Johnny Doe v. Epic Games, Inc.Johnny Doe v. Epic Games, Inc.
- Reporters:
- ,
- Before:
- Yvonne Gonzalez Rogers
Plaintiff Johnny Doe, by and through his guardian Jane Doe, brings this putative class action against defendant Epic Games, Inc. arising out of plaintiff‘s in-application purchases made while playing defendant‘s video game, Fortnite.
Now pending before the Court are three concurrently-filed motions: (1) defendant‘s motion to compel arbitration, or in the alternative, to transfer; (2) defendant‘s motion to dismiss pursuant to
I. BACKGROUND
The following background is drawn from the complaint and declarations offered in support of the parties’ briefs.
A. Fortnite
Defendant is the creator of Fortnite, “an open-world survival video game in which players collect weapons, tools, and resources . . . in order to survive and advance in the game.” The game can be downloaded at no cost but allows players to make “in-App purchases” using virtual currency called “V-Bucks,” which can be earned through game play or purchased for money. One hundred V-Bucks general cost around $1.00, but a player can obtain V-Bucks at a discount for purchasing a higher quantity. On certain platforms, defendant may refund a total of three items during the lifetime of the user if those purchases were made within the previous 30 days. Other purchases are non-refundable. Players allegedly do not have access to their historical purchases, within the game or otherwise.
B. The End User Licensing Agreements
Plaintiff, a minor, created a Fortnite account on March 4, 2018. Upon downloading the software for the video game, plaintiff accepted the terms of defendant‘s End User License Agreement (“EULA“) by first clicking a box that read, “I have read and agree with the End User License Agreement,” and then clicking a button that read, “Accept.” The EULA purported to set forth players’ rights and obligations relating to the gaming experience. The EULA contained a forum selection clause, which provided, in relevant part:
11. Governing Law and Jurisdiction. Any action or proceeding brought to enforce the terms of this Agreement or to adjudicate any dispute must be brought in the Superior Court of Wake County, State of North Carolina or the United States District Court for the Eastern District of North Carolina. You agree to the exclusive jurisdiction and venue of these courts[.]
The EULA further provided that defendant might “issue an amended Agreement, Terms of Service, or Privacy Policy at any time in its discretion,” and if any such amendment “[wa]s not acceptable to [the player], [the player] may terminate th[e] Agreement and must stop using the Software.” Continued use of the software would “demonstrate [the player‘s] acceptance of the amended Agreement and Terms of Service[.]” Plaintiff allegedly does not recall seeing, reading, or agreeing to the EULA, nor did plaintiff‘s parents seek, read, or agree to the EULA.
On June 7, 2019, plaintiff logged on to Fortnite and accepted an amended EULA,1 which contained the following arbitration provision:
THIS AGREEMENT CONTAINS A BINDING, INDIVIDUAL ARBITRATION AND CLASS-ACTION WAIVER PROVISION. IF YOU ACCEPT THIS AGREEMENT, YOU AND EPIC AGREE TO RESOLVE DISPUTES IN BINDING, INDIVIDUAL ARBITRATION AND GIVE UP THE RIGHT TO GO TO COURT INDIVIDUALLY OR AS PART OF A CLASS ACTION, AND EPIC AGREES TO PAY YOUR ARBITRATION COSTS FOR ALL DISPUTES OF UP TO $10,000 THAT ARE MADE IN GOOD FAITH (SEE SECTION 12). YOU HAVE A TIME-LIMITED RIGHT TO OPT OUT OF THIS WAIVER.
It also provided:
TO ENTER INTO THIS LICENSE AGREEMENT, YOU MUST BE AN ADULT OF THE LEGAL AGE OF MAJORITY IN YOUR COUNTRY OF RESIDENCE. . . . YOU AFFIRM THAT YOU HAVE REACHED THE LEGAL AGE OF MAJORITY, UNDERSTAND AND ACCEPT THIS AGREEMENT (INCLUDING ITS DISPUTE RESOLUTION TERMS). IF YOU ARE UNDER THE LEGAL AGE OF MAJORITY, YOUR PARENT OR LEGAL GUARDIAN MUST CONSENT TO THIS AGREEMENT.
In addition, the amended EULA contained a “governing law and jurisdiction” clause like the one contained in the original EULA. The amended EULA, also like the original EULA, stated that continued use of the software would demonstrate acceptance of the amended agreement. Further, as with the original EULA, plaintiff‘s parents allegedly did not see, read, or agree to the amended EULA.
C. The Instant Suit
On May 17, 2019, plaintiff‘s counsel sent a letter to defendant in which counsel claimed that defendant had “specifically target[ed] minors for in-App Purchases” without “includ[ing] any provisions to get parental consent before making purchases.” The letter further asserted that plaintiff “can legally disaffirm contracts with [defendant] for in-App [p]urchases,” including purchases that were made by using the minor‘s own money. The letter purported to put defendant on “notice of [its] violations of the state laws of California,” and “demand[ed] that [defendant] correct, repair, replace or otherwise rectify” its policies regarding non-refundable in-App purchases. The letter warned that if defendant did not respond, plaintiff would file a class action complaint. The letter further stated that plaintiff wished to remain anonymous, describing him as “a minor residing in California” and “a player of Fortnite.”
On June 21, 2019, plaintiff filed the instant suit. In the complaint, plaintiff alleges that he made several non-refundable in-App purchases using V-Bucks, including, for example, purchases of “Battle Pass” or “Battle Pass Tiers.” Plaintiff further alleges that he used his own money, through gift cards received on social occasions, to make these purchases. Plaintiff alleges that he made these purchases without understanding the dollar amounts involved, and although the later wanted to cancel the purchases, he was not allowed to do so under defendant‘s non-refundable policy. Plaintiff brings this putative class action on behalf of all minors in the United States (the nationwide class) and California (the statewide sub-class) who made an in-App purchase that was non-refundable or made an in-App purchase with their own gift card.
