IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF NORTH CAROLINA
`WESTERN DIVISION
`No. 5: l 9-cv-348-BO
`
`<
`
`MICHAEL HEIDBREDER,
`
`Plaintiff,
`
`V.
`
`EPIC GAMES, INC. ,
`
`Defendant.
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`ORDER
`
`This matter is before the Court on defendant 's motion to compel arbitration. [DE 11]. For
`
`the reasons that follow, defendant 's motion [DE 11) is GRANTED.
`
`BACKGROUND
`
`Defendant Epic Games is the developer of Fortnite, a popular video game with millions of
`
`players in the United States and around the world. Fortnite can be downloaded and played for free
`
`by merely creating an Epic Games account with a name and valid email address, but users have
`
`the option of making additional in-game purchases. DE 1, ~ 16. These in-game purchases require
`
`a credit or debit card, the information for which is then stored by Epic Games. Id. ~ 17.
`
`Plaintiff is a Missouri resident and had an Epic Games account that was linked to his debit
`
`card. Id. ~~ 11- 12. Plaintiffs complaint alleges that despite assurances to users that the Epic
`
`Games prioritized the security of user personal information, cyber vulnerabilities existed in
`
`Fortnite's web infrastructure as early as November 2018 . Id. ~ 23 .
`
`Plaintiff alleges
`
`that defendant 's
`
`inadequate data security and Fortnite's cyber
`
`vulnerabilities allowed hackers to breach user accounts and that plaintiff was a victim of such a
`
`hack. Id.~~ 36-41. Specifically, between November 2018 and January 2019, plaintiffs debit card
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 1 of 9
`
`

`

`associated with his Epic Games account was fraudulently charged for in-game purchases as a result
`
`of the data breach. Id., 39. In response, plaintiff filed this putative class action in August 2019,
`
`bringing both statutory and common law claims against Epic Games.
`
`Through the instant motion, defendant moves to compel plaintiff to arbitrate his claims
`
`individually in accordance with the arbitration provision contained in a March 2019 End User
`
`License Agreement ("EULA"). The EULA was agreed to by a user of plaintiff's Epic Games
`
`account on March 15, 2019.
`
`The arbitration provision contains additional features, including: (1) an agreement to
`
`arbitrate on an individual basis only ; (2) a 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 users the choice of venue between their home state or North Carolina; ( 4) Epic
`
`Games's agreement to pay arbitration fees under $10,000, share costs after $10,000, and not seek
`
`attorney's fees against users; and (5) a 30-day opt-out provision, giving users a 30-day window
`
`after agreeing to the EULA to opt-out of the arbitration provision. Rein Deel. , Ex. B, § 12, DE 12-
`
`1 (hereinafter "EULA § 12").
`
`Plaintiff opposes enforcement of the arbitration provision for three reasons. First, plaintiff
`
`argues that he never agreed to the EULA on March 15, 2019. Pl.'s Resp. at 7-11 , DE 15 . Rather,
`
`it was his minor son, who lacked contractual capacity and now disaffirms the EULA, who clicked
`
`"agree" to the terms of the EULA. Id. Second, plaintiff argues that the privacy-related data breach
`
`claims are outside the scope of the arbitration provision. Id. at 11- 15. Third, plaintiff claims that
`
`the arbitration provision, the delegation clause, and the class action waiver are unconscionable. Id.
`
`at 15- 20.
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 2 of 9
`
`2
`
`

