Skillz Platform Inc. v. Papaya Gaming, Ltd

Background

Skillz sued Papaya under the Lanham Act and New York General Business Law § 349, alleging false advertising. Papaya asserted counterclaims against Skillz involving false advertising, defamation, civil conspiracy, and copyright and trademark infringement. In an earlier opinion, the court dismissed some counterclaims while allowing others to remain.

Papaya then moved under Federal Rule of Civil Procedure 15(a)(2) for permission to file proposed second amended counterclaims. The proposed amendments added allegations about Skillz’s handling of consumer complaints submitted through the 4 Fair Play website, fabricated or edited consumer testimonials on that website, and a scheme to obtain confidential information from former Papaya employees. Because a scheduling order governed amendments, the court considered both whether Papaya showed good cause for the delay and whether the proposed claims would be futile. An amendment is futile if the proposed claim could not survive a motion to dismiss for failure to state a claim under Rule 12(b)(6).

Consumer complaints sent to state officials

Papaya alleged that Skillz added language about bot use to consumer complaints before forwarding them to state attorneys general, even when the original complaints did not mention bots. The court held that these allegations could not support Lanham Act or New York General Business Law § 349 claims because those laws concern consumer-facing representations. The court also found that the allegations did not state a defamation claim. The proposed counterclaims did not say that the added language itself was false, that state authorities acted on the complaints, that the communications became public, or that Papaya suffered reputational harm. The court further stated that Papaya had not denied its historic undisclosed use of bots and therefore could not prove the required falsity of the alleged defamatory statement.

4 Fair Play website

Papaya proposed allegations that Skillz fabricated some consumer testimonials and edited others on the 4 Fair Play website. The court found those allegations insufficient for false-advertising, consumer-deception, or defamation claims. Papaya did not allege that the substance of the testimonials—criticizing Papaya’s games as using bots or being generally unfair—was false. The court held that the alleged misattribution of words to people identified by initials, a state, or a game was not plausibly material or harmful; it was not reasonably likely to affect purchasing decisions or otherwise have a meaningful effect on readers.

The court also rejected proposed amendments concerning the website’s complaint counter, pie chart, and map. It relied on the reasons given in the earlier opinion and held that the amendments did not plausibly allege that the graphics were literally false or not substantially true.

Interview scheme and unfair competition

Papaya alleged that an organization posing as a public-policy research group offered payments to interview participants and obtained confidential information from two former Papaya employees. Papaya proposed an unfair-competition claim based on misappropriation. Under New York law, that theory generally requires taking and using a competitor’s property, trade secret, or the product of its labor and expenditures to compete against it.

The court held that Papaya did not allege that Skillz actually used the information obtained in the interviews. Skillz had publicly accused Papaya of using bots before the interviews, and the proposed pleading did not adequately connect the interview information to later advertising or marketing. The court also found Papaya’s allegation that Skillz used the information to compete unfairly to be a conclusory statement rather than sufficient factual support. Independently, the court found that Papaya had not shown good cause for waiting until near the end of fact discovery to propose the interview-related amendments, because Papaya knew about the scheme no later than November 21, 2024.

Disposition

The court denied Papaya’s March 3 motion for leave to file the proposed second amended counterclaims.