Influencers strike back with detailed contracts showing Honey violated terms

Content creators filed a comprehensive second amended complaint on January 5, 2026, providing specific merchant contract terms and detailed evidence of commission theft that directly addresses the standing issues that led to the November 21, 2025 dismissal. The 101-page filing in the United States District Court for the Northern District of California includes actual affiliate agreements with merchants like Bergdorf Goodman, documenting exact commission percentages and qualifying link definitions that PayPal's Honey browser extension allegedly violated.

The second amended consolidated class action complaint represents a significant expansion from earlier filings. Ten named plaintiffs now include Ahntourage Media LLC, Aaron Ramirez, Angry Snowboarder, Brevard Marketing LLC, Red Beard Studios LLC, Storm Productions LLC, Gents Scents LLC, Daniel Lachman, Justin Tech Tips LLC, Stuber Holdings LLC, and Dan Becker LLC. These content creators claim PayPal systematically interfered with their contractual relationships and stole affiliate commissions worth potentially tens of millions of dollars.

Merchants define qualifying links in contracts

The complaint directly quotes contract language from multiple merchants establishing what constitutes a qualifying affiliate link entitled to commission payments. According to the Bergdorf Goodman agreement cited in the filing, "Merchant agrees to pay Affiliate the commission specified in the [affiliate contract] if Merchant sells to a visitor to Merchant's site (a 'Customer') a product or service that is the subject of the [affiliate contract] and if that Customer has accessed Merchant's site and purchased the product or service via a Qualifying Link."

A qualifying link according to another representative contract means "a link from Affiliate's Site to Merchant's Site," which "means a link contained on a web page within Affiliate's Site or a link contained in an e-mail message originated by Affiliate and sent to recipients who have opted-in to receiving email messages from Affiliate." The contracts specify that qualifying links enable merchants to identify which affiliate sent the customer and calculate appropriate commission payments.

These contractual definitions prove critical to establishing standing requirements that federal courts demand. The November 21, 2025 dismissal order specifically noted that "the FAC does not contain any allegations at all about the terms of Plaintiffs' agreements with the merchants," distinguishing it from a Virginia case where plaintiffs established standing by citing actual merchant agreements. The second amended complaint cures this deficiency by providing extensive contract excerpts demonstrating plaintiffs' entitlement to commissions when consumers complete purchases after clicking affiliate links.

Contract terms establish commission rights

Plaintiffs provided specific commission percentages and payment structures across multiple merchants. According to the filing, "Affiliate Commissions can be significant—some are up to 40% of the sale price—and Affiliate Marketers drive a significant (and increasing) volume of online commerce." The complaint details that affiliate commissions totaled approximately $10 billion globally in 2023, with projected growth to $16 billion by 2028 representing a 60 percent increase.

The contracts cited in the complaint establish clear attribution rules governing commission payments. According to the agreements, affiliate marketers each have unique Affiliate IDs added within cookies on consumers' browsers when consumers get directed to merchant websites via affiliate links. Merchants read these cookies at checkout to determine which affiliate earned the commission. The contracts specify that "the predominant attribution model in the affiliate marketing industry is 'last click attribution,'" wherein the affiliate marketer who provided the last affiliate link used before purchase gets credit for the sale.

This last-click attribution system operates as an all-or-nothing mechanism. If multiple affiliate marketers advertise the same product to a consumer, only the last-selected affiliate link gets credited for resulting sales. The contracts make clear that "'last click' in this context refers to navigating from one page to another by activating a hyperlink" and "does not refer to actions that the consumer takes once they have arrived at the Merchant's website."

Honey's technical implementation violated terms

The second amended complaint provides extensive technical documentation of how Honey allegedly violated these contractual terms. According to the filing, when consumers download Honey, the installation process grants the extension permissions to query and modify cookies, observe and analyze web traffic, execute scripts, store consumer data, and schedule periodic code execution. PayPal uses these permissions to surreptitiously replace affiliate marketers' cookies with its own affiliate identifiers during checkout processes.

The complaint explains that "when a consumer clicks on an Affiliate Marketer's link, a 'cookie' with a unique identifier is stored in the consumer's web browser for a set amount of time." This cookie contains the affiliate marketer's Affiliate ID and logs the consumer's purchasing activity to ensure proper commission attribution. However, "Honey surreptitiously injects itself as the 'last click' during the consumer's checkout process, thus supplanting the Affiliate ID of the Affiliate Marketer who drove the consumer to the Merchant's website in the first place."

The technical mechanism operates through what plaintiffs characterize as cookie stuffing. According to the complaint, "when a consumer engages with Honey in any way—even if only to view discounts or click the 'Got it' button on a pop-up message—Honey surreptitiously creates a hidden tab, iframe, or refresh that reloads the Merchant's website with Honey's own affiliate link." This action replaces plaintiffs' affiliate links with PayPal's affiliate link, signaling to merchants that PayPal rather than the referring affiliate marketer should receive the commission.

Named plaintiffs document specific losses

The second amended complaint includes detailed examples from named plaintiffs showing concrete commission diversions rather than statistical modeling. According to the filing, each named plaintiff provided evidence of actual lost commissions traceable to Honey's interventions during specific purchase transactions. This addresses the November 21, 2025 order's criticism that earlier complaints relied on "highly attenuated chain of possibilities" rather than demonstrating concrete particularized injuries to named plaintiffs.

Justin Tech Tips LLC documented commission losses on Adorama purchases where consumers clicked affiliate links but Honey intervened during checkout. According to the complaint, testing showed that when consumers made purchases without Honey activated, Justin Tech Tips received expected commissions. When the same purchase pattern occurred with Honey active, commissions got diverted to PayPal despite Justin Tech Tips providing the initial referral that brought consumers to the merchant's website.

The complaint explains that affiliate networks including Impact Radius, Commission Junction, Rakuten LinkShare, ShareASale, and Awin maintain records of cookie replacements and commission diversions. These records allegedly show systematic patterns where Honey replaced affiliate cookies across thousands of transactions involving named plaintiffs. The filing states that discovery will provide access to PayPal's internal commission records demonstrating the full scope of diverted payments.

Industry standards prohibit cookie stuffing

Beyond contractual violations, the second amended complaint emphasizes that PayPal's conduct violated well-established affiliate marketing industry standards. According to the filing, "the Affiliate Marketing industry has repudiated PayPal's conduct" and major affiliate networks explicitly prohibit cookie stuffing in their terms of service. The complaint cites Performance Horizon Group's industry standards stating that "cookie stuffing is when an affiliate places their own cookie on top of another affiliate's cookie fraudulently."

The filing documents that when affiliate marketing industry participants discovered Honey's practices in December 2024, major content creators immediately terminated relationships with the browser extension. Linus Media Group, one of Honey's largest promotional partners, ended their partnership after discovering the commission diversion practices, following approximately 160 sponsored segments that garnered 194 million views.

Matt Mullenweg, founder of WordPress, characterized Honey's behavior as "particularly egregious" in public statements following the initial investigation. The complaint notes that "millions of users reportedly uninstalled Honey after the scheme came to light," with the extension dropping from over 20 million Chrome users to 14 million by July 2025. This user exodus demonstrated public recognition that Honey's practices violated reasonable expectations about how the browser extension operated.

PayPal acquired knowledge through contracts

The second amended complaint establishes that PayPal possessed actual knowledge of affiliate marketing contractual structures and industry standards. According to the filing, Honey itself operated as an affiliate marketer with contracts from thousands of merchants. PayPal's agreements with these merchants contained the same qualifying link definitions and last-click attribution provisions that governed relationships between merchants and content creator plaintiffs.

The complaint states that "PayPal knew the standard terms of Affiliate Marketer agreements because Honey itself operates as an Affiliate Marketer and has agreements with thousands of Merchants." This knowledge extended to understanding that merchants expected affiliate commissions to flow to the referral source that actually drove consumer purchase decisions. By replacing cookies after consumers already reached merchant websites through affiliate links, Honey violated the fundamental attribution mechanisms that contracts were designed to measure.

PayPal's $4 billion acquisition of Honey in January 2020 included due diligence on the extension's business model and revenue sources. According to the filing, Honey's affiliate commission revenue represented a known component of the company's valuation, along with the valuable cross-merchant shopping data the extension collected from 17 million monthly active users at the time of acquisition. The complaint argues PayPal cannot claim ignorance of contractual terms it reviewed during the acquisition process.

Authorization arguments address computer fraud claims

The second amended complaint restructures computer fraud allegations to address the November 21, 2025 dismissal order's finding that consumers granted Honey broad permissions when downloading the extension. According to the new filing, "PayPal exceeded the authorization granted by consumers" because consumers authorized coupon searching functionality, not systematic affiliate cookie replacement unrelated to providing discount codes.

The complaint emphasizes that Honey's cookie replacement occurs "regardless of whether Honey in fact offers consumers any coupons or discounts, cashback rewards, or the option to pay with PayPal." This practice allegedly demonstrates that cookie stuffing serves PayPal's commission theft objectives rather than the coupon-finding functionality consumers believed they authorized. According to the filing, "consumers authorize Honey to search for and test coupon codes—they do not authorize Honey to surreptitiously inject hidden tabs and overwrite preexisting cookie data for purposes wholly unrelated to finding consumers coupons."

The authorization arguments connect to Federal Trade Commission guidance on browser extension permissions. The complaint cites FTC enforcement actions establishing that extensions exceed authorization when they use granted permissions for purposes materially different from disclosed functionality. By presenting itself primarily as a coupon-finding tool while actually operating as an affiliate commission diversion mechanism, Honey allegedly obtained permissions through misrepresentation about how those permissions would be used.

Seven causes of action seek comprehensive relief

The second amended complaint asserts seven distinct legal theories supporting the class action. Count One alleges violations of the Computer Fraud and Abuse Act based on unauthorized access exceeding consumer permissions. Count Two claims unjust enrichment from PayPal receiving affiliate commissions that properly belonged to content creators. Count Three alleges intentional interference with prospective economic advantage by disrupting affiliate marketer relationships with potential customers.

Count Four asserts intentional interference with contractual relations based on PayPal's knowledge of merchant agreements and deliberate cookie replacement to divert contractually-owed commissions. Count Five claims violations of California's Comprehensive Computer Data Access and Fraud Act paralleling federal computer fraud allegations. Count Six alleges violations of California's Unfair Competition Law based on practices contrary to industry standards and public policy.

Count Seven adds Washington Consumer Protection Act violations for a state subclass. According to the complaint, Washington law prohibits unfair methods of competition and unfair or deceptive acts in commerce. PayPal's cookie stuffing practices allegedly constitute both unfair competition by violating affiliate marketing industry norms and deceptive acts by misrepresenting Honey's actual functionality to consumers and affiliate marketers.

The complaint seeks actual damages, statutory damages, restitution, disgorgement of profits, treble damages under applicable statutes, attorneys' fees and costs, permanent injunctive relief prohibiting future cookie replacement, and pre-judgment and post-judgment interest. Class certification would potentially extend relief to thousands of content creators affected by Honey's practices from December 29, 2022 through final judgment.

Discovery phase promises internal documents

The second amended complaint positions the case for extensive discovery into PayPal's internal operations and decision-making regarding Honey's affiliate practices. According to the filing, plaintiffs seek access to PayPal's commission records showing exact amounts diverted from affiliate marketers, internal communications about cookie replacement functionality, and documents related to the $4 billion Honey acquisition that may reveal PayPal's knowledge of questionable practices.

Discovery will likely target the selective standdown system that investigations revealed Honey used to evade compliance testing. According to technical analysis, Honey deployed sophisticated fraud detection evasion mechanisms that modified the extension's behavior based on user profiling to determine whether someone was a legitimate shopper or an affiliate industry insider testing for violations. Server-side rules stored on cloud infrastructure allowed PayPal to modify behavior across millions of users without requiring extension updates or providing transparency.

The complaint notes that affiliate networks including Impact Radius, Commission Junction, and Rakuten LinkShare maintain detailed transaction logs that could document the full scope of commission diversions. These logs would show patterns of cookie replacement across specific merchants, time periods, and geographic regions. Combined with PayPal's internal records, discovery could reveal whether the company's leadership received reports about cookie stuffing complaints and how those reports were handled.

Class certification faces procedural hurdles

While the second amended complaint addresses standing deficiencies from the earlier dismissal, class certification will require demonstrating that common questions of law and fact predominate over individual issues. According to Rule 23 of the Federal Rules of Civil Procedure, plaintiffs must show numerosity, commonality, typicality, and adequacy of representation. The complaint argues these requirements are satisfied because PayPal applied standardized cookie replacement practices affecting thousands of affiliate marketers through identical technical mechanisms.

The commonality requirement focuses on whether class members' claims depend on common legal or factual questions. According to the filing, all class members share the common question of whether Honey's cookie replacement practices violated contractual rights to receive commissions for consumer referrals. The standardized nature of affiliate marketing contracts across different merchants creates legal commonality even though specific commission percentages and terms may vary between individual agreements.

Typicality demands that named plaintiffs' claims be typical of the class. The complaint argues typicality exists because all class members experienced the same injury through the same conduct: PayPal replacing their affiliate cookies with Honey's cookies to divert commissions. The technical mechanism operated identically whether the affected affiliate marketer was a YouTube creator, blogger, or podcaster. Variations in commission amounts or specific merchants do not defeat typicality when the core injury derives from uniform practices.

The adequacy requirement examines whether class representatives will fairly and adequately protect class interests. According to the filing, named plaintiffs retain experienced class action counsel from Lieff Cabraser Heimann & Bernstein LLP, Girard Sharp LLP, and Cotchett, Pitre & McCarthy LLP. These firms' track records in complex commercial litigation and technology cases allegedly demonstrate adequate representation capability.

Timeline traces legal proceedings

The Honey litigation has proceeded through multiple stages since the initial December 22, 2024 investigation exposed commission diversion practices. Content creators filed the original class action complaint on December 29, 2024, less than one week after the MegaLag investigation documented systematic cookie replacement affecting thousands of affiliate marketers. The expedited filing reflected urgency among content creators who feared ongoing commission losses during holiday shopping seasons.

PayPal responded with a motion to compel arbitration on November 7, 2025, arguing that plaintiffs who owned PayPal or Venmo accounts had agreed to binding arbitration clauses covering all disputes involving PayPal services. Federal Judge Beth Labson Freeman rejected this argument, finding that consumer-facing user agreements governing personal account usage could not extend to broader commercial disputes about business practices affecting third parties. The arbitration denial allowed discovery to proceed rather than forcing individual arbitration that would prove cost-prohibitive for most content creators.

PayPal followed with a motion to dismiss for lack of standing and failure to state claims under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Judge Freeman granted the motion on November 21, 2025, dismissing the First Amended Complaint with leave to amend. The order identified specific deficiencies including absence of contract terms establishing commission entitlements, reliance on statistical modeling rather than concrete injuries to named plaintiffs, and authorization problems with computer fraud claims given broad permissions consumers granted when downloading Honey.

Plaintiffs filed the Second Amended Consolidated Class Action Complaint on January 5, 2026, directly addressing each deficiency identified in the dismissal order. The comprehensive filing includes actual merchant contracts, specific commission diversion examples for each named plaintiff, detailed authorization arguments distinguishing permitted coupon searching from unauthorized cookie replacement, and additional causes of action under state consumer protection laws. The case now proceeds toward PayPal's response to the amended allegations and potential summary judgment motions.

Affiliate marketing industry watches precedent

The Honey litigation carries implications extending beyond the specific parties to fundamental questions about browser extension permissions, affiliate marketing attribution, and consumer consent to data practices. According to industry observers, a ruling favoring content creators could establish that browser extensions cannot use broad technical permissions for purposes materially different from disclosed functionality without additional specific consent. This precedent might force extensions to provide granular permission controls specifying exactly which features users authorize.

Attribution mechanism integrity represents another critical issue. The affiliate marketing industry relies on last-click attribution as a standardized method for allocating commissions across complex consumer journeys involving multiple touchpoints. If courts find that browser extensions can legally insert themselves as the last click regardless of which party actually influenced purchase decisions, the entire attribution framework loses reliability. Merchants might respond by abandoning cookie-based tracking in favor of alternative methods less susceptible to manipulation.

The broader context of PayPal's data practices also faces scrutiny. Investigations revealed that Honey collected extensive browsing data across every website it classified as an online store, tracking thousands of page views within three-month windows. PayPal's recent launch of Transaction Graph Insights & Measurement on January 6, 2026 demonstrates how the company leverages cross-merchant shopping data for advertising purposes. The $4 billion Honey acquisition price reflected strategic value of this data infrastructure beyond simple coupon functionality.

Browser extension regulation may tighten in response to practices the Honey litigation exposes. European Union regulators have shown interest in applying General Data Protection Regulation principles to browser extensions that process personal data for advertising purposes. California's privacy framework under the Consumer Privacy Act might extend to browser extensions that collect and monetize browsing data. Federal legislation remains uncertain, though congressional committees have requested information from technology companies about browser extension privacy practices.