Plaintiff brings claims for declaratory judgment; violation of the California Consumer Legal Remedies Act,
II. MOTION TO COMPEL ARBITRATION
The Court first considers defendant‘s motion to compel arbitration. The Federal Arbitration Act (“FAA“) reflects a “liberal federal policy favoring arbitration.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (citation omitted). “By
Defendant moves to compel arbitration pursuant to the arbitration provision contained in the amended EULA. In opposition, plaintiff argues, among other things, that he has disaffirmed the EULAs and therefore cannot be compelled to arbitrate. Thus, as a threshold issue, the Court must determine whether plaintiff disaffirmed the agreement in which he purportedly agreed to arbitration.
A. Disaffirmance
California law2 provides that a minor has the capacity to contract, with the exception of certain contracts specifically prohibited by statute,3 and subject to the power of disaffirmance. See
Disaffirmance “may be made by any act or declaration” indicating an intent to disaffirm. Celli v. Sports Car Club of Am., Inc., 29 Cal.App.3d 511, 517 (1972). In other words, “express notice to the other party is unnecessary,” id., and “[n]o specific language is required to communicate an intent to disaffirm[,]” Berg v. Traylor, 148 Cal.App. 4th 809, 820 (2007). Whatever the method, “[d]isaffirmance by a minor rescinds the entire contract, rendering it a nullity.” I.B. ex rel. Fife v. Facebook, Inc., 905 F.Supp.2d 989, 1000 (N.D. Cal. 2012)
(citing Scollan v. Gov‘t Emps. Ins. Co., 222 Cal.App.2d 181, 183-84 (1963)). The disaffirmance statute reflects a policy of “shield[ing] minors from their lack of judgment and experience and confer[ing] upon them the right to avoid their contracts in order that they may be protected against their own improvidence and the designs and machinations of other people.” Sparks v. Sparks, 101 Cal.App.2d 129, 137 (1950); see also Fife, 905 F.Supp.2d 1000
Here, plaintiff claims that by sending the May 17 letter and later filing suit, he has disaffirmed both EULAs. Defendant disagrees arguing that (i) plaintiff has not clearly communicated what he is or is not disaffirming, and (ii) plaintiff‘s briefs suggest that he may continue playing Fortnite, which means he cannot disaffirm the contract.
With respect to defendant‘s first argument, both the May 17 letter and the complaint convey plaintiff‘s intent to repudiate the binding force and effect of plaintiff‘s in-App purchases. Neither, however, conveys disaffirmance of the EULAs more generally. Indeed, the letter asserts that plaintiff “can legally disaffirm contracts with [defendant] for in-App Purchases” and purchases plaintiff made “us[ing] [his] own money from gift cards.” Consistent with this assertion, plaintiff‘s complaint purports to bring this declaratory judgment action “for a minor‘s right to disaffirm in-App purchases in Epic‘s video game Fortnite.”4 Given that the minor‘s power to disaffirm a contract is broad and can be invoked through “any act or declaration” that conveys his intent to repudiate a contract, Celli, 29 Cal.App.3d at 517, the Court finds this statement sufficient to “disclos[e] [plaintiff‘s] unequivocal intent to repudiate [the] binding force and effect” of both EULAs.5
Berg v. Traylor, 148 Cal.App. 4th 809 (2007) is in accord. There, one of the appellants, a minor, purportedly entered into a contract giving the respondent authority to act as the minor‘s exclusive personal manager in exchange for a commission and other consideration. Id. at 812-813. After the minor obtained a recurring role on a network television show, the minor‘s parent sent the respondent a letter stating they no longer needed her services and could no longer afford to pay her
As to defendant‘s second argument that plaintiff cannot disaffirm the contract because he continues to play Fortnite, this contention is directly contradicted by a notice filed by plaintiff‘s counsel shortly after the hearing on the motion, which stated that plaintiff “has not played the Fortnite game . . . after filing of the lawsuit” and “has no intention of playing Fortnite in the future.” Thus, this is not a case in which a minor seeks to “adopt that part of an entire transaction which is beneficial, and reject its burdens.” E.K.D. ex rel. Dawes v. Facebook, Inc., 885 F. Supp. 2d 894, 899 (S.D. Ill. 2012) (quoting Peers v. McLaughlin, 88 Cal. 294, 26 P. 119, 120 (1891)) (rejecting minor plaintiffs’ attempt to disaffirm a forum selection clause in Facebook‘s terms of service while continuing to use facebook.com); 5 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 9:14 (4th ed. 1993 & Supp. 2011) (“If an infant enters into any contract subject to conditions or stipulations, the minor cannot take the benefit of the contract without the burden of the conditions or stipulations.“). Instead, plaintiff has disaffirmed the EULAs in their entirety, including by not playing Fortnite.7 See T. K. v. Adobe Sys. Inc., No. 17-CV-04595-LHK, 2018 WL 1812200, at *6 (N.D. Cal. Apr. 17, 2018) (“T.K. has disaffirmed the entire renewal agreement. There is . . . no evidence that T.K. continues
Because plaintiff validly disaffirmed the EULAs, plaintiff cannot be compelled to arbitrate this dispute pursuant to the arbitration provision contained in the amended EULA.8 Defendant‘s motion to compel arbitration is therefore DENIED.9
III. MOTION TO TRANSFER
Having found that plaintiff cannot be compelled to arbitrate this dispute, the Court considers defendant‘s motion to transfer this action to the Eastern District of North Carolina pursuant to
A. 28 U.S.C. § 1391(b)
Under
Where, as here, a defendant raises a venue challenge, the plaintiff bears the burden of showing that venue is proper. Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir. 1979). The court need not accept the pleadings as true and may consider facts outside of the pleadings. See Kukje Hwajae Ins. Co., Ltd. v. M/V Hyundai Liberty, 408 F.3d 1250, 1254 (9th Cir. 2005). Plaintiff claims venue is proper for two reasons: (i) defendant waived its right to argue lack of personal jurisdiction by failing to move to dismiss on this basis, and venue therefore
First, with respect to personal jurisdiction and venue under section 1391(b)(1), plaintiff argues defendant‘s failure to move on a timely basis to dismiss for lack of personal jurisdiction within 21 days of service constitutes waiver and is sufficient to establish the “residency” requirement under section 1391(b)(1). See Agasino v. American Airlines, No. 19-cv-03243-LB, 2019 WL 3387803, at *3 (N.D. Cal. July 26, 2019) (by failing to move to dismiss for lack of personal jurisdiction, defendant “therefore has waived any personal-jurisdiction arguments and is subject to personal jurisdiction here with respect to this case“); Ward v. Certain Underwriters at Lloyd‘s of London, No. 18-cv-07551-JCS, 2019 WL 2076991, at *4 (N.D. Cal. May 10, 2019) (“As far as this Court is aware, every court to consider the issue has held that personal jurisdiction even based on waiver is sufficient to establish ‘residency’ for the purpose of
Even if venue was not proper under section 1391(b)(1), the Court finds plaintiff also has established proper venue under section 1391(b)(2), namely, because a substantial portion of events at issue occurred in this district. Notably, section 1391(b)(2) “does not require that a majority of the events have occurred in the district where the suit is filed, nor does it require that the events in that district predominate,” and “venue may be proper in multiple districts if a ‘substantial part’ of the underlying events took place in each of those districts.” Ward v. Certain Underwriters at Lloyd‘s of London, No. 18-CV-07551-JCS, 2019 WL 2076991, at *5 (N.D. Cal. May 10, 2019) (quoting Tech. Credit Corp. v. N.J. Christian Acad., Inc., 307 F. Supp. 3d 993, 1002 (N.D. Cal. 2018)). Here, plaintiff contends, and defendant does not dispute, that plaintiff downloaded and played Fortnite, and completed all in-App purchases, in this district. This is sufficient to establish venue under section 1391(b)(2) given the dispute at issue.
