Ryan v. PayPal Inc

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
JENNIFER L. RYAN, §
§
Plaintiff, §
§
v. § Case No. 3:25-cv-01223-E-BT
§
PAYPAL INC., §
§
Defendant. §
FINDINGS, CONCLUSIONS, AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
Before the Court is Defendant PayPal Inc. (PayPal)’s Renewed Motion to
Compel Arbitration and Dismiss under Rule 12(b)(3) or, alternatively, Rule
12(b)(6) (ECF No. 13). For the Reasons stated, the Court should GRANT IN
PART Defendant’s Motion, COMPEL the Parties to arbitration, and STAY the
action pending arbitration.
Background
In her Amended Complaint, Plaintiff Jennifer Ryan alleges that she
maintained a PayPal account for about fifteen years—until it was terminated on
January 21, 2021. Pl. Am. Compl. ¶ 1 (ECF No. 8). Six days earlier, federal agents
arrested Plaintiff on a misdemeanor charge arising from her presence at the U.S.
Capitol on January 6, 2021. Id. ¶ 12. Plaintiff received a 60-day sentence for the
January 6 misdemeanor offense. Id. ¶ 16. She later received a Presidential Pardon.
Id.
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The same day as her arrest, Plaintiff posted a fundraising message on social
media. Id. ¶ 13. And later that day, PayPal closed Plaintiff’s account based on a
“policy violation.” Id. By January 22, 2021, multiple news articles referencing
Plaintiff’s account termination had been published. Id. ¶ 14.
Plaintiff alleges that PayPal coordinated with government agencies and
leaked information about her account termination to media outlets. Id. ¶¶ 1, 15. As
a result, Plaintiff claims, she was banned by financial institutions, suspended from
social media platforms, evicted from her real-estate office, and forced to change
her name, close her business, sell her home, and relocate. Id. ¶¶ 15, 17. Plaintiff
alleges that she continued to encounter account closures, professional difficulties,
and expenses related to litigation and relocation through 2025. Id. ¶ 17.
In June 2022, Plaintiff filed a civil action in a Denton County state court
asserting tort and statutory claims against PayPal related to the termination of her
account. Id. ¶ 18. PayPal then removed the case to federal court in the Eastern
District of Texas, Jenna Ryan et al. v. PayPal Hold. Co., 4:22-cv-00559-ALM-BD
(E.D. Tex. 2022). Id. ¶ 18. The federal court ordered Plaintiff and PayPal to
arbitration. Id. ¶¶ 19. Plaintiff initiated an arbitration proceeding with the
American Arbitration Association (AAA), but the AAA ultimately closed the matter
due to unpaid fees. Id. Plaintiff voluntarily dismissed her first lawsuit on May 1,
2025. Id. ¶ 20.
Two weeks later, Plaintiff sued PayPal in this District, asserting claims under
42 U.S.C. §§ 1983 and 1985, as well as state-law tort claims. See Original Compl.
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(ECF No. 3). In response, PayPal moved to compel arbitration and dismiss the
case, or alternatively, to dismiss the Complaint under Fed. R. Civ. P. 12(b)(6). See
ECF No. 6. Plaintiff then filed her Amended Complaint, ECF No. 8, prompting
PayPal to file the pending Renewed Motion to Compel Arbitration and Dismiss.
See ECF No. 13.
In the Renewed Motion, PayPal seeks to compel arbitration based on
language in PayPal’s User Agreement (the “Arbitration Agreement”). See Renewed
Mot. Compel (ECF No. 13) (citing Pl. Am. Compl., Ex. 9, Arbitration Agreement
(ECF No. 8-9)). PayPal also argues the issues litigated and decided in the Eastern
District of Texas—that the Arbitration Agreement is valid and enforceable—should
be afforded preclusive effect here, and that each of Plaintiff’s claims should be
compelled to arbitration. See id. 6–13. Plaintiff responds that issue preclusion does
not apply, that her federal statutory claims are non-arbitrable, that PayPal has
waived its right to arbitration, that the prohibitive costs of arbitration prevent the
Court from enforcing the Arbitration Agreement, and that “Equitable
Considerations” demand the judicial resolution of her claims. See Pl. Opp. Mot.
Compel (ECF No. 14).
Legal Standards
Historically, American courts adopted from the English common law
“centuries of judicial hostility to arbitration agreements.” Scherk v. Alberto-Culver
Co., 417 U.S. 506, 510 (1974). But Congress passed the Federal Arbitration Act
(FAA) to reverse this hostility and “ensure judicial enforcement of privately made
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agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219
(1985). Section 2 of the FAA provides that “[a] written provision in . . . a contract
evidencing a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity or the revocation
of any contract.” 9 U.S.C. § 2; see also Rent-A-Center, West, Inc. v. Jackson, 561
U.S. 63, 67 (2010). “The FAA thereby places arbitration agreements on an equal
footing with other contracts . . . and requires courts to enforce them according to
their terms.” Rent-A-Center, 561 U.S. at 67.
Parties aggrieved by another party’s failure to arbitrate a claim under a
written arbitration agreement may petition a federal court “for an order directing
that such arbitration proceed in a manner provided for in such agreement.” Id.
(quoting 9 U.S.C. § 4). “Once the court is satisfied that the making of the agreement
for arbitration or the failure to comply therewith is not in issue, it shall order
arbitration.” Gezu v. Charter Commc’ns, No. 3:20-CV-01476-G-BT, 2021 WL
419741, at *4 (N.D. Tex. Jan. 7, 2021) (Rutherford, J.), rec. adopted, No. 3:20-CV-
01476-G (BT), 2021 WL 410000 (N.D. Tex. Feb. 5, 2021) (Fish, J.), aff’d, 17 F.4th
547 (5th Cir. 2021) (internal quotation marks omitted).
“Courts perform a two-step inquiry when considering whether to compel
arbitration.” Id. (quoting Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214
(5th Cir. 2003)). First, the court determines “whether the [P]arties agreed to
arbitrate the dispute,” as “[a]rbitration is strictly a matter of consent.” Id. (quoting
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Granite Rock Co. v. Int'l Brotherhood of Teamsters, 561 U.S. 287, 299 (2010)).
This inquiry involves answering two questions: “(1) whether there is a valid
agreement to arbitrate between the [P]arties; and (2) whether the dispute in
questions falls within the scope of the [A]rbitration [A]greement.” Id. (quoting Am.
Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 537 (5th Cir. 2003)). The strong
federal policy favoring arbitration does not apply “to the determination of whether
there is a valid agreement to arbitrate between the [P]arties.” Id. Second, the court
must determine “whether any federal statute or policy renders the claims non-
arbitrable.” Id. (quoting R.M. Perez & Assocs., Inc. v. Welch, 960 F.2d 534, 538
(5th Cir. 1992)).
Analysis
A. Whether Plaintiff and PayPal Agreed to Arbitrate Their Dispute
(1) Whether There is a Valid Agreement to Arbitrate Between the Parties
The initial question for the Court is “whether the [P]arties entered into any
arbitration agreement at all.” Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199,
201 (5th Cir. 2016) (emphasis in original). “This first step is a question of contract
formation only—did the [P]arties form a valid agreement to arbitrate some set of
claims.” IQ Prods. Co. v. WD-40 Co., 871 F.3d 344, 348 (5th Cir. 2017). And courts
“apply ordinary state-law principles that govern the formation of contracts.” Webb
v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996).
When, as here, an agreement contains both a choice-of-law provision
and an arbitration clause, see Pl. Am. Compl., Ex. 9, Arbitration Agreement (ECF
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No. 8-9), courts will apply the substantive law of the state named in the choice-of-
law provision. Ebner v. Fin Architects, Inc., 763 F. Supp. 2d 697, 700 (D. Del.
2011); see also Noel v. Paul, No. 3:21-CV-2485, 2022 WL 4125216, at *4–5 (N.D.
Tex. Sept. 9, 2022) (discussing exceptions to this rule that are not present here).
The User Agreement includes a broad Delaware choice-of-law provision. See
Pl. Am. Compl., Ex. 9, Arbitration Agreement (ECF No. 8-9) (“[T]he laws of the
State of Delaware . . . will govern this user agreement and any claim or dispute that
has arisen or may arise between you and PayPal.”). Thus, the Court looks to
Delaware law in its analysis on contract formation.
Plaintiff alleges in her Amended Complaint that her claims are not subject
to arbitration due to “invalidity” and “no valid agreement.” Am. Compl. ¶ 22. She
states that “[t]he clickwrap agreement lacked clear notice and was unconscionable,
given PayPal’s coercive ban.” Id. She also states she “did not knowingly assent to
civil rights violations or obstructed arbitration process.” Id. But nowhere in her
Amended Complaint or opposition to PayPal’s motion does Plaintiff elaborate on
any lack of notice or unconscionability.
PayPal’s User Agreement, which includes the Arbitration Agreement, is a
“clickwrap” agreement—an online agreement that requires a “webpage user [to]
manifest assent to the terms of a contract by clicking an ‘accept’ button in order to
proceed.” Doe v. Massage Envy Franchising, LLC, No. S20C-05-5RFS, 2020 WL
7624620, at *2 (Del. Super. Ct. Dec. 21, 2020) (citing Newell Rubbermaid Inc. v.
Storm, No. 9398-VCN, 2014 WL 1266827, at *1 (Del. Ch. Mar. 27, 2014)). Courts
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have routinely found clickwrap agreements as binding contracts under Delaware
law. Id. Absent any specific argument regarding how or why the Arbitration
Agreement is invalid, the Court should find that the Agreement is valid.
Additionally, the federal court in the Eastern District of Texas held the
Arbitration Agreement at issue to be valid and enforceable, JLR Glob., LLC v.
PayPal Holding Co., No. 4:22-CV-559, 2023 WL 2527158, at *6 (E.D. Tex. Mar. 15,
2023) (Mazzant, J.) (the “Arbitration Order”), and PayPal argues that decision
should be afforded preclusive effect. See Renewed Mot. Compel 6–9. As explained
below, the Court may exercise its “broad discretion” and preclude Plaintiff from
relitigating the validity and enforceability of the Arbitration Agreement in this
case.
The Supreme Court has “long recognized that the determination of a
question directly involved in one action is conclusive as to that question in a second
suit.” B & B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138, 148 (2015)
(internal quotations omitted). This concept is known as “issue preclusion”
(formerly called “collateral estoppel”). See id. “The idea is straightforward: Once a
court has decided an issue, it is forever settled as between the parties, thereby
protecting against the expense and vexation attending multiple lawsuits,
conserving judicial resources, and fostering reliance on judicial action by
minimizing the possibility of inconsistent verdicts.” Id. (cleaned up) (internal
quotation omitted). “In short, ‘a losing litigant deserves no rematch after a defeat
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fairly suffered.’” Id. (quoting Astoria Fed. Sav. & Loan Assn. v. Solimino, 501 U.S.
104, 107 (1991)).
The question “of whether to apply [issue preclusion] is a question of law.”
Bradberry v. Jefferson Cnty., Tex., 732 F.3d 540, 549 (5th Cir. 2013). And a
district judge generally has broad discretion to determine whether issue preclusion
should be applied to preclude litigation of an issue. Copeland v. Merrill Lynch &
Co., 47 F.3d 1415, 1423 (5th Cir. 1995) (citing Nations v. Sun Oil Co. (Delaware),
705 F.2d 742, 744–45 (5th Cir. 1983) (en banc), cert denied, 464 U.S. 893 (1983)).
In determining the preclusive effect of a prior federal court’s decision, the
Court applies federal common law. Freeman v. Lester Coggins Trucking, Inc., 771
F.2d 860, 862 (5th Cir. 1985). Under federal common law, the elements of issue
preclusion are those set out in the Restatement (Second) of Judgments. See
Langley v. Prince, 926 F.3d 145, 164 (5th Cir. 2019) (en banc) (citing B & B
Hardware, Inc., 575 U.S. at 153). The Restatement provides that issue preclusion
applies when:
[A]n issue of fact or law is actually litigated and determined by a valid
and final judgment, and the determination is essential to the
judgment, the determination is conclusive in a subsequent action
between the parties, whether on the same or a different claim.
See Restatement (Second) of Judgments § 27 (1982). Additionally, the issue of fact
or law must be “identical” in both proceedings. See Pace v. Bogalusa City Sch. Bd.,
403 F.3d 272, 290 (5th Cir. 2005).
In the context of issue preclusion, however, the requirement of a “final
judgment” is not absolute. See Rest. (Second) of J. §§ 13, 27 comment k (1982).
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The Restatement provides that “for purposes of issue preclusion . . . ‘final
judgement’ includes any prior adjudication of an issue in another action that is
determined to be sufficiently firm to be accorded conclusive effect.” Id. § 13. The
Restatement recognizes that requiring “strict finality” can lead to hardship through
“needless duplication of effort and expense in a second action to decide the same
issue.” Id. § 13 comment g; see also 18A Wright & Miller’s Federal Practice and
Procedure § 4434 (3d. ed. Sep. 2025 update) (noting that in applying issue
preclusion, “[r]ecent decisions have relaxed traditional views of the finality
requirement”).
In determining whether an interlocutory order should be considered “final,”
a court should analyze the following factors:
(a) Whether the decision to be carried over was “adequately
deliberated and firm,” or was instead “avowedly tentative”;
(b) Whether the “conclusion in question” was “procedurally
definite”;
(c) Whether “the parties were fully heard” on the issue;
(d) Whether the court supported its decision with a reasoned
opinion; and
(e) Whether “the decision was subject to appeal or was in fact
reviewed on appeal.”
See id. The Fifth Circuit, too, has recognized that “finality” for purposes of issue
preclusion does not always require a “final judgment,” but only that the issues have
been “fully litigated.” See Wheeler v. Kidder Peabody & Co., Inc., 1993 WL 455869,
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at *2–3 (5th Cir. Oct. 26, 1993) (unpublished) (holding that a prior state-court
order compelling arbitration, although interlocutory, was entitled to preclusive
effect in subsequent federal court proceeding after Plaintiff voluntarily dismissed
his suit and refiled in federal court).
To apply issue preclusion, the Court must find that: (a) the same issue was
“actually litigated and determined by a valid and final judgment”; and (b) the issue
was “essential to the judgment.” See Rest. (Second) of J. § 27; Langley v. Prince,
926 F.3d 145, 164 (5th Cir. 2019).
The first question is thus whether the interlocutory Arbitration Order may
be treated as “valid and final” for purposes of issue preclusion. See, e.g., Doe v.
Tonti Mgmt. Co., L.L.C., 24 F.4th 1005, 1009 (5th Cir. 2022) (recognizing that
“orders compelling arbitration that stay and administratively close a civil action
pending arbitration are interlocutory and unappealable.”). The Restatement
clarifies that certain interlocutory orders, although not “final judgments” in the
strict sense, may be treated as final for the purposes of issue preclusion. See Rest.
(Second) of J. §§ 13, 27.
Based on the procedural history of Plaintiff’s earlier case in the Eastern
District of Texas, the Court may exercise its discretion to treat the interlocutory
Arbitration Order as final. Plaintiff, who was represented by counsel in her first
lawsuit, was fully heard on the issue, as the Motion to Compel was fully briefed.1
1 The briefing included the Motion itself, a Response Brief, a Reply Brief, and a Sur-
Reply—totaling over 50 pages.
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Id. §13 comment g. And the district judge supported his Arbitration Order with a
well-reasoned, written memorandum opinion and order. See id.; See generally
JLR Glob., No. 4:22-CV-559, 2023 WL 2527158 (E.D. Tex. Mar. 15, 2023)
(Mazzant, J.). The district judge similarly issued a thorough written opinion and
order denying Plaintiff’s Motion for Reconsideration of the Arbitration Order
purportedly “based on new evidence of the prohibitive costs to arbitrate and
impossibility of performance.” JLR Glob., LLC v. PayPal Holding Co., No. 4:22-
CV-559, 2024 WL 4198003 (E.D. Tex. Sept. 13, 2024) (Mazzant, J.). To be sure, an
order compelling arbitration is “unappealable,” which weighs against applying
issue preclusion. See Rest. (Second) of J. § 13 comment g. But on balance, the
decision here was sufficiently “firm” and “procedurally definite,” such that it is
appropriate to treat it as final for purposes of issue preclusion. See id. § 13;
Cf. Wheeler, 1993 WL 455869, at *2–3 (noting that issue preclusion does not
always require a “final judgment” but only that the issues have been “fully
litigated”).
Having resolved that threshold issue, the Court turns to the remaining
requirements: whether the “enforceability and validity” of the Arbitration
Agreement was “actually litigated and determined” by the Arbitration Order and
whether it was “essential to” that Arbitration Order. See Rest. (Second) of J. § 27.
The same issue before the Court here—whether a valid and enforceable
arbitration agreement existed between Plaintiff and PayPal—was litigated and
determined by the Arbitration Order. The Parties specifically briefed, and the court
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specifically held, that the Arbitration Agreement was: (1) valid and enforceable
against Plaintiff; and (2) it survived termination of the Parties’ contractual
relationship. See JLR Glob., 2023 WL 2527158, at *3–6. And that determination
was clearly essential to the Arbitration Order. See id. Had validity and
enforceability been decided differently, the court could not have compelled the
Parties to arbitration. Plaintiff, however, argues that the issues here are not
identical because this case “presents new facts absent from [the Eastern District]
case,” and that she did not have a full and fair opportunity to litigate her claims
under 42 U.S.C. §§ 1983 and 1985. See Pl. Opp. Mot. Compel 9 (ECF No. 14). But
for purposes of issue preclusion, issues are identical where the legal standards
governing their resolution are not “significantly different.” See Pace, 403 F.3d at
290. Here, there is no difference between the legal standards—the standard for
determining the validity and enforceability of an arbitration agreement is the
same. The issues are therefore “identical.” See id.; see also Rest. (Second) of J. § 27
(where issue preclusion applies, “the determination [as to that issue] is conclusive
in a subsequent action between the parties, whether on the same or a different
claim”).
Finally, applying issue preclusion here “conserve[es] judicial resources,” and
fosters “reliance on judicial action by minimizing the possibility of inconsistent
verdicts.” B & B Hardware, Inc., 575 U.S. at 148. And, as discussed above, Plaintiff
had a full and fair opportunity to litigate this issue in the earlier case. See Allen v.
Curry, 449 U.S. 90 (1980). Thus, applying the doctrine will not result in injustice
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to Plaintiff and does not contravene public policy. But allowing Plaintiff a clean
slate to relitigate this issue after she received an adverse decision about
arbitrability would be unfair to PayPal and creates needless duplication. See B & B
Hardware, Inc., 575 U.S. at 148. Thus, the Court may, in its discretion, find that
Plaintiff is precluded from relitigating the validity and enforceability of the
Arbitration Agreement.
(2) Whether the Dispute in Questions Falls Within the Scope of the
Arbitration Agreement
Whether the claims “fall within the scope” of the Arbitration Agreement is
for this Court to decide. Pennzoil Expl. & Prod. Co. v. Ramco Energy Ltd., 139 F.3d
1061, 1066 (5th Cir. 1998); see also Pl. Am. Compl., Ex. 9, Arbitration Agreement
(ECF No. 8-9).2 The Court’s sole responsibility, however, “is to determine whether
this dispute is governed by an arbitration clause, not to determine the merits of the
dispute.” Pennzoil Expl., 139 F.3d at 1067. The Court “resolve[s] doubts concerning
the scope of coverage of an arbitration clause in favor of arbitration.” Id. (quoting
Snap-On Tools Corp. v. Mason, 18 F.3d 1261, 1267 (5th Cir. 1994)). And
“[a]rbitration should not be denied unless it can be said with positive assurance
that an arbitration clause is not susceptible of an interpretation that would cover
the dispute at issue.” Id. (quoting Neal v. Hardee’s Food Sys., Inc., 918 F.2d 34, 37
(5th Cir. 1990)). In addressing questions of arbitrability, the Court must “keep in
2 The Parties’ Arbitration Agreement states that “issues relating to arbitrability, the
scope, or enforceability of this Agreement to Arbitrate . . . shall be for a court of
competent jurisdiction to decide.” See Pl. Am. Compl., Ex. 9 (ECF No. 8-9).
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mind the strong federal policy favoring arbitration.” See Neal, 918 F.2d at 37
(citing Volt Info. Sciences v. Board of Trustees of Leland Stanford Junior
Univ., 489 U.S. 468, 475 (1989)).
In her Amended Complaint, Plaintiff asserts six claims against PayPal. See
generally Pl. Am. Compl. (ECF No. 8). Two of her claims are based on Texas law:
(1) defamation and (2) intentional infliction of emotional distress (IIED) (the
“state-law claims”). See id. ¶¶ 48–53. Three of her claims are based on PayPal’s
alleged violations of the First, Fourth, and Fourteenth Amendments under 42
U.S.C. § 1983 (collectively, the “§ 1983 claims”). See id. ¶¶ 36–44. And her final
claim alleges that PayPal conspired with government agencies to interfere with her
civil rights, in violation of 42 U.S.C. § 1985. See id. ¶¶ 45–47. The Court assesses
each of Plaintiff’s claims to determine whether the “claim is covered by the
arbitration agreement.” See Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199,
201 (5th Cir. 2016). But, as the party resisting arbitration, Plaintiff bears the
burden of proving that these claims are not arbitrable. See Polyflow, L.L.C. v.
Specialty RTP, L.L.C., 993 F.3d 295, 303 (5th Cir. 2021).
The Arbitration Agreement provides, in relevant part:
You and PayPal agree that any and all disputes or claims that have
arisen or may arise between you and PayPal, including without
limitation federal and state statutory claims, common law claims, and
those based in contract, tort, fraud, misrepresentation or any other
legal theory, shall be resolved exclusively through arbitration, rather
than in court, except that you may assert claims in small claims court,
if your claims qualify and so long as the matter remains in such court
and advances only on an individual (non-class, non-representative)
basis. This Agreement to Arbitrate is intended to be broadly
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interpreted. The Federal Arbitration Act governs the interpretation
and enforcement of this Agreement to Arbitrate.
Pl. Am. Compl. at Ex. 9 (ECF No. 8-9). The Arbitration Agreement is very broad
and applies to “any and all disputes or claims that have arisen or may arise”
between Plaintiff and PayPal. See id.; cf. In re Sedco, 767 F.2d 1140, 1145 (5th Cir.
1985) (“[I]t is difficult to imagine broader general language in [an arbitration
clause]” than “any dispute”).
i. The State-Law Claims.
Plaintiff brings claims for defamation and IIED against PayPal. See Pl. Am.
Compl. ¶¶ 48–53. Both claims are tort claims under Texas law.3 The plain language
of the Arbitration Agreement requires the arbitration of state-law tort claims. See
Pl. Am. Compl., Ex. 9, Arbitration Agreement (ECF No. 8-9) (providing that
“claims based in . . . tort . . . shall be resolved exclusively through arbitration”).
Thus, Plaintiff’s defamation and IIED claims fall within the scope of the Arbitration
Agreement.
ii. The § 1983 Claims
Plaintiff next alleges that PayPal violated her First, Fourth, and Fourteenth
Amendment Rights and seeks damages for those alleged violations under 42 U.S.C.
3 See, e.g., Davis v. City of McLendon-Chisholm, 2025 WL 848474, at *7 (N.D. Tex.
Feb. 5, 2025) (McKay, J.), rec. adopted, 2025 WL 847877 (N.D. Tex. Mar. 18,
2025) (Scholer, J.) (“Defamation is an intentional tort under Texas law.”) (citing
Williams v. United States, 71 F.3d 502, 507 (5th Cir. 1995)); Pinedo v. City of
Dallas, Texas, 2015 WL 221085 (N.D. Tex. Jan. 15, 2015) (Fitzwater, J.)
(“Intention infliction of emotional distress is a tort claim under Texas law.”) (citing
Pleasant Glade Assembly of God v. Schubert, 264 S.W.3d 1, 16 n.3 (Tex. 2008)).
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§ 1983. See Pl. Am. Compl. ¶¶ 36–44. Section 1983 is a federal statute that allows
a person to bring a claim against a state actor for violating federal law or
constitutional rights. See 42 U.S.C. § 1983. Thus, these claims are “federal
statutory claims,” which the plain language of the Arbitration Agreement provides
are subject to mandatory arbitration. See Pl. Am. Compl., Ex. 9, Arbitration
Agreement (ECF No. 8-9) (providing that “federal and state statutory claims . . . or
any other legal theory, shall be resolved exclusively through arbitration”).
Plaintiff asserts that her § 1983 claims are non-arbitrable, however, and
makes two arguments in support of her position. See Pl. Opp. Mot. Compel ¶¶ 10–
12 (ECF No. 14). First, Plaintiff asserts the Arbitration Agreement “lacks ‘a clear
and unmistakable’ waiver for constitutional claims.” See id. ¶ 10. Second, Plaintiff
argues that these claims “require judicial review” because they “implicate public
interests in government accountability,” and are “unsuitable for private
arbitration.” See id.
In support of her first argument, Plaintiff cites a single Supreme Court case,
Wright v. Universal Maritime Service Corporation, 525 U.S. 70, 80 (1998). See id.
In Wright the Supreme Court addressed whether a union-negotiated, general
arbitration clause in a collective-bargaining agreement (CBA) required an
employee to arbitrate an alleged violation of the Americans with Disabilities Act,
42 U.S.C. § 12101. See Wright, 525 U.S. at 72. The Wright Court held that the union
could not waive an employee’s statutory right to a judicial forum absent a “clear
and unmistakable” waiver in the CBA. Id. at 80. The Court explicitly stated,
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however, that the “clear and unmistakable” standard applied only to a union’s
waiver of the rights of represented employees, not to “an individual’s waiver of his
own rights.” See id. at 80–81. Thus, the “clear and unmistakable” standard in
Wright is inapplicable here—Plaintiff “waiv[ed] her own rights” in the Arbitration
Agreement. See id. And, in any event, the Arbitration Agreement does contain clear
language requiring arbitration of federal statutory claims. Pl. Am. Compl., Ex. 9,
Arbitration Agreement (ECF No. 8-9) (providing for arbitration of “any and all
disputes or claims that have arisen or may arise between you and PayPal including
without limitation federal and state statutory claims . . . or any other legal theory”).
Plaintiff’s second argument, that her § 1983 claims are “unsuitable for
arbitration” requires her to show that Congress specifically intended to preclude a
waiver of a judicial forum for the subject statutory claims. See Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991) (noting that the party who
has “made the bargain to arbitrate” will be held to it unless they show that Congress
intended to preclude a waiver for the statutory rights at issue). Plaintiff can show
such Congressional intent by pointing to (i) the statute’s text, (ii) its legislative
history, or (iii) an inherent conflict between arbitration and the purposes of the
statute. Id.
Plaintiff offers nothing from the text or the legislative history of 42 U.S.C.
§ 1983 in support of the position that Congress intended such claims be brought
exclusively in a judicial forum. She does, however, cite McDonald v. City of West
Branch in support of her position. See Pl. Opp. Mot. Compel ¶ 12 (ECF No. 14)
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(citing McDonald 466 U.S. 284, 290 (1984)).4 The Court liberally construes this
citation and her briefing on this point to be an argument that there is an “inherent
conflict between arbitration and the underlying purposes” of 42 U.S.C. § 1983. See
Gilmer, 500 U.S. at 26.
But McDonald is not controlling here, as it did not involve the issue of the
enforceability of an agreement to arbitrate § 1983 claims. See Gilmer, 566 U.S. at
35 (recognizing that McDonald “did not involve the issue of the enforceability of
an agreement to arbitrate statutory claims”). Rather, the issue in McDonald was
narrower: whether prior arbitration of contract-claims arising out of a collective
bargaining agreement precluded subsequent judicial resolution of related § 1983
claims. See id. (citing McDonald, 466 U.S. 284). And, on that narrow issue, the
Court held that “in a § 1983 action, a federal court should not afford res judicata or
collateral-estoppel effect to an award in an arbitration proceeding brought
pursuant to the terms of a collective-bargaining agreement.” McDonald, 466 U.S.
at 292. McDonald is therefore inapplicable here.
4 Plaintiff also cites “E.E.O.C. v. Waffle House, 534 U.S. 279, 294 (2002)” in
support of her argument that her claims “implicate public interests requiring
judicial review.” See Pl.’s Opp. Mot. Compel ¶ 10 (ECF No. 14). But the pin citation
provided by Plaintiff discusses the Equal Employment Opportunity Commission’s
independent statutory authority and whether it may be bound by an arbitration
provision it did not sign. See E.E.O.C. v. Waffle House, 534 U.S. 279, 294 (2002).
Plaintiff’s citation to E.E.O.C., does not support the proposition for which it was
cited and is inapplicable here.
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To be sure, dicta in McDonald appears to support Plaintiff’s argument.
Indeed, the McDonald court noted that “arbitration cannot provide an adequate
substitute for a judicial trial [in §1983 actions].” See McDonald, 466 U.S. at 290–
292 (also noting that arbitrators may not always have the experience or authority
to consider § 1983 claims, plaintiffs may not be adequately represented during
arbitration proceedings, and arbitral factfinding procedures may not be adequate
to protect plaintiffs’ federal rights). While a district court is ordinarily not bound
by dicta, Supreme Court dicta is “another matter” and commands significant
deference. See, e.g., Campaign for S. Equal. v. Bryant, 791 F.3d 625, 627 n.1 (5th
Cir. 2015).
But, relevant here, the Supreme Court has since retreated from its position
in McDonald “that arbitration was inferior to the judicial process for resolving
[federal] statutory claims.” See Gilmer, 500 U.S. at 30, 35. In fact, only a year after
McDonald was decided, the Supreme Court recognized that a party “does not forgo
the substantive rights afforded by statute” by agreeing “to arbitrate a statutory
claim.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
628 (1985). Instead “it only submits to their resolution in an arbitral, rather than
a judicial, forum.” Id.
And, a few years later, in Gilmer, the Supreme Court refused to rely on
McDonald as a basis to preclude enforcement of an agreement to arbitrate a federal
statutory claim. See Gilmer, 500 U.S. at 26–35. The Court stated that it was “by
now clear that statutory claims may be the subject of an arbitration agreement,
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enforceable pursuant to the FAA.” See id. at 26. The Gilmer Court noted that
McDonald “was not decided under the FAA, which . . . reflects a liberal federal
policy favoring arbitration agreement,” and further found that concerns unique to
the factual circumstance in McDonald were central to that holding.5 See id. at 35.
Then, in Green Tree, the Supreme Court recognized that “even claims arising
under a statute designed to further important social policies may be arbitrated
because so long as the prospective litigant effectively may vindicate a statutory
cause of action in the arbitral forum, the statute serves its functions.” See Green
Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 89–90 (2000) (citing Gilmer,
500 U.S. at 28) (internal quotations omitted).
Considering McDonald’s narrow holding and the more recent Gilmer, Green
Tree, and Mitsubishi Motors decisions, the Court should give McDonald’s dicta
5 Gilmer, 500 U.S. at 35 (“There are several important distinctions between the
Gardner–Denver line of cases and the case before us. First, those cases did not
involve the issue of the enforceability of an agreement to arbitrate statutory claims.
Rather, they involved the quite different issue whether arbitration of contract-
based claims precluded subsequent judicial resolution of statutory claims. Since
the employees there had not agreed to arbitrate their statutory claims, and the
labor arbitrators were not authorized to resolve such claims, the arbitration in
those cases understandably was held not to preclude subsequent statutory actions.
Second, because the arbitration in those cases occurred in the context of a
collective-bargaining agreement, the claimants there were represented by their
unions in the arbitration proceedings. An important concern therefore was the
tension between collective representation and individual statutory rights, a
concern not applicable to the present case. Finally, those cases were not decided
under the FAA, which, as discussed above, reflects a “liberal federal policy favoring
arbitration agreements.” Mitsubishi, 473 U.S., at 625, 105 S.Ct., at 3353. Therefore,
those cases provide no basis for refusing to enforce Gilmer's agreement to arbitrate
his ADEA claim.”).
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little weight. What’s more, Plaintiff points to no other case in which the Supreme
Court—or any court—has held that § 1983 claims are non-arbitrable.
Finally, nothing in the text of 42 U.S.C. § 1983 appears to preclude
arbitration. Section 1983 provides that an injured plaintiff may bring an action, “at
law . . . in equity, or other proper proceeding for redress.” 42 U.S.C. § 1983
(emphasis added); see also Mitsubishi Motors Corp., 473 U.S. at 628 (“We must
assume that if Congress intended the substantive protection afforded by a given
statute to include protection against waiver of the right to a judicial forum, that
intention will be deducible from text or legislative history.”). Arbitration may be a
“proper proceeding for redress” of federal statutory claims under § 1983. See, e.g.,
Green Tree, 531 U.S. at 89–90 (“[E]ven claims arising under a statute designed to
further important social policies may be arbitrated.”)
Plaintiff has not met her burden to show that her § 1983 claims are not
arbitrable—her concern about the importance of her federal statutory claims does
not warrant disregarding the Parties’ agreement to arbitrate them. See Polyflow,
L.L.C., 993 F.3d at 303; see also Gilmer 500 U.S. at 26. Thus, Plaintiff’s § 1983
claims fall within the scope of the Arbitration Agreement.
iii. The § 1985 Claim.
Section 1985 is a federal statute permitting a person injured by “conspiracy
to violate federal rights” to sue for damages. See 42 U.S.C. § 1985(3). Thus,
Plaintiff’s § 1985 claim is a “federal statutory claim,” which the plain language of
the Arbitration Agreement provides is subject to mandatory arbitration. See Pl.
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Am. Compl., Ex. 9, Arbitration Agreement (ECF No. 8-9) (providing that “federal
and state statutory claims . . . or any other legal theory, shall be resolved
exclusively through arbitration”).
Plaintiff argues, however, that her § 1985 claim is not arbitrable for the same
reasons as her § 1983 claims. See Pl. Opp. Mot. Compel ¶ 10. Again, Plaintiff cites
Wright and McDonald in support of her position. See id. But, for the reasons
explained above, Wright’s “clear and unmistakable” standard does not apply,6 and
McDonald does not preclude arbitration of Plaintiff’s § 1985 claim. Plaintiff also
offers nothing from the text or the legislative history of § 1985 in support of her
position.
Plaintiff has not met her burden of proving the Court should disregard this
plain language and require the Parties to litigate this federal statutory claim in
Court. See Polyflow, L.L.C., 993 F.3d at 303; see also Gilmer 500 U.S. at 26; Green
Tree, 531 U.S. at 89–90 (“[E]ven claims arising under a statute designed to further
important social policies may be arbitrated.”). Thus, Plaintiff’s § 1985 claim falls
within the scope of the Arbitration Agreement.
6 Even if that standard applied, the Arbitration Agreement contains clear language
requiring arbitration of “federal statutory claims.” See Pl. Am. Compl., Ex. 9,
Arbitration Agreement (ECF No. 8-9).
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B. Whether Any Federal Statute, Policy, or Defense Renders the Claims
Non-Arbitrable
1. Waiver
The right to arbitration may be waived. In the Fifth Circuit, the test for
waiver is “whether the party knowingly relinquished the right to arbitrate by acting
inconsistently with that right.” See Garcia v. Fuentes Rest. Mgmt. Servs. Inc., 141
F.4th 671, 676 (5th Cir. 2025). One way a party may waive its right to seek
arbitration is by “substantially invoking the judicial process,” that is, “engag[ing]
in some overt act in court that evinces a desire to resolve the arbitrable dispute
through litigation rather than arbitration.” See id. at 676 n. 4. Additionally,
prejudice is no longer “a condition of finding that a party, by litigating too long,
waived its right to stay litigation or compel arbitration under the FAA.” Morgan v.
Sundance, Inc., 596 U.S. 411, 419 (2022). “[A] court must hold a party to its
arbitration contract just as the court would to any other kind,” and it may not
devise novel rules to favor arbitration over litigation. Id.
Waiver may also result from intentional conduct, the negligent failure to
assert the right timely, or some other “default in proceeding with
such arbitration.” See 9 U.S.C. § 3. The FAA does not define what it means for
a party to be in default, but the Fifth Circuit has explained that such a
determination must be made on the peculiar facts of each case. Republic Ins. Co.
v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir. 2004); Valero Refining,
Inc. v. M/T Lauberhorn, 813 F.2d 60, 65 (5th Cir. 1987).
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In Plaintiff’s Response to the Motion to Compel, she argues that PayPal has
waived its right to arbitration by: (1) refusing to pay AAA fees; (2) filing “merits-
based” motions; and (3) causing a “25-month” stay in “prior litigation.” See Pl.
Opp. Mot. Compel 1, 4–7 (ECF No. 14). But these arguments will not prevent
enforcing the Arbitration Agreement.
First, PayPal did not act inconsistent with its rights to arbitration by refusing
to pay arbitration fees. The Arbitration Agreement provides that PayPal need only
pay arbitration fees for claims “under $10,000.” See Pl. Opp. Mot. Compel ¶ 7; see
also Pl. Am. Compl., Ex. 9 (ECF No. 8) (User Agreement). And here, Plaintiff seeks
far more than $10,000 in damages. See Pl. Am. Compl. ¶ 54 (Requesting an award
of “not less than $25,000,000”); see also Pl. Opp. Mot. Compel ¶ 17
(acknowledging that the Arbitration Agreement “limits fee coverage to claims
under $10,000”).
To be sure, the Arbitration Agreement provides that, in some cases, PayPal
may be required to pay arbitration fees regardless of the amount of damages
claimed. See Pl. Am. Compl., Ex. 9, Arbitration Agreement (ECF No 8-9). But to
shift the costs to PayPal under the Arbitration Agreement, a plaintiff must
“demonstrate [to the arbitrator] that the costs of accessing arbitration are
prohibitive.” Id. If a plaintiff makes such a showing, the arbitrator can require
PayPal to “pay as much of the [arbitration costs] as the arbitrator(s) deem
necessary” to prevent the costs from being prohibitive. Id. But the record contains
no evidence that Plaintiff submitted any such request to the arbitrator. See Pl. Am.
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Compl. Ex. 37 (ECF No. 8-37) (Plaintiff’s email to the arbitrator); cf. Pl. Am.
Compl., Ex. 38 (ECF No. 8-38) (Plaintiff’s email to PayPal’s counsel requesting
that PayPal pay her fees). Instead, Plaintiff sought a “fee waiver” for herself, which
the arbitrator granted (lowering the fee to $1,500 from $12,500), and a payment
plan for that reduced fee, which the arbitrator denied. See id. at Ex. 37 (ECF No. 8-
37). Plaintiff never paid the filing fee and, although she told the arbitrator (via
email) that she was facing financial difficulties, there is no evidence that Plaintiff
submitted financial statements or any supporting documentation showing that she
could not afford the expected arbitration fees. See id. at Ex. 36 (ECF No. 8-36); id.
at Ex. 37 (ECF No. 8-37). Thus, the record does not support a finding that PayPal
waived its right to arbitration by failing or refusing to pay arbitration fees.
Plaintiff next argues that PayPal engaged in “merits-based litigation,” which
the Court liberally construes as an argument that PayPal “substantially invoked the
judicial process.” See Pl. Opp. Mot. Compel ¶ 5 (ECF No. 14); see also Garcia, 141
F. 4th at 676. In support of this argument, Plaintiff points the Court to an Exhibit 7
she alleges summarizes PayPal’s “[l]itigation conduct . . . waiving arbitration.” See
Pl. Opp. Mot. Compel ¶ 5 (ECF No. 14) (citing Pl. Am. Compl., Ex. 34 (ECF No. 8-
34). In that Exhibit, Plaintiff argues that beginning with removal to the Eastern
District of Texas, PayPal “began a pattern of judicial engagement inconsistent with
7 For clarity, the Exhibit referenced in Plaintiff’s Opposition Brief is “Exhibit 32:
PayPal’s Litigation Conduct in Breach of Arbitration Agreement, Waiving
Arbitration.” See ECF No. 8-34. Plaintiff cites to this document as “Exhibit 34,” in
her brief. See Pl. Opp. Mot. Compel ¶ 5 (ECF No. 14).
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arbitration.” Pl. Am. Compl., Ex. 34 at 1 (ECF No. 8-34). Plaintiff asserts that
PayPal included “merits-based allegations” in a motion to compel arbitration,
“refused to pay AAA arbitration fees,” and filed responses and sur-replies to her
various motions. Id. Plaintiff further argues that PayPal waived arbitration by filing
an alternative motion to dismiss under 12(b)(6) along with its Motion to Compel
Arbitration, and because PayPal raised collateral estoppel as a defense in that
Motion. See id.
In view of the record, however, the Court finds that PayPal’s conduct did not
waive arbitration. First, as discussed above, PayPal did not waive arbitration by
not paying “AAA arbitration fees.” And PayPal did not act inconsistent with its
right to arbitration by removing Plaintiff’s case to the Eastern District of Texas in
the earlier action. See, e.g., Williams v. Cigna Fin. Advisors, Inc., 56 F.3d 656, 661
(5th Cir. 1995) (holding that a party did not waive its right to arbitration by
removing action to federal court, moving to dismiss, moving to stay proceedings,
answering the complaint, asserting counterclaim, and exchanging Rule 26
discovery). Additionally, immediately after Plaintiff filed this lawsuit, PayPal
moved to compel arbitration. See Mot. Compel (ECF No. 5). When Plaintiff
amended her complaint, thereby mooting PayPal’s first motion, PayPal filed a
renewed motion seeking to compel arbitration. See Renewed Mot. Compel (ECF
No. 13).
Further, the mere fact that PayPal seeks dismissal under 12(b)(6) as an
alternative to its motion to compel arbitration does not constitute a waiver. See id.;
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see also Westbrook v. Jag. Indus. Servs., 3:14-CV-2080-M, 2015 WL 93447, at *5
(N.D. Tex. Jan. 7, 2015); TrueBlue, Inc. v. DeRuby, 3:18-CV-0192-M, 2019 WL
13535488, at *3–4 (N.D. Tex. Jan. 24, 2019). PayPal also did not act inconsistent
with its right to arbitration by responding to Plaintiff’s various motions in this case.
See Intent Performance LLC v. Intent Sports & Fitness, LLC, No. 2:23-CV-85-
TBM-RPM, 2025 WL 1601045 (S.D. Miss. Jun. 5, 2025), appeal dismissed, No. 25-
60344, 2025 WL 3900530 (5th Cir. Oct. 15, 2025) (noting that a party had “not
waived their right to arbitrate merely by filing responsive pleadings”). Plaintiff
cannot manufacture a waiver by filing motions and putting PayPal in a position to
either respond or risk losing an opportunity to do so.
Raising collateral estoppel (issue preclusion), too, was not inconsistent with
PayPal’s right to arbitration. Indeed, PayPal seeks to use this doctrine to preclude
Plaintiff from challenging the Arbitration Agreement’s validity and enforceability.
Finally, Plaintiff’s argument that PayPal’s “delay” constitutes a waiver is
unsupported by the record. Any delay is attributable to Plaintiff’s general
resistance to arbitration. PayPal has acted in a manner consistent with its right to
compel arbitration. See Garcia, 141 F. 4th at 676. Thus, the undersigned
recommends that the District Court find that PayPal has not waived its right to
arbitration.
2. Prohibitive Costs and Equitable Considerations
The Court briefly addresses Plaintiff’s remaining arguments that (i) the
prohibitive costs of arbitration prevent the Court from enforcing the Arbitration
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Agreement and (ii) that “Equitable Considerations” demand the judicial resolution
of Plaintiff’s claims. Pl. Opp. Mot. Compel ¶¶ 16–17, 23–27 (ECF No. 14).
As the party resisting arbitration, Plaintiff has the burden to show “some
individualized evidence that [she] will face prohibitive costs in the arbitration at
issue and that [she] is financially incapable of meeting those costs.” See, e.g.,
Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 300 (5th Cir. 2004). In
her Response, Plaintiff cites “Dkt. 8, Exs. 35–39” as purported evidence of her
“demonstrated hardship.” Pl. Opp. Mot. Compel ¶ 17. But she does not point to
anything within those exhibits specifically. Although the cited exhibits are not
overly voluminous, it is “wholly insufficient for a party to cite to the record in the
most skeletal way, leaving the Court to conduct an open-ended review of each cited
document to determine whether it might contain evidence supporting the party’s
argument.” See Wimberley v. Beast Energy Servs., Inc., No. 3:19-CV-00096, 2022
WL 658717, at *12 (S.D. Tex. Mar. 4, 2022), rec. adopted, 2022 WL 836427 (S.D.
