Wilkins v. PayPal, Inc.

— 1 — — 2 — — 3 — 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION — 7 — 8 BRIAN A. WILKINS, Case No. 23-cv-02931-VKD 9 Petitioner, ORDER DENYING PETITION TO 10 v. VACATE ARBITRATION AWARD 11 PAYPAL, INC., Re: Dkt. No. 13 Respondent. — 12 — — 13 — 14 Petitioner Brian A. Wilkins, who is representing himself, asks the Court to vacate an 15 arbitration award resulting from a dispute with respondent PayPal, Inc. (“PayPal”).1 He argues 16 that the award violates several provisions of California law. PayPal opposes Mr. Wilkins’s 17 petition, arguing that it is untimely and that he has not met the standard for vacatur of an 18 arbitration award under the Federal Arbitration Act, 9 U.S.C. 1, et seq. (“FAA”). Dkt. No. 17. 19 The Court held a hearing on the matter on August, 15, 2023. Dkt. No. 22. 20 Upon consideration of the moving and responding papers, as well as the oral arguments 21 presented, the Court denies Mr. Wilkins’s petition. 22 I. BACKGROUND 23 Unless otherwise noted, the following facts are not disputed. 24 Mr. Wilkins is a resident of Iowa, Arizona, and Nevada.2 Dkt. No. 13 ¶ 7. PayPal is a — 25 — 1 All parties have expressly consented that all proceedings in this matter may be heard and finally — 26 — adjudicated by a magistrate judge. 28 U.S.C. § 636 (c); Fed. R. Civ. P. 73; Dkt. Nos. 6, 15. — 27 — 2 Mr. Wilkins is also the sole owner of Veracity Objectives, LLC, which is incorporated in New 1 Delaware corporation with a principal place of business in California. Id. ¶ 8 . In view of the 2 amount in controversy, the parties agree that the Court has diversity jurisdiction of this matter 3 pursuant to 28 U.S.C. § 1332 (a). See Theis Rsch., Inc. v. Brown & Bain, 400 F.3d 659 , 664 (9th 4 Cir. 2005). 5 In January of 2021, Mr. Wilkins launched a website called “The COVID Blog.” Dkt. No. 6 13 ¶ 2. He used PayPal’s platform to collect “donations and payments.” Id. On August 9, 2021, 7 PayPal stopped processing payments for Mr. Wilkins’s website, claiming that he had violated the 8 company’s acceptable use policy by “running a blog that promulgated misleading information 9 about COVID-19, including anti-COVID statements about masks and hydroxychloroquine” and 10 “selling white pine needles . . . marketed . . . as a prevention and/or cure of the COVID-19 virus.” 11 Dkt. No. 13-1 at 65. 12 After PayPal limited Mr. Wilkins’s account, the company continued to receive payments 13 from others directed to Mr. Wilkins. Id. Each time this occurred, PayPal sent Mr. Wilkins an 14 email notifying him of the payment. Id.; see also id. at 13, 18. Mr. Wilkins received a total of 96 15 such emails between August of 2021 and May of 2022. Dkt. No. 13 ¶ 12. On three occasions in 16 August and September of 2021, Mr. Wilkins sent messages to PayPal asking the company to stop 17 sending him “spam emails.” Id. ¶ 11; Dkt. No. 13-1 at 13, 16, 18. 18 On March 3, 2022, Mr. Wilkins sent PayPal a demand for arbitration, asserting claims for 19 breach of contract and for violations of California and Nevada anti-spam laws, Cal. Bus. & Prof. 20 Code § 17529 and Nev. Rev. Stat. § 41.730 . Id. at 73-81 . He requested $136,500 in statutory 21 damages. Id. at 80 . In response, PayPal filed a counterclaim for breach of contract against Mr. 22 Wilkins. Dkt. No. 13 ¶ 13; Dkt. No. 13-1 at 68-70. Citing provisions of its user agreement that 23 barred the use of its platform for transactions involving products that “present a risk to consumer 24 safety,” “encourage, promote, facilitate or instruct others to engage in illegal activity,” or “have a 25 high likelihood of being fraudulent,” PayPal claimed that Mr. Wilkins’s sale of pine needle tea 26 was a “restricted activity.” Id. at 68-69 . PayPal demanded $2,500 for each of Mr. Wilkins’s sales — 27 — 1 under a liquidated damages provision of its agreement, for a total of $380,000. Id. at 70 . 