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Joola and USAP Lawsuits from the Perspective of a Lawyer and Paddle Company Owner
Hi everybody! I see a lot of conversations around the USAP and Joola lawsuits, so I thought it might be helpful for me to chime in given my background as a lawyer and pickleball paddle company owner (Spartus).
By way of background, I was a practicing attorney in the 2010s before moving into finance and the business world (and eventually starting Spartus). As a lawyer, I have litigation experience all the way up the Supreme Court level where I was part of the 2014 landmark Supreme Court case Octane Fitness v. ICON which we won 9-0 against a stacked team led by Carter Phillips. Nowadays, I run Spartus and hope that all these experiences can shed some light on the happenings around these lawsuits, including providing more insight into some of the USAP approval processes. Please note that everything I say below is my opinion and is not legal advice.
The first thing I want to state is that I think both the class action lawsuit against Joola (“class action”) and Joola’s lawsuit against USAP should be analyzed together and not in a vacuum independently.
Next is to identify the incentives and motivations. Let’s take a look at the class action. This class action is extremely unusual. The reason being is that David Boies is on this case. I’m not one to think anything is that big of a deal normally but the moment I saw his name, it was a shocker. For those unfamiliar with David Boies, he is one of the most well-known, if not the most well-known, litigators in the country famous for his ultra-aggressive style. He was on the Microsoft anti-trust case, the Bush v. Gore recount, and Theranos (Elizabeth Holmes). I encourage you to look him up to get a better understanding of the magnitude of having not just his law firm Boies Schiller but David Boies himself on this case. It’s crazy that he’s on some pickleball lawsuit. It’s likely that the lead plaintiff somehow knows him or is connected to him but regardless, the presumption should be that there is a huge and obtainable judgment in this lawsuit. David Boies would not be on a case where the projected recovery is small.
More relevant information on incentives: the first cause of action (claim) in the class action is for fraud. That opens up the grounds for treble damages, which they later explicitly state in the demands (e.g., punitive damages). These kinds of damages are usually multipliers applied on the actual damages the plaintiffs suffered. When you hear of cases where someone suffered $1MM of damages but somehow was awarded $10MM of damages, it’s almost certainly because of treble damages. Treble damages are not always available but the class action lawsuit is going for that.
What amount is that? Based on Joola’s lawsuit against USAP (let’s call this “USAP lawsuit” going forward), Joola claims to have sold 60,000 Gen 3 paddles already. Back of napkin math at $250 a paddle means $15,000,000 in money that affected customers spent. Apply any multiplier against that (2x, 3x, 4x, 5x, etc.), and you’ll start to see big numbers.
Looking at those potential numbers, there is a clear incentive for Joola to reduce their legal liability immensely and immediately. Offering a full refund for every single customer despite Joola asserting they are in the right seems to be more about reducing liability (i.e., reduce the base damages and weaken the class action claims). If there were no class action, would there be any incentive to offer the full refunds? Yes, but not as strong since it’s mostly reputation control if that were the case.
So, what about the USAP lawsuit? If you look at that lawsuit keeping in mind the class action that preceded it, it opens the possibility that one of the purposes, if not the main purpose, is to affect the class action. How so?
First, Joola can file a Motion to Stay for the class action. A Motion to Stay basically is a request for the court to pause that lawsuit pending the outcome of another lawsuit whose results would have a material impact on the first lawsuit. In this situation, Joola is basically saying USAP was at fault for this, which would impact the fraud claims in the class action (i.e., if the USAP lawsuit finds that to be the truth, then the fraud claims of the class action are way harder to prove). Second, Joola is seeking an injunction to compel USAP to recertify the Gen 3 paddles. If that happens, then all the affected paddles are back in play, which would also lead to a severely weakened class action.
The USAP lawsuit has what many would agree is an outlandish demand for damages: $200MM. Where is that figure coming from? A lot of times with these huge numbers, the end goal is not to collect that number. It is not unheard to use outlandish demands to try to quickly force a settlement. I’ll just leave this here for you to think about.