B. 28 U.S.C § 1404(a)
The Court proceeds to consider whether transfer is appropriate under
For the convenience of the parties and witnesses, in the interest of justice, a
district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.
Section 1404(a) “does not condition transfer on the initial forum‘s being ‘wrong’ . . . [a]nd it permits transfer to any district where venue is also proper . . . or to any other district to which the parties have agreed by contract or stipulation.” Atlantic Marine Const. Co., Inc. v. United States District Court, 571 U.S. 49, 59 (2013) (”Atlantic Marine“).11 Importantly, the moving party carries the burden of showing that the transferee district is the more appropriate forum. Jones v. GNC Franchising, Inc., 211 F.3d 495, 499 (9th Cir. 2000).
Courts considering transfer must first determine whether the action could have been brought in the target district in the first instance. See Hoffman v. Blaski, 363 U.S. 335, 343-44 (1960). An action could have been brought in any court that has subject matter jurisdiction over the claims and personal jurisdiction over the defendant, and where venue would have been proper. See id. Here, defendant contends, and plaintiff does not appear to dispute, that this action could have been brought in the Eastern District of North Carolina.
If the action could have been brought in the target district, courts then undertake an “individualized, case-by-case consideration of convenience and fairness.” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)) (internal quotations omitted). Relevant factors the Court may consider include: (1) plaintiff‘s choice of forum, (2) convenience of the parties, (3) convenience of the witnesses, (4) ease of access to the evidence, (5) familiarity of each forum with the applicable law, (6) feasibility of consolidation with other claims, (7) any local interest in the controversy, and (8) the relative court congestion and time of trial in each forum. Vu v. Ortho-McNeil Pharm., Inc., 602 F. Supp. 2d 1151, 1156 (N.D. Cal. 2009).12 The Court considers the relevant factors below.13
1. Plaintiff‘s Choice of Forum
“While a plaintiff‘s choice of forum always weighs against transfer under section 1404(a), a court considering transfer must determine how much weight to give this choice under the circumstances.” Glob. Hawk Ins. Co. v. Vega, No. 15-CV-02093-YGR, 2015 WL 7720801, at *4 (N.D. Cal. Nov. 30, 2015). “Although great weight is generally accorded plaintiff‘s choice of forum, when an individual . . . represents a class, the named plaintiff‘s choice of forum is given less weight.” Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir. 1987) (citation omitted). The rationale for a diminished degree of deference is that
Further, in determining the appropriate amount of deference to accord plaintiff‘s choice of forum, courts consider the extent of the parties’ contacts with the chosen forum, including contacts relating to the plaintiff‘s cause of action. Belzberg, 834 F.2d at 739 (citing Pac. Car & Foundry Co. v. Pence, 403 F.2d 949, 954 (9th Cir. 1968)). A plaintiff‘s choice of forum receives only minimal deference if the operative facts did not occur within the forum and the forum has no interest in the parties or subject matter. Id. In contrast, where “there is no evidence that plaintiffs engaged in forum shopping and both plaintiffs and defendant have significant contacts with the Northern District of California, plaintiffs’ choice of forum carries significant weight.” Roling v. E*Trade Sec., LLC, 756 F.Supp.2d 1179, 1186 (N.D. Cal. 2010).
Here, plaintiff purports to bring this action on behalf of a nationwide class and a California sub-class. That this case involves a putative nationwide class diminishes the deference afforded to plaintiff‘s choice of forum. Even if the classes are certified, however, the named plaintiff, who resides in this district, “would still bear a fiduciary responsibility to lead the class,” and thus his choice of forum still is entitled to some deference. Van Slyke v. Capital One Bank, 503 F.Supp.2d 1353, 1363 (N.D. Cal. 2007). As to the extent of the parties’ contacts with this forum, plaintiff avers that his contacts are significant because he resides, downloaded and played Fortnite, and accepted and disaffirmed the EULAs in this district. Defendant does not dispute these facts but counters that it has no relevant contacts with this district, and indeed, the relevant functions related to in-App sales and refunds are determined by employees located in North Carolina. That said, it also cannot be disputed that large numbers of Fortnite players reside in this district.
On balance, although defendant‘s relevant contacts with this district appear minimal, it is undisputed that plaintiff has substantial contacts with this forum. Thus, plaintiff‘s choice of forum is entitled to at least some deference. This factor weighs minimally against transfer.
