By Lauryn Robinson, GWLaw 2L
Michael Heidbreder, a Missouri resident, filed suit alleging Epic Games’ “vulnerable” security allowed hackers to charge fraudulent in-game purchases to his debit card between November 2018 and January 2019.
Heidbreder filed both statutory and common law claims including negligence, breach of implied contract and violation of state consumer-protection and data-breach statutes with the U.S. District Court of the Eastern Division of North Carolina. However, assigned Judge Terrence W. Boyle decided the matter must be moved to arbitration since the End User License Agreement (“EULA”) with Fornite developer, Epic Games, mandated such.
That decision was made in response to Epic Games’ Motion to Compel, filed in October 2019, which argued that the terms and conditions of the EULA should prevail. Pursuant to the EULA, the arbitration provision included: “(1) an agreement to arbitrate on an individual basis only; (2) delegation clause granting the arbitrator the power to determine whether a specific dispute is governed by the arbitration clause; (3) a venue selection clause giving user the choice of venue between their home state or North Caroline; (4) Epic Games’ agreement to pay arbitration fees under $10,000, share costs after $10,000 and not seek attorney fee’s against users and (5) a 30 -day opt-out provision, giving users a 30 day window after agreeing to the End User License Agreement to opt out of arbitration provision.” Compl.
Heidbreder presented three compelling, yet unsuccessful, arguments.
First, he asserted his minor son lacked contractual capacity to agree to the EULA. Judge Boyle rejected this argument noting “under the basic principles of principal-agent law” his son acted as Heidbreder’s agent, giving him both actual and apparent authority to agree.
Second, Heidbreder argued that privacy related matters are outside the scope of arbitration. According to common law, when the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract.” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 529 (2019). Therefore, the arbitrator, rather than the court, determines the scope of these provisions.
Lastly, Heidbreder claimed the class action waiver, arbitration clause and class action clause are unconscionable because Epic Games is applying the agreement retroactively. Judge Boyle acknowledges yet quibbles with Heidbreder’s last argument noting the terms at issue “are common terms in modern contracts that have been recently sanctioned by the courts and can hardly be considered substantively unconscionable.”
Although Epic Games has won the first round, some believe it could backfire on it (and other publishers) if parents decide to no longer turn over their credit/debit cards over to their kids, for in-game purchases.
Heidbreder v. Epic Games, Inc. No. 5:19-cv-348, 2020 WL 548408 (E.D.N.C. Feb. 3, 2020)