2 The case was arbitrated by an arbitrator appointed by the American Arbitration 3 Association. Both parties moved for summary judgment on Mr. Wilkins’s claims against PayPal. 4 Dkt. No. 13-1 at 49-52. In addition, Mr. Wilkins moved to dismiss PayPal’s counterclaim against 5 him, arguing that he had been cleared of any violations of PayPal’s policies by the company’s 6 internal proceedings and, as a result, PayPal’s claims were barred by the doctrine of res judicata. — 7 — Id. at 52 . 8 On February 23, 2023, the arbitrator issued an order, styled as “Rulings on Dispositive 9 Motions” and “Orders of Dismissal.” Id. at 29-33 . He granted PayPal’s motion for summary 10 judgment on Mr. Wilkins’s claims, denied Mr. Wilkins’s cross-motion for summary judgment on 11 those same claims, and dismissed Mr. Wilkins’s claims with prejudice. Id. at 31-32 . The 12 arbitrator rejected Mr. Wilkins’s choice of law arguments, stating “[t]here has been no showing 13 that the choice of law provision should be voided [and] [t]here has not been any legal challenge to 14 the Delaware clause as to unconscionability, estoppel, or waiver.” Id. at 32 . However, the 15 arbitrator also noted that “[t]he choice of law does not matter in this case” because there was “no 16 evidence of a violation of California or Nevada law.” Id. After reviewing the emails Mr. Wilkins 17 claimed were spam, he determined that “[t]he email communications received by Wilkins were not 18 spam or advertising, but rather, were legitimate and reasonable communications with Wilkins 19 concerning his account and the trailing consequences of his internet sales. PayPal had no choice in 20 this regard, as they continued receiving payments from Wilkins’s customers.” Id. at 31 . 21 The arbitrator also denied Mr. Wilkins’s motion to dismiss PayPal’s counterclaim, stating 22 that “the legal requirements of [res judicata] have not been satisfied.” Id. at 32-33 . 23 Finally, the arbitrator also purported to deny a “Motion for Summary Judgment supporting 24 its Counterclaim” by PayPal on the merits. Id. at 33 . In so doing, he found that the liquidated 25 damages provision in PayPal’s user agreement was “a penalty and cannot be enforced” and 26 dismissed the counterclaim with prejudice. Id. 27 On March 10, 2023, PayPal filed a “Motion to Amend Dismissal Order and Dismiss its 1 judgment on its counterclaim and asked the arbitrator to strike the section of his order rejecting the 2 claim on the merits. Id. at 58 . However, PayPal also stated that it was then dismissing the 3 counterclaim with prejudice. Id. 4 On March 31, 2023, the arbitrator issued an order, styled as “Amended Rulings on 5 Dispositive Motions” and “Amended Orders of Dismissal.” Id. at 49-53 . This order was 6 substantially the same as the February 23, 2023 order, except that it omitted the arbitrator’s 7 findings on the merits of PayPal’s counterclaim and stated instead that “[o]n March 10, 2023, 8 PayPal dismissed its liquidated-damages Counterclaim with Prejudice.” Id. at 53 . 9 Mr. Wilkins filed an initial petition to vacate and correct the arbitration award on June 14, 10 2023 and an amended petition a week later on June 23, 2023. Dkt. Nos. 1, 13. In the operative 11 petition, he requests that this Court review the arbitrator’s decision de novo and award him 12 $96,000 in damages for PayPal’s violations of Cal. Bus. & Prof. Code § 17529.5 (B)(ii), as well as 13 costs of the action. Dkt. No. 13 at 10. In addition, Mr. Wilkins asks the Court to declare that the 14 choice of law provision in PayPal’s user agreement is unenforceable, that the liquidated damages 15 provision is unlawful, and that he has a statutory right to opt out of spam emails. Id. 16 II. LEGAL STANDARD 17 Review of an arbitration decision is “limited and highly deferential.” Coutee v. Barington 18 Capital Group, L.P., 336 F.3d 1128, 1132 (9th Cir. 2003) (quoting Sheet Metal Workers’ Int’l 19 Ass’n v. Madison Indus., Inc., 84 F.3d 1186, 1190 (9th Cir.1996)). The FAA applies to 20 “contract[s] evidencing a transaction involving commerce.” 