999-02-046,

2003 Del. C.P. LEXIS 15, at *15-16 (New Castle C.P. Feb. 20,

2003).

In other words, “contracts are not ones of adhesion [when]

the very terms at issue — the arbitration clauses — were

optional, i.e., they were not presented on a take-it-or-leave-it

basis.” Chassen v. Fid. Nat'l Fin., Inc., 836 F.3d 291, 307 (3d

Cir. 2016). Moreover, “unequal bargaining power is not alone

enough to make an agreement to arbitrate a contract of

adhesion.” Brennan v. CIGNA Corp., 282 F. App’x 132, 136 (3d

Cir. 2008).

Of particular significance to this case, is the fact that

while . . .

Delaware law allows a court to rescind a contract on

the grounds of unconscionability[,] [] the Delaware

Supreme Court has held that mere disparity between the

bargaining power of parties to a contract will not

support a finding of unconscionability. Instead, in

order for a court to find unconscionability, the party

with the superior bargaining power [must have] used it

to take advantage of his weaker counterpart by

drafting terms that are so one-sided as to be

oppressive.

Johnson v. Tele-Cash, Inc., Civil Action No. 99-104, 1999 U.S.

Dist. LEXIS 20653, at *20 n.5 (D. Del. Dec. 29, 1999) (cleaned

up).

“Delaware’s public policy strongly favors arbitration

unless the parties did not contractually agree to arbitrate.”

CLP Toxicology, Inc. v. Casla Bio Holdings LLC, C.A. Nos. 2018-

0783-PRW, 2019-0401-PRW, and C.A. No. N18C-10-332 PRW CCLD, 2021

Del. Ch. LEXIS 131, at *23 (Del. Ch. June 24, 2021). To that

end,

[T]the sole question a court confronted with a valid

arbitration clause should answer is “whether the

parties should be arbitrating at all. . . .” To

determine an arbitration clause’s validity, the Court

starts with the contract’s text. An arbitration

clause is presumptively valid unless it is ambiguous

or does not clearly indicate an intention to

arbitrate. Doubt as to the parties’ intentions,

however, ordinarily is resolved in favor of

arbitration. And if the enforceable arbitration

clause is “broad in scope,” the Court “will defer to

arbitration on any issues that touch on contract

rights or contract performance” “so far as the series

of obligations set forth in the underlying agreement.”

Mikkilineni v. PayPal, Inc., C.A. No. N19C-05-123 PRW CCLD, 2021

Del. Super. LEXIS 499, at *23 (Del. Super. Ct. July 1, 2021)

(cleaned up).

Without any relevant legal authority to support its

position, Plaintiff argues “[e]ven though the Plaintiff did not

exercise its privilege to opt-out, this does not make the

contraction in the Agreement language somehow valid or negate

its inconsistency.” (ECF No. 16 at 7.)

When challenged on this same basis, PayPal’s arbitration

provision has been found to be valid and enforceable by a court

applying Delaware law:

The dispute raised by [Plaintiff]’s opposition is

whether the arbitration agreement is valid and

enforceable. [Plaintiff] argues that the arbitration

agreement is unconscionable under Delaware law and

therefore unenforceable. [Plaintiff] complains that

PayPal, the entity with superior bargaining power,

unilaterally drafted the {User Agreement (“UA”)] and

the arbitration agreement.

* * * *

PayPal says that its UA is an enforceable clickwrap

agreement under Delaware law. PayPal contends that

the individual provisions as not unconscionable,

pointing to Delaware case law rejecting [Plaintiff]'s

arguments that similar provisions in other contracts

are unconscionable.

The Court agrees with PayPal that the arbitration

agreement is valid and enforceable. First, the

arbitration agreement is part of a valid clickwrap

agreement under Delaware law. “A clickwrap agreement

is an online agreement that requires a ‘webpage user

[to] manifest assent to the terms of a contract by

clicking an 'accept' button in order to proceed.’”

Massage Envy Franchising, 2020 Del. Super. LEXIS 3021,

2020 WL 7624620, at *2 (quoting Newell Rubbermaid Inc.

v. Storm, 2014 Del. Ch. LEXIS 45, 2014 WL 1266827, at

*1 (Del. Ch. Mar. 27, 2014)). “Clickwrap agreements

are routinely recognized by courts and are enforceable

under Delaware law” Id. (citing Newell Rubbermaid,

2014 Del. Ch. LEXIS 45, 2014 WL 1266827, at *1). The

agreement here is a clickwrap agreement. To proceed

with creating a PayPal account, [Plaintiff] needed to

(1) check a box indicating that he had “read and

agree[d] to the User Agreement,” and then (2) click a

large blue button labeled “Agree and Create Account.”

[Plaintiff] was required to click two items indicating

his assent to the UA. The UA was thus a presumptively

valid clickwrap agreement containing an arbitration

clause.

A contract provision is unconscionable under Delaware

law only if “no man in his senses and not under

delusion would make [it] on the one hand, and as no

honest or fair man would accept [it], on the other.”

