IF YOU OPENED A PAYPAL ACCOUNT BETWEEN OCTOBER 1999 AND JANUARY 2004,
YOU MAY BE ENTITLED TO A PAYMENT FROM A CLASS ACTION SETTLEMENT.
PLEASE READ THIS NOTICE CAREFULLY.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
In re PayPal litigation
Case No. CV-02-01227-JF (PVT)
NOTICE OF PENDENCY OF CLASS ACTION AND PROPOSED
SETTLEMENT
1. WHY DID I GET THIS NOTICE?
You have been sent this Notice because the records of PayPal, Inc.
indicate you are a current or former PayPal account holder. This means
you may be eligible to receive a payment from the proposed class action
settlement in the lawsuit In re PayPal Litigation, Case No. 02 1227 JF
PVT, pending in the United States District Court for the Northern
District of California in San Jose. This Notice provides a summary of
the terms of the proposed settlement. It also explains the lawsuit, your
legal rights under the settlement, what benefits are available to you
under the settlement, and how to get them.
2. WHAT IS A CLASS ACTION?
In a class action, one or more people, called Class Representatives (in
this case Roberta Toher and Jeffrey Resnick), sue on behalf of people
who have similar claims. All of these people are members of the Class.
One court resolves the issues for all Class Members, except for those
who exclude themselves from the Class. United States District Judge
Jeremy Fogel is in charge of this class action.
3. WHAT IS THIS LAWSUIT ABOUT?
In early 2002, Plaintiffs Roberta Toher and Jeffrey Resnick filed
separate lawsuits against PayPal, Inc. These two cases were later
consolidated into one lawsuit in the United States District Court for
the Northern District of California, San Jose Division, entitled In re
PayPal Litigation, Case No. CV 02 01227-JF (PVT). The lawsuit alleges
that PayPal violated the federal Electronic Fund Transfer Act
("EFTA"), 15 U.S.C. §§ 1693 et seq., including provisions
requiring PayPal to supply customers with information about dispute
resolution procedures and to follow certain procedures when
investigating complaints of unauthorized or incorrect electronic fund
transfers. For example, the lawsuit claims that PayPal did not provide
account statements in the manner required by the EFTA. The lawsuit
further alleges that PayPal has placed inappropriate restrictions or
other limits on customers' accounts and engaged in other improper
practices. Based on these practices, the lawsuit asserts claims under
California state law for conversion, money had and received, negligence,
and violations of consumer protection statutes.
PayPal does not believe that it did anything wrong. In
fact, PayPal disputes that the EFTA, originally passed in 1978, applies
to its business. PayPal denies any and all liability for the claims
alleged in the lawsuit. The Court did not decide in favor of the
Plaintiffs or PayPal. Instead, beginning in the fall of 2003, the
parties began a series of settlement negotiation sessions mediated by
United States Magistrate Judge Edward Infante. Eventually, in November
2003, both sides agreed to a settlement in principle. By settling their
claims, both parties avoided the uncertainty and cost of a trial. The
settlement provides money and other benefits to the Class. On June 11,
2004, the parties entered into a formal, written Settlement Agreement,
which is on file with the Court and available on the Internet at
https://www.paypal.com/settlement/. By entering into the Settlement
Agreement, PayPal is not admitting any wrongdoing. PayPal continues to
believe that it did not do anything wrong. The Representative Plaintiffs
and the attorneys appointed by the Court to represent the Class believe
that the settlement is fair to Class Members. By this notice, the Court
is not expressing any view on the merits of the lawsuit.
4. HOW DO I KNOW IF I AM PART OF THE SETTLEMENT?
On July 12, 2004, Judge Fogel entered an order granting preliminary
approval of the settlement and certifying the following class for
purposes of the settlement: All Persons who opened a PayPal account
during the period from October 1, 1999 through January 31, 2004.
Excluded from the class are any judicial officer to whom the lawsuit is
assigned; PayPal and any of its affiliates; any current or former
employee, officer, or director of PayPal; anyone who resides in Austria,
Belgium, Denmark, Germany, Greece, Finland, France, Ireland, Italy,
Luxembourg, Portugal, Spain, Sweden, The Netherlands, or United Kingdom;
and all persons who timely and validly request exclusion from the class
pursuant to this notice.
Thus, if you opened a PayPal account between October
1, 1999 and January 31, 2004, and are not one of the excluded persons
listed above, you are a member of the class.
5. WHO REPRESENTS ME IN THIS CASE?
To represent the class, the Court has appointed Plaintiffs Roberta Toher
and Jeffrey Resnick as Representative Plaintiffs and their counsel of
record as Class Counsel. The Court has also appointed the following
attorneys and law firms as Co-Lead Counsel:
A. J. De Bartolomeo
Girard Gibbs & De Bartolomeo LLP
601 California Street, Suite 1400
San Francisco, California 94108
Robert C. Finkel
Wolf Popper LLP
845 Third Avenue
New York, New York 10022
6. WHAT DOES THE SETTLEMENT PROVIDE?
A. Injunctive Relief
The settlement requires that PayPal consent to the entry of an order,
called an injunction, that mandates various changes to PayPal's business
practices. PayPal has already implemented these changes. The injunction
includes PayPal's agreement to comply with certain notice and error
resolution procedures of the EFTA, and to follow certain procedures for
limiting accounts and responding to and returning funds to customers
whose accounts have been limited. A copy of this injunction can be found
as Exhibit D to the Settlement Agreement, entitled "Form of
Injunctive Order."
B. Monetary Relief
Under the settlement, PayPal will pay $9.25 million into a settlement
fund, to be held in an interest-bearing account. The fund will be used
(1) to make payments to class members who submit valid claims before the
claims deadline; (2) to pay certain costs of giving notice to the Class
and of settlement administration, as approved by the Court; and (3) to
pay attorneys' fees and expenses to Class Counsel in the amount awarded
by the Court. Class Counsel have proposed that, after deduction of
notice and administrative costs and Class Counsel's attorneys' fees and
expenses, the balance of the fund ("Net Settlement Fund") be
applied in accordance with a written plan of allocation. (The following
explanation is qualified in its entirety by reference to the Plan of
Allocation attached to the Settlement Agreement as Exhibit C, a copy of
which is on file with the Court and available on the Internet at
https://www.paypal.com/settlement/.)
1. Certain Definitions
Certain capitalized words are used in this part of the Notice to
describe the way in which the Net Settlement Fund will be allocated.
These capitalized words have the following meanings:
(a) "Released Persons" means PayPal and its past and present
partners, affiliates, predecessors, successors, assigns, parents,
subsidiaries, officers, directors, attorneys, and employees.
(b) "Fund Claimants" are class members who
submit timely, valid claims in accordance with the procedures described
in this notice.
(c) "Dispute Resolution Claimants" are Fund
Claimants who contend that, prior to February 1, 2004, they:
(i) experienced or reported to PayPal an unauthorized
or incorrect electronic transfer to or from their PayPal account
including, without limitation, electronic transfers initiated by (a) the
Fund Claimant; (b) PayPal in connection with, among other things,
chargebacks, refunds, buyer complaints, PayPal's Seller Protection
Policy, Buyer Complaint Process and/or Buyer Protection Policy; or (c)
any third party;
(ii) had access to their PayPal account improperly,
incorrectly or erroneously limited or restricted, in whole or in part;
(iii) made a request for information in connection
with PayPal's restriction or limitation of the Fund Claimant's PayPal
account or regarding an incorrect or unauthorized electronic transfer to
which PayPal did not respond at all or did not respond to the Fund
Claimant's satisfaction.
(d) "Statutory Damage Fund Claimants" are all Fund Claimants
who are not Dispute Resolution Claimants.
2. Statutory Damage Fund Claimants
The plan of allocation designates $1 million of the Net Settlement Fund
to a "Statutory Damage Fund," to be distributed equally among
all Fund Claimants who are not Dispute Resolution Claimants. This means
that if you are a member of the Class and do not fall within the
definition of a "Dispute Resolution Claimant," as set out
above, you can make a claim for a payment from the Statutory Damage
Fund. The Statutory Damage Fund provides compensation for potential
statutory damages under the Electronic Fund Transfer Act
("EFTA"), 15 U.S.C. §§ 1693 et seq. Statutory damages under
the EFTA are limited by law to no more than $500,000 for any class of
individuals claiming "the same failure to comply." Plaintiffs'
counsel contended in the litigation and for purposes of settlement that
PayPal was potentially liable for multiple failures to comply, a
position PayPal vigorously opposed.
