Endeavor Can’t Evade Consultant’s Suit Over IPO Marketing

Endeavor must face a claim from a consultant who says its debut on the public market was salvaged thanks to his blueprint of the company’s business model. David Carde may have created an implied contract with Endeavor when his attorney emailed CEO Ari Emanuel his analysis that illustrated how its hodgepodge of unrelated acquisitions is actually good for business, according to a decision that came down Monday.

The suit revolves around Endeavor’s $10.3 billion IPO last year. Leading up to the public offering, there was prevalent analyst criticism of the company’s acquisition blitz, which included mixed martial arts organization UFC, art fair company Frieze and Professional Bull Riders. The “spending spree,” as Carde called it in his complaint, led to Endeavor losing $554 million in 2019 and racking up $4.5 billion in long-term debt.

Endeavor planned to hold its IPO in 2019 but pulled it amid skepticism from the market.

“Following the embarrassment of the failed first IPO, Endeavor’s crushing debt became an existential threat after the COVID pandemic ground the Company’s business to a halt,” reads the complaint. “However, once Endeavor stole and then embraced Mr. Carde’s approach of communicating about its business to the market a pathway to a successful IPO became apparent and was ultimately realized.”

Endeavor has denied the allegations. In a motion seeking dismissal of the suit, it argued there was no implied contract with Carde that would lead him to expect payment for his analysis of the company. Even if there was, Endeavor said it didn’t use his ideas.

L.A. Superior Court Judge Gregory Keosian called Endeavor’s arguments “unpersuasive.” He pointed to Carde’s claim that it’s standard industry practice to provide compensation for use of ideas submitted through a lawyer.

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“The existence of a provision in the terms of service for defendant’s website regarding submissions, although perhaps relevant to evidence of the parties’ intent, is not dispositive against Plaintiff’s allegations at the pleading stage,” Keosian wrote in the ruling, which is embedded below.

One week before Endeavor called off its first IPO in 2019, Carde’s attorney sent Emanuel an analysis that said Endeavor’s infrastructure of supposedly unrelated companies drives network effects, which is the concept that the value of a product increases are more people use it. According to the suit, Carde’s ideas were used in the marketing materials for Endeavor’s second IPO by several company executives.

“My friend and client (to the extent 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 Uber’s valuation and Bharat Anand’s theories on digital media,” Carde’s attorney Michael Giordano wrote in a September 2019 to Emanuel. “David believes that with applied AI & machine learning, Endeavor is poised to become a $100 Billion company due to  network effects, which I know has to make you smile.”

The judge was also unconvinced by arguments from Endeavor that it didn’t actually use the analysis from Carde because his blueprint and the company’s IPO marketing materials weren’t similar. While there’s no direct evidence of use, at this stage in proceedings it’s enough for Carde to argue that Endeavor had access to his ideas, he found.

“Plaintiff alleges that defendant took up using plaintiff’s definition of network effect in its next IPO, and altered its previous IPO materials to copy a cyclical diagram presented by plaintiff in his analysis,” Keosian wrote. “The complaint sufficiently alleges substantial similarity.”

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For Carde to substantiate a claim for breach of an implied contract, he had to prove that he prepared the work, that he 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.