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`Case 3:21-cv-06468-CRB Document 70 Filed 04/18/22 Page 1 of 26
`
`Melinda Haag (State Bar No. 132612)
`mhaag@paulweiss.com
`PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
`535 Mission Street, 24th Floor
`San Francisco, California 94105
`Telephone: (628) 432-5100
`Facsimile: (202) 204-7383
`
`Daniel Kramer (admitted pro hac vice)
`dkramer@paulweiss.com
`Audra J. Soloway (admitted pro hac vice)
`asoloway@paulweiss.com
`Geoffrey R. Chepiga (admitted pro hac vice)
`gchepiga@paulweiss.com
`Daniel S. Sinnreich (admitted pro hac vice)
`dsinnreich@paulweiss.com
`PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
`1285 Avenue of the Americas
`New York, New York 10019-6064
`Telephone: (212) 373-3000
`Facsimile: (212) 757-3990
`
`Attorneys for Defendants
`PayPal Holdings, Inc., et al.
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
`HUEI-TING KANG and ARTHUR FLORES,
`
`
`Plaintiffs,
`
` - against -
`PAYPAL HOLDINGS, INC., et al.,
`
`
`Defendants.
`
` Case No. 3:21-cv-06468-CRB
`DEFENDANTS’ NOTICE OF
`MOTION AND MOTION TO
`DISMISS; SUPPORTING
`MEMORANDUM OF POINTS AND
`AUTHORITIES
`The Honorable Charles R. Breyer
`
`Date: July 8, 2022
`Time: 10:00 a.m.
`Place: Courtroom 6 – 17th Floor
`
`
`
`
`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO DISMISS; SUPPORTING
`MEMORANDUM OF POINTS AND AUTHORITIES - CASE NO.: 3:21-CV-06468-CRB
`
`

`

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`Case 3:21-cv-06468-CRB Document 70 Filed 04/18/22 Page 2 of 26
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`TABLE OF CONTENTS
`
`Page
`
`TABLE OF AUTHORITIES .......................................................................................................... ii
`NOTICE OF MOTION AND MOTION TO DISMISS ................................................................ iv
`ISSUES TO BE DECIDED ........................................................................................................... iv
`SUMMARY OF ARGUMENT .......................................................................................................v
`PRELIMINARY STATEMENT .....................................................................................................1
`BACKGROUND .............................................................................................................................1
`A.
`Plaintiffs’ Allegations Concerning PayPal Credit ...................................................2
`B.
`Plaintiffs’ Allegations Concerning PayPal Debit Cards ..........................................4
`C.
`Alleged Misleading Statements ...............................................................................5
`D.
`Alleged Corrective Disclosures ...............................................................................5
`ARGUMENT ...................................................................................................................................6
`I.
`PLAINTIFFS FAIL TO ALLEGE MISLEADING STATEMENTS OR
`OMISSIONS ........................................................................................................................6
`PLAINTIFFS FAIL TO ALLEGE A STRONG INFERENCE OF
`SCIENTER ........................................................................................................................10
`PLAINTIFFS FAIL TO ALLEGE LOSS CAUSATION ..................................................14
`III.
`PLAINTIFFS’ FAIL TO ALLEGE A VIOLATION OF SECTION 20(a) .......................15
`IV.
`CONCLUSION ..............................................................................................................................15
`
`
`
`
`II.
