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Litigation Over PayPal Holds Languishes in Court

A pair of cases involving multiple sellers suing over PayPal’s policy of holding funds continue to linger in a California court, the march toward settlement slowed by dubious attorney conduct, mutual assertions of negotiating in bad faith from the litigants, and the emergence of new plaintiffs seeking to intervene in the actions.

The class-action cases – Fernando vs. eBay and Zepeda vs. PayPal – both date to 2010, each involving a group of sellers who brought various allegations against the payment provider and its parent company for holding sellers’ funds for up to 180 days or longer. The Fernando plaintiffs have argued that the policy is fraudulent and in violation of PayPal’s user agreement, among other allegations. The allegations in the Zepeda case include breach of contract, breach of fiduciary duty and violation of California statute.

PayPal had told EcommerceBytes in a November 2011 statement that the company had in place a holds policy for the benefit of consumers, though it declined to comment specifically on the litigation.

The parties in both the Zepeda and Fernando cases had appeared to be nearing a resolution with PayPal and eBay in 2011, though the agreement broke down after a dispute over the scope of the settlement.

“This case has a long and tortured history,” California District Judge Saundra Brown Armstrong wrote in a May 2013 order denying several motions brought by the Fernando plaintiffs. “Initially, it appeared that the parties had reached a global settlement in both this and the Zepeda action. However, disagreements over the settlement terms led to each side accusing the other of reneging on their agreement.”

But after the initial breakdown, the cases seemed like they might be again headed toward a settlement in early 2013. The previous November, Armstrong had ordered all parties in the case to participate in a mandatory settlement conference before a magistrate judge, Nathanial Cousins. That proceeding began on Feb. 7, and was slated to reconvene the following day. But one of the attorneys for the Fernando plaintiffs, Marina Trubitsky, did not show up. In response, Cousins issued an order to show cause asking her and the plaintiffs to explain why the case should not be dismissed and why they should not be held liable for civil action and responsible for the other participants’ attorneys’ fees and other expenses.

Trubitsky and other attorneys involved in the cases did not respond to requests for comment for this report.

Further complicating matters, the previous March, Trubitsky had brought a separate lawsuit against eBay, representing Dennis Dunkel and Cy Stapleton, who had alleged that eBay had improperly suspended their accounts, amounting to breach of contract, among other claims. Additional plaintiffs later joined that case in a series of amended complaints. This November 27, 2012 order from Judge Armstrong provides some background on the complexities of these cases.

Last January, U.S. District Judge Edward Davila granted eBay’s motion to dismiss the Dunkel case, in the same order rejecting plaintiffs’ request for leave to amend their complaint. In that order, Davila left room for the plaintiffs to amend several of their claims individually, however.

In a separate order from May 2013, Armstrong denied a motion for another seller who has been seeking to intervene in the Zepeda case, adding to the voluminous dockets of the Fernando and Zepeda proceedings.

In the meantime, the Zepeda and Fernando cases remain pending before Judge Armstrong.

Kenneth Corbin on Linkedin
Kenneth Corbin
Kenneth Corbin
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn.