Nigel Eccles’ FanDuel Lawsuit Clears Major Hurdle as Judge Lets Core Claims Proceed
Claims that FanDuel was deliberately undervalued during its 2018 merger will move forward after a New York judge largely rejected efforts to dismiss the case.
A New York Supreme Court judge has largely denied efforts to dismiss a lawsuit brought by FanDuel co-founder Nigel Eccles and more than 100 former employees and investors over the company’s controversial 2018 sale to Paddy Power Betfair.
In a July 9 decision, Judge Andrea Masley largely denied motions to dismiss the plaintiffs’ complaint. The court allowed claims for breach of fiduciary duty, fraud, unlawful means conspiracy, knowing receipt, secret commissions and aiding and abetting breach of fiduciary duty to survive.
The ruling doesn’t determine whether the plaintiffs’ claims are true. However, it gives them a major legal win and allows the case to proceed toward discovery and potentially to trial.
In an X post, Eccles called the developments “an interim but important step as we move towards being able to present all of the evidence in court.”
Plaintiffs Claim FanDuel Was Deliberately Undervalued
The lawsuit stems from FanDuel’s 2018 merger with Paddy Power Betfair, now known as Flutter Entertainment. The transaction created a new holding company called PandaCo. Paddy Power Betfair acquired a 60% stake in PandaCo, while former FanDuel shareholders collectively received the remaining 40%.
Eccles originally filed a lawsuit in Scotland in 2018, before refiling the current lawsuit in New York in 2020. The New York suit includes more than 100 former employees and investors as plaintiffs.
According to the lawsuit, the transaction valued FanDuel’s 40% stake in the merged business at $559 million. The plaintiffs allege the valuation was deliberately set at the precise level at which FanDuel’s preferred shareholders—including private equity firms KKR & Co. and Shamrock Capital Advisors—would receive all of the merger proceeds under the company’s Articles of Association. That left common shareholders and option holders with nothing.
Eccles and the other plaintiffs have argued that the company was worth substantially more than $559 million. A key argument in support was the U.S. Supreme Court’s May 2018 decision overturning the Professional and Amateur Sports Protection Act (PASPA), which opened the door to nationwide sports betting.
In December 2020, Flutter acquired most of the remaining stake in PandaCo for approximately $4.2 billion. The plaintiffs argue that the investors who allegedly benefited from the $559 million valuation later realized billions of dollars in gains from that investment.
Court Allows Core Claims to Proceed
Judge Masley largely sided with the plaintiffs on the case’s central allegations.
The court rejected arguments that a recent U.K. Supreme Court decision undermined an earlier New York Court of Appeals ruling that allowed the fiduciary-duty claims to proceed. The plaintiffs allege that certain FanDuel directors failed in their duties to common shareholders during the merger process.
The judge also allowed claims alleging that certain investors and directors worked together to deprive common shareholders of their stake in the business and then improperly benefited from the transaction.
In addition, the court allowed allegations involving undisclosed payments and conflicts of interest to remain part of the case.
The judge also allowed the plaintiffs’ fraud claims to proceed. The court found they had sufficiently alleged that the valuation used in the merger failed to reflect FanDuel’s future sports betting opportunities following PASPA’s repeal.
Finally, the judge ruled that the plaintiffs may continue pursuing claims against certain defendants for knowