Terry Kass v. PayPal Inc.
75 F.4th 693
7th Cir.2023Background
- Terry Kass opened a PayPal account in 2004 and accepted a User Agreement that allowed PayPal to amend terms and to deliver notices electronically.
- In October 2012 PayPal amended its User Agreement to add a mandatory arbitration clause (with an opt-out), and PayPal asserts it emailed a Policy Update to active users notifying them of the change.
- Kass donated to charities via the PayPal Charitable Giving Fund in 2016 and later alleged PayPal mishandled donations; she and one charity filed a class action in 2017.
- Defendants moved to compel arbitration; the district court granted the motion in 2018 relying on the mailbox-rule presumption that an emailed notice was received, and the case proceeded to arbitration and an adverse award to Kass.
- On appeal the Seventh Circuit held the district court erred by resolving a factual dispute—Kass expressly denied receiving the 2012 email—so the presumption of receipt was rebutted and must be resolved by a trier of fact; the court vacated and remanded for trial on receipt of the notice.
- The Seventh Circuit also confirmed the district court properly retained subject-matter jurisdiction over Kass’s claims (arbitrability is an affirmative, waivable defense and does not defeat jurisdiction).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Kass agreed to arbitrate under PayPal’s 2012 amendment | Kass says she never received notice of the 2012 amendment and never agreed to it | PayPal says it emailed the Policy Update to active users (including Kass) and her silence/continuing account manifests assent | There is a genuine factual dispute (Kass denies receipt) that requires a trial; arbitration cannot be compelled summarily |
| Whether the mailbox-rule presumption of receipt is conclusive | Kass: her sworn denial rebuts the presumption and creates a triable issue | PayPal: the presumption applies and Kass’s denial is insufficient to defeat it | The presumption is rebuttable; an express denial of receipt requires a trier of fact to resolve receipt |
| Whether Ball and Tinder control to allow summary enforcement | Kass: those cases don’t allow summary resolution where there is a flat denial of receipt | PayPal: Ball/Tinder support presuming receipt and ordering arbitration | Court clarifies Ball/Tinder allow a presumption of receipt only when sending is established; they do not override a factual denial of receipt |
| Whether the district court retained subject-matter jurisdiction over Kass’s claims | Kass argued some claims proceeded to confirmation, but jurisdiction was proper | PayPal argued arbitration might render CAFA jurisdiction frivolous | Court: jurisdiction properly retained—arbitrability is an affirmative defense and does not strip jurisdiction |
Key Cases Cited
- Ball v. Kotter, 723 F.3d 813 (7th Cir. 2013) (discussing mailbox-rule presumption of receipt where communications were shown to have been sent)
- Tinder v. Pinkerton Security, 305 F.3d 728 (7th Cir. 2002) (addressing application of mailbox-rule presumption in arbitration-notice context)
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) (arbitration agreements treated as contracts; parties cannot be required to arbitrate disputes they did not agree to submit)
- Weisberg v. Handy & Harman, 747 F.2d 416 (7th Cir. 1984) (Illinois presumption that a properly addressed/posted letter is received)
- Liquorama, Inc. v. American Nat’l Bank & Trust, 408 N.E.2d 373 (Ill. App. 1980) (mailbox-rule presumption may be rebutted and, if so, receipt is a factual issue for the trier of fact)
- First Nat’l Bank of Antioch v. Guerra Constr. Co., 505 N.E.2d 1373 (Ill. App. 1987) (evidence of usual office practice can corroborate that a mailing occurred and trigger the presumption)