Endeavor has to face a claim from a consultant who says its public market debut was saved thanks to his blueprint of the company’s business model. David Carde may have entered into an implied contract with Endeavor when his attorney emailed CEO Ari Emanuel his analysis illustrating how the hodgepodge of unrelated acquisitions is actually good for business, according to a decision dropped Monday.
The lawsuit revolves around Endeavor’s $10.3 billion IPO last year. Leading up to the public offering, analysts have criticized the company’s takeover blitz, including mixed martial arts organization UFC, art scholarship company Frieze and Professional Bull Riders. The “spending spree,” as Carde put it in his complaint, resulted in Endeavor losing $554 million in 2019 and racking up $4.5 billion in long-term debt.
Endeavor had planned to hold its IPO in 2019, but pulled it amid market skepticism.
“Following the embarrassment of the failed first IPO, Endeavor’s crushing debt became an existential threat after the COVID pandemic brought the company’s operations to a standstill,” the complaint reads. “However, when Endeavor stole Mr Carde’s approach and then embraced it to communicate about his company to the market, a path to a successful IPO became clear and finally realized.”
Endeavor has denied the allegations. In a motion to demand dismissal from the lawsuit, it argued that there was no implied contract with Carde that would lead him to expect payment for his analysis of the company. Even if it did, Endeavor said it wasn’t using his ideas.
LA Superior Court Judge Gregory Keosian called Endeavor’s arguments “unconvincing.” He pointed to Carde’s claim that it is industry standard practice to provide compensation for the use of ideas submitted through a lawyer.
“The existence of any provision in the terms of service for Defendant’s website relating to Submissions, while perhaps relevant to the evidence of the parties’ intentions, is not conclusive against Plaintiff’s allegations at the advocacy stage,” Keosian wrote in a statement. the statement, which is embedded below .
A week before Endeavor canceled its first IPO in 2019, Carde’s attorney Emanuel sent an analysis stating that Endeavor’s infrastructure of supposedly unrelated companies causes network effects, which is the concept that the value of a product increases the more people use it. According to the lawsuit, Carde’s ideas were used by several company executives in the marketing materials for Endeavor’s second IPO.
“My friend and client (as far as Disney/Fox allows me to have clients!) David Carde took it upon himself to write an analysis of your upcoming IPO, based on VC Bill Gurley’s (Benchmark Capital) defense of the valuation of Uber and Bharat Anand’s theories about digital media,” Carde’s lawyer Michael Giordano wrote to Emanuel in September 2019. “David believes that with applied AI and machine learning, Endeavor is poised to become a $100 billion company because of network effects, which I know should make you laugh.”
The judge was also unconvinced by Endeavor’s arguments that it didn’t actually use Carde’s analysis because his blueprint and the company’s IPO marketing materials were not comparable. While there is no direct evidence of use, at this stage in the proceedings it is enough for Carde to claim that Endeavor had access to his ideas, he found.
Plaintiff alleges that Defendant used Plaintiff’s definition of network effect in its next IPO and modified its prior IPO material to copy a cyclical diagram presented by Plaintiff in its analysis, Keosian wrote. “The complaint alleges sufficiently substantial similarity.”
To substantiate a claim for breach of an implied contract, Carde had to prove that he had prepared the work, shared it with Endeavor, and that it had value. Claims for unjust enrichment and punitive damages were dismissed as Carde filed a notice that he did not oppose dismissal.
WME and its counsel have not yet responded to requests for comment.