One of the best things about a massive tech screw-up like a security breach or a massive service failure is the inevitable story that comes out of it about a group of disgruntled customers taking it upon themselves to sue the firm responsible for their hardship. We saw it with Sony for example after the massive security breach last year. These stories will soon be a thing of the past, however, at least with PayPal, as changes to the terms of service now specifically state that you can't get all angry mob with it anymore.
It hasn't come into effect yet, but as of November 2 you won't be able to join in any class action suits against PayPal:
Amendment to the PayPal User Agreement: This update to the User Agreement effective November 1, 2012 contains changes that affect how claims you and PayPal have against each other are resolved (see Disputes with PayPal below). You will, with limited exception, be required to submit claims you have against PayPal to binding and final arbitration, unless you opt out of the Agreement to Arbitrate (Section 14.3) by December 1, 2012. Unless you opt out: (1) you will only be permitted to pursue claims against PayPal on an individual basis, not as a plaintiff or class member in any class or representative action or proceeding and (2) you will only be permitted to seek relief (including monetary, injunctive, and declaratory relief) on an individual basis. See Disputes with PayPal below for more information.
This means that you can still sue them as an individual, you just won't be able to punch your details into a webform operated by a law firm to join a class action, for example.
Farewell, headlines. We'll miss you. [PayPal]