Infostream is the operator of two sites that “cater to adults looking for a non-traditional dating experience.” For a fee, Seeking facilitates “mutually beneficial relationships” between members who refer to themselves as either a “sugar daddy,” “sugar mommy” or “sugar baby.” Whats Your charges a fee to allow members to “buy and sell the opportunity of going out on a first date.”When Pay Pay moved to dismiss Infostream’s complaint, it was quick to point to media sources that have associated the Infostream sites with purveying sexual services (see Pay Pal memorandum in support of motion to dismiss, n. One of the cited articles included alleged accounts of sex-for-pay encounters arranged through the Seeking site by graduates seeking to pay off student loans. As to Pay Pal’s argument that it had reserved the right to terminate any account “at its sole discretion,” and “for any reason at any time,” the court found that the contract included, by implication, an implied covenant of good faith and fair dealing.
Infostream responded with the allegation that Pay Pal was invoking its unfairly, because the company continues to provide services to competitor sites that are similar to its own, such as Ashley Madison.com, which urges users to “have an affair,” and Arrangement Finders.com, which promotes “mutually beneficial arrangements” between men and women. Infostream had adequately alleged that obligation had been breached, the court said, if it could show that Pay Pal terminated the account in order to benefit Infostream’s competitors.
Pay Pal, the preeminent online payment service, addresses the issue in its User Agreement and Acceptable Use Policy (Just what falls into these prohibited categories can be the subject of dispute, however. But the court allowed Infostream’s breach of contract, breached of the implied covenant of good and fair dealing, and California state unfair competition law claims to stand, at least at this early stage of the litigation.
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