The Statutory Damage Fund Claim Form requires you to
provide certain identifying information and sign a statement under
penalty of perjury authenticating your claim, which may be subject to
verification by PayPal's records. To make a claim for payment from this
fund, please complete and submit the Statutory Damage Fund Claim Form
available on the Internet at https://www.paypal.com/settlement/ in
accordance with the instructions on the form.
3. Dispute Resolution Claimants
The balance of the Net Settlement Fund will be allocated for
distribution to Dispute Resolution Claimants. If you fall within the
definition of a "Dispute Resolution Claimant," as set out
above, you have the right to make a Dispute Resolution Claim. You can
choose to submit either the Short Claim Form or the Long Claim Form
available on the Internet at https://www.paypal.com/settlement/. If the
Court awards attorneys' fees and costs in the amount requested, Class
Counsel estimate that there will be approximately $4.3 million to pay
the claims of Dispute Resolution Claimants. Half of the money allocated
to Dispute Resolution Claimants will be allocated to pay Short Form
Claimants (the "Short Form Fund"). The other half will be
allocated to pay Long Form Claimants (the "Long Form Fund").
a. Short Form Claimants
The Short Claim Form requires you to provide certain identifying
information and sign a statement under penalty of perjury, which may be
verified using PayPal's records, that you experienced an unauthorized or
incorrect electronic transfer or an account limitation or denial of
access to your account. If you make a timely, valid claim using the
Short Claim Form, you will receive a payment of $50, unless the amount
needed to pay all of the Short Form claims exceeds the Short Form Fund.
In that case, the Short Form Fund will be divided equally among all
Short Form Claimants. If the amount needed to pay all of the Short Form
claims is less than the amount of the Short Form Fund, the money left
over will be added to the Long Form Fund.
b. Long Form Claimants
The Long Claim Form requires you to provide certain identifying
information; give the details of the account restriction(s) and/or
unauthorized electronic fund transfer(s) you experienced; state the
amount of your claim, and sign a statement, under penalty of perjury,
which may be subject to verification by PayPal's records, that you
actually suffered the claimed damages. You should also provide any
documentation you have that will support your claim, as explained in
more detail on the Long Form.
If you make a timely, valid claim using the Long Claim
Form, an independent, court-approved claims administrator will evaluate
your claim and determine the amount you should receive. In making this
determination, the claims administrator will take into account the
amount of damages you claim; the nature of your complaint; the quality
of the supporting documentation you provide; your recoverable damages;
the probability that you would be successful on your complaint; and such
other factors that the claims administrator considers relevant. If the
amount needed to pay all of the Long Form claims is less than the amount
of the Long Form Fund, the money left over will be added to the Short
Form Fund.
c. Balance after payment of Long Form and Short Form
Claimants
If there are sufficient funds to pay all Short Form and Long Form
Claimants in full in accordance with the written plan of allocation, any
remaining funds will be divided equally among all Dispute Resolution
Claimants to supplement their recoveries.
7. HOW DO I MAKE A CLAIM AND GET A PAYMENT?
To make a claim for payment, please complete one of the claim forms
(Statutory Damage Claim Form, Short Claim Form, or Long Claim Form)
available on the Internet at https://www.paypal.com/settlement/. To make
a valid claim, you will need to (1) fill out the claim form
electronically and (2) print the signature page of your claim form, sign
it and return it by mail to the address provided on the claim form. You
must complete the claims procedure no later than October 23, 2004. Your
payment will be transferred electronically to your PayPal account. If
you do not have a current, unrestricted PayPal account or you indicate
on the claim form that you prefer to receive a check, payment will be
made in the form of a check, sent by first class mail to the address
provided on the claim form. If you are paid by check, a $1.00 charge
will be deducted from your payment to cover the cost of issuing and
mailing the check. The claims administrator will not issue checks for
less than $1.00. Such amounts will instead be reallocated to those
claimants who are entitled to receive distributions.