2. Convenience of the Parties and Witnesses
Section 1404(a) provides for transfer to a more convenient forum, “not to a forum likely to prove equally convenient or inconvenient.” Adobe Sys. Inc. v. Childers, No. 5:10-cv-03571-JF/HRL, 2011 WL 566812, at *9 (N.D. Cal. Feb. 14, 2011) (quoting Van Dusen, 376 U.S. at 646). Thus, transfer “should not be granted if the effect is simply to shift the inconvenience to the plaintiff.” Id. (citing Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986)). Further, “[t]he convenience of the witnesses, particularly non-party witnesses, is often the most important factor” in ruling on a motion to transfer venue under section 1404(a). Grossman v. Johnson & Johnson, No. 14-CV-03557-VC, 2015 WL 1743116, at *1 (N.D. Cal. Apr. 13, 2015) (citation omitted). To evaluate witness convenience, “courts must consider not only the number of witnesses, but also the nature and quality of their testimony.” United States ex rel. Tutanes-Luster v. Broker Sols., Inc., No. 17-CV-04384-JST, 2019 WL 1024962, at *5 (N.D. Cal. Mar. 4, 2019) (citation omitted). Moreover, courts generally give less consideration to the convenience of party witnesses or witnesses employed by a party because these witnesses can be compelled by the parties to testify regardless of where the litigation will occur. Allstar Mktg. Grp., LLC v. Your Store Online, LLC, 666 F.Supp.2d 1109, 1132 (C.D. Cal. 2009). “[In] establishing inconvenience to witnesses, the moving party must name the witnesses, state their location, and explain their testimony and its relevance.” Imran v. Vital Pharm., Inc., No. 18-CV-05758-JST, 2019 WL 1509180, at *4 (N.D. Cal. Apr. 5, 2019) (citation omitted).
As previously mentioned, defendant avers that the employees familiar with issues in this case, including the marketing of and refunds for in-App purchases, work at or near defendant‘s headquarters in Cary, North Carolina. Plaintiff counters that based on publicly-available job postings, some party witnesses, including defendant‘s software engineers and Chief Technology Officer, work at defendant‘s office in Larkspur, California. Plaintiff further emphasizes that defendant has not identified any witnesses who cannot be produced in this district or for whom this district would not be a more convenient forum.
Defendant‘s arguments fail to persuade. Although it is likely some witnesses would be inconvenienced by traveling from North Carolina headquarters to this district for trial, defendant does not identify any one of them—much less a non-party witness—with specificity. The absence of reference to non-party witnesses is notable because defendant‘s employees may be compelled to appear in this Court. Insofar as some employees may leave the company by the time this case is tried, the Court cannot predict where these former employees will reside, and thus, cannot assume either district will be a more convenient forum. With respect to depositions, those can be conducted in North Carolina if appropriate.
Defendant has not carried its burden of demonstrating that North Carolina is a more convenient location for the parties or most witnesses. Plaintiff, for his part, has not identified any witnesses that would be inconvenienced by transfer either. Therefore, this factor is neutral.
3. Ease of Access to Evidence
“[I]n the age of electronically stored information, the ease of access to evidence is neutral because much of the evidence in this case will be electronic documents, which are relatively easy to obtain in any district.” See Simpson Strong-Tie Co., Inc. v. Oz-Post Int‘l, LLC, 2018 WL 3956430, at *8 (N.D. Cal. Aug. 17, 2018) (internal citation and quotation marks omitted). As such, this factor is neutral.
4. Familiarity with Applicable Law
Plaintiff contends that this Court is more familiar with California law, which governs at least two of his six claims in
5. Local Interest in the Controversy
Defendant argues that this factor is, at worst, neutral, because North Carolina has as much interest in regulating the conduct of one of its corporations as California does in protecting its residents. In R.A. v. Epic Games, Inc., Case No. 2:19-cv-014488 (C.D. Cal. July 30, 2019), Dkt. No. 39 at 15 n.4, the court found California and North Carolina both had interests in the outcome of the litigation based on this rationale, especially given the reach of defendant. This Court agrees. Thus, this factor is neutral.
6. Balancing of Factors
In sum, all section 1404(a) factors are neutral except for plaintiff‘s choice of forum, which weighs minimally against transfer. As such, defendant has not established that the Eastern District of North Carolina is the more appropriate forum, and its request for transfer is DENIED.14
IV. MOTION TO DISMISS
Under
Defendant moves to dismiss plaintiff‘s claims. Below, the Court analyzes each claim in turn.15
Defendant moves to dismiss claiming that plaintiff lacks standing to pursue a declaratory judgment given the dispute over the legal effect of disaffirmance and the failure to plead whether defendant refused plaintiff‘s request for a refund.
Pursuant to the Declaratory Judgment Act, “[i]n a case of actual controversy,” the Court “may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.”
Here, plaintiff seeks “a determination by the Court that: (a) this action may proceed and be maintained as a class action; (b) the sales contracts between [d]efendant and the children of the class members, relating to the purchase of Game Currency, are voidable at the option of the respective class members on behalf of their minor children; (c) if the class members elect to void the contracts, they will be entitled to restitution and interest thereon; (d) an award of reasonable attorneys’ fees and costs of suit to Plaintiff and the Class is appropriate; and (e) such other and further relief as is necessary and just may be appropriate as well.”
Defendant‘s standing arguments fail to persuade. To claim that there is no dispute on disaffirmance strains credulity. Nowhere in its numerous filings related to the pending motions does defendant suggest that it agrees with plaintiff‘s position on disaffirmance or refunds, such that there can be no dispute. To the contrary, in its motion, defendant argues that plaintiff did not and cannot disaffirm contracts with defendant. Further, the May 17 letter sent by plaintiff‘s counsel to defendant stated plaintiff‘s position that he “can legally disaffirm contracts with [defendant] for in-App [p]urchases” and that defendant‘s “non-refundable policy violates the laws of the state of California with respect to contracting with minors.” The letter “demand[ed] that [defendant] correct, repair, replace[,] or otherwise rectify the Fortnite video game non-refundable policy” and stated that plaintiff would file a complaint if defendant did not respond. There is no evidence, allegation, or suggestion that defendant responded. Defendant therefore has indicated its unwillingness to honor plaintiff‘s disaffirmance and refund the in-App purchases.
