Court Opinion

ID: 9946702
Source: CourtListenerOpinion
Date Created: 2024-03-01 05:06:27.270548+00
Date Added: 2024-06-11T14:25:39.805740
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                  revision until final publication in the Michigan Appeals Reports.

                           STATE OF MICHIGAN

                            COURT OF APPEALS

ROGER MAUFORT,                                                        UNPUBLISHED
                                                                      February 29, 2024
               Plaintiff-Appellant,

v                                                                     No. 366527
                                                                      Jackson Circuit Court
PAYPAL, INC., doing business as a licensed                            LC No. 23-503 CB
Michigan Money Transmitter,

               Defendant-Appellee.

Before: FEENEY, P.J., and REDFORD and YATES, JJ.

PER CURIAM.

        Plaintiff, Roger Maufort, opened an account with defendant, PayPal, Inc. (PayPal). When
he did so, plaintiff agreed to arbitrate all disputes with defendant arising from the PayPal account.
On March 13, 2020, defendant allegedly transferred $11,305.04 from plaintiff’s account to pay for
liquidated damages that defendant assessed against plaintiff for violations of the PayPal terms of
service. In response, plaintiff filed a complaint against defendant alleging conversion and statutory
claims under Michigan law, but defendant obtained summary disposition under MCR 2.116(C)(7)
based on plaintiff’s agreement to arbitrate the dispute. The trial court ruled that plaintiff’s claims
must be arbitrated, and the trial court memorialized that ruling in an order entered on June 1, 2023.
Plaintiff appealed of right, asserting that he is entitled to revoke the arbitration agreement because
defendant failed to comply with a notice-of-dispute provision contained in the parties’ agreement.
We affirm.

                                 I. FACTUAL BACKGROUND

        Plaintiff does business individually and as the sole member of a limited liability company,
The Seed Cellar, which is a cannabis seed bank that sells cannabis sativa L seed, which is federally
described as hemp. As part of his business, plaintiff opened a PayPal account. Defendant accused
plaintiff of violating the PayPal terms of service and retained $11,305.04 from plaintiff’s account
for the purpose of recovering liquidated damages that defendant assessed for plaintiff’s purported
misuse of his PayPal account. That prompted plaintiff to file this suit in 2023 accusing defendant
of engaging in conversion and violating several Michigan statutes.

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        Defendant moved for summary disposition under MCR 2.116(C)(7), contending that all of
plaintiff’s claims must be resolved in arbitration, as opposed to litigation, because of the arbitration
agreement between the parties. Despite plaintiff’s objections to arbitration, the trial court granted
defendant’s motion, explaining that “[p]laintiff’s claims are subject to an agreement to arbitrate.”
Plaintiff thereafter appealed that decision of right.

                                       II. LEGAL ANALYSIS

         On appeal, plaintiff concedes that he agreed to arbitrate his disputes with defendant, but he
asserts that defendant’s actions gave him the right to rescind that arbitration agreement. We review
de novo a ruling on a motion for summary disposition brought under MCR 2.116(C)(7). Altobelli
v Hartmann, 499 Mich 284, 294-295; 884 NW2d 537 (2016). “Under MCR 2.116(C)(7), summary
disposition is appropriate if a claim is barred because of ‘an agreement to arbitrate[.]’ ” Id. at 295.
“Whether an arbitration agreement exists and is enforceable is a question for the court that is . . .
reviewed de novo.” Hicks v EPI Printers, Inc, 267 Mich App 79, 84; 702 NW2d 883 (2005).

        “Arbitration is a matter of contract.” Altobelli, 499 Mich at 295. A “valid agreement must
exist for arbitration to be binding.” Ferndale v Florence Cement Co, 269 Mich App 452, 460; 712
NW2d 522 (2006). Here, neither side disputes that the parties entered into an arbitration agreement
when plaintiff opened his PayPal account. Thus, as a threshold matter, the parties’ dispute appears
destined for arbitration, rather than resolution through litigation. But plaintiff contends he has the
right to rescind the otherwise-enforceable arbitration agreement because of defendant’s misdeeds.
Specifically, plaintiff claims that defendant gave him no notice or explanation before taking the
money from his PayPal account, contrary to a notice-of-dispute provision purportedly set forth in
the governing arbitration agreement. Plaintiff criticizes the trial court for deferring to the arbitrator
to consider which version of the PayPal arbitration agreement—the one from 2019 or the one that
is currently in effect—governs this dispute and whether defendant breached the notice-of-dispute
provision of the governing arbitration agreement.

         Defendant concedes that the current version of the parties’ arbitration agreement contains
a notice-of-dispute provision, but defendant points out that no such provision was contained in the
arbitration agreement in 2019 when defendant took action against plaintiff’s PayPal account. In
addition, defendant explains that it simply froze plaintiff’s PayPal account for six months starting
on October 22, 2019, before eventually taking action in 2020 to collect the disputed money from
the account as liquidated damages for plaintiff’s violation of the PayPal terms of service. Finally,
defendant insists that no matter which iteration of the arbitration agreement governs the parties’
dispute, the trial court correctly ruled that plaintiff cannot avoid arbitration of his claims.

         The notice-of-dispute provision on which plaintiff relies begins with the explanation that,
“[b]efore bringing any dispute or claim, you or PayPal must first send the other party, by certified
mail, a completed Notice of Dispute.” Then, “[i]f you and PayPal are unable to resolve the claims
described in the notice within 45 days after the notice is received by you or PayPal, you or PayPal
may commence an arbitration proceeding or suit in small claims court.” In other words, a notice-
of-dispute form is a precondition to “an arbitration proceeding or suit in small claims court[,]” but
not to the assessment of liquidated damages. A PayPal user dissatisfied with such an assessment
may be obligated to provide defendant with a notice-of-dispute form before demanding arbitration
or filing suit in small claims court, but the notice-of-dispute obligation is not triggered by unilateral

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action on defendant’s part that neither invokes arbitration nor launches civil litigation. Therefore,
defendant’s failure to provide plaintiff with a notice-of-dispute form has no bearing on the parties’
contractual obligation to arbitrate, rather than litigate, their disputes. Simply put, plaintiff is bound
by the parties’ arbitration agreement to seek resolution of his claims through arbitration.

        Affirmed.

                                                                /s/ Kathleen A. Feeney
                                                                /s/ James Robert Redford
                                                                /s/ Christopher P. Yates

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