FanDuel wins $1 billion lawsuit in New York court

The Supreme Court of the State of New York dismissed a lawsuit against FanDuel Sportsbook on Thursday, October 13, which was brought by the company’s founders and was seeking $1 billion in damages.

The founders have claimed that they were not paid appropriately when the operator was acquired in 2018 by Paddy Power Betfair.

Plaintiffs in the case included 134 early stage workers of FanDuel, as well as the company’s founders, Nigel and Leslie Eccles, as well as Thomas Griffiths.

They stated that KKR and Shamrock Capital, both private equity companies, placed pressure on board members of the daily fantasy sports (DFS) company who had conflicts of interest to accept a $559 million buyout offer from Paddy Power Betfair. KKR and Shamrock both benefited financially from that transaction, but common equity holders were virtually left with nothing to compensate them.

A lawsuit that was initiated by the founders of FanDuel in an effort to prevent the sale of the company to Paddy Power, which is domiciled in Ireland, was dismissed by a Scottish court in 2018.

Later on, Eccles and his fellow founders decided to file a lawsuit against KKR and Shamrock for a total of $120 million, alleging that the two investment firms were given preferential treatment that was not available to investors holding common shares. The plaintiffs in the lawsuit wanted the law of Scotland to be applied to the situation in New York, but the judge ruled against that endeavor.

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“As to the merits, plaintiffs have failed to state a claim for breach of fiduciary duty under Scots law, as Scots law states that directors generally owe fiduciary duties only to their company, not to its shareholders. While a director may owe a fiduciary duty to a shareholder in special circumstances, such circumstances are not present here,” said the court.

Reports state that Eccles and the rest of the FanDuel founders are attempting to sue KKR and ShamRock Capital for a total of $120 million. The decision would be supported by claims that these two private investor firms had received biased support and treatment. However, the same support was not extended to average equity investors.

Representative of FanDuel and its board of directors, Mark Kirsch, commented on the court’s conclusion and described it as a success that shows the company’s unbiased attitude toward promoting proper business procedures.

“This is a sweeping victory for our client, which confirms that the transaction was fundamentally fair and the proceeds were appropriately distributed,” he said.