Next, with respect to the notion that plaintiff lacks standing because he has not alleged that he purchased items labeled “not eligible for refund” or that he saw any non-refundable disclosures, the complaint alleges that “[s]ome items remain non-refundable and outside Epic‘s refund policy including for example, Battle Pass or BattlePass tiers,” both which plaintiff allegedly purchased. The complaint also includes screenshots indicating that when a player purchases “Battle Pass,” at the bottom-right of the screen, there is a disclaimer
Finally, T. K., on which defendant relies, does not compel a different result. There, the court allowed plaintiff to proceed with a declaratory relief claim, finding that the complaint “show[ed] an apparent dispute between the parties about the legal effect of disaffirmance, insofar as Adobe initially refused to refund all of T.K.‘s payments made under the renewal agreement and did so only after T.K. filed this action.” 2018 WL 1812200, at *13. Here, defendant is not entitled to dismissal simply because it has not affirmatively rejected a refund request. Nor can defendant claim to be ignorant regarding plaintiff‘s position on disaffirmance. Rather, like in T.K, there exists an actual controversy between the parties over the rights of minors to disaffirm in-App purchases and, if the contracts can be disaffirmed, whether minors are entitled to refunds. See In re Apple In-App Purchase Litig., 855 F. Supp. 2d 1030, 1035-36 (N.D. Cal. 2012) (denying motion to dismiss declaratory relief claim for determination that minors’ sales contracts of in-app game currency are voidable).
Defendant‘s motion to dismiss the claim for declaratory relief is therefore DENIED.
B. California Consumer Legal Remedies Act (CLRA)
Defendant moves for dismissal of the CLRA claim on the grounds that virtual currency is not a good or service and because plaintiff was not misled. The CLRA prohibits “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.”
1. “Goods or Services”
The CLRA applies to transactions involving the sale or lease of “goods or services.” Relevant here, “goods,” as defined in California Civil Code section 1761(a), means “tangible chattels bought or leased for use primarily for personal, family, or household purposes, including certificates or coupons exchangeable for these goods.”
Defendant argues that V-Bucks, the virtual currency plaintiff allegedly purchased while playing Fortnite, is not a “good or service” under the CLRA. Defendant primarily relies on two cases for support. In the first, Berry v. American Express Publishing, Inc., 147 Cal. App.4th 224, 227, 229 (2007), the California Court of Appeal held that “the extension of credit” was not “tangible chattel.” Specifically, the court found that although
In the second case, I.B. ex rel. Fife v. Facebook, Inc., 905 F. Supp. 2d 989, 996 (N.D. Cal. 2012), which relied on Berry, minors brought a CLRA claim against Facebook arising out of their alleged purchases of “Facebook Credits,” a “payment system” that allowed “users to make purchases within the Facebook website.” On a motion to dismiss, the court found that Facebook
Credits, like the extension of credit in Berry, were not “tangible chattel,” and thus were not covered by the CLRA. Id. at 1007-08.
Plaintiff avers that the “digital content” players can acquire through in-App purchases, including “virtual supplies, ammunition, and skins,” is more akin to a “real-world” good than the credit at issue in Berry and I.B. The Court disagrees. The complaint alleges that Fortnite players can use real money to purchase V-Bucks, which can then be used to purchase content with which to play the game. Thus, the transactions at issue in this case involve purchases of virtual currency, not virtual supplies, ammunition, and skins. As such, and contrary to plaintiff‘s contention, this case bears close similarities to I.B., in which Facebook Credits, which could be used as “payment” on Facebook‘s website, were not considered “goods” under the CLRA. Additionally, like in Berry, V-Bucks “exist only as an indicia of the credit extended” to a Fortnite player. Moreover, although “supplies” and “ammunition” may sound tangible, they are, as plaintiff himself agrees, “digital.”16
Plaintiff‘s CLRA claim therefore fails because the virtual currency at issue is not a good or service. Nevertheless, in order to fully address the claim on the merits, the Court proceeds to consider the other proposed basis for dismissal, namely, whether plaintiff has adequately pleaded that he was misled.
2. Whether Plaintiff Adequately Pleaded that He Was Misled
The CLRA prohibits “unfair methods of competition” and “unfair or deceptive acts or practices.”
Here, defendant argues that plaintiff‘s CLRA claim fails because plaintiff was not misled. Specifically, defendant contends that plaintiff does not claim that he saw statements about in-App purchases being “not eligible for refund,” and even if he had, he has not alleged that these statements caused him damages. Plaintiff counters
T.K. is instructive. There, a minor brought a CLRA claim related to Adobe‘s sales of subscriptions to the “Adobe Creative Cloud Platform” to minors. 2018 WL 1812200, at *1. Adobe brought a motion to dismiss, arguing in part that plaintiff failed to allege that she relied on defendant‘s alleged misrepresentations, which purportedly led plaintiff to belief that she “had no right to either disaffirm the[] contracts or receive refunds.” Id. at *7. The court agreed, finding that the complaint did not allege that plaintiff actually read the relevant terms of service or relied on them. Id.18 Similarly here, plaintiff fails to allege that he relied on any particular misrepresentations or omissions when making in-App purchases.
In addition, the subsections of the CLRA cited in the compliant, namely sections 1770(a)(5) (representations regarding “characteristics, . . . uses, benefits, or quantities“), 1770(a)(7) (representations that goods “are of a particular standard, quality, or grade“), and 1770(a)(14) (representations regarding “rights, remedies, or obligations“), are unsupported. Nowhere in the complaint does plaintiff allege facts showing that defendant misrepresented the characteristics, uses, benefits, or quantities of V-Bucks, or failed to disclose that they were of lower standard or quality than represented. Further, and as previously explained, plaintiff fails to explain how he was misled regarding his rights, remedies, or obligations when making the in-App purchases.
