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Maynard v. Paypal Inc.

United States District Court, N.D. Texas, Dallas Division

August 5, 2019

MATTHEW MAYNARD, et al., Plaintiffs,
v.
PAYPAL, INC., et al. Defendants.

          MEMORANDUM OPINION AND ORDER

          SIDNEY A. FITZWATER SENIOR JUDGE.

         In this action in which the court entered a final judgment dismissing with prejudice the actions of plaintiffs Matthew Maynard (“Maynard”) and Maynard Investment Group, LLC d/b/a Discount Sport Nutrition (“DSN”), plaintiffs move under Fed.R.Civ.P. 59(e) to set aside the dismissal and judgment. For the reasons that follow, the court grants the motion in part and denies it in part, subject to plaintiffs' paying defendants their reasonable attorney's fees and costs incurred in responding to the motion.

         I

         In December 2017 Maynard filed suit in state court against defendants PayPal, Inc. and PayPal Holdings, Inc. The action stems from activities surrounding Maynard and DSN's use of defendants' merchant services (a “PayPal account”) to accept online payments for a variety of vitamins and sport nutrition supplements. Maynard alleges that defendants knowingly allowed a fraudulent chargeback scheme in which buyers of DSN's products would file false disputes with defendants' dispute resolution system and seek a full refund on DSN's products months after they had received their orders. According to Maynard, defendants improperly issued full refunds to all of the buyers despite the fact that Maynard provided defendants with thousands of pages of documentary evidence that proved the disputes were without merit, and without regard for the provisions in the PayPal User Agreement (“user agreement”).[1]

         Both defendants were served in January 2018 and removed the case to this court in February 2018. In April 2018 defendants filed a motion to dismiss Maynard's state court petition. Maynard did not respond to the motion, despite requesting and receiving a time extension. In July 2018 the court granted defendants' motion to dismiss but also granted Maynard leave to replead, stating, inter alia:

Maynard filed this case in state court, under the pleading standards that govern in that forum. He should be given an opportunity to replead under the federal pleading standards. See, e.g., Hoffman v. L & M Arts, 774 F.Supp.2d 826, 849 (N.D. Tex. 2011) (Fitzwater, C.J.) (granting similar relief in removed case). Accordingly, the court grants Maynard 28 days from the date this order is filed to file an amended complaint. If he fails to replead, this action will be dismissed based on defendants' April 19, 2019 motion. If he repleads, defendants may move anew to dismiss, if they have a basis to do so.

         July 5, 2018 Order at 1-2. Maynard filed a first amended complaint in August 2018. Shortly thereafter, defendants moved anew to dismiss Maynard's first amended complaint. In response, Maynard moved for leave to file a second amended complaint in order to add DSN as a plaintiff. In November 2018 the court denied defendants' motion to dismiss without prejudice and granted Maynard leave to file a second amended complaint. See Maynard v. PayPal, Inc., 2018 WL 5776268, at *1, 6 (N.D. Tex. Nov. 2, 2018) (Fitzwater, J.).

         The second amended complaint-now on behalf of Maynard and DSN[2]-was filed, and defendants moved again to dismiss. Plaintiffs requested, and the court granted, two extensions of time to file a response to defendants' motion such that the final deadline to respond was February 1, 2019. Despite being granted two extensions of time, plaintiffs failed to respond to defendants' motion to dismiss. The court granted defendants' motion and entered judgment in favor of defendants on February 13, 2019, holding that the second amended complaint failed to state a claim on which relief can be granted.

         On March 13, 2019-28 days after the entry of judgment-plaintiffs filed a motion to alter or amend the judgment pursuant to Rule 59(e). The motion has been briefed and is now ripe for decision.

         II

         “The district court has considerable discretion in deciding whether to reopen a case under Rule 59(e).” Edward H. Bohlin Co. v. Banning Co., 6 F.3d 350, 355 (5th Cir. 1993) (footnote omitted). In deciding plaintiffs' motion, the court considers such factors as whether their failure to comply with the court's order was the result of excusable neglect, whether setting aside the judgment would prejudice the adversary, and whether plaintiffs have a meritorious claim. See CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60, 64 (5th Cir. 1992).[3] “These factors are not ‘talismanic,' and [the court] will consider others.” Id. (quoting In re Dierschke, 975 F.2d 181, 184 (5th Cir. 1992)). The ultimate inquiry remains whether the movants show good cause. See Id. “The district court need not consider all of these factors.” Id.

         III

         A

         The court addresses first whether plaintiffs have established excusable neglect.

