A court has set aside a default judgment against eBay in a lawsuit over the company's alleged practice of forcing sellers to use PayPal. The lawsuit was filed in Michigan on April 12, 2010, in Michigan, and the Court had held eBay in default after it failed to respond. This week, the court set aside the default judgement and gave eBay time to respond to the lawsuit.

In doing so, the Court said that plaintiffs had mailed eBay the summons and complaint by certified mail, return receipt requested addressed to Defendants' "Corporate Counsel," and that they failed to attempt to serve eBay by any other method, including service upon eBay's or PayPal's respective agents - although the plaintiffs pointed out that in attempting to find eBay's registered agent in Michigan, they found that eBay's registered agent had withdrawn from duty.

The Court addressed the issues raised under a rule that provides that an entry of default may be set aside for "good cause." To determine whether good cause has been shown, the court must consider "whether (1) the default was willful, (2) set aside would prejudice plaintiff, and (3) the alleged defense is meritorious."

Federal policy strongly favors allowing parties to resolve their disputes at trial rather than by default, and the Court said the defendant's default was not willful; it also said that setting aside the defaults would not prejudice the plaintiffs.

The court also used eBay's argument that it had a meritorious defense to the plaintiffs' complaint, arguing that the plaintiffs' claims in this lawsuit were nearly identical to antitrust claims that had been dismissed in a federal case in the Northern District of California (see information about that case in this March 05, 2010, AuctionBytes article).

The attorney representing the plaintiffs told the Detroit News he had offered to settle the lawsuit without any monetary payments if eBay would change its policy and allow use of payment methods other than PayPal.

While eBay does not technically require sellers to accept PayPal in the U.S., eBay.com bans sellers from soliciting payments by checks and money orders. eBay.com allows sellers to accept credit cards through merchant accounts, which are not feasible for small sellers. eBay.com also allows sellers to offer two international payment services, both with low adoption rates by eBay shoppers in the U.S.