9 U.S.C. § 2 . “When an agreement 21 falls within the purview of the FAA, there is a strong default presumption that the FAA, not state 22 law, supplies the rules for arbitration.” Johnson v. Gruma Corp., 614 F.3d 1062, 1066 (9th Cir. 23 2010) (cleaned up). “To overcome that presumption, parties to an arbitration agreement must 24 evidence a ‘clear intent’ to incorporate state law rules for arbitration.” Id. 25 Under the FAA, an arbitration award may be vacated: (1) where the award was procured 26 by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the 27 arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to 1 material to the controversy; or of any other misbehavior by which the rights of any party have 2 been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed 3 them that a mutual, final, and definite award upon the subject matter submitted was not made. 9 4 U.S.C. §§ 10 (a)(1)-(4). 5 III. DISCUSSION 6 Citing California law, Mr. Wilkins asks the Court to vacate the arbitration award because 7 the arbitrator exceeded his powers and refused to hear evidence material to the controversy. Dkt. 8 No. 13 ¶ 9. PayPal argues that the FAA—not California law—applies to Mr. Wilkins’s petition, 9 that the petition fails to meet the FAA’s standards for vacatur, and that the petition was not timely 10 filed. Dkt. No. 17 at 1. 11 The Court first addresses whether the FAA applies to this case. Then, the Court considers 12 whether Mr. Wilkins’s petition to vacate is timely, and if so, whether Mr. Wilkins has established 13 a basis to vacate the award. 14 A. Governing Law 15 Mr. Wilkins cites the California Arbitration Act, Cal. C.C.P. §§ 1280 et seq. (“CAA”), as 16 the basis for his petition to vacate. Dkt. No. 13 ¶ 9. PayPal argues that the FAA applies. Dkt. No. 17 17 at 6. 18 The FAA applies to arbitration agreements in contracts affecting interstate commerce, 19 regardless of whether the contract invokes the FAA or not. See Circuit City Stores, Inc. v. Adams, 532 20 U.S. 105 , 111-12 (2001). Mr. Wilkins does not appear to dispute that the PayPal user agreement is a 21 contract affecting interstate commerce. Moreover, he acknowledges that the PayPal user agreement 22 provides that “the Federal Arbitration Act (FAA) governs the interpretation and enforcement of 23 this Agreement to Arbitrate.” Dkt. No. 13 ¶ 5. 24 The Court agrees with PayPal that the FAA’s standard for vacatur, not the CAA’s, applies 25 here. See Johnson, 614 F.3d at 1067 (holding “where the FAA’s rules control arbitration proceedings, 26 a reviewing court must also apply the FAA standard for vacatur”). 27 B. Timeliness of Petition 1 served upon the adverse party or his attorney within three months after the award is filed or 2 delivered.” 9 U.S.C. § 12 ; see also Stevens v. Jiffy Lube Int’l, Inc., 911 F.3d 1249, 1251-52 (9th 3 Cir. 2018) (applying Rule 6(a) of the Federal Rules of Civil Procedure to calculate time). PayPal 4 argues that Mr. Wilkins missed this deadline. Dkt. No. 17 at 4. Mr. Wilkins disagrees. Dkt No. 5 18 at 2. Their dispute turns on whether the arbitrator’s February 23, 2023 order or his March 31, 6 2023 order is the final arbitration award. 