What happens next in litigation

PayPal faces a deadline to respond to the Second Amended Consolidated Class Action Complaint, likely filing either an answer admitting or denying specific allegations or another motion to dismiss challenging sufficiency of the amended pleadings. The company could argue that plaintiffs still fail to establish concrete injuries traceable to Honey despite the additional contract details and specific commission loss examples. Alternative arguments might focus on challenging the legal theories supporting each cause of action or asserting affirmative defenses.

If the case survives dismissal challenges, discovery will consume substantial time and resources. Plaintiffs will likely serve requests for production seeking PayPal's internal documents about Honey's development, deployment, and modification of cookie replacement functionality. Interrogatories may demand information about commission revenues Honey received from merchants, numbers of affected transactions, and decision-making processes regarding selective standdown systems. Depositions of PayPal executives, Honey engineers, and affiliate network representatives could provide testimony about knowledge and intent.

Class certification briefing typically follows completion of some discovery. Plaintiffs must demonstrate that Rule 23 requirements are satisfied through evidence rather than mere allegations. This may include expert testimony about the scope of the affected class, commonality of technical mechanisms, and damages calculation methodologies. PayPal will likely oppose certification by highlighting individual issues regarding specific merchant contracts, varying commission percentages, and differences in how various affiliate marketers use tracking mechanisms.

Settlement discussions may occur in parallel with litigation proceedings. Complex class actions frequently resolve through negotiated settlements providing monetary compensation plus injunctive relief changes to business practices. Potential settlement structures could include a claims process for affiliate marketers to document lost commissions, establishment of a settlement fund allocated based on verified losses, and permanent modifications to Honey preventing future cookie replacement. Court approval would be required for any class action settlement along with notice to absent class members and an opportunity to object.

Timeline

• October 2012: Ryan Hudson and George Ruan create Honey browser extension
• October 2017: Earliest documented selective standdown system code appears in Honey version 10.5.2
• January 2020: PayPal acquires Honey for $4 billion when extension has 17+ million monthly active users
• March 2022: Ryan Hudson departs PayPal after nine-and-a-half years with company
• December 22, 2024: MegaLag investigation exposes Honey's affiliate commission diversion practices
• December 29, 2024: Content creators file initial class action lawsuit seeking $5+ million damages
• November 7, 2025: Federal court denies PayPal's motion to compel arbitration
• November 21, 2025: Court dismisses First Amended Complaint with leave to amend due to standing issues
• January 5, 2026: Plaintiffs file Second Amended Consolidated Class Action Complaint with detailed merchant contracts
• January 6, 2026: PayPal launches Transaction Graph Insights & Measurement leveraging cross-merchant data

Summary

Who: Ten named plaintiff content creators including Ahntourage Media LLC, Aaron Ramirez, Angry Snowboarder, Brevard Marketing LLC, Red Beard Studios LLC, Storm Productions LLC, Gents Scents LLC, Daniel Lachman, Justin Tech Tips LLC, Stuber Holdings LLC, and Dan Becker LLC filed the complaint against PayPal Inc. and PayPal Holdings Inc. in the United States District Court for the Northern District of California.

What: Plaintiffs filed a comprehensive 101-page Second Amended Consolidated Class Action Complaint providing specific merchant contract terms, detailed commission loss examples, and seven distinct causes of action alleging PayPal's Honey browser extension systematically violated affiliate marketing agreements by replacing content creators' tracking cookies with Honey's own cookies to divert commissions.

When: The Second Amended Complaint was filed on January 5, 2026, following the November 21, 2025 dismissal of the First Amended Complaint with leave to amend, addressing standing deficiencies identified in that dismissal order.

Where: The lawsuit proceeds in the United States District Court for the Northern District of California, San Jose Division, before Judge Beth Labson Freeman, with jurisdiction established under the Class Action Fairness Act based on minimal diversity, over 100 putative class members, and damages exceeding $5 million.

Why: Content creators filed the amended complaint to address standing requirements by providing actual merchant contracts defining qualifying links and commission entitlements, documenting specific commission losses for named plaintiffs, and restructuring legal theories to survive dismissal motions while seeking damages for affiliate commissions PayPal allegedly stole through Honey's cookie replacement practices contrary to contractual terms and industry standards.