8. WHAT AM I GIVING UP IF I PARTICIPATE IN THE
SETTLEMENT?
If you do not exclude yourself from the class and the settlement is
granted final approval, the judgment entered upon approval of the
settlement will dismiss the lawsuit with prejudice, and will release any
and all claims, demands, rights, liabilities, and causes of action of
every nature and description whatsoever, known or unknown, matured or
unmatured, at law or in equity, existing under federal or state law,
that were or could have been asserted in the Litigation against the
Released Persons, including without limitation, claims under the
Electronic Fund Transfer Act, California Business and Professions Code
§§ 17200 et seq.; the California Consumers Legal Remedies Act, Cal.
Civ. Code §§ 1750 et seq.; and for PayPal's alleged conversion, breach
of the User Agreement or other contract, money had and received, unjust
enrichment, and negligence under California law or any other state or
federal law arising out of, among other things, PayPal's restriction or
limitation of accounts; PayPal's dispute resolution policies, practices
and procedures; PayPal's debit of accounts following the receipt of
chargebacks, buyer complaints, reports of unauthorized access or in
connection with its Seller Protection Policy, Buyer Complaint Process or
Buyer Protection Policy; PayPal's alleged conversion of funds; and
PayPal's compliance with the Electronic Fund Transfer Act, 15 U.S.C.
§§ 1693 et seq., or any similar legislation arising under the laws of
any state. You will be permanently barred from bringing any such claims
that arose prior to February 1, 2004. With regard to accounts that were
limited prior to February 1, 2004, however, you will not be releasing
claims to recover any balance that remained in the account 180 days
after the account was initially limited.
In summary, if you do not exclude yourself, you will
not be able to sue, continue to sue, or be part of another lawsuit
against PayPal relating to the legal issues in this case. You will be
bound by all proceedings, orders, and judgments entered in connection
with the settlement, whether favorable or unfavorable, and will be
represented by the Representative Plaintiffs and Class Counsel for
purposes of the settlement. If you do not exclude yourself from the
class, and the settlement is granted final approval, your claims against
PayPal and its affiliates will be released as described above. If you
are a class member, you may, if you wish, appear in this lawsuit through
your own attorney at your own expense. You need not do so to participate
in the settlement, however.
9. WHAT IF I WANT TO EXCLUDE MYSELF (OPT-OUT) FROM THE
SETTLEMENT?
If you do not want to remain a member of the class and participate in
the settlement, then you must mail or deliver (email is not considered
adequate), such that it is RECEIVED on or before September 7, 2004, (1)
an original written, signed request for exclusion to Co-Lead Counsel at
the following address:
Co Lead Counsel:
PayPal Class Action Settlement
A. J. De Bartolomeo
Girard Gibbs & De Bartolomeo LLP
601 California Street, Suite 1400
San Francisco, California 94108
and (2) a copy of the written signed request to PayPal's counsel at the
following address:
PayPal's counsel:
PayPal Class Action Settlement
Morgan Lewis & Bockius LLP
One Market
Spear Street Tower
San Francisco, California 94105
This request for exclusion must contain your name and address; be signed
by you; and include the reference "In re PayPal Litigation, Case
No. CV-02-1227-JF (PVT)."
If you exclude yourself from the class, you will not
participate in the settlement and cannot receive any payment from the
settlement. Your claims will not be released.
10. HOW WILL THE LAWYERS FOR THE CLASS BE PAID?
>From the inception of the litigation in early 2002 to the present,
Class Counsel have not received any payment for their services in
prosecuting the case, nor have they been reimbursed for any
out-of-pocket expenses. If the Court approves the proposed settlement,
Class Counsel will make a motion to the Court for an award of attorneys'
fees of up to $3,332,500 and reimbursement of expenses of up to
$135,000, to be paid from the $9.25 million settlement fund. Class
Counsel will also seek reimbursement from the settlement fund on behalf
of certain of the named plaintiffs in the litigation for reimbursement
of their expenses related to their service as class representatives in
the litigation, in an aggregate amount not to exceed $15,000. The motion
will be heard at the settlement hearing described below in Section 11.