7 PayPal argues that February 23 order is the final award and that its March 10, 2023 motion 8 to amend that order simply requested the correction of a “clerical error.” Dkt. No. 17 at 4-5; Dkt. 9 No. 13-1 at 55-59. Mr. Wilkins responds that the March 31 order “fundamentally changed what 10 the arbitrator had originally ruled” by withdrawing the arbitrator’s findings on the merits against 11 PayPal and allowing the company to voluntarily dismiss its counterclaim against him without the 12 adverse findings. Dkt. No. 18 at 3. 13 “To be considered ‘final,’ an arbitration award must be intended by the arbitrator to be a 14 complete determination of every issue submitted.” Orion Pictures Corp. v. Writers Guild of Am., 15 W., Inc., 946 F.2d 722, 724 (9th Cir. 1991) (quoting Millmen Local 550 v. Wells Exterior Trim, — 16 — 828 F.2d 1373, 1376 (9th Cir. 1987)) (cleaned up); see also Aerojet Rocketdyne, Inc. v. Int'l 17 Union, United Auto., Aerospace & Agric. Implement Workers of Am., No. CV 17-5122 PSG 18 (SKx), 2017 WL 9500948 , at *4 (C.D. Cal. Nov. 27, 2017) (collecting cases). “Where an 19 arbitrator retains jurisdiction in order to decide a substantive issue the parties have not yet 20 resolved, this retention of jurisdiction indicates that the arbitrator did not intend the award to be 21 final.” Orion, 946 F.3d at 724 (cleaned up). 22 Courts generally “infer [the arbitrator’s] intent from the attributes of the award and 23 arbitration record.” PG Publ’g, Inc. v. Newspaper Guild of Pittsburgh, 19 F.4th 308, 321-22 (3d 24 Cir. 2021) (citing cases from several circuits, including the Ninth Circuit). In doing so, they may 25 “go beyond a document’s heading and delve into its substance and impact to determine whether 26 the decision is final.” Chinmax Med. Sys. Inc. v. Alere San Diego, Inc., No. 10-cv-2467 WQH 27 (NLS), 2011 WL 2135350 , at *5 (S.D. Cal. May 27, 2011) (quoting Publicis Commc’n v. True N. 1 Commc'ns, Inc., 206 F.3d 725, 729 (7th Cir. 2000)).3 2 Here, both of the arbitrator’s orders purport to finally dispose of all the claims in the 3 arbitration. See Dkt. No. 13-1 at 29-33, 49-53. The parties appear to agree that the arbitrator 4 made an error when he decided a summary judgment motion addressing the merits of PayPal’s 5 counterclaim that neither party had filed. Had the arbitrator not made this error, the counterclaim 6 would have remained pending for later resolution, and the February 23 order would not have 7 completely determined all claims in the arbitration. PayPal does not suggest that the arbitrator’s 8 disposition of Mr. Wilkins’s claims alone would have started the clock running on either party’s 9 challenge to the disposition of those claims, while PayPal’s counterclaim remained pending in the 10 arbitration. As it happens, by voluntarily dismissing its counterclaim with prejudice, PayPal 11 replicated the outcome of the arbitrator’s erroneous decision, without the adverse factual findings. 12 In these unusual circumstances, the Court concludes that the arbitrator’s March 31 order is 13 the final arbitration award, and Mr. Wilkins’s petition to vacate is therefore timely. This 14 conclusion is consistent with the approach taken by other judges in this District in assessing the 15 timeliness of a petition to vacate a corrected arbitration award, particularly where the petitioning 16 party is proceeding pro se. See Balan v. Tesla Motors Inc., No. 19-CV-00449-EMC, 2019 WL 17 1411223, at *1 (N.D. Cal. Mar. 28, 2019) (calculating deadline based on date of corrected award); 18 May v. Amgen, Inc., No. C 12-01367 WHA, 2012 WL 2196151 , at *4 (N.D. Cal. June 14, 2012) 19 (“[B]ecause plaintiff is pro se, and as a concession to the shortness of life, this Court will assume 20 for the sake of argument that this civil action is timely and proceed to decide the case on the 21 merits.”). 