438 F.Supp.3d 591
E.D.N.C.2020Background:
- Plaintiff (Missouri resident) had an Epic Games Fortnite account linked to his debit card; between Nov. 2018 and Jan. 2019 unauthorized in-game charges were made after alleged account compromise.
- Plaintiff filed a putative class action in Aug. 2019 asserting statutory and common-law privacy/data-security claims against Epic Games.
- Epic moved to compel individual arbitration under a March 15, 2019 End User License Agreement (EULA) containing: an individual-only arbitration clause, a delegation clause (arbitrator decides arbitrability), a class-action waiver, venue choices, cost-shifting limits, and a 30-day opt-out.
- The March 15 EULA was accepted by a user of plaintiff’s account (his minor son); plaintiff contends the son lacked capacity and disaffirms; plaintiff also argues the claims fall outside the EULA and that the arbitration terms are unconscionable and retroactive.
- The court found the son had implied actual and apparent authority to bind plaintiff, deferred scope questions to the arbitrator under the delegation clause, rejected unconscionability and retroactivity arguments, granted the motion to compel, and stayed the proceedings.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Formation/Consent: whether plaintiff agreed to EULA | Plaintiff: his minor son clicked "agree" without capacity and can disaffirm | Epic: son acted with actual and apparent authority to bind plaintiff | Court: son had implied actual and apparent authority; plaintiff bound by EULA |
| Scope/arbitrability: whether privacy/data-breach claims are arbitrable | Heidbreder: claims fall outside arbitration clause | Epic: EULA delegates arbitrability to arbitrator | Court: delegation clause requires arbitrator to decide scope; court declines to decide |
| Unconscionability and retroactivity | Plaintiff: clause is procedurally/substantively unconscionable and improperly applied retroactively | Epic: clause common, users had notice and 30-day opt-out; provision contains user-friendly terms | Court: no procedural or substantive unconscionability; retroactivity issue for arbitrator if applicable |
Key Cases Cited
- Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002) (FAA embodies liberal federal policy favoring arbitration)
- Berkeley Cty. Sch. Dist. v. Hub Int'l Ltd., 944 F.3d 225 (4th Cir. 2019) (agent authority to bind principal on arbitration is a fact question)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (courts must enforce delegation clauses and defer arbitrability questions to arbitrators)
- Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (class-arbitration waivers can be enforceable)
- Levin v. Alms & Assocs., Inc., 634 F.3d 260 (4th Cir. 2011) (retroactive application of arbitration clauses can be enforceable if language is broad)
- Tillman v. Commercial Credit Loans, Inc., 362 N.C. 93 (N.C. 2008) (unconscionability requires both procedural and substantive showings)