Tex. Mar. 21, 2022).
That said, having reviewed these exhibits, the Court finds that they are
insufficient to show that the costs of arbitration are prohibitive so as to prevent
enforcement of the Arbitration Agreement. In Exhibit 36, the arbitrator emailed
Plaintiff and provided a significant filing fee waiver (reduced from $12,500 to
$1,500). See Pl. Am. Compl., Ex. 36 (ECF No. 8-36). And while, in Plaintiff’s
response to the arbitrator, (Exhibit 37) she stated that she was facing financial
difficulties, there is no evidence that Plaintiff submitted any tax returns, financial
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statements, or other evidence to the AAA demonstrating that she could not afford
the expected arbitration fees. See id. at Ex. 37 (ECF No. 8-37) (Plaintiff stated that
she “was behind on her mortgage,” that the “real estate market had taken a
nosedive,” that she had applied for, and was denied financing, and that her “credit
cards were maxed out”). Nor is there evidence that Plaintiff requested that the
arbitrator require PayPal to pay her fees. See id. at Ex. 38 (ECF No. 8-38) (Plaintiff
emailed PayPal’s counsel—not the arbitrator—to “confirm” that PayPal will pay her
arbitration fees and asked about upfront payment of “$250,000-$350,000”). On
this record, then, the Court should find that Plaintiff failed to carry her burden of
showing that she “will face prohibitive costs” that she is “financially incapable of
meeting.” See Carter, 362 F.3d at 300.
Second, Plaintiff’s argument that equity requires the Court to set aside the
Arbitration Agreement is unconvincing. Plaintiff argues that her “pro se status,
$20,000 in costs, and reputational harm from false ‘extremist’ labels warrant
leniency.” Pl. Opp. Mot. Compel ¶ 23 (ECF No. 14). And she cites the Supreme
Court case, Haines v. Kerner, 404 U.S. 519, 520 (1972), in support of her position.
Id. (citing 404 U.S. at 519–20). In Haines, an Illinois state prison inmate sued the
governor of Illinois and other state officers and prison officials to recover for
alleged injuries sustained in solitary confinement. See Haines, 404 U.S. 519–20.
The Haines Court held that the prisoner’s complaint should not have been
dismissed under Federal Rule of Civil Procedure 12(b)(6). Id. at 520–21. Haines
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did not involve arbitration, reputational harm, or any discussion of costs. See id.
Haines does not support Plaintiff’s position.
Plaintiff also cites “E.E.O.C. v. Waffle House, 534 at 294” in support of her
argument that “the public interest in addressing federal-private collusion
outweighs arbitration.” Pl. Opp. Mot. Compel ¶ 23. But the pin citation provided
by Plaintiff involves a discussion about whether the Equal Employment
Opportunity Commission may be bound by an arbitration provision it did not sign.
See E.E.O.C. v. Waffle House, 534 U.S. 279, 294 (2002).8 Thus, Plaintiff’s citation
to E.E.O.C. does not support her position.
Plaintiff has failed to present equitable grounds warranting setting aside the
Arbitration Agreement. Absent such grounds, the Court should not disturb the
Parties’ otherwise valid Arbitration Agreement.
C. PayPal’s Remaining Arguments and Request to Dismiss
PayPal, as an alternative to compelling arbitration, seeks dismissal of all
Plaintiff’s claims based on the statute of limitations. See Renewed Mot. Compel
15–22 (ECF No. 13). But because Plaintiff’s claims are arbitrable, the Court cannot
consider the merits of PayPal’s arguments for dismissal. See, e.g., City of Meridian,
Miss. v. Algernon Blair, Inc., 721 F.2d 525, 528 (5th Cir. 1983).
PayPal further asserts that “dismissal under 12(b)(3) is an ‘appropriate’
remedy” where, as here, “all of plaintiff’s claims must be submitted to arbitration.”
8 While E.E.O.C. discusses “the public interest” it does so in a context that is
unrelated to Plaintiff’s proposition. See E.E.O.C., 534 U.S. at 290–296.
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See Renewed Mot. Compel 13–14 (ECF No. 13). At the same time, PayPal
acknowledges that if Plaintiff “requests a stay pending arbitration,” the Court must
stay the action pursuant to Smith v. Spizzirri, 601 U.S. 472 (2024). Id. 14. PayPal
argues, however, that since neither party has “requested a stay” Spizzirri is
inapplicable and the decision to dismiss or stay “remains in the sound discretion
of the Court.” Id. (citing Marquez v. US Foods, Inc., No. 3:23-CV-2455-K, 2024
WL 3625674, at *8 (N.D. Tex. July 31, 2024)). But Plaintiff requested a stay in her
Opposition to the Motion to Compel. See Pl. Opp. Mot. Compel ¶ 18 (ECF No. 14).
Thus, the Court should stay the proceeding. See Spizzirri, 601 U.S. at 478–79.
Recommendation
For the reasons stated, the District Judge should GRANT IN PART
Defendant’s Motion, COMPEL the Parties to arbitration, and STAY the
proceedings.
SO RECOMMENDED.
January 28, 2026.
____________________________
REBECCA RUTHERFORD
UNITED STATES MAGISTRATE JUDGE
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INSTRUCTIONS FOR SERVICE AND
NOTICE OF RIGHT TO APPEAL/OBJECT
A copy of this report and recommendation will be served on all parties in the
manner provided by law. Any party who objects to any part of this report and
recommendation must file specific written objections within 14 days after being
served with a copy. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). To be specific,
an objection must identify the specific finding or recommendation to which
objection is made, state the basis for the objection, and specify the place in the
magistrate judge’s report and recommendation where the disputed determination
is found. An objection that merely incorporates by reference or refers to the
briefing before the magistrate judge is not specific. Failure to file specific written
objections will bar the aggrieved party from appealing the factual findings and legal
conclusions of the magistrate judge that are accepted or adopted by the district
judge, except upon grounds of plain error. See Douglass v. United Servs. Auto.
Ass’n, 79 F.3d 1415, 1417 (5th Cir. 1996).
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