`

`DISCUSSION
`
`The Federal Arbitration Act ("FAA") "reflects a liberal federal policy favoring arbitration
`
`agreements." Adkins v. Labor Ready, Inc., 303 F.3d 496, 500 (4th Cir. 2002) (quotations
`
`omitted). "Accordingly, due regard must be given to the federal policy favoring arbitration .... "
`
`Id. (quotations omitted). A district court must stay proceedings and grant a motiori to compel
`
`arbitration if the moving party proves: (1) the existence of a dispute between the parties, (2) a
`
`written agreement that includes an arbitration provision which purports to cover the dispute, (3)
`
`the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign
`
`commerce, and (4) the failure, neglect or refusal of the defendant to arbitrate the dispute." Id. at
`
`500- 01. In addition, when determining whether the parties agreed to arbitrate, courts apply state
`
`law principles governing contract formation. See, e.g. , Galloway v. Santander Consumer USA,
`
`Inc. , 819 F.3d 79, 85 (4th Cir. 20 16).
`
`There is no dispute as to factors one, three, and four. At issue- and what is contested by
`
`plaintiff-
`
`is that the arbitration provision contained in the EULA at issue is valid, enforceable,
`
`and covers the claims in this case. The record is clear that a written EULA, containing the
`
`arbitration provision at issue, was agreed to on March 15, 2019 by a user of plaintiff's Epic
`
`Games account. Rein Deel. ~ 14, DE 12-1. But as mentioned above, plaintiff raises three
`
`arguments for why it should not be enforced. The Court addresses each of these below.
`
`Plaintiff's Minor Chi ld and the EULA
`
`Plaintiff first argues he never accepted the terms of the EULA. Instead, it was his minor
`
`child, K.H. , who was playing Fortnite and agreed to the EULA on March 15 , 2019. Plaintiff
`
`contends that K.H. lacked contractual capacity and now disaffirms the agreement. See K.H.
`
`Deel. , ~ 5, DE 15-2. This objection fails because under basic principles of principal-agent law,
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 3 of 9
`
`3
`
`

`

`K.H. was acting as plaintiffs agent and had both actual and apparent authority to agree to the
`
`EULA and bind plaintiff.
`
`"Actual authority is that authority which the agent reasonably thinks he possesses .... "
`
`Stainless Valve Co. v. Safefresh Techs., LLC, 231 N.C. App. 286, 290 (2013). Actual authority
`
`may be implied from the specific facts and circumstances of the situation. Munn v. Haymount
`
`Rehab. & Nursing Ctr., Inc., 208 N.C. App. 632, 638 (2010) . "Apparent authority is that
`
`authority which the principal has held the agent out as possessing or which he has permitted the
`
`agent to represent that he possesses." Heath v. Craighill, Rendleman, Ingle & Blythe, P.A., 97
`
`N.C. App. 236, 242 (1990) (quotations omitted). A principal's liability is determined by "what
`
`authority the third person in the exercise of reasonable care was justified in believing that the
`
`principal had, under the circumstances, conferred upon his agent. " Id. ( quotations omitted).
`
`Under the FAA, whether an agent possesses actual or apparent authority to bind the
`
`principal to an arbitration provision is "a question for a factfinder where the evidence is either
`
`conflicting or admits of more than one inference." Berkeley Cty. Sch. Dist. v. Hub Int'! Ltd. , 944
`
`F.3d 225 , 238 (4th Cir. 2019) (quotations omitted). In analyzing such questions, a court should
`
`determine if there are genuine issues of material fact regarding the existence of the agreement to
`
`arbitrate. See, e.g. , Chorley Enterprises, Inc. v. Dickey's Barbecue Restaurants, Inc., 807 F.3d
`
`553,564 (4th Cir. 2015). Because an objective of 9 U.S .C. § 4 is to decide the arbitration issue
`
`quickly- an objective which would otherwise be frustrated by "round after round" of
`
`discovery-
`
`the procedures over discovery on a motion to compel arbitration are committed to
`
`the "sound discretion" of the district court. See Berkeley Cty. Sch. Dist., 944 F.3d at 242. On this
`
`point, the Court is satisfied with the number of exhibits and declarations submitted with the
`
`parties' motions and finds that no additional discovery is warranted.
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 4 of 9
`
`4
`
`