I'm keeping my eyes peeled for a Motion to Stay in the class action or any other mechanism designed to delay that lawsuit. Again, the biggest threat to Joola, in my opinion, is the class action which is led by the most “feared” litigator in America with a potential mid-to-high 8-figures of damages on the line. Again, how did he end up on this case? I have no idea but viewing this situation in light of the people involved is very important.
A few other notes on USAP and Joola:
1. It seems like people have misunderstandings on exactly how the USAP approval works so I’d like to shed some light on how it does work. The application form is mostly an honor code thing. It’s a two page form where you simply write out what the surface material is, the core material is, and sign your signature in multiple places saying you are not violating any rules. Six paddles are sent off to four locations (two to the testing entity called NTS and four to various USAP officials). NTS runs a few tests that measure some objective things such as roughness, deflection, etc. Until recently, there’s no indication that USAP sends paddles off to verify the chemical compositions are indeed what the companies state they are or if USAP broke down every paddle to confirm what the companies asserted. I’m sure they will be creating additional safeguards in the approval process given some of the holes that were recently allegedly abused (I’m not claiming Joola did anything).
2. I think one of the most critical pieces of information is that Joola admits USAP informed them ahead of launch that the Gen 3s will be decertified. There was notice prior to the economic activity.
3. My instinct based on seeing all the facts so far indicates Joola seems to be looking to get a quick settlement out of USAP (most importantly, recertification). Joola did not immediately seek a preliminary injunction when USAP first notified Joola or after USAP actually decertified the Gen 3s. It was only after the class action that Joola sued USAP seeking an injunction.
4. One big thing to note is that moving forward in litigation will compel Joola to turn over evidence during discovery. This includes internal communications regarding the Gen 3s. Are there internal documents that show Joola knew about non-compliance of their paddles or intentional designing around the rules but decided to launch anyway? Are there communications where Joola is proactively trying to break the rules? If there are, going to trial would probably not be the end goal for Joola since they would likely lose both cases flat out. Joola has the option of never entering this stage with the USAP case because USAP can settle prior to that stage or Joola can withdraw the case. If Joola is not worried about that, then they have the option of pushing into litigation to get to the bottom of this. I’ll point out again that the USAP lawsuit attaches a ultra-high $200MM demand and was filed after the class action, which indicates to me, that the end goal may be a relatively quick settlement regardless of whether there is internal communication that would break apart Joola’s case or not.
5. I’m not sure what’s going on with USAP because while there seems to be at least something consistent for the Joola Gen 3, Oni, and Ripple delistings (i.e., the type of foam/EVA used and configuration of said foam), I’m confused about the Gearbox PPE. We at Spartus have internal video footage of the PPE completely deflecting at the middle of the paddle when a pickleball is thrown from three feet above onto the face of the paddle. The CEO of Gearbox also claims that the PPE has a trampoline effect. At first, I thought Gearbox was simply in marketing mode talking about the trampoline effect given the PPE did not seem to fit the pattern of the other delistings but when we investigated this ourselves, the PPE face does bend. You can also bend it with your hands. If there’s inconsistent treatment of paddles from USAP, that will support Joola to some degree. At the same time, we don’t know the procedures USAP is taking at the moment for delistings (e.g., they could simply be going one-by-one as they find them).
6. As much as everybody is upset with USAP, USAP is currently the only independent regulatory body. Being independent is super important. I’m not affiliated with USAP at all nor has Spartus ever been in financial cahoots with USAP. I’m simply saying this because you want to remove conflicts of interest as much as possible, so having the regulatory body be independent should be pretty high up on the priority list.
7. USAP does not inform the public for what specific reasons a paddle failed testing. They only inform the company. This applies to both paddles that are not yet approved and, apparently, paddles that had been approved and subsequently are getting delisted. It is up to the company to inform the public what the reasons are and also up to the company to be truthful about that if they do disclose the reason to the public. My personal view is that this protocol makes sense for paddles never approved (they're not on the market) but for paddles that are being decertified, USAP should make a statement from their side with the exact reason for the decertification. This provides clarity for the market and consumers.