22 C. Vacatur Under the FAA 23 Mr. Wilkins asks the Court to review the arbitrator’s award de novo and to decide the — 24 — 3 Some of the cases cited are decisions under the Labor Management Relations Act (“LMRA”), 29 25 U.S.C. § 185 , rather than the FAA. However, “the federal courts have often looked to the FAA for guidance in labor arbitration cases and courts have also looked to LMRA Section 301 cases for — 26 — guidance on the FAA.” PG Publ'g, Inc., 19 F.4th at 319 (quoting United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29 , 40 n.9 (1987)) (cleaned up). See also Pac. Reinsurance Mgmt. — 27 — Corp. v. Ohio Reinsurance Corp., 935 F.2d 1019 , 1022 (9th Cir. 1991) (applying LMRA caselaw 1 dispute in his favor on the merits. See Dkt. No. 13 at 8, 10 (“the Petitioner respectfully prays this 2 Court, upon de novo review of this arbitration, grant [various forms of relief]”). This is not the 3 Court’s proper role in reviewing an arbitration award. 4 As explained above, a court may vacate an arbitration award only on the grounds 5 enumerated in 9 U.S.C. § 10 (a). Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584 (2008). 6 Acknowledging these limitations on the Court’s review authority, Mr. Wilkins contends that the 7 arbitrator exceeded his powers or otherwise erred by applying the choice of law provision in the 8 PayPal user agreement without considering the merits of Mr. Wilkins’s claims under California 9 law. Dkt. No. 13 ¶¶ 9-10, 21; Dkt. No. 18 at 6-8. He also contends that the arbitrator refused to 10 hear evidence material to the controversy. Dkt. No. 13 ¶ 9; Dkt. No. 18 at 9. 11 The Court considers each ground separately. 12 1. Whether the arbitrator exceeded his powers 13 A court may vacate an arbitration award “where the arbitrator[] exceeded [his] powers, or 14 so imperfectly executed them that a mutual, final, and definite award upon the subject matter 15 submitted was not made.” 9 U.S.C. § 10 (a)(4). This review authority is “extremely limited” and 16 “is designed to preserve due process but not to permit unnecessary public intrusion into private 17 arbitration procedures.” Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987 , 998 18 (9th Cir. 2003). 19 An award may be vacated where it exhibits a manifest disregard of law or is completely 20 irrational. HayDay Farms, Inc. v. FeeDx Holdings, Inc., 55 F.4th 1232 , 1240 (9th Cir. 2022). 21 “[M]anifest disregard . . . requires something beyond and different from a mere error in the law or 22 failure on the part of the arbitrators to understand and apply the law.” Id. at 1240-41 (quoting 23 Bosack v. Soward, 586 F.3d 1096, 1104 (9th Cir. 2009)). “To demonstrate manifest disregard, the 24 moving party must show that the arbitrator understood and correctly stated the law, but proceeded 25 to disregard the same.” Id. at 1241 . “There must be some evidence in the record, other than the 26 result, that the arbitrators were aware of the law and intentionally disregarded it.” Id. An award is 27 “completely irrational” if it “ignores the controlling terms of the parties’ contract.” Id. However, 1 Mr. Wilkins has not shown that the arbitrator disregarded applicable law or ignored 2 controlling terms of the PayPal user agreement. With respect to the choice of law question, the 3 arbitrator correctly observed that the user agreement specifies Delaware as the governing law, and 4 his decision to apply that law—in the context of a dispute between a Delaware corporation and a 5 user who does not reside in California—does not reflect a knowing or manifest disregard of any 6 legal authority. Moreover, the arbitrator did not rest his decision on the application of Delaware 7 law alone. Rather, he considered Mr. Wilkins’s claims under California law (and Nevada law) on 8 the merits, writing: 9 Wilkins claims PayPal violated California and Nevada