`

`The Court finds that there is no genuine issue of fact 1 as to whether K.H. acted with
`
`actual and apparent authority-
`
`indeed, he did.
`
`With respect to implied actual authority, the evidence illustrates that K.H. used plaintiff's
`
`Epic Games account with exclusivity, regul arity, and for such a duration that K.H. would have
`
`reasonably believed he had the authority to click "agree" to the EULA terms. Plaintiff created the
`
`Epic Games account in his name but did not himself play. Heibreder Deel. , ~~ 1-3, DE 15-1.
`
`Instead, K.H. used the account. Id. ~ 3. K.H. used plaintiff's account "every day" to play Fortnite
`
`starting in November 2017 when the account was created. K.H. Deel. , ~~ 1-2, DE 15-2; Kelz
`
`Deel. , Ex. A, DE 16-1. K.H. knew or had access to the login credentials for plaintiff's account.
`
`K.H. Deel. ~ 2, DE 15-2. Furthermore, the record contains no evidence that tends to show it was
`
`umeasonable for K.H. to believe he had authority to agree to the EULA considering his regular
`
`use. Put another way, the evidence demonstrates that plaintiff created an Epic Games account
`
`and then gave K.H. free rein over the account for over a year. Under such circumstances, K.H.
`
`reasonably believed he had the implied actual authority to click "agree" to the EULA. No
`
`genuine issue of fact exists as to K.H.' s actual authority.
`
`With respect to apparent authority, the evidence demonstrates that defendant was justified
`
`in believing that the user of plaintiff's Epic Games account possessed the authority to agree to
`
`the EULA. Defendant had no reason to believe that the user of plaintiff's account was anyone
`
`other than plaintiff- or someone to whom plaintiff gave authority over hi s account. Epic Games
`
`1 Buried in foo tnote 3 of his response, plaintiff references the FAA's provision for a summary
`trial on the factual issue of the making of the arbitration agreement. Pl. ' s Resp. at 6. As the party
`alleged to be "in default" of the arbitration agreement, plaintiff carries the burden to demand a
`summary trial on the issues. 9 U.S.C. § 4. The Court finds that plaintiff's passing reference to the
`summary trial provision does not constitute a formal demand, and consequently, that the Court
`has the power to determine the issue. See id.
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 5 of 9
`
`5
`
`

`

`accounts are personalized, associated with specific names and email addresses. Users maintain
`
`their own passwords. See K.H. Deel. , ~ 2. DE 15-2 . Defendant was therefore justified in
`
`believing that the user of the account, who would have needed plaintiffs login credentials, had
`
`the authority to agree to the EULA. No genuine issue of fact exists as to K.H. ' s apparent
`
`authority.
`
`The Court finds that K.H. acted with implied actual and apparent authority when he
`
`accepted the EULA and that plaintiff is bound to the agreement.
`
`Scope of the Arbitration Provision
`
`Plaintiffs second argument is that the privacy-related claims against defendant are
`
`outside the scope of the arbitration provision. Whether the claims fall within the scope of the
`
`provision is not a question for this Court. " When the parties' contract delegates the arbitrability
`
`question to an arbitrator, a court may not override the contract. In those circumstances, a court
`
`possesses no power to decide the arbitrability issue." Henry Schein, Inc. v. Archer & White Sales,
`
`Inc., 139 S. Ct. 524, 529 (2019). The EULA in this case specifically states: " You and Epic agree
`
`that whether a dispute is subject to arbitration under this Agreement will be determined by the
`
`arbitrator rather than a court. " EULA§ 12.3.1. The Court must defer to the arbitrator as to the
`
`question of the arbitration provision' s scope.
`
`U nconscionabi Ii ty
`
`Plaintiffs final argument is that the arbitration agreement, delegation clause, and class
`
`action waiver are unconscionable. "A party asserting that a contract is unconscionable must
`
`prove both procedural and substantive unconscionability ." Tillman v. Commercial Credit Loans,
`
`Inc., 362 N.C . 93 , 102 (2008). [P]rocedural unconscionability involves ' bargaining naughtiness '
`
`in the form of unfair surprise, lack of meaningful choice, and an inequality of bargaining power."
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 6 of 9
`
`6
`
`