The Court finds plaintiff‘s CLRA claim fails on this ground as well. However, because amendment of the pleadings could potentially cure the defects identified herein, the CLRA claim is Dismissed with Leave to Amend.
C. Implied Duty of Good Faith and Fair Dealing
Defendant moves for dismissal of this claim on the basis that it is not grounded in any express contract provision. Moreover, defendant argues there was no breach of these purported implied
Every contract in the state of California contains an implied covenant of good faith and fair dealing that neither party will injure the right of the other party to receive the benefits of the agreement. In re Apple In-App Purchase Litig., 855 F.Supp.2d at 1041 (citing Wolf v. Walt Disney Pictures & Tel., 162 Cal. App. 4th 1107, 1120 (2008)). “The covenant is implied in every contract in order to protect the express covenants or promises of the contract.” Imber-Gluck v. Google, Inc., No. 5:14–CV–01070–RMW, 2014 WL 3600506, at *8 (N.D. Cal. July 21, 2014). As such, the implied covenant “cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” Appling v. State Farm Mut. Auto. Ins. Co., 340 F.3d 769, 779 (9th Cir. 2003) (quoting Guz v. Bechtel Nat. Inc., 24 Cal.4th 317, 352 (2000)). However, “breach of a specific provision of the contract is not a necessary prerequisite” for breach of implied covenant of good faith and fair dealing. Carma Developers (Cal.), Inc. v. Marathon Development California, Inc., 2 Cal.4th 342, 373 (1992).
“A plaintiff asserting a claim for breach of the implied covenant of good faith and fair dealing must allege the following elements: (1) the existence of a contract; (2) the plaintiff did all, or substantially all of the significant things the contract required; (3) the conditions required for the defendant‘s performance had occurred; (4) the defendant unfairly interfered with the plaintiff‘s right to receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant‘s conduct.” Oculus Innovative Sciences, Inc. v. Nofil Corp., 2007 WL 2600746, at *4 (N.D. Cal. Sept. 10, 2007) (citation omitted). Here, plaintiff alleges that defendant breached its duty of good faith and fair dealing by not taking steps to ensure that minors obtained consent from their parents or guardians before playing Fortnite and by inducing minors to make non-refundable in-App purchases.
Defendant relies on T.K. to support its argument. There, the court dismissed plaintiff‘s good faith and fair dealing claim on the ground that plaintiff had not alleged that defendant frustrated her right to receive the benefits of the contract. 2018 WL 1812200, at *9. Specifically, the court found that plaintiff‘s entire case was premised on her claims that Adobe‘s terms of service misled her about her rights under California law and that Adobe refused to honor her disaffirmance. Id. By the plaintiff‘s own admission, however, the contract did not promise her the right to disaffirm, and thus, it was not actionable as a breach of the implied covenant of good faith and fair dealing, which covers “the express covenants or promises of the contract.” Id. (quoting Imber-Gluck, 2014 WL 3600506 at *8).
The Court agrees that this case is similar to T.K. Namely, plaintiff alleges that defendant breached the implied covenant of good faith and fair dealing by misleading plaintiff with respect to disaffirmance and refunds. However, the EULA and the screenshot included in the complaint indicate that defendant never promised plaintiff such options would be available, and indeed, stated that certain products were non-refundable. Further, although the amended EULA requires minors to obtain the consent of a parent or guardian before accepting the agreement, the Court is not persuaded that defendant breached an implied covenant by failing to ensure minors abide by this provision. Indeed, the provision
Accordingly, defendant‘s motion to dismiss plaintiff‘s good faith and fair dealing claim is Granted. Because amendment would not be futile, however, the Court grants plaintiff Leave To Amend.
D. Negligent Misrepresentation
Next, defendant avers that plaintiff has not established any of the five elements of a negligent misrepresentation claim. “The elements of negligent misrepresentation are (1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another‘s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal.App.4th 226, 243 (2007) (citing Shamsian v. Atlantic Richfield Co., 107 Cal.App.4th 967, 983 (2003)); see also
Here, defendant argues that although the complaint alleges it did not give notice to plaintiff of its non-refundable policy at the time of his purchases, plaintiff also alleges that defendant “may allow a refund of a total of three items through the lifetime of the user” and identifies which items are not eligible for refund under this policy. Defendant also contends that under the EULA, purchases of V-Bucks and content are final and not refundable except “as otherwise required by applicable law.”
As explained with respect to plaintiff‘s CLRA claim, plaintiff has failed to allege sufficiently that defendant made a misrepresentation or that plaintiff justifiably relied on any misrepresentation. Thus, as with the CLRA claim, plaintiff‘s negligent misrepresentation claim is Dismissed With Leave To Amend insofar as plaintiff may be able to replead to meet the elements of the claim.
E. UCL
Defendant argues plaintiff‘s UCL claim fails because (i) plaintiff does not sufficiently allege claims under any of the UCL‘s prongs, and (ii) plaintiff cannot seek equitable relief under the UCL because he already has an adequate remedy at law. The UCL prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.”
The unlawful prong of the UCL prohibits “anything that can properly be called a business practice and that at the same time is forbidden by law.” Cel-Tech Commc‘ns., Inc. v. L.A. Cellular Telephone Co., 20 Cal.4th 163, 180 (1999) (quotation marks and citations omitted). “By proscribing ‘any unlawful’ business practice, the UCL permits injured consumers to ‘borrow’ violations of other laws and treat them as unlawful competition that is independently actionable.” In re Adobe Sys., Inc. Privacy Litig., 66 F. Supp. 3d 1197, 1225 (N.D. Cal. 2014) (quoting Cel-Tech Commc‘ns., 20 Cal.4th at 180).
Plaintiff alleges that defendant‘s conduct is unlawful under the UCL because it (i) violates the CLRA, (ii) breaches the implied covenant of good faith and fair dealing, (iii) constitutes negligent misrepresentation, and (iv) violates the minor‘s right to disaffirm a contract. As to the first three claims, the Court has dismissed these causes of action. Accordingly, they may not form the basis for plaintiff‘s UCL claim. The Court also has found, however, that plaintiff‘s allegations are sufficient to support his theory that defendant is unwilling to honor plaintiff‘s disaffirmance of his in-App purchases.
