FanDuel’s founders will get their day in court after all.
The New York Appeals Court ruled Thursday that a lawsuit filed against Paddy Power Betfair following the 2018 sale of FanDuel should proceed under Scottish law.
The state’s Appellate Division of the Supreme Court ruled in 2022 that the plaintiffs didn’t have a legal claim, but the new ruling allows them to move forward with their claim of a contract breach.
“The Appellate Division correctly concluded that Scots law applies to plaintiffs’ claims and appropriately took judicial notice of its content in resolving defendants’ motion to dismiss,” Associate New York Court of Appeals Judge Madeline Singas wrote. “We conclude, however, that plaintiffs have sufficiently pleaded causes of action for breach of fiduciary duty under Scots law. Accordingly, we reverse the Appellate Division order.”
Back in time
This years-long saga began in 2016 when FanDuel and DraftKings attempted to merge their fantasy sports companies, but the agreement was blocked.
That led FanDuel to break up its structure into two stocks and begin seeking a merger that would lead to joining Paddy Power, which later rebranded at Flutter.
FanDuel founders Nigel and Leslie Eccles and a group of 100 investors received nothing after Paddy Power purchased a $158 million majority stake in a company that turned into a sportsbook power after PASPA was overturned in 2018, allowing U.S. states to legalize sports betting.
The husband-wife duo left the company before the deal was made with Paddy Power, which went on to purchase 95% of FanDuel.
Alleged scheme
The plaintiffs claim that FanDuel was undervalued by $120 million by Shamrock Capital Advisors and KKR, two investment firms that held a combined 36% of the preferred shares.
The plaintiffs claim there was a scheme to make sure the preferred shareholders and executive team were the ones paid out from the merger, leaving no additional funds for the founders.
FanDuel has exploded since, ending 2023 with 51% of the sports betting net revenue market share. It’s also the gross gaming revenue leader in online casinos at 25%.
