Dispute with Paypel

Quick question. Im having a dispute with Paypel. Its not an alarming amount ($309), its just the concept. It short, I purchased an item on ebay and paid using Paypel via my Amex card. The item was defective. I contacted the seller and they provided a shipping label for a refund. I shipped it, the tracking shows delivered, but they never credited. I contacted Paypel to open a claim, they issued a credit (which they now call a temp credit). They then denied the claim. Reason for denial was because: “The address I used to ship the item wasn’t written in the sellers email (they seller had just attached a shipping label)”. Im now getting collection calls to collect this amount. I can use small-claims court, but more than that, I wish to suit them so they change this wrong and ridiculous policy. My question is twofold: 1)Is this a case? 2)Is this something an attorney was take as a get-paid-if-i-win basis?