PayPal Charitable Donation Class Action Heads to Arbitration

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Earlier this week, an Illinois federal judge ordered several charities to pursue their claims against PayPal Inc.’s charitable giving platform in arbitration instead of a class action lawsuit, ruling that they are bound by an arbitration clause they agreed to when they created accounts.

The plaintiffs claim that the PayPal Charitable Giving Fund, which allows individuals to use their PayPal accounts to make donations to charitable organizations, fails to issue payment and receipts to charities in a timely manner–and in some cases fails to deliver the donations at all.

Plaintiff Terry Kass alleges she used the PayPal Charitable Giving Fund to donate to 13 charities in December 2016. According to the PayPal class action lawsuit, the charities did not have a record of her donation.

The plaintiffs allege that charities that do not have PayPal accounts do not receive donations in a timely manner, or fail to receive the donations at all.

When a donor uses PayPal to make a charitable contribution to a charity that does not have a PayPal account, and the charity does not establish a PayPal account to claim the donation within six months, PayPal donates the money without regard to the donor’s wishes, according to the PayPal class action.

When they do receive the donations, the charities do not receive valuable donor information, the PayPal charitable donation class action lawsuit alleges.

PayPal’s motivation in establishing the Charitable Giving Fund was to boost its reputation and to entice charities to set up PayPal accounts when they otherwise would not have done so.

PayPal attempted to force the charitable donation class action lawsuit to arbitration, which would force the plaintiffs to arbitrate their claims individually instead of as a group. The plaintiffs argued that PayPal’s arbitration clause was not valid and that it did not waive their right to pursue a class action lawsuit to resolve their claims.

U.S. District Judge Robert W. Gettleman disagreed with the plaintiffs and found that they were all provided with adequate notice about the arbitration agreement and that they accepted the terms of the agreement when they set up their PayPal accounts. The judge also found that the arbitration clause explicitly states that disputes will be handled in arbitration and not in court.

“Failure of the parties to bargain over the terms of the user agreement, and unequal bargaining power, do not render the arbitration agreement unenforceable,” Judge Gettleman wrote in his opinion.

The plaintiffs also argued that the arbitration clause did not apply to the PayPal Charitable Giving Fund, but the judge ruled that the plaintiffs collectively referred to PayPal and the PayPal Charitable Giving Fund as defendants and lodged the same allegations against them. Therefore, the PayPal Charitable Giving Fund can also force the plaintiffs into arbitration, the judge found.

The plaintiffs are represented by Jay Edelson, Benjamin H. Richman, Christopher L. Dore and Ari J. Scharg of Edelson PC and by Michael H. Moirano and Claire G. Kenny of Moirano Gorman Kenny LLC.

The PayPal Charitable Giving Fund Class Action Lawsuit is Friends for Health: Supporting the North Shore Health Center, et al. v. PayPal Inc., et al., Case No. 1:17-cv-01542, in the U.S. District Court for the Northern District of Illinois.