`
`
`
`i
`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO DISMISS; SUPPORTING
`MEMORANDUM OF POINTS AND AUTHORITIES - CASE NO.: 3:21-CV-06468-CRB
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`

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`Case 3:21-cv-06468-CRB Document 70 Filed 04/18/22 Page 3 of 26
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`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`Bodri v. GoPro, Inc.,
`252 F. Supp. 3d 912 (N.D. Cal. 2017) ............................................................................... ix, 14
`In re Carnival Corp. Sec. Litig.,
`No. 20-cv-22202, Dkt. 86 (S.D. Fla. Mar. 30, 2022) .................................................................8
`City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc.,
`856 F.3d 605 (9th Cir. 2017) .....................................................................................................8
`Costabile v. Natus Med. Inc.,
`293 F. Supp. 3d 994 (N.D. Cal. 2018) .....................................................................................13
`In re Facebook, Inc. Sec. Litig.,
`477 F. Supp. 3d 980 (N.D. Cal. 2020) ............................................................................. passim
`In re Gentiva Sec. Litig.,
`932 F. Supp. 2d 352 (E.D.N.Y. 2013) .......................................................................................9
`Grigsby v. BofI Holding, Inc.,
`979 F.3d 1198 (9th Cir. 2020) .................................................................................................15
`Ikeda v. Baidu, Inc.,
`2021 WL 1299046 (N.D. Cal. Apr. 7, 2021) ...................................................................... vii, 9
`Loos v. Immersion Corp.,
`762 F.3d 880 (9th Cir. 2014) ............................................................................................. ix, 14
`McCasland v. FormFactor Inc.,
`2009 WL 2086168 (N.D. Cal. July 14, 2009) .................................................................. viii, 11
`Mehta v. Robinhood Fin. LLC,
`2021 WL 6882377 (N.D. Cal. May 6, 2021) ...........................................................................10
`Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc.,
`774 F.3d 598 (9th Cir. 2014) ...................................................................................................10
`In re PMI Grp., Inc. Sec. Litig.,
`2009 WL 1916934 (N.D. Cal. July 1, 2009) ...................................................................... ix, 13
`
`Prodanova v. H.C. Wainwright & Co., LLC,
`993 F.3d 1097 (9th Cir. 2021) .....................................................................................10, 11, 12
`Reidinger v. Zendesk, Inc.,
`2021 WL 796261 (N.D. Cal. Mar. 2, 2021) .................................................................... vii, 6, 8
`
`- ii -
`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO DISMISS; SUPPORTING
`MEMORANDUM OF POINTS AND AUTHORITIES - CASE NO.: 3:21-CV-06468-CRB
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`Case 3:21-cv-06468-CRB Document 70 Filed 04/18/22 Page 4 of 26
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`Retail Wholesale & Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard
`Co.,
`845 F.3d 1268 (9th Cir. 2017) ...................................................................................................8
`Ronconi v. Larkin,
`253 F.3d 423 (9th Cir. 2001) .....................................................................................................6
`Singh v. Cigna Corp.,
`918 F.3d 57 (2d Cir. 2019).........................................................................................................8
`Stichting Pensioenfonds ABP v. Countrywide Fin. Corp.,
`802 F. Supp. 2d 1125 (C.D. Cal. 2011) ...............................................................................x, 15
`Tellabs, Inc. v. Makor Issues & Rts, Ltd.,
`551 U.S. 308 (2007) .................................................................................................................10
`In re Twitter, Inc. Sec. Litig.,
`506 F. Supp. 3d 867 (N.D. Cal. 2020) ............................................................................... ix, 13
`Veal v. LendingClub Corp.,
`423 F. Supp. 3d 785 (N.D. Cal. 2019) ...................................................................... vii, 7, 9, 10
`Zucco Partners, LLC v. Digimarc Corp.,
`552 F.3d 981 (9th Cir. 2009) ..................................................................................... viii, 11, 12
`
`Statutes
`
`15 U.S.C. § 78u-4(b)(1)(B) ..............................................................................................................6
`28 U.S.C. § 1658(b)(2) ..............................................................................................................x, 15
`Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4 .................................... viii, 6
`Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) ............................v, 2, 6
`Section 20(a) of the Securites Exchange Act of 1934, 15 U.S.C. § 78t(a) ........................v, x, 2, 15
`
`Other Authorities
`
`Fed. R. Civ. P. 9(b) .................................................................................................................... iv, 6
`Fed. R. Civ. P. 12(b)(6).................................................................................................................. iv
`
`
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`NOTICE OF MOTION AND MOTION TO DISMISS
`PLEASE TAKE NOTICE that on July 8, 2022, at 10:00 a.m., in the courtroom of the
`Honorable Charles R. Breyer of the United States District Court for the Northern District of
`California, defendants PayPal Holdings, Inc. (“PayPal” or the “Company”), Daniel Schulman,
`John Rainey, Doug Bland, and Joseph Gallo (the “Individual Defendants,” and, with PayPal,
`“Defendants”), will, and hereby do, move to dismiss all claims in the Amended Class Action
`Complaint for Violations of the Securities Laws (the “Complaint”). Defendants move to dismiss
`pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure and the Private
`Securities Litigation Reform Act of 1995 (“PSLRA”) on the grounds that lead plaintiffs
`(“Plaintiffs”) fail to state a claim for violations of Section 10(b) of the Securities Exchange Act
`of 1934 (the “Exchange Act”) and SEC Rule 10b-5, as well as Section 20(a) of the Exchange
`Act. Defendants’ motion is based on the Memorandum of Points and Authorities below, the
`Declaration of Geoffrey R. Chepiga and attached exhibits,1 the [Proposed] Order, the arguments
`of counsel, and any other matters properly before the Court.