state laws pertaining to span. Even if these other states’ laws applied to the — 10 — relationship and communications between PayPal and Wilkins, since 11 the communications sent to Wilkins were not advertising in any way, those statutes are not implicated. Also Wilkins’[s] breach of 12 contract claim fails as a matter of law because there has been no showing PayPal breached any provision in the parties’ agreement. — 13 — 14 Dkt. No. 13-1 at 51; see also id. at 53 (“The choice of law does not matter in this case. There has 15 been no evidence of a violation of California or Nevada law.”). Mr. Wilkins may disagree with 16 the arbitrator’s decision, but he has not demonstrated that the arbitrator disregarded the law, or that 17 his conclusions are irrational. To the contrary, the arbitrator’s decision reflects a plausible 18 application of California law.4 19 Accordingly, the Court concludes that the arbitrator did not exceed his powers by acting in 20 manifest disregard of the law or rendering a completely irrational decision. 21 2. Whether the arbitrator refused to hear material evidence 22 A court may vacate an arbitration award “where the arbitrators were guilty of misconduct 23 . . . in refusing to hear evidence pertinent and material to the controversy.” 9 U.S.C. § 10 (a)(3). A 24 party seeking vacatur on this ground must, at a minimum, identify the evidence the arbitrator — 25 — — 26 — 4 The California law provisions that Mr. Wilkins cites only bar the sending of “commercial e-mail advertisements,” defined as “any electronic mail message initiated for the purpose of advertising — 27 — or promoting the lease, sale, rental, gift offer, or other disposition of any property, goods, services, 1 refused to hear and must demonstrate that the party has been prejudiced by that refusal. See U.S. 2 Care, Inc. v. Pioneer Life Ins. Co. of Illinois, 53 F. App’x 491, 492 (9th Cir. 2002); U.S. Life Ins. 3 Co. v. Superior Nat. Ins. Co., 591 F.3d 1167, 1174 (9th Cir. 2010). 4 Mr. Wilkins does not identify the material evidence he contends the arbitrator refused to 5 || hear. Dkt. No. 13 9] 9, 14-15; Dkt. No. 18 at 9. Instead, he argues that he “had no opportunity at 6 || discovery in this case.” Dkt. No. 13 § 15. PayPal points out that Mr. Wilkins agreed at the outset 7 || of the arbitration that no discovery was needed, as reflected in an August 4, 2022 “Preliminary 8 || Hearing Scheduling Order,” which provides “[b]y agreement of the parties . . . [the] “Exchange of 9 Documents and Discovery: None.” Dkt. No. 17-2 at 2. At the hearing, Mr. Wilkins explained that 10 || he sought to reopen discovery after the parties filed dispositive motions. However, the only 11 materials that he said he hoped to obtain through discovery were evidence showing he had 12 || attempted to opt out of email communications from PayPal by phone and evidence concerning 5 13 || PayPal’s counterclaim against him. 14 This evidence could not be material to the controversy. It could not have affected the 3 15 arbitrator’s decision on Mr. Wilkins’s claims, which turned on the nature of the communications 16 || PayPal sent to Mr. Wilkins and not whether he asked PayPal to stop sending them. Nor could the 3 17 || evidence have affected the ultimate resolution of PayPal’s counterclaim, which was dismissed 18 || with prejudice in Mr. Wilkins’s favor. In short, Mr. Wilkins has not shown that he was prejudiced 19 || by a lack of discovery or by the arbitrator’s refusal to consider evidence. 20 || IV. CONCLUSION 21 For the reasons explained above, the Court denies Mr. Wilkins’s petition to vacate the 22 || arbitration award. 23 IT IS SO ORDERED. 24 || Dated: August 22, 2023 — 25 — 26 Verein ®, □□□□□□ 7 VIRGINIA K. DEMARCHI United States Magistrate Judge — 28 —