Class Counsel's motion for an award of attorneys' fees
and reimbursement of expenses is based on various factors that include
the benefits obtained for the class through litigation. These benefits
include the $9.25 million cash settlement and PayPal's agreement to the
injunctive relief requirements. In addition, certain changes to PayPal's
business practices are attributable in part to this litigation,
including PayPal's decision to undertake to return to its customers
approximately $5.1 million in those accounts to which access was limited
for 180 days or more; modifications to PayPal's arbitration provision in
its User Agreement and its replacement with a clause that limits
PayPal's ability to compel arbitration where the total amount of the
award sought is $10,000 or greater; and various other changes in
PayPal's business practices during the pendency of the litigation.
Class Counsel submitted their proposed request for
attorneys' fees to the Magistrate Judge who had previously presided over
discovery and settlement discussions. Class Counsel's request for
attorneys' fees is equal to the amount recommended by the Magistrate
Judge.
11. WHEN AND HOW WILL THE COURT DECIDE WHETHER TO
APPROVE THE SETTLEMENT?
The Court will hold a hearing on September 24, 2004, at 9:00 a.m.,
before the Honorable Jeremy Fogel, United States District Judge, United
States District Court for the Northern District of California, Courtroom
3, 5th Floor, 280 South First Street, San Jose, California 95113. The
purpose of the hearing will be to determine (a) whether the proposed
settlement should be approved as fair, reasonable, and adequate; (b)
whether the application by Class Counsel for an award of attorneys' fees
and expenses should be granted; and (c) whether the lawsuit and class
members' claims should be dismissed with prejudice pursuant to the
settlement. The Court reserves the right to adjourn or continue the
hearing without further notice to the class.
You may attend the hearing if you wish, but are not
required to do so to participate in the settlement.
If the settlement is not approved by the Court, the
lawsuit will proceed. If there are further actions taken in the case
that affect your rights, you will receive notice as determined by the
Court.
12. CAN I COMMENT ON THE SETTLEMENT?
If you decide to remain in the class, and you wish to comment in support
of or in opposition to the settlement or Class Counsel's motion for
attorneys' fees and expenses, you may do so by mailing or delivering
your written (non-email) comments, such that they are RECEIVED on or
before September 3, 2004, as follows: (1) the original must be sent to
the Court at the following address:
Clerk of the Court
United States District Court for the Northern District of California
280 South First Street
San Jose, California 95113
and (2) copies must be sent to Co Lead Counsel and PayPal's counsel at
the addresses listed in Section 9, above.
Your written comments must contain your name and
address; be signed by you; and include the reference In re PayPal
Litigation, Case No. CV-02-1227-JF (PVT). If you wish to appear and
present your comments orally at the hearing, your written comments must
contain a notice that you intend to appear and be heard, a statement of
the position you intend to present at the hearing, and any supporting
arguments.
If you do not comply with the foregoing procedures and
deadlines for submitting written comments or appearing at the hearing,
you will not be entitled to be heard at the hearing; contest or appeal
from approval of the settlement or any award of attorneys' fees or
expenses; or contest or appeal from any other orders or judgments of the
Court entered in connection with the settlement.
13. HOW CAN I GET MORE INFORMATION ABOUT THE
SETTLEMENT?
You can get more information by writing Plaintiffs' Co-Lead Counsel
electronically or by first class mail at:
paypalsettlement@settlement4onlinepayments.com
Girard Gibbs & De Bartolomeo LLP
601 California Street, Suite 1400
San Francisco, California 94108
Wolf Popper LLP
845 Third Avenue
New York, NY 10022
This notice is a summary and does not describe all details of the
settlement. For full details of the matters discussed in this notice,
you may wish to review the Settlement Agreement dated June 11, 2004 and
on file with the Court or visit https://www.paypal.com/settlement/.
Complete copies of the Settlement Agreement and all other pleadings and
papers filed in the lawsuit are also available for inspection and
copying during regular business hours, at the Office of the Clerk of the
Court, United States District Court for the Northern District of
California, 280 South First Street, San Jose, California 95113.
PLEASE DO NOT TELEPHONE THE COURT REGARDING THIS
NOTICE.
DATED: July 12, 2004
BY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA
