EXCELLENT NEWS. After a customer had won a court judgement against Alpha, they wrote in to PayPal; directly to their legal department and they paid up!
They refunded the money in full, but it didn't include court costs so the customer still needs to get that through another means.. but a huge chunk of his money he has finally gotten back after a long time waiting (he ordered in early 2014).
I've attached a copy of PayPal's response. Thanks everyone and know that this is an avenue you have open thanks to this smart guy!
EDIT: Here's the letter the person sent:
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Dear PayPal Legal Team,
I’ve been asked to contact you regarding a legal judgment I received against Alpha Technology. I made a payment to Alpha Technology, via PayPal, on [DATE]. I sent payment for a product, that to this day, has not been received. Recently I brought a lawsuit against Alpha Technology to the [COUNTY COURT WHERE CASE WAS HEARD]. The court found that Alpha Technology had acted unreasonably and had broken the terms of agreement. A judgment was issued to the claimant, [CLAIMANT NAME]. It is to my understanding, through numerous talks with PayPal customer service, that my original funds have not been released to Alpha Technology. I request that based on the judgment that has been awarded by the court, that PayPal refund this money back to my account. I’ve included the original PayPal transaction, County Court Judgment, and my personal witness statement used in the court hearing. Please let me know if there are more supporting documents needed.
[YOUR NAME]