K.W. v. Epic Games, Inc.

Background

K.W., a minor, and K.W.’s guardian, Jillian Williams, sued Epic Games, Inc. The complaint concerns Epic’s practices involving in-video-game sales to minors and policies concerning disaffirming and obtaining refunds for those sales.

Epic filed a motion to stay the case. It also filed a separate motion asking the court to dismiss the complaint or compel arbitration, which means requiring the parties to resolve the dispute through arbitration instead of court litigation.

The requested stay was based on a North Carolina state court’s preliminary approval of a proposed class-action settlement in a case against Epic. The parties agreed that, if finally approved, the settlement would resolve the plaintiffs’ claims in this case unless they opted out. The North Carolina order also purported to bar settlement class members from starting, continuing, or prosecuting related claims in any court or tribunal.

Ruling

The court stayed this case until the North Carolina court grants or denies final approval of the proposed settlement, whichever occurs first. The court relied on its inherent power to stay proceedings after weighing competing interests, including possible harm from the stay, hardship from requiring a party to proceed, and whether a stay would simplify the issues and promote an orderly resolution.

The court concluded that the stay would allow both sides to conserve resources if the settlement became final and that the upcoming final-approval decision would not prejudice the plaintiffs. The court did not decide whether the plaintiffs would opt out of the settlement. It stated that the plaintiffs’ objections to the proposed settlement should be addressed to the North Carolina court.

The court also explained that the stay was not based on the North Carolina order’s provision purporting to bar related federal proceedings. It declined to decide whether an exception for class actions could be read into the Supreme Court’s rule that state courts generally cannot restrain federal-court proceedings. The court likewise concluded that the federal abstention doctrine concerning concurrent state proceedings did not apply because it was imposing a limited stay rather than declining to hear the case.

The parties must notify the court when the North Carolina court grants or denies final approval. If that court does not decide the issue within 60 days of this order, the parties must file a joint status report. The court also denied as moot the plaintiffs’ administrative motion for leave to file a reply concerning whether cases should be related, because Judge Rogers had denied the relevant motion to relate the cases. The excerpt does not state a ruling on Epic’s separate motion to dismiss or compel arbitration. Judge Charles R. Breyer issued the order.