`ISSUES TO BE DECIDED
`1. Should the Section 10(b) and Rule 10b-5 claims (Counts I and II) be dismissed
`because Plaintiffs have failed to adequately plead any material misleading statements
`or omissions by Defendants?
`2. Should the Section 10(b) and Rule 10b-5 claims (Counts I and II) be dismissed
`because Plaintiffs have failed to plead particularized facts giving rise to a strong
`inference of scienter that is at least as compelling as any opposing inference of
`nonfraudulent intent?
`3. Should the Section 10(b) and Rule 10b-5 claims (Counts I and II) be dismissed
`because Plaintiffs have failed to plead loss causation by linking any decline in
`PayPal’s stock price to a disclosure “correcting” any purported misstatement?
`4. Should the Section 20(a) control person claim (Count III) be dismissed because
`Plaintiffs have failed to plead a primary violation of Section 10(b)?
`
`1 References to “Ex. __” are to the Declaration of Geoffrey R. Chepiga.
`- iv -
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`Case 3:21-cv-06468-CRB Document 70 Filed 04/18/22 Page 6 of 26
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`5. Should claims relating to transactions in PayPal securities that occurred before
`August 20, 2016 be dismissed because they are untimely under Section 10(b)’s five-
`year statute of repose?
`6. Should the Amended Complaint be dismissed with prejudice because Plaintiff has
`already amended and the deficiencies in the Complaint are uncurable, rendering any
`further amendment futile?
`SUMMARY OF ARGUMENT
`Plaintiffs’ securities fraud complaint is fatally defective. It is premised on the
`unremarkable fact that PayPal received inquiries from two regulators seeking information about
`its business. Plaintiffs rely on the existence of those inquiries to make the broad claim that the
`Company’s general statements about its compliance efforts were intentionally false and
`misleading. Plaintiffs ignore the fact that neither regulator has charged PayPal with any
`violation. They also ignore the fact that the Individual Defendants they identify as having sold
`PayPal stock actually increased their stake in the Company during the purported class period and
`that PayPal itself bought back billions of dollars of stock during that period—conduct that is
`wholly inconsistent with an intent to benefit from a fraud. Unsurprisingly, courts in this Circuit
`routinely reject similar theories. Similarly, this Court should dismiss Plaintiffs’ Complaint, with
`prejudice, because Plaintiffs fail to plead (i) that any Defendant made a materially misleading
`statement or omission, or (ii) that any Defendant acted with scienter, or (iii) that the alleged fraud
`caused Plaintiffs’ losses.
`No Material Misleading Statements or Omissions. None of the alleged misstatements
`are adequately pleaded to be false or misleading.
