game over for allegations relating to misattributed/distorted consumer complaints

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2025 WL 918411, 24cv1646(DLC) (S.D.N.Y. Mar. 26, 2025)

Previously, the court partially granted Skillz’s motion to dismiss Papaya’s amended counterclaims; Papaya sought leave to file further amended counterclaims, which the court denied.

The parties compete in the market for mobile games that allow users to spend and win money (and in-game prizes). “Users of Papaya’s games typically compete with between five and twenty opponents. … The Skillz platform hosts games, each of which allows gameplay between only two players, created by third-party developers.” Skillz allegedly “engaged in a multipronged campaign to discredit Papaya in the eyes of the public and law enforcement officials regarding Papaya’s use of robots or ‘bots.’”

The challenged conduct included an alleged “false-front organization called 4 Fair Play” that “solicited complaints from consumers about Papaya and other competitors of Skillz.” As alleged:

Skillz forwarded these complaints to state attorneys general. But before doing so, it added stock language to the complaint, which said “I’m a resident of your state and I would like to make you aware of a mobile game that is defrauding consumers like me out of their hard-earned money. I strongly believe the following games use AI or ‘bots’ to scam players by pretending that those are real players.” It then listed the games selected on the complaint form. Skillz did not tell complainants it was adding this language. Most complaints that 4 Fair Play received did not mention bot use, but the stock language, which misleadingly appeared to have been written by the complainant, was added to them anyway. Skillz “spot checked” the complaints that it forwarded to law enforcement, but it otherwise did not vet them to make sure they came from real people.

This Skillz-added material in the forwarded consumer complaints was not alleged in the previous counterclaims.

The 4 Fair Play website also included short quotations purportedly from consumers complaining about Papaya’s games. “These testimonials, each one or two sentences long, were attributed to consumers identified only by initials and state of origin … or by the game they had played.” Skillz itself allegedly drafted some of those testimonials, and they had not come from real consumers. “Other testimonials did come from real consumers but had been edited by Skillz.” The fact that these weren’t real consumers or real quotes was added to the proposed counterclaims.

[Gotta say, if we had a working FTC, this would be the kind of thing that the FTC considers deceptive, though it might well leave the parties to private remedies given their incentives to litigate and the lack of direct sales from the website.]

Finally,

[p]ortraying itself as a “public policy group conducting research,” 4 Fair Play contacted Skillz employees … and offered recipients $300 for participating in interviews meant to “better understand the mobile gaming industry.” An internal guide, which was edited by Skillz executives, encouraged interviewers to ask questions about Papaya’s use of bots. The involvement of Skillz and 4 Fair Play in this scheme was hidden.

Despite NDAs, two former Papaya employees participated in interviews and “disclosed information about when and why bots are used and the coding behind the bots, among other things.” Using this information, Skillz publicly accused Papaya of using bots. It also sued Papaya for false advertising about lack of bots. The proposed counterclaims added an unfair competition claim based on these facts.

The existing surviving counterclaims relate to Papaya’s challenges to Skillz’ advertising that its own platform did not use bots, matched players evenly, and allowed customers to withdraw cash at any time.

The new allegations didn’t change the outcome for Papaya. Misleadingly adding to consumer complaints before sending them to state law enforcement doesn’t violate the Lanham Act because it’s not “commercial advertising or promotion.” It also doesn’t violate NY GBL § 349 because it doesn’t involve consumer-facing representations/consumer-oriented conduct.

That leaves defamation, but falsity requires pleading that the alleged statement is not “substantially true,” meaning that it “could have produced no worse an effect on the mind of a reader than the truth pertinent to the allegation.” But Papaya didn’t allege that “the substantive content of this stock language was false—just that it was misattributed.” Nor did it allege that state authorities ever did anything with these communications or that they became public. There was thus no allegation of harm, “reputational or otherwise.” The statements couldn’t be per se actionable, which requires proof that the statement “impugns the basic integrity or creditworthiness of a business.” But, while “the integrity of Papaya’s business practices and its deception of the public about its historic use of bots to compete with customers in its games of ‘skill’ are at the heart of this case,” Papaya didn’t deny such undisclosed historic use in the proposed amended complaint, and thus wouldn’t be able to prove the falsity of the supposedly defamatory statement at trial. Footnote: “In recent depositions, none of Papaya’s individual deposition witnesses denied the historic use of bots, as they all asserted their Fifth Amendment rights against self-incrimination rather than testifying to any potentially disputed facts.” [Yikes!]

Misattribution of testimonials: Both Lanham Act and GBL claims require materiality, and Papaya didn’t allege that the content of the testimonials (accusing Papaya of using bots or being unfair generally) were false, nor that numerous real consumers were not submitting complaints along these lines. Even if the consumers “(barely) identified by the website –‘J.P. from Florida,’ ‘Bingo Cash Player,’ and the like” didn’t write “the specific words included in the displayed testimonials,” it was not plausible that the misattribution was material and caused injury.  

[N]o reasonable jury could find that anyone’s purchasing decisions would have been affected (or that consumers would be affected in any other meaningful sense) by the fact that a real “J.P. from Florida” did not say the words, “I have genuinely never played a game that is so rigged in my life.” While parties generally “should be given the opportunity to develop their evidence to demonstrate materiality,” the pleadings must set forth some plausible basis for the defendant to ultimately be held liable.

Finally, the interview scheme wasn’t actionable. “The essence of an unfair competition claim under New York law is that the defendant misappropriated the fruit of plaintiff’s labors and expenditures by obtaining access to plaintiff’s business idea either through fraud or deception, or an abuse of a fiduciary or confidential relationship.” Although Skillz allegedly used deceptive means to obtain information about Papaya’s business, there were no allegations that Skillz actually did anything with that information. Yes, Skillz told reporters that Papaya was using bots in its games. But according to the complaint itself, “Skillz was publicly accusing Papaya of using bots well before the interviews took place anyway.” Given that context, “characterizing the accusation that Papaya used bots as a trade secret is a stretch at best.” And even if it was, this conduct wasn’t unfair competition.