8. Some people have pointed out that Joola is claiming USAP is applying a new roughness test specifically against them. The Rt/Rz 44/33 is not a new test specifically made for Joola. All manufacturers were notified of this change back in February 8, 2024 with implementation to occurring on April 1, 2024. All paddles being tested after April 1, 2024 are subject to the Rt/Rz 44/33 test, including any paddles Joola submitted for testing after that date.
9. On the point of "Joola can sue USAP out of existence", Joola having more funds than USAP doesn't really change how much it costs to defend a lawsuit. Average price at least ten years ago through full trial was around $2MM. My understanding is that USAP has more than that in their annual operating budget but I don't have concrete proof of that. Additionally, if there is a frivolous nature to the lawsuit, attorneys fees can be shifted to the offending party. In this example, if Joola really had no claim, it's possible they will be on the hook for USAP's attorneys fees. Not saying that's the case but just explaining possible financial outcomes. Of course, USAP can look to settle to avoid the headache but that opens up questions of exposing themselves to other liability. In any case, I don't think Joola can "sue USAP out of existence". Those situations are super rare. Even the most famous recent situation of this (when Hulk Hogan, backed by Peter Thiel, sued Gawker), Gawker went under because of the treble damages at the conclusion of the trial, not because Hulk Hogan forced Gawker to go bankrupt from paying attorneys. If you have a few single digits on hand, you should be able to defend through the end of trial.
Alright, that was lengthy but hopefully helpful. All of this is my opinion and none of it is legal advice. The whole situation is messy for the sport. As many paddle companies are aware, USAP hasn't been really responding to our emails, likely because of this situation. We hope USAP does provide clarity soon though so the sport can move forward while these lawsuits are pending in the background.
If you also have litigation experience, please comment as I’d love to hear your thoughts.
#sport
source
Hi everybody! I see a lot of conversations around the USAP and Joola lawsuits, so I thought it might be helpful for me to chime in given my background as a lawyer and pickleball paddle company owner (Spartus).
By way of background, I was a practicing attorney in the 2010s before moving into finance and the business world (and eventually starting Spartus). As a lawyer, I have litigation experience all the way up the Supreme Court level where I was part of the 2014 landmark Supreme Court case Octane Fitness v. ICON which we won 9-0 against a stacked team led by Carter Phillips. Nowadays, I run Spartus and hope that all these experiences can shed some light on the happenings around these lawsuits, including providing more insight into some of the USAP approval processes. Please note that everything I say below is my opinion and is not legal advice.
The first thing I want to state is that I think both the class action lawsuit against Joola (“class action”) and Joola’s lawsuit against USAP should be analyzed together and not in a vacuum independently.
Next is to identify the incentives and motivations. Let’s take a look at the class action. This class action is extremely unusual. The reason being is that David Boies is on this case. I’m not one to think anything is that big of a deal normally but the moment I saw his name, it was a shocker. For those unfamiliar with David Boies, he is one of the most well-known, if not the most well-known, litigators in the country famous for his ultra-aggressive style. He was on the Microsoft anti-trust case, the Bush v. Gore recount, and Theranos (Elizabeth Holmes). I encourage you to look him up to get a better understanding of the magnitude of having not just his law firm Boies Schiller but David Boies himself on this case. It’s crazy that he’s on some pickleball lawsuit. It’s likely that the lead plaintiff somehow knows him or is connected to him but regardless, the presumption should be that there is a huge and obtainable judgment in this lawsuit. David Boies would not be on a case where the projected recovery is small.
More relevant information on incentives: the first cause of action (claim) in the class action is for fraud. That opens up the grounds for treble damages, which they later explicitly state in the demands (e.g., punitive damages). These kinds of damages are usually multipliers applied on the actual damages the plaintiffs suffered. When you hear of cases where someone suffered $1MM of damages but somehow was awarded $10MM of damages, it’s almost certainly because of treble damages. Treble damages are not always available but the class action lawsuit is going for that.
What amount is that? Based on Joola’s lawsuit against USAP (let’s call this “USAP lawsuit” going forward), Joola claims to have sold 60,000 Gen 3 paddles already. Back of napkin math at $250 a paddle means $15,000,000 in money that affected customers spent. Apply any multiplier against that (2x, 3x, 4x, 5x, etc.), and you’ll start to see big numbers.
Looking at those potential numbers, there is a clear incentive for Joola to reduce their legal liability immensely and immediately. Offering a full refund for every single customer despite Joola asserting they are in the right seems to be more about reducing liability (i.e., reduce the base damages and weaken the class action claims). If there were no class action, would there be any incentive to offer the full refunds? Yes, but not as strong since it’s mostly reputation control if that were the case.
So, what about the USAP lawsuit? If you look at that lawsuit keeping in mind the class action that preceded it, it opens the possibility that one of the purposes, if not the main purpose, is to affect the class action. How so?
First, Joola can file a Motion to Stay for the class action. A Motion to Stay basically is a request for the court to pause that lawsuit pending the outcome of another lawsuit whose results would have a material impact on the first lawsuit. In this situation, Joola is basically saying USAP was at fault for this, which would impact the fraud claims in the class action (i.e., if the USAP lawsuit finds that to be the truth, then the fraud claims of the class action are way harder to prove). Second, Joola is seeking an injunction to compel USAP to recertify the Gen 3 paddles. If that happens, then all the affected paddles are back in play, which would also lead to a severely weakened class action.
The USAP lawsuit has what many would agree is an outlandish demand for damages: $200MM. Where is that figure coming from? A lot of times with these huge numbers, the end goal is not to collect that number. It is not unheard to use outlandish demands to try to quickly force a settlement. I’ll just leave this here for you to think about.
I'm keeping my eyes peeled for a Motion to Stay in the class action or any other mechanism designed to delay that lawsuit. Again, the biggest threat to Joola, in my opinion, is the class action which is led by the most “feared” litigator in America with a potential mid-to-high 8-figures of damages on the line. Again, how did he end up on this case? I have no idea but viewing this situation in light of the people involved is very important.
A few other notes on USAP and Joola:
1. It seems like people have misunderstandings on exactly how the USAP approval works so I’d like to shed some light on how it does work. The application form is mostly an honor code thing. It’s a two page form where you simply write out what the surface material is, the core material is, and sign your signature in multiple places saying you are not violating any rules. Six paddles are sent off to four locations (two to the testing entity called NTS and four to various USAP officials). NTS runs a few tests that measure some objective things such as roughness, deflection, etc. Until recently, there’s no indication that USAP sends paddles off to verify the chemical compositions are indeed what the companies state they are or if USAP broke down every paddle to confirm what the companies asserted. I’m sure they will be creating additional safeguards in the approval process given some of the holes that were recently allegedly abused (I’m not claiming Joola did anything).
2. I think one of the most critical pieces of information is that Joola admits USAP informed them ahead of launch that the Gen 3s will be decertified. There was notice prior to the economic activity.
3. My instinct based on seeing all the facts so far indicates Joola seems to be looking to get a quick settlement out of USAP (most importantly, recertification). Joola did not immediately seek a preliminary injunction when USAP first notified Joola or after USAP actually decertified the Gen 3s. It was only after the class action that Joola sued USAP seeking an injunction.
