The contract does not say, for example, "when we, at our sole discretion, toss a coin and arbitrarily decide one way or the other".

I think that tossing a coin and using reason are different, and I believe that a court would uphold my expectation that reason was used. Paypal will then have an opportunity to present their reasons. In this case, IMHO, it would appear that a "reasonable standard" of "reason" was not used.