`First, Plaintiffs allege that Defendants misled investors about PayPal’s compliance
`efforts and the quality of its compliance program. Plaintiffs challenge statements that PayPal
`
`was “completely focused” on compliance, that PayPal’s compliance program was “world class,”
`and that PayPal “cooperate[s]” and “work[s]” with regulators to ensure compliance. (E.g.,
`¶¶ 109, 115, 142, 1442; see Ex. 1 at 1–7.) These statements do not become false or misleading
`
`2 References to “¶ __” refer to paragraphs of the Amended Complaint.
`- v -
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`because subsequent regulatory inquiries arise. In fact, courts in this district have repeatedly
`rejected identical allegations. See In re Facebook, Inc. Sec. Litig., 477 F. Supp. 3d 980, 1023–24
`(N.D. Cal. 2020) (“Defendants had no obligation or requirement to elaborate on any alleged non-
`compliance because they had not yet been found to be non-compliant.”); Veal v. LendingClub
`Corp., 423 F. Supp. 3d 785, 806 (N.D. Cal. 2019). Plaintiffs’ theory is particularly inappropriate
`here because PayPal explicitly warned investors that it was “regularly subject” to “government
`and regulatory investigations, inquiries or requests,” the outcomes of which “cannot be predicted
`with certainty” (Ex. 2 at 27), and that non-compliance could “result in . . . redress.” (¶ 109.) See
`Reidinger v. Zendesk, Inc., 2021 WL 796261, at *7 (N.D. Cal. Mar. 2, 2021) (Breyer, J.)
`(holding that statements touting data security program were not rendered misleading by a
`security breach because defendant never guaranteed perfect compliance and instead
`“acknowledged” the risk of breaches). Many of the challenged statements, such as the “belie[f]”
`that PayPal’s interests were “aligned” with its regulators (¶ 115), are also not actionable because
`they are statements of opinion, and Plaintiffs do not allege they were subjectively disbelieved.
`See Ikeda v. Baidu, Inc., 2021 WL 1299046, at *9 (N.D. Cal. Apr. 7, 2021). Most of the
`challenged statements are also classic examples of corporate puffery that this Court has held time
`and again to be not actionable. See In re Facebook, 477 F. Supp. 3d at 1023. (See generally
`infra 7–9.)
`Second, Plaintiffs allege that PayPal’s statements in SEC filings that generally describe
`regulations that govern debit card interchange fees were misleading because, according to
`Plaintiffs (but not any regulators), PayPal has violated these regulations. (¶¶ 111, 117; see Ex. 1
`at 8–9.) This is an incoherent theory: Plaintiffs do not allege that the statements themselves were
`false, since they only describe the regulations. Further, there can be no omissions because
`companies have no duty to “engage in self-flagellation by disclosing unproven allegations.” In
`
`re Facebook, 477 F. Supp. 3d at 1024. (See generally infra 9–10.)
`Third, Plaintiffs allege that Defendant Gallo made misleading statements about the
`Company’s response to a letter-writing campaign by an advocacy group called the Student
`Borrower Protection Center (“SBPC”). The SBPC had raised concerns that certain for-profit
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`Case 3:21-cv-06468-CRB Document 70 Filed 04/18/22 Page 8 of 26
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`educational programs were promoting PayPal Credit on their own websites without proper
`disclosures regarding interest charges. Gallo told the press that PayPal took the SBPC letters
`“very seriously” and had “already begun taking action” against the for-profit programs identified
`in the letters. (¶¶ 136, 138.) Plaintiffs allege that Gallo’s statements were false, and yet
`Plaintiffs concede in the Complaint that PayPal responded to the SBPC letter by “sending
`representatives . . . to meet with the SBPC,” and PayPal ensured that “several of the misleading
`promotions . . . were taken down.” (¶¶ 86, 158.) Given these concessions, Plaintiffs do not
`come close to alleging that Gallo’s statements were false. (See generally infra 10.)
`No scienter. Plaintiffs fail to plead any specific facts raising a strong inference that the
`Individual Defendants knew or deliberately disregarded facts contradicting their public
`statements, or were motivated to defraud investors.