4. One big thing to note is that moving forward in litigation will compel Joola to turn over evidence during discovery. This includes internal communications regarding the Gen 3s. Are there internal documents that show Joola knew about non-compliance of their paddles or intentional designing around the rules but decided to launch anyway? Are there communications where Joola is proactively trying to break the rules? If there are, going to trial would probably not be the end goal for Joola since they would likely lose both cases flat out. Joola has the option of never entering this stage with the USAP case because USAP can settle prior to that stage or Joola can withdraw the case. If Joola is not worried about that, then they have the option of pushing into litigation to get to the bottom of this. I’ll point out again that the USAP lawsuit attaches a ultra-high $200MM demand and was filed after the class action, which indicates to me, that the end goal may be a relatively quick settlement regardless of whether there is internal communication that would break apart Joola’s case or not.
5. I’m not sure what’s going on with USAP because while there seems to be at least something consistent for the Joola Gen 3, Oni, and Ripple delistings (i.e., the type of foam/EVA used and configuration of said foam), I’m confused about the Gearbox PPE. We at Spartus have internal video footage of the PPE completely deflecting at the middle of the paddle when a pickleball is thrown from three feet above onto the face of the paddle. The CEO of Gearbox also claims that the PPE has a trampoline effect. At first, I thought Gearbox was simply in marketing mode talking about the trampoline effect given the PPE did not seem to fit the pattern of the other delistings but when we investigated this ourselves, the PPE face does bend. You can also bend it with your hands. If there’s inconsistent treatment of paddles from USAP, that will support Joola to some degree. At the same time, we don’t know the procedures USAP is taking at the moment for delistings (e.g., they could simply be going one-by-one as they find them).
6. As much as everybody is upset with USAP, USAP is currently the only independent regulatory body. Being independent is super important. I’m not affiliated with USAP at all nor has Spartus ever been in financial cahoots with USAP. I’m simply saying this because you want to remove conflicts of interest as much as possible, so having the regulatory body be independent should be pretty high up on the priority list.
7. USAP does not inform the public for what specific reasons a paddle failed testing. They only inform the company. This applies to both paddles that are not yet approved and, apparently, paddles that had been approved and subsequently are getting delisted. It is up to the company to inform the public what the reasons are and also up to the company to be truthful about that if they do disclose the reason to the public. My personal view is that this protocol makes sense for paddles never approved (they're not on the market) but for paddles that are being decertified, USAP should make a statement from their side with the exact reason for the decertification. This provides clarity for the market and consumers.
8. Some people have pointed out that Joola is claiming USAP is applying a new roughness test specifically against them. The Rt/Rz 44/33 is not a new test specifically made for Joola. All manufacturers were notified of this change back in February 8, 2024 with implementation to occurring on April 1, 2024. All paddles being tested after April 1, 2024 are subject to the Rt/Rz 44/33 test, including any paddles Joola submitted for testing after that date.
9. On the point of "Joola can sue USAP out of existence", Joola having more funds than USAP doesn't really change how much it costs to defend a lawsuit. Average price at least ten years ago through full trial was around $2MM. My understanding is that USAP has more than that in their annual operating budget but I don't have concrete proof of that. Additionally, if there is a frivolous nature to the lawsuit, attorneys fees can be shifted to the offending party. In this example, if Joola really had no claim, it's possible they will be on the hook for USAP's attorneys fees. Not saying that's the case but just explaining possible financial outcomes. Of course, USAP can look to settle to avoid the headache but that opens up questions of exposing themselves to other liability. In any case, I don't think Joola can "sue USAP out of existence". Those situations are super rare. Even the most famous recent situation of this (when Hulk Hogan, backed by Peter Thiel, sued Gawker), Gawker went under because of the treble damages at the conclusion of the trial, not because Hulk Hogan forced Gawker to go bankrupt from paying attorneys. If you have a few single digits on hand, you should be able to defend through the end of trial.
Alright, that was lengthy but hopefully helpful. All of this is my opinion and none of it is legal advice. The whole situation is messy for the sport. As many paddle companies are aware, USAP hasn't been really responding to our emails, likely because of this situation. We hope USAP does provide clarity soon though so the sport can move forward while these lawsuits are pending in the background.
If you also have litigation experience, please comment as I’d love to hear your thoughts.
#sport
source
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