Thus, plaintiff may proceed with his UCL claim for unlawful conduct to the extent it is predicated on defendant‘s alleged violation of the minor‘s right to disaffirm a contract. Defendant‘s motion to dismiss plaintiff‘s UCL claim on this ground is therefore Denied.
2. Unfair
There are two standards for determining what is “unfair competition” under the UCL. The first standard, in the context of claims brought by consumers, requires allegations that the challenged conduct violates a “public policy” that is “tethered” to a specific constitutional, statutory, or regulatory provision. Gregory v. Albertson‘s, Inc., 104 Cal. App. 4th 845, 853 (2002). The second standard “involves balancing the harm to the consumer against the utility of the defendant‘s practice.” Lozano, 504 F.3d at 735.
Plaintiff asserts that defendant‘s conduct is unfair under both standards. Specifically, plaintiff alleges that defendant engaged in unfair practices by actively advertising, marketing, and promoting applications as “free” with the intent to induce minors to purchase game currency. The complaint, however, does not contain a single factual allegation to support this conclusory statement. Indeed, plaintiff alleges that V-Bucks can be earned in-game or purchased for money, and players must enter and save a payment method in order to make in-App purchases. As such, the Court Grants defendant‘s motion to dismiss plaintiff‘s UCL claim insofar as that claim is premised on the unfair prong of the UCL. However, because amendment would not be futile, the Court grants plaintiff Leave To Amend.
3. Fraudulent
The “fraudulent” prong of the UCL “requires a showing [that] members of the public are likely to be deceived.” Wang v. Massey Chevrolet, 97 Cal. App. 4th 856, 871 (2002). “[W]hether a business practice is deceptive will usually be a question of fact not appropriate for decision on” a motion to dismiss. See Williams, 552 F.3d at 938. To state a claim under the fraudulent prong, a plaintiff also is “required to prove ‘actual reliance on the allegedly deceptive or misleading statements,’ and that ‘the misrepresentation was an immediate cause of the injury-producing conduct.‘” Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, 793 (9th Cir. 2012) (quoting Kwikset v. Superior Court, 51 Cal. 4th 310 (2011) and In Re Tobacco II Cases, 46 Cal. 4th 298 (2009)). Here, plaintiff alleges that defendant‘s conduct was fraudulent under the UCL because defendant intentionally and knowingly “omitted giving information” on amounts spent on in-App purchases, thereby misleading plaintiff about his purchase history. Elsewhere in the complaint, plaintiff alleges that Fortnite players have no way of knowing and cannot track the money already spent on in-App purchases.
Defendant argues that plaintiff‘s claim under the fraudulent prong of the UCL fails because players can track through their credit or debit cards or through PayPal, and in any event, defendant is not obligated to provide players with such information. Plaintiff counters that minors do not have access to their parents’ credit card or bank account statements and that non-disclosure of material information such as purchasing history is fraudulent.
Plaintiff‘s argument that minors do not have access to information about their purchase history is undermined by the fact that plaintiff‘s allegations in this case are based on in-App purchases he made using his own money. Moreover, it is reasonable to believe that at least some minors obtain the consent of their parents or guardians before using their credit cards or bank accounts to make in-App purchases, and for those who do not, the Court is not persuaded that defendant must make their purchase history easily accessible through Fortnite. In addition, plaintiff‘s allegation that defendant “omitted giving information” about purchase history does not explain whether plaintiff ever sought this information and whether defendant refused to provide it.
Plaintiff‘s UCL claim under the fraudulent prong is Dismissed With Leave To Amend.
4. Adequate Remedy at Law
Having found that plaintiff‘s UCL claim survives to the extent it is brought under the unlawful prong and predicated on an alleged violation of the minor‘s right to disaffirm, the Court considers whether the claim nevertheless fails because plaintiff has an adequate remedy at law.
The Court recently considered this issue in Luong v. Subaru of Am., Inc., 2018 WL 2047646 at *7 (N.D. Cal. May 2, 2018). There, like here, defendant argued that plaintiffs’ UCL claim was subject to dismissal to the extent they sought equitable relief because plaintiffs already had an adequate remedy at law. Id. This Court held:
[T]here is a split of authority in the California district courts on the question of whether plaintiffs should be barred from pleading claims for equitable relief under the UCL and CLRA if they have alleged a claim that would provide an adequate remedy at law. See Aberin v. Am. Honda Motor Co., Inc., No. 16-CV-04384-JST, 2018 WL 1473085, at *9 (N.D. Cal. Mar. 26, 2018) (denying dismissal); Adkins v. Comcast Corp., No. 16-CV-05969-VC, 2017 WL 3491973, at *3 (N.D. Cal. Aug. 1, 2017) (“A few federal courts seem to have decided that claims for equitable relief should be dismissed at the pleading stage if the plaintiff manages to state a claim for relief that carries a remedy at law. . . . But this Court is aware of no basis in California or federal law for prohibiting the plaintiffs from pursuing their equitable claims in the alternative to legal remedies at the pleadings stage.“); Huu Nguyen v. Nissan N. Am., Inc., No. 16-CV-05591-LHK, 2017 WL 1330602, at *4 (N.D. Cal. Apr. 11, 2017) (granting dismissal
because plaintiff had adequate remedy at law); Munning v. Gap, Inc., 238 F. Supp. 3d 1195, 1204 (N.D. Cal. 2017) (same); Moss v. Infinity Ins. Co., 197 F. Supp. 3d 1191, 1203 (N.D. Cal. 2016) (same). The Court finds those decisions allowing claims for equitable relief to proceed as an alternative remedy, at the pleading stage, to be more persuasive, based upon the broad remedial purposes of the California consumer protection statutes.
Id. (emphasis supplied). Specifically, the Court reasoned that Business & Professions Code section 17205 expressly states that the remedies provided for a UCL violation are “cumulative to each other and to the remedies or penalties available under all other laws of this state.” Id.; see also State v. Altus Fin., S.A., 36 Cal. 4th 1284, 1303 (2005) (“[T]he fact that there are alternative remedies under a specific statute does not preclude a UCL remedy, unless the statute itself provides that the remedy is to be exclusive.“).