Tulowitzki v. Atlantic Richfield Co., 396 A.2d 956,

960 (Del. 1978). Ignoring the outdated language of

the Delaware test, this formulation has been divided

into procedural unconscionability—the lack of a

meaningful choice—and substantive unconscionability—

unreasonably favorable terms to one party. Progressive

Int'l Corp. v. E.I. Du Pont de Nemours & Co., 2002

Del. Ch. LEXIS 91, 2002 WL 1558382, at *11 n.46 (Del.

Ch. Jul. 9, 2002). It is [Plaintiff]’s burden to

prove unconscionability. Harris v. Green Tree Fin.

Corp., 183 F.3d 173, 181 (3d Cir. 1999).

* * * *

[Plaintiff] [ ]complains that PayPal unilaterally

drafted the UA and has superior bargaining power to

him. But “[u]nequal bargaining power, without more,

is insufficient to hold an arbitration agreement

unconscionable.” Wells v. Merit Life Ins. Co., 671 F.

Supp. 2d 570, 574 (D. Del. 2009); see also Mikkilineni

v. PayPal, Inc., 2021 Del. Super. LEXIS 499, 2021 WL

2763903, at *12 (Del. Super. Ct. Jul. 1, 2021 (“An

otherwise clear intent to arbitrate will not be

invalidated merely because a party did not negotiate

the arbitration provision or participate in its

drafting.”).

* * * *

The arbitration clause is accordingly not procedurally

unconscionable.

Tingyu Cheng v. Paypal, Inc., Case No. 21-cv-03608-BLF, 2022

U.S. Dist. LEXIS 7245, *7-10, 12 (N.D. Cal. Jan. 13, 2022).

Importantly, a “Plaintiff[’s] failure to establish

procedural unconscionability eliminates the need to consider

substantive unconscionability.” Maxwell v. Cellco P’ship, Civil

Action No. 19-152-RGA, 2019 U.S. Dist. LEXIS 188816, at *19 (D.

Del. Oct. 30, 2019).

Plaintiff claims here the contract at issue is

unconscionable because he had no opportunity to “negotiate” its

terms. (ECF No. 16 at 4.) Therefore, as in Cheng, Plaintiff is

making a procedural unconscionability argument. But there is no

procedural unfairness here. By the very terms of the User

Agreement, Plaintiff, a corporation presumably run by an

individual or individual with experience in contract

negotiations and substantial and sophisticated enough to require

the services of internet payment vendor, had the opportunity to

reject the arbitration provision not once – upon signing - but

twice – during the 30 day rejection period. In the language of

the Yellow Book United States case cited above, Plaintiff cannot

assert adhesion “when [it] ... had the requisite experience in

dealing in this type of contract, and was free to walk away from

it and not deal with the other party to the contract, or was

free to bargain for better terms.” Yellow Book United States v.

Sullivan, 2003 Del. C.P. LEXIS 15, at *15-16.

In view of the foregoing precedents, this Court finds

Plaintiff’s argument that the subject Agreement to Arbitrate is

unconscionable to be without merit. See Mikkilineni, 2021 Del.

Super. LEXIS 499 at *24 (“An otherwise clear intent to arbitrate

will not be invalidated merely because a party did not negotiate

the arbitration provision or otherwise participate in its

drafting.”)2 Accordingly, its claims against Defendant for

fraud, unlawful conversion, unjust enrichment, and breach of

contract are not properly before this Court. See Ashe v.

Blenheim Homes, L.P., C. A. No.: 06C-07-204 (CLS), 2007 Del.

Super. LEXIS 500, at *10-11 (Del. Super. Ct. March 12, 2007)

(concluding binding arbitration agreement prohibited court from

assessing the merits of contract, negligence and fraud claims

filed in Superior Court by Plaintiff in an effort to bypass

arbitration proceedings).

CONCLUSION

For the reasons expressed above, Defendant’s Motion to

Compel Arbitration or in the Alternative, to Dismiss Plaintiff’s

Amended Complaint (ECF No. 15) will be granted.3

An appropriate Order will be entered.

Date: 3/21/23 /s/ Noel L. Hillman, J.

At Camden, New Jersey NOEL L. HILLMAN, U.S.D.J.

2 Plaintiff also takes issue with the Limitation of Liability

provision of the Agreement, claiming it is “at odds” with what a

court could award. However, this provision clearly specifies

that it applies only “to the extent permitted by applicable

law.” (ECF No. 16 at 6.) This argument is without merit.

3 In its Response, Plaintiff states “Dismissal of the Plaintiff’s

action should not be ordered until the court has determined that

the arbitration clause itself is valid.” (ECF No. 16 at 7.)

Because this Court has determined the arbitration clause is

valid and neither party requests that the court stay the action

pending arbitration, the case will be dismissed. See Lloyd v.

Hovensa, LLC, 369 F.3d 263, 269 (3d Cir. 2004)(“[T]he plain

language of [9 U.S.C.] § 3 affords a district court no

discretion to dismiss a case where one of the parties applies

for a stay pending arbitration.”) (emphasis added).