`No regulator has charged PayPal with a violation relating to the two regulatory inquiries
`that are the subject of the Complaint, let alone has any violation been found. Nor do Plaintiffs
`plead that any Individual Defendant knew about or deliberately disregarded any uncharged
`violation. Although the Complaint refers to several confidential witnesses (“CWs”), none
`purports to have knowledge of any regulatory violations, and none purports to have ever spoken
`with the Individual Defendants or conveyed facts to the Individual Defendants that would have
`contradicted any of their public statements. One CW recalls “weekly or biweekly meetings”
`where “updates were provided” on a 2015 Consent Order between the Consumer Financial
`Protection Bureau (“CFPB”) and PayPal. (¶ 156.) But this CW does not recall any particular
`meeting where violations were discussed, as opposed to compliance generally, and certainly does
`not allege that any Individual Defendant ever attended or received reports from any such meeting
`about violations. These allegations do not come close to meeting the heightened standard for
`pleading fraudulent intent under the PSLRA. See Zucco Partners, LLC v. Digimarc Corp., 552
`
`F.3d 981, 998–1000 (9th Cir. 2009); McCasland v. FormFactor Inc., 2009 WL 2086168, at *5–6
`(N.D. Cal. July 14, 2009). (See generally infra 11–12.)
`Since Plaintiffs cannot allege fraudulent intent based on any CW statement, they try to
`salvage their claims by pointing to stock sales by Defendants Schulman and Rainey during the
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`five-year purported Class Period. (¶ 166.) These allegations fail for many reasons, including
`that (i) Schulman and Rainey both significantly increased their holdings during the class period,
`(ii) Plaintiffs do not (and cannot) allege that any sales were unusual in timing or amount, and (iii)
`nearly every sale was made pursuant to a Rule 10b5–1 trading plan or to satisfy tax obligations.
`See In re PMI Grp., Inc. Sec. Litig., 2009 WL 1916934, at *10 (N.D. Cal. July 1, 2009); In re
`Twitter, Inc. Sec. Litig., 506 F. Supp. 3d 867, 890 (N.D. Cal. 2020). (See generally infra 13.)
`Moreover, PayPal repurchased more than 100 million shares of its own stock at a cost of more
`than $9 billion during the purported Class Period, which completely undermines any inference of
`fraudulent intent. Bodri v. GoPro, Inc., 252 F. Supp. 3d 912, 933 (N.D. Cal. 2017). (See
`generally infra 13–14.)
`No loss causation. Plaintiffs also cannot meet their burden to plead loss causation.
`Their principal theory—that the “truth” was revealed by the disclosure of regulatory inquiries in
`July 2021—has been squarely rejected by the Ninth Circuit. In Loos v. Immersion Corp., 762
`F.3d 880, 883 (9th Cir. 2014), the Ninth Circuit held that “the announcement of an investigation,
`standing alone, is insufficient to establish loss causation.” This is because a “decline in a
`corporation’s share price following the announcement of an investigation can only be attributed
`to market speculation about whether fraud has occurred. This type of speculation cannot form
`the basis of a viable loss causation theory.” Id. (See generally infra 14.)
`Plaintiffs also seek to recover from a stock drop that purportedly followed the disclosure
`of a letter sent from an advocacy group called The Clearing House Association (“CHA”) to the
`Federal Reserve calling for “revisions” to regulations governing interchange fees. (¶ 149.) But
`the letter does not accuse PayPal (or any institution) of any regulatory violation and only
`mentions PayPal in a footnote. (Ex. 11 at 1–2 & n.5.) Moreover, Plaintiffs allege that the stock
`drop caused by this letter occurred on October 26, 2020, the first trading day after the letter was
`
`emailed to the Federal Reserve. (¶¶ 149–150.) The public record shows, however, that the letter
`was not released by the Federal Reserve to the public until more than one month later on
`December 10, 2020. Any stock drop on October 26, 2020 could not be caused by a letter that
`had not yet been disclosed to the public. (See generally infra 15.)
