A Highland Park charity and a donor are accusing PayPal of illegally withholding and redirecting donations intended to benefit certain charities in a class action complaint filed Feb. 28 in Chicago federal court. 

Plaintiff Terry Kass, of Illinois, said she attempted to use PayPal Charitable Giving Fund to donate $3,250 to 13 local and national charities, including the organization known as Friends For Health: Supporting the North Shore Health Center. Friends for Health is also a named plaintiff in the action. 

Although PayPal had profile pages on its giving platform for all 13 of the charities Kass said she donated to, the complaint said Paypal only allowed contributions to the three actually registered with PayPal, meaning PayPal withheld $3,150 from going to the 10 non-registered organizations. 

“On its face, PayPal Giving Fund is an admirable endeavor,” the complaint states, noting PayPal launched launched the platform in 2013. “However, in practice, it falls woefully short of that mission on numerous fronts.” 

By listing charities on the website that are not registered to receive donations through the Fund, and failing to inform donors those listed charities will not receive their contributions, or to notify the charities that donations have been made, “tens of thousands of generous individuals, after placing their trust in PayPal, have made donations, that, unbeknownst to them, have never reached their chosen charity. Likewise, thousands of charities have been deprived of much needed funds they never knew were even intended for them.” 

Further, the complaint alleges PayPal has taken donations made to unregistered charities and directed the money to organizations of its choice, without notifying the donors or intended recipients. This occurred, the lawsuit alleges, despite a website that purportedly “repeatedly promises its customers — in no uncertain terms — that 100 percent of their donations will go to whichever charity they choose within the PayPal giving platform” and email solicitations promising to add 1 percent to each donation. The lawsuit said Paypal also sent email confirmations of donations given to specific charitable organizations.

The complaint said charities can only receive donations if they have both a PayPal business account and a separate Giving Fund account. While common practice for many large organizations, the complaint said “hundreds of thousands of smaller charities (those that have the hardest time fundraising) have not.” The complaint includes screenshots from Giving Fund web pages, and notes that while PayPal advertises the ability to donate to more than 1 million charities, 2015 securities filings showed only 29,000 had registered Giving Fund accounts. 

The complaint seeks to establish a class for donors, a second class for agencies that can demonstrate undelivered funds and a third that can argue false affiliation, should a court agree PayPal used names, trademarks and likenesses without consent. 

Formal allegations include violation of the Lanham Act’s intellectual property statutes, conversion, unjust enrichment, accounting standards and the Washington, D.C., Consumer Protection Procedures Act, as PayPal Giving Fund’s headquarters are in the District of Columbia. 

In addition to a jury trial and class certification, the complaint asks the court to declare all donations rightfully belong to the charities donors designated as recipients, and to declare Kass and all donor class members should be able to claim those donations on their state and federal tax returns. 

Plaintiffs also ask the court to order a full, complete accounting of all relevant transactions and to force PayPal to provide the names of each donor who did not request anonymity, along with the amount of their donation and intended recipient. 

The complaint seeks injunctive and equitable relief as well as actual, treble, punitive and statutory damages and restitution, with interest and attorney fees. 

Representing Kass and Friends For Health and the putative class are lawyers from Edelson PC, Chicago, and Moirano Gorman Kenny LLC, also of Chicago.

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Organizations in this Story

Edelson PC
350 N LaSalle St Suite 1300
Chicago, IL 60654

Moirano Gorman Kenny LLC
3025 135 South La Salle Street
Chicago, IL 60603

U.S. District Court for the Northern District of Illinois
219 S Dearborn St
Chicago, IL 60604

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