Doe v. Epic Games, Inc.

• Decision Date: 23 January 2020
• Docket Number: Case No. 19-cv-03629-YGR
• Parties: Johnny DOE, Plaintiff, v. EPIC GAMES, INC., Defendant.
• Court: U.S. District Court — Northern District of California

435 F.Supp.3d 1024

Johnny DOE, Plaintiff,

v.EPIC GAMES, INC., Defendant.

Case No. 19-cv-03629-YGR

United States District Court, N.D. California.

Signed January 23, 2020

Deepali Apurva Brahmbhatt, Peter Reza Afrasiabi, One LLP, Newport Beach, CA, John E. Lord, One LLP, Beverly Hills, CA, for Plaintiff.

Jeffrey S. Jacobson, Drinker Biddle & Reath LLP, New York, NY, Matthew Jacob Adler, Drinker Biddle Reath LLP, San Francisco, CA, Ryan Matthew Salzman, Drinker Biddle and Reath LLP, Los Angeles, CA, for Defendant.

ORDER (1) DENYING MOTION TO COMPEL ARBITRATION OR TRANSFER;

(2) GRANTING IN PART MOTION AND DENYING IN PART MOTION TO DISMISS;

(3) GRANTING MOTION TO COMPEL COMPLIANCE WITH F.R.C.P.10(A)

Re: Dkt. Nos. 18, 20, 21, 44, 47, 49, 52

Yvonne Gonzalez Rogers, United States District Court Judge

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 Federal Rule of Civil Procedure 12(b)(6) ; and (3) defendant's motion to compel plaintiff to comply with Federal Rule of Civil Procedure 10(a). Having carefully considered oral argument, the pleadings in this action, and the papers submitted, and for the reasons set forth below, the Court rules as follows: (1) defendant's motion to compel arbitration or transfer is DENIED , (2) defendant's motion to dismiss is GRANTED IN PART and DENIED IN PART ; and (3) defendant's motion to compel compliance with Rule 10(a) is GRANTED .

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, Cal. Civ. Code § 1750, et seq. ("CLRA"); breach of duty of good faith and fair dealing; negligent misrepresentation; violation of California Business & Professions Code § 17200 et seq. ("UCL"); and restitution or unjust enrichment.

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, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (citation omitted). "By its terms, the [FAA] leaves no room for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd , 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) (emphasis in original); see also 9 U.S.C. § 4. "The court's role under the Act is therefore limited to determining: (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue. If the response is affirmative on both counts, then the Act requires the court to enforce the arbitration agreement in accordance with its terms." Daugherty v. Experian Info. Sols., Inc. , 847 F. Supp. 2d 1189, 1193 (N.D. Cal. 2012) (quoting Chiron Corp. v. Ortho Diagnostic Sys., Inc. , 207 F.3d 1126, 1130 (9th Cir. 2000) ).

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 Cal. Family Code § 6700 ("Except as provided in Section 6701, a minor may make a contract in the same manner as an adult, subject to the power of disaffirmance[.]"). Under California Family Code section 6710, "[e]xcept as otherwise provided by statute, a contract of a minor may be disaffirmed by the minor before majority or within a reasonable time afterwards[.]" Cal. Fam. Code § 6710.

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, 105 Cal.Rptr. 904 (1972)....