Accordingly, defendant‘s motion to dismiss plaintiff‘s UCL claim because plaintiff has an adequate remedy at law is Denied.
F. Unjust Enrichment
The Ninth Circuit has held that under California law, while “there is not a standalone cause of action for unjust enrichment, . . . [w]hen a plaintiff alleges unjust enrichment, a court may construe the cause of action as a quasi-contract claim seeking restitution.” Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 762 (9th Cir. 2015) (internal citations and quotations omitted). “The fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.” First Nationwide Savings v. Perry, 11 Cal.App.4th 1657, 1663 (1992) (emphasis in original); see also Astiana, 783 F.3d at 762 (explaining that restitution and unjust enrichment “describe the theory underlying a claim that a defendant has been unjustly conferred a benefit through mistake, fraud, coercion, or request” (internal quotation marks omitted)).
Plaintiff alleges defendant was unjustly enriched through its policy of not refunding in-App purchases of digital products and game currency. Plaintiff asserts that he is entitled to recover all revenue acquired as a result of this policy. Defendant argues that this claim fails for the same reason as certain of the other claims, namely, because plaintiff has not alleged that he requested to disaffirm his contract with defendant or that defendant unjustly refused such a request. This argument fails because, as explained above, plaintiff has sufficiently pleaded that defendant was unwilling to honor plaintiff‘s disaffirmance and refund plaintiff for his in-App purchases. Plaintiff‘s unjust enrichment claim nevertheless fails, however, because plaintiff has not alleged that he was misled or that defendant breached any express or implied covenant as it relates to defendant‘s non-refundable policy.19
As such, defendant‘s motion to dismiss the unjust enrichment claim is Granted. As with the other claims that have been dismissed, however, plaintiff shall be granted Leave To Amend.
V. MOTION TO COMPEL COMPLIANCE WITH RULE 10(A)
Finally, the Court addresses defendant‘s motion to compel plaintiff to
As a threshold matter, plaintiff contends that the motion is procedurally improper because it essentially is a motion for reconsideration of the Court‘s order granting plaintiff leave to proceed under a pseudonym, filed absent leave of Court. Plaintiff filed this action on June 21, 2019 and concurrently field an ex parte motion to seek leave from the Court to proceed under a pseudonym. In its ex parte motion, plaintiff noted that defendant would not be prejudiced by the Court allowing plaintiffs “to press their claims anonymously at this juncture[,] given the limited, initial stage through which [p]laintiffs seek this relief: as [p]laintiffs plead their case, and [d]efendant presents its answer and defenses.” On June 25, 2019, defendant executed a waiver of service of summons that included receipt of the motion. Just over two weeks later, on July 11, 2019, the Court granted plaintiff‘s motion.
The Court granted plaintiff‘s motion to proceed under a pseudonym when this case was in its infancy, before defendant‘s counsel had appeared let alone responded to the complaint. Now that defendant‘s counsel has appeared and the parties have engaged in motion practice that provides additional insight into the case, the circumstances have changed materially. This is sufficient to warrant consideration of the motion to compel compliance with
Turning to the merits, in the Ninth Circuit, parties may proceed under pseudonyms only “in the ‘unusual case’ when nondisclosure of the party‘s identity ‘is necessary . . . to protect a person from harassment, injury, ridicule or personal embarrassment.” Does I Thru XXIII v. Advanced Textile Corp., 214 F.3d 1058, 1067–68 (9th Cir. 2000) (quoting United States v. Doe, 655 F.2d 920, 922 n. 1 (9th Cir. 1981)). The Court determines whether the plaintiff may proceed anonymously by balancing five factors: (1) the severity of the threatened harm, (2) the reasonableness of the anonymous party‘s fears, (3) the anonymous party‘s vulnerability to such retaliation, (4) the prejudice to the opposing party, and (5) the public interest. Id. at 1068–69.
Here, plaintiff contends that he should be permitted to proceed under pseudonym because his gaming habits constitute highly sensitive personal information and he fears retaliation from the community if his identity is revealed. Plaintiff further argues that defendant will not suffer any hardship from plaintiff proceeding anonymously because defendant knows plaintiff‘s identity. Further, plaintiff avers that the public interest in seeing this case resolved on the merits weighs in favor of granting anonymity, implying that plaintiff may not proceed with the litigation if he must face public scrutiny.
Plaintiff‘s arguments fail to persuade. Although plaintiff‘s position in this litigation may be unpopular to some, his fear of social stigmatization is speculative and there is no indication plaintiff is likely to suffer more severe retaliation than in the typical consumer action. Further, plaintiff‘s “technology preferences” and “video-gaming habits,” while perhaps sensitive, do not justify the use of a pseudonym, which runs contrary to the “normal presumption in litigation [] that parties must use their
As such, defendant‘s motion to compel compliance with
VI. CONCLUSION
For the foregoing reasons, the Court hereby Orders:
(i) defendant‘s motion to compel arbitration is Denied;
(ii) defendant‘s motion to transfer this case to the Eastern District of North Carolina is Denied;
(iii) defendant‘s motion to dismiss is Denied as to (A) declaratory judgment, and (B) the UCL, insofar as plaintiff‘s claim is brought under the unlawful prong and predicated on an alleged violation of the minor‘s right to disaffirm;
(iv) defendant‘s motion to dismiss is Granted With Leave To Amend as to (A) the CLRA, (B) the implied covenant of good faith and fair dealing, (C) negligent misrepresentation claim, (D) the UCL, except as set forth above, and (E) unjust enrichment; and
(v) defendant‘s motion to compel compliance with
An amended complaint must be filed within twenty-one (21) days of issuance of this order.21 Such complaint must identify plaintiff Johnny Doe and his guardian Jane Doe by name in accordance with
This Order terminates Docket Numbers 18, 20, 21, 44, and 47, 49, and 52.
It Is So Ordered.
Dated: January 23, 2020
YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT COURT JUDGE