Skillz Challenges Papaya’s Chapter 15 Bankruptcy Shield

Skillz has taken steps to block Papaya Gaming’s bid for bankruptcy protection in the United States. The row comes after a legal dispute over Papaya’s use of automated players in mobile games that saw the firm ordered to pay $719 million. Skillz Opposes Papaya’s Bankruptcy Protection in Delaware The objection was filed in the US Bankruptcy Court for the District of Delaware by Skillz, now known as Firy Inc. The company said Papaya’s business and financial interests are tightly intertwined with the United States and that the Israeli gaming operator should not be permitted to use Chapter 15. Chapter 15 is designed to address the insolvencies of companies that do business in, or own assets in, more than one country. Papaya sought protection from the Tel Aviv District Court and appealed the underlying judgment and ultimately resorted to the procedure. In the bankruptcy case of Papaya, Skillz says it is not a wide-ranging restructuring with many creditors. Instead, the company says it is mostly trying to stall enforcement of the judgment owed to its former competitor. The objection also challenges Papaya‘s decision to file for protection in Delaware, when it states its primary business activities are located elsewhere. Skillz has filed an application with the bankruptcy court to refuse to recognize the Israeli proceedings. The latest filing comes after a major judgment against Papaya in New York. In April, a federal jury found the company engaged in deceptive conduct by providing computer-generated opponents in games advertized to users as player-versus-player competitions. Papaya Appeals $719M Judgment in Skillz Dispute Papaya was ordered in July by US District Judge Denise Cote to pay about $719 million. Disgorgement related to the company’s conduct was part of the award, and the court also awarded about $10.1 million in legal fees and costs. Papaya denies the allegations and is appealing. The company had contended earlier that its games were still based on skill and had contested Skillz‘s interpretation of how opponents were presented to players. Papaya has moved to stay collection of the judgment pending the appeal. In August, Delaware bankruptcy Judge Mary F. Walrath issued a temporary injunction barring collection efforts while the court considers whether to grant formal recognition of Papaya’s Chapter 15 case. Skillz had asked the court to require Papaya to post financial security or impose limits on moving money out of the United States. The judge denied those requests but granted Papaya temporary protection. The company has also had problems establishing a longer-term repayment plan. In August, the Tel Aviv District Court rejected Papaya’s plan to pay off the judgment over six and a half years from the proceeds of its ongoing operations. Skillz has since argued that Papaya has not yet formulated a replacement plan to show how the $719 million obligation would be met. Hence, the bankruptcy dispute is closely connected with the result of Papaya’s appeal. Skillz will hope to have the Chapter 15 proceedings dismissed, but until then, Papaya can continue to run its gaming business under temporary US protection.