Deshotel v. CardCash Exchange Inc
6:19-cv-00373
W.D. La.Apr 2, 2020Background
- Plaintiffs Jeremy and Courtney Deshotel (members of Giftopia, LLC) sold bulk gift cards to CardCash; payments were routed through PayPal.
- After a large April 2016 transaction, CardCash reported increasing alleged deficiencies; Jeremy’s PayPal account was shown with a large negative balance.
- PayPal investigators communicated with local police (Scott PD); Detective Caleb Lege prepared affidavits and obtained arrest and search warrants; plaintiffs were arrested and later had some criminal charges dismissed (major charges dropped; Jeremy pled to paraphernalia).
- CardCash later obtained a default judgment against plaintiffs in New Jersey; plaintiffs sued CardCash, PayPal, PayPal investigator Ashley Were, and local police alleging malicious prosecution, §1983 claims, punitive damages, and (abandoned) false imprisonment.
- Defendants PayPal and Were moved to dismiss; the magistrate judge recommends: deny as moot dismissal of false imprisonment (abandoned), and grant dismissal of all malicious prosecution claims against PayPal defendants, dismiss §1983 claims, and dismiss claims for punitive damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Malicious prosecution (state-law) — causation & malice | Paytons/Deshotel: PayPal relayed false/stale CardCash information that caused plaintiffs’ prosecution | PayPal: its report merely provided information; independent Scott PD investigation and judge broke the chain of causation; no bad faith alleged | Dismissed — plaintiffs failed to plead causation and malice; independent police investigation and judicial review broke chain of causation |
| Section 1983 claim (state action) | Plaintiffs allege PayPal acted under color of state law in causing prosecution | PayPal: private actor; merely reporting to police is not state action | Dismissed — PayPal not a state actor; §1983 claim not pleaded plausibly |
| Punitive damages | Plaintiffs seek punitive damages related to malicious prosecution | PayPal: punitive damages improper without a cognizable underlying claim; choice-of-law prevents applying Arizona punitive-damage law | Dismissed — punitive damages unavailable because underlying claims fail and Article 3546 choice-of-law contacts preclude Arizona law |
| False imprisonment | Plaintiffs initially alleged false imprisonment | Plaintiffs later abandoned the claim | Denied as moot; also time-barred if pursued (one-year prescription) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for Rule 12(b)(6) pleading)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must raise plausible entitlement to relief)
- Lormand v. U.S. Unwired, Inc., 565 F.3d 228 (5th Cir. 2009) (accept well-pleaded facts, draw inferences for plaintiff)
- Jones v. Soileau, 448 So. 2d 1268 (La. 1984) (elements for malicious prosecution under Louisiana law)
- Priester v. Lowndes County, 354 F.3d 414 (5th Cir. 2004) (tests for attributing private conduct to state action)
- Daniel v. Ferguson, 839 F.2d 1124 (5th Cir. 1988) (private party eliciting police action does not necessarily act under color of law)
- Hernandez v. Schwegmann Bros. Giant Supermarkets, Inc., 673 F.2d 771 (5th Cir. 1982) (police reliance on private information does not make private party a state actor)
- LoBiondo v. Schwartz, 970 A.2d 1007 (N.J. 2009) (elements for malicious prosecution under New Jersey law)