Person-to-person payments operator PayPal has been accused of fraud, defamation and breach of contract in a lawsuit filed by erstwhile business partner NoBidding Inc.
The complaint has been filed in the Eastern District Court of Pennsylvania by Bidville.com attorney George Kounoupis. The suit alleges that after breaching a contract with the online auction operator, PayPal sent libelous emails to its customers claiming the NoBidding Web sites were fraudulent. It relates to an agreement between PayPal and NoBidding to open AuXpal.com, an online auction that seamlessly integrated PayPal's e-mail based funds transfer system into its payments architecture.
PayPal is the world's largest Web-based P2P payment network. It is reported to process one-fourth of all transactions occurring on online auction site eBay.
Ed Orlando, president of NoBidding, claims that PayPal notified him five days before AuXpal's opening in early December last year that it would no longer support the project. On opening day, PayPal completely blocked AuXpal's access to PayPal accounts, alleges Orlando.
"We spent six months developing AuXpal technology and were in constant contact with PayPal representatives. They knew exactly how our system worked and explicitly approved it each step of the way," Orlando says. "Pulling out at the last minute had devastating consequences."
The AuXpal Web site continues to operate as Bidville.com and claims to be the second largest online auction next to eBay.
"Bidville quickly became a major contender in the online auction space," Orlando adds. "It is hard to imagine where we would be now if PayPal delivered on its promises."
Although Bidville does not use an integrated payment system as designed, he says, patents are pending.