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`Statute of repose. Plaintiffs propose a class period that violates the Exchange Act’s
`clear five-year statute of repose. Claims relating to transactions in PayPal securities that
`occurred more than five years before the initial complaint was filed on August 20, 2021, are
`time-barred and must be dismissed. 28 U.S.C. § 1658(b)(2); see Stichting Pensioenfonds ABP v.
`Countrywide Fin. Corp., 802 F. Supp. 2d 1125, 1134 (C.D. Cal. 2011). (See generally infra 15
`n.10.)
`No control person liability. Plaintiffs’ Section 20(a) claims must be dismissed because
`Plaintiffs fail to allege a primary violation. See In re Facebook, 477 F. Supp. 3d at 1034. (See
`generally infra 15.)
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`PRELIMINARY STATEMENT
`Plaintiffs pursue a theory of securities fraud that courts have repeatedly rejected.
`Plaintiffs allege, without basis, that the disclosure of two regulatory inquiries in July 2021
`somehow demonstrates that Defendants misled investors for more than five years about PayPal’s
`commitment to regulatory compliance. Courts in this Circuit routinely dismiss claims like this,
`particularly where, as here, no charges have been filed. The fundamental flaws in Plaintiffs’
`legal theory are incurable, and the Amended Complaint should be dismissed with prejudice.
`First, Plaintiffs fail to sufficiently plead falsity. None of the challenged statements about
`PayPal’s compliance contains any misstatements of fact, and most are classic examples of
`statements of opinion or corporate puffery that are not actionable. Defendants also explicitly
`warned investors that PayPal was regularly subject to regulatory inquiries and that non-
`compliance could materially affect the business. No reasonable investor would have understood
`Defendants’ statements as a guarantee that PayPal would never face regulatory inquiries.
`Second, Plaintiffs fail to satisfy the PSLRA’s heightened pleading standard for scienter.
`Plaintiffs plead no facts suggesting that any Individual Defendant knew of and deliberately
`misrepresented any regulatory violations. Although the Complaint references several former
`employee CWs, none purports to have first-hand knowledge of any violation, and none purports
`to have ever met or spoken with any Individual Defendant. Plaintiffs’ allegation that Defendants
`Schulman and Rainey were motivated to commit fraud to profit from stock sales should also be
`rejected, as both Defendants significantly increased their ownership of PayPal stock during the
`purported class period. PayPal itself spent more than $9 billion repurchasing its own stock.
`These facts thoroughly negate any claim of motive and undermine any inference of scienter.
`Third, Plaintiffs fail to plead loss causation. Their principal theory—that disclosure of
`regulatory inquiries revealed prior fraud—has been squarely rejected by the Ninth Circuit.
`BACKGROUND
`PayPal is a leading technology company that enables digital payments and simplifies
`commercial transactions on behalf of merchants and consumers worldwide. (¶ 2; Ex. 3 at 4–5.)
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`PayPal had approximately 34 million active merchant accounts as of December 31, 2021, and
`offers numerous payment solutions, including PayPal Credit and PayPal debit cards. (Ex. 3 at 5.)
`Plaintiffs seek to represent a class of purchasers of PayPal common stock between April
`27, 2016 and July 28, 2021 (the “Class Period”), and assert claims under Section 10(b) and Rules
`10b-5(a)–(c) against PayPal and officers and employees Daniel Schulman, John Rainey, Joseph
`Gallo, and Doug Bland, and under Section 20(a) against Schulman and Rainey.
`Plaintiffs’ Allegations Concerning PayPal Credit
`A.
`Plaintiffs’ allegations focus largely on PayPal’s July 29, 2021 disclosure that the CFPB
`had sent a civil investigative demand (“CID”) regarding marketing of PayPal Credit by
`merchants offering for-profit educational services. (¶ 151.)
`PayPal Credit is a revolving credit line issued by Synchrony Bank that allows PayPal
`customers to pay for purchases with their PayPal Credit account on merchant websites that
`accept PayPal as a form of payment. (¶¶ 3, 35.) One of PayPal Credit’s promotional finance
`offerings is a “deferred interest” arrangement on purchases of $99 or more, where no interest is
`charged if the balance is paid within six months of the purchase date, but interest is charged from
`the date of purchase if the customer does not pay the balance in full within six months. (¶ 35.)
