PayPal has upgraded its class action waiver and arbitration provisions for the mass-arbitration era. The result is one of the most heavily fortified consumer arbitration clauses out there - supercharged to meet the mass arbitration threat that PayPal has faced in recent years.
Before you can file anything, you or PayPal has to mail the other side a completed Notice of Dispute by certified mail, signed with your original handwritten signature and your counsel's if you have one. A 60-day good-faith negotiation window follows, with an optional settlement conference you must personally attend. Completing this is a "condition precedent to initiating arbitration," and a court can enforce it by staying your arbitration and freezing fees.
This from the company that built itself on taking friction out of payments. This is a filter, aimed at mitigating the onrush of thousands of identical demands.
Batching is triggered if 25 or more similar Disputes are brought "by the same or coordinated counsel or are otherwise coordinated." At that point you are in a Mass Arbitration, and a staged bellwether process takes over. In the first stage, if there are 50 or more claims, each side selects 25 to be filed and decided individually by different arbitrators. Everyone else waits. And for every claim left waiting:
JAMS will not assess or demand payment of fees for the remaining Disputes or cases, nor will JAMS administer them.
Mass arbitration used to work as leverage because a few thousand claims hit a company with millions in per-case filing fees long before any merits are reached. PayPal has turned this off. The bellwethers run, a global mediation follows, and if that fails the whole thing repeats. Your own claim, in PayPal's words, "might be delayed and ultimately proceed in court." The pressure that makes mass arbitration work is gone.
The provider changed too. AAA is out and JAMS is in, under the JAMS Streamlined Rules and its Mass Arbitration Procedures. PayPal also pulled two federal-court deterrents into the arbitration itself: Rule 11 certification and sanctions, and Rule 68 cost-shifting after an award.
But by far the most noteworthy aspect of the new PayPal terms is that the gates of this fortress purport to close before the past is even dead. The new agreement "will govern and apply to all Disputes, including all Disputes that arose before the effective date," and it expressly reaches "any filed or pending arbitrations." The new JAMS rules and the batching machinery, applied to arbitrations already on file under the old AAA regime.
The only way out is to close your PayPal account before September 1, or submit an opt-out. The opt-out path is narrow. The window to do so is 30 days after you first accepted the user agreement, even if that was ancient history. For most of us, the window to opt-out closed years ago.
Corporate nature finds a way.
