Imposition of sanctions is not to be undertaken lightly. It is particularly difficult to do so when attorneys of unblemished reputation and a distinguished law firm are among the sanctioned parties. But reluctance to enter sanctions cannot excuse a failure to impose them when they are warranted. If the filing of duplicative, vexatious litigation were allowed to escape sanction, the costs would exceed those imposed on the defendants here. Courts and other parties may be encouraged to undertake burdensome and duplicative litigation. The administration of justice would suffer. — Judge Denise L. Cote
Everyone knows that if mom tells you no, it’s not acceptable — even if tempting — to try to get approval from dad. It doesn’t get any smarter if you replace mom and dad with the Southern District of New York and the Eastern District of Virginia.
Last February, Skadden client and mobile gaming outfit Papaya Gaming’s counterclaims against Skillz Platform were dismissed in the Southern District. At that point, Papaya moved to amend those claims and filed an “essentially identical” suit in Virginia. The Virginia action found its way back to New York and an understandably peeved Judge Cote.
Papaya Gaming operates in the “real-money skill-based” mobile gaming market — which is apparently a term of art — running multiplayer tournaments where players compete for cash prizes. Theoretically, users compete against people, but Papaya was deploying bots in some of these tournaments without telling anyone. On occasion, a single human player would be competing against an entire field of bots. Skillz, one of Papaya’s competitors, sued in March 2024, asserting a false advertising claim under the Lanham Act. Papaya eventually admitted it had been using bots until 2024 — but not before first trying to resist discovery by claiming Israeli law prevented it from producing records. (That gambit also failed.)
Papaya fired back with counterclaims alleging Skillz had created a “false front” organization called 4FairPlay, which maintained a website encouraging consumers to file complaints about Papaya with state attorneys general. Judge Cote dismissed Papaya’s counterclaims about the 4FairPlay website in February 2025. Papaya attempted to amend, and that earned a dismissal a month later.
BUT, after filing its motion to amend — though before the denial — Papaya filed a new lawsuit in the Eastern District of Virginia against 4FairPlay, its operators, and related entities as defendants, asserting claims under Virginia law. Papaya’s counsel then “scrubbed” the Virginia complaint to remove references to Skillz’s direct involvement and delete allegations about bots — in what Judge Cote described as “an apparent attempt to circumvent the preclusion doctrines that its adversaries had identified in correspondence threatening sanctions.”
Judge Nachmanoff in the Eastern District of Virginia didn’t mince words when he transferred the case to New York, stating that Papaya “blatantly attempted to get a second bite at the apple by pursuing different but clearly related defendants in a different forum after Judge Cote conclusively rejected Papaya’s counterclaim and motion for leave to file a second amended counterclaim on virtually identical claims.”
Once the case came back to Judge Cote, the strategy of playing the parents against each other was already, inevitably cooked.
Judge Cote found that Papaya and Skadden “operated in bad faith in filing the Virginia Action.” The evidence of bad faith included the “ineffective scrubbing” of the Virginia complaint to make it appear less duplicative and the “strained arguments” attempting to distinguish the two litigations. The court explicitly identified the strategy at work: Papaya was pursuing claims against Skillz affiliates “to place pressure on Skillz and thereby unreasonably increased the cost of litigation.”
Because the underlying Lanham Act case is still ongoing, with Skillz seeking over $700 million in damages. While that’s a significant chunk of change, as the court noted, “large potential damages figures cannot excuse litigation tactics that improperly and unfairly increase the burden of litigation.” Trial is slated to begin in April.
This is a rough outcome for Skadden. The court’s finding of bad faith — not “oopsie” level negligence — is about as bad as a sanctions opinion gets. The only way this week could get any worse for Skadden is if they found out they spinelessly gave away $100 million for no good reason.
Oh.
Well, maybe the DOJ will be able to convince a court to allow it to reverse its own position from 24 hours before. Failing that… maybe the government can try filling essentially identical claims in another court? I wonder if they could find a firm to help them do that pro bono?
(Check out the full opinion and order on the next page…)
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
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