Unfortunately, I doubt you have a court claim against Paypal. If for no other reason than that you agreed to binding arbitration and gave up your right to sue them. But also because you have to prove that Paypal has actually done something wrong. You previously agreed to their payment protection process, and not you are not accepting that processes outcome. A battle against PayPal would be a difficult one that you would surely lose. Your dispute is with the seller, not paypal.
I don't understand why people use paypal. It only exists because of it's early integration with Ebay. Their dispute resolution sucks and always has. I know many people that have been screwed by paypal and refuse to use them now. Both buyers and sellers. Myself on both ends of that and I will never use them again. What I get from my credit union is 100x better. I call them up and tell them to reverse the charges, and they do. Money is back in my account in 24 hours. It's that simple.
Sorry about your loss