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Founders and early investors in FanDuel, the largest U.S. regulated sportsbook, can move forward with their suit claiming a breach of contract against Paddy Power Betfair, now known as Flutter Entertainment.
Flutter Entertainment
Paddy Power and British rival Betfair agreed terms for a merger on 8 September 2015. The business is owned 52% by the former Paddy Power shareholders and 48% by the former Betfair shareholders The merger was completed on 2 February 2016.
In May 2018, Paddy Power Betfair announced its intent to acquire FanDuel, one of the two leading daily fantasy sports operators in the United States at the time, which was well positioned to capitalize on the U.S. Supreme Court's overturning of a federal prohibition on sports betting.
As part of the acquisition, the company paid $158 million and merged its existing operations in the United States into FanDuel to form FanDuel Group. It holds a 61% controlling stake, with the option to increase its stake to 80% after three years and 100% after five.
Paddy Power Betfair would go on to rebrand as Flutter Entertainment with its marquee brand in the U.S. now FanDuel Sportsbook.
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The Court Ruling
From Covers.com:
The New York 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.”
FanDuel Founder Nigel Eccles Offers His Take
Shortly after the New York Court of Appeals ruling, FanDuel founder Nigel Eccles (pictured above) spoke out on the decision.
"Yesterday, the New York Court of Appeals unanimously ruled in favor @fanduel founders and over 100 former employees and early investors, who are currently suing former board members for breach of fiduciary duty.
"In 2018, FanDuel agreed a merger with Flutter's US arm to create FanDuel Group Inc. As part of the merger FanDuel, shareholders received 40% of that new company. FanDuel's board, which was then controlled by KKR and Shamrock, misrepresented the value of that 40% in order to enrich themselves and cut founders, employees, and early investors out of the deal.
"The defendants tried to dismiss the case by contending that board members do not owe a fiduciary duty to shareholders. The court rejected that argument.
"I would like to thank the court for their thoughtful consideration of the case. We look forward to vigorously pursuing our claims."
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