`

`Id. at 103. "Substantive unconscionability, on the other hand, refers to harsh, one-sided, and
`
`oppressive contract terms." Id.
`
`Plaintiff contends that the EULA provisions at issue are unconscionable because
`
`defendant is attempting to apply the agreement retroactively against injuries that already accrued.
`
`Plaintiffs injuries occurred between November 2018 and January 2019 whereas the EULA was
`
`presented and agreed to by plaintiff in March 2019. Plaintiff argues defendant knew about data
`
`breaches, failed to provide notice, then foisted a new EULA upon plaintiff in March 2019 to
`
`avoid liability, resulting in unfair surprise and lack of meaningful choice.
`
`Plaintiff does not satisfy either the procedural or substantive unconscionability prongs.
`
`To start, arbitration agreements app lied retroactively against claims that have already accrued are
`
`enforceable if the clause ' s language is broad enough. See, e.g. , Levin v. Alms & Assocs., Inc., 634
`
`F .3d 260, 267- 68 ( 4th Cir. 2011 ). Whether this specific provision appli es to pre-existing claims,
`
`as discussed above, is a question for the arbitrator. That said, the courts ' sanctioning of
`
`retroactive arbitration agreements is relevant as it undermines plaintiffs specific emphasis on
`
`retroactivity as a basis for unconscionability. See Pl. ' s Resp. at 18.
`
`Second, plaintiff greatly exaggerates the lack of notice and choice users were given with
`
`respect to the arbitration provision at issue here. Prior to March 2019, the parties were governed
`
`by a previous EULA, which plaintiff agreed to when he created his Epic Games account. The
`
`previous EULA stated in bold type: "Epic may issue an amended Agreement . .. at any time in
`
`its discretion by posting the amended Agreement ... on its website or by providing you with
`
`digital access to amended versions ... when you next access the Software. " Rein Deel. , Ex. A, §
`
`14. This constitutes reasonable notice that defendant could amend the EULA terms. More
`
`important, though, is that users had meaningful choice over the arbitration provision. Defendant
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 7 of 9
`
`7
`
`

`

`provided users a 30-day window after accepting the EULA to opt-out of the arbitration
`
`provision. EULA§ 12.6. When presented with the new terms in March 2019, plaintiff could
`
`have exerci sed thi s opt-out right or, simply, stopped playing the game if he objected to
`
`arbitration.
`
`For substantive unconscionability , the terms at issue-
`
`the arbitration agreement,
`
`delegation clause, and class-action waiver- are common terms in modern contracts that have
`
`recently been sanctioned by the courts and can hardly be considered substantively
`
`unconscionable. See Schein, 139 S. Ct. 524(2019) (rejecting a "wholly groundl ess" exception to
`
`a delegation clause), and Epic Sys. Corp. v. Lewis, 138 S. Ct. 161 2 (20 18) (holding that the
`
`ational Labor Relation' s Act does not prohibit enforcement of a class arbitration waiver in
`
`empl oyment contracts). Moreover, defend ant's arbi trati on provision contains other user-friendly
`
`terms, including the opt-out ri ght, choice of venue, defendant pays arb itration costs, and
`
`defendant waives the ri ght to seek fees and costs. EULA§ 12. The arbi trati on, delegation, and
`
`class waiver provisions are neither procedurally nor substantively unconscionable.
`
`In sum, the Court finds that the arbitration provision is valid and enforceable. In
`
`accordance with the delegation clause, whether the specific claims brought by plaintiff are
`
`covered by the scope of the agreement is a question for the arbitrator. Plaintiff is bound to
`
`individually arbitrate hi s claims against defendant.
`
`CONCLUSION
`
`For the foregoing reasons, defendant's motion [DE 11] is GRANTED. The proceedings
`
`are STAYED and plaintiff is COMPELLED to indi vidually arbitrate hi s claims.
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 8 of 9
`
`8
`
`

`

`SO ORDERED, this _ _ L_ day of February, 2020. ~w.¥
`
`NCEW.BOYLE
`T
`I
`CHIEF UNITED ST A TES DISTRICT JUDGE
`
`Case 5:19-cv-00348-BO Document 17 Filed 02/03/20 Page 9 of 9
`
`9
`
`