`The CFPB inquiry on which Plaintiffs focus came approximately one year after the
`SBPC, a student borrower advocacy group, issued a report titled “Shadow Student Debt.” (¶ 62.)
`In that report, the group raised concerns about certain for-profit “schools” that marketed financial
`products with high interest rates for tuition payment, including from PayPal Credit. (¶ 63; Ex. 5
`at 5, 14.) On August 20, 2020, the SBPC sent letters to the CFPB and PayPal purporting to
`identify 151 for-profit programs, such as the Academy of Ancient Reflexology, that offered
`PayPal Credit as a financing option. (¶ 69; Ex. 6 at 1–2.) 3 Plaintiffs cite the SBPC letters
`throughout the Complaint for the proposition that the identified for-profit schools did not
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`properly disclose the terms of PayPal Credit’s deferred interest offering. (E.g., ¶¶ 10, 64–68, 85–
`88.) Plaintiffs allege that they independently “investigated” the for-profit schools listed in the
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`3 According to the Yahoo! Finance article cited by Plaintiffs throughout their Complaint, the
`“transactions in question” by these for-profit programs “only represented 0.01% of PayPal
`Credit’s total dollar volume between 2017 and 2020.” (Ex. 8 at 2.)
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`SBPC letter and identify ten that supposedly promoted PayPal Credit financing during the Class
`Period without “clearly and prominently explaining that interest would be charged from the date
`of purchase” if the balances were not paid in six months. (See ¶¶ 67–69, 83, 86–87.)
`The day after the SBPC letters were sent, Joseph Gallo, a Director on PayPal’s
`Communications Team, told The Washington Post that PayPal took “very seriously” the claims
`that merchants were not accurately describing PayPal Credit financing terms, and that “[i]f an
`organization is found to be using inaccurate or misleading messaging or characterization about
`PayPal Credit products . . . we will quickly move to terminate the use of our services.” (¶ 85;
`Ex. 7 at 2.) One week later, Gallo told Yahoo! Finance that PayPal had “already begun taking
`action” against certain merchants using “inaccurate or misleading messaging/characterization of
`our products.” (¶ 85; Ex. 8 at 1.) Plaintiffs concede that “several of the misleading promotions
`. . . were taken down.” (¶ 86.) Plaintiffs nonetheless identify four specific schools, representing
`0.0000001% of PayPal’s approximately 34 million active merchant accounts, whose “misleading
`promotions” allegedly remained on their websites following publication of the SBPC letters.
`(See ¶¶ 86–87.) Plaintiffs do not allege whether PayPal Credit could still be accessed from these
`merchants’ websites, and ignore that the Yahoo! Finance article on which they rely states that the
`alleged conduct “seems to have been nipped in the bud” and that certain for-profit schools
`continued to “mention” PayPal Credit on their websites without an active link. (Ex. 8 at 2, 6.)
`Plaintiffs incorrectly allege that the 2021 CID is somehow connected to a regulatory
`proceeding brought six years earlier by the CFPB concerning different allegations. In 2015, the
`CFPB filed a federal complaint alleging that PayPal (i) was enrolling consumers in PayPal Credit
`without consent, (ii) sometimes failed to honor promotional ads, such as monetary rebates and
`“no interest for six or twelve months,” and (iii) failed to properly inform customers about how
`payments would be allocated among multiple deferred-interest balances. (¶¶ 38–39; Ex. 9 at 6–
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`10.) The CFPB complaint did not allege that PayPal or merchants offering PayPal Credit misled
`customers about interest charges on deferred-interest purchases.
`PayPal settled the CFPB lawsuit without admitting or denying the allegations, and agreed
`to a Consent Order filed in federal court (the “Consent Order”). (Ex. 10 at 2.) The Consent
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`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO DISMISS; SUPPORTING
`MEMORANDUM OF POINTS AND