The following is a letter sent to A. J. De Bartolomeo of the San Francisco law firm of Girard Gibbs & De Bartolomeo on August 6, 2004, in connection with litigation against PayPal, the Internet payment company. The suit alleged that PayPal’s customers have been injured because PayPal “did not provide account statements in the manner required by the Electronic Fund Transfer Act.” PayPal denied wrongdoing, but to avoid the cost of litigation, it reached a settlement. It agreed to pay $9.25 million: the law firm gets $3.3 million, and each PayPal customer who joins the suit will get $50.*
Dear Mr. De Bartolomeo:
I am replying to your invitation to join, and cash in on, the class-action lawsuit you have filed against the PayPal company. Although I am an affected party and therefore eligible for money, of course I refuse to participate in the proposed settlement. Anyone with a sense of proportion and morality would refuse to be a part of it. When a private party demands money by threatening to use force we call it extortion. A lawsuit is a demand for money by threatening to use the physical force at the command of a court in the form of policemen and jails. It therefore borders on extortion, however legal it might be. To qualify as non-extortionary, a lawsuit needs to meet two criteria. First, the defendant should have inflicted an intentional, major injury on the plaintiff. In other words, the defendant has to do something he knew was very wrong, like deliberately driving a bulldozer into his house. If this condition isn’t met, the plaintiff’s lawyer is no better than a gangster holding a gun who says, “Give me ten G’s on account of you wrinkled my suit.”
This lawsuit does not meet this test. It does not allege, for example, that PayPal used violence against any of its customers, or that it deliberately defrauded them of their life savings. It says the company failed to implement certain government regulations. I’m sorry, but failing to follow a federal regulation hardly rates as a major wrong. Every American does it, and must do it to survive in our over-regulated society. As a satisfied PayPal customer, I am not aware I have suffered any injury as a result of PayPal’s failing to adhere to these regulations (which PayPal contends don’t even apply in its case). The fact that plaintiffs are to get only $50 each proves that this is a trivial “injury,” one that does not merit using the threatened violence of the state to redress. The second condition that distinguishes a legitimate lawsuit from extortion is that no one profits from the lawsuit beyond the amount necessary to make the wronged party financially whole. This suit does not meet this criterion. It does not indicate that plaintiffs suffered any monetary loss, certainly not the $9.25 million being awarded. They are just greedily cashing in. And so are you, Mr. DeBartolomeo, lining your own pockets with the obscene fee of $3.3 million.
It’s dismaying to think that any of my fellow Americans will join you in this deplorable racket.
James L. Payne