         Plaintiffs' motion makes no attempt to explain how or why they failed to respond to defendants' motion to dismiss plaintiffs' second amended complaint. The court is thus unable to discern whether plaintiffs' failure to respond was the result of excusable neglect, and this factor does not favor reconsideration of the court's dismissal order.

         B

         The court considers next whether setting aside the judgment of dismissal would prejudice defendants.

         A party who secures dismissal of a case will of course “suffer some form of prejudice anytime [the party] obtains such relief and the opposing party is successful in having it set aside. The court must therefore assess whether the prejudice is unfair.” Artemis Seafood, Inc. v. Butcher's Choice, Inc., 1999 WL 1032798, at *3 (N.D. Tex. Nov. 10, 1999) (Fitzwater, J.). If the court sets aside the judgment of this case, defendants will be required to defend a lawsuit that they would otherwise not have been obligated to defend. This is not unfairly prejudicial to defendants, except to the extent they have been required to respond to plaintiffs' present motion. As in Artemis Seafood, the court holds that if defendants are compensated for such fees and costs, the prejudice to defendants of granting the motion is not unfair. See Duffin v. Ocwen Loan Servicing, LLC, 2019 WL 2341047, at *2 (N.D. Tex. June 3, 2019) (Fitzwater, J.).

         C

         Finally, the court addresses whether plaintiffs have a meritorious claim.[4]

         Plaintiffs maintain that the facts and allegations set forth in their second amended complaint “were sufficient to state the causes of action discussed below and to survive [dismissal].” Ps. Br. 2. Defendants respond, inter alia, that plaintiffs abandoned their claims by failing to respond to the motion to dismiss and that the court properly dismissed plaintiffs' claims because they failed to satisfy the federal pleading standard.[5]

         1

         A party may abandon its claim when it fails to pursue the claim beyond the complaint. See, e.g., Black v. N. Panola Sch. Dist., 461 F.3d 584, 588 n.1 (5th Cir. 2006); Vela v. City of Houston, 276 F.3d 659, 678-79 (5th Cir. 2001); Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1163-64 (5th Cir. 1983). In this case, the court does not agree with defendants' argument that plaintiffs' failure to respond to the motion to dismiss equates to total abandonment of all of their claims. Some of the claims, however, do appear to have been abandoned by plaintiffs as a result of the papers filed in support of the instant motion.

         In their briefing, plaintiffs do not challenge the court's dismissal of the following claims: negligent undertaking; negligent hiring, training, and supervision; vicarious liability; conversion; aiding and abetting/assisting and participating; and promissory estoppel.[6]Indeed, plaintiffs implicitly acknowledge that not all of the causes of action they pleaded should have survived dismissal. See Ps. Br. 2 (stating “[t]he facts and allegations in Plaintiffs' Complaint were sufficient to state the causes of action discussed below” and proceeding to discuss select causes of action). Thus the court, in its discretion, declines to revisit its dismissal of those claims.

         2

         To determine whether it was error to grant defendants' motion to dismiss, the court, in its discretion, will engage in a more thorough analysis of each cause of action on which the parties disagree.

         IV

         A

         As a threshold matter, the parties disagree as to which state's law should apply to plaintiffs' claims. Defendants maintain that, per the user agreement's choice of law clause, Delaware law applies. In their instant motion, plaintiffs suggest that the court should look to Texas law because the choice of law provision is not enforceable.

         To properly analyze each disputed cause of action, the court will first determine whether Texas or Delaware law applies to plaintiffs' claims. See Energy Coal S.P.A. v. CITGO Petroleum Corp., 836 F.3d 457, 459 (5th Cir. 2016) (“Choice-of-law decisions can be resolved at the motion to dismiss stage when factual development is not necessary to resolve the inquiry.”). “A diversity court generally applies the choice-of-law rules of the state in which it sits.” InterFirst Bank Clifton v. Fernandez, 853 F.2d 292, 294 (5th Cir. 1988) (citing Stuart v. Spademan, 772 F.2d 1185, 1195 (5th Cir. 1985)). Because this court sits in Texas, it applies Texas choice of law rules. “Under the Texas rules, in those contract cases in which the parties have agreed to an enforceable choice of law clause, the law of the chosen state must be applied.” Resolution Tr. Corp. v. Northpark Joint Venture, 958 F.2d 1313, 1318 (5th Cir. 1992) (citing DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 678 (Tex. 1990)).

         Here, the user agreement provides:

You agree that, except to the extent inconsistent with or preempted by federal law and except as otherwise stated in this user agreement, the laws of the State of Delaware, without regard to principles of conflict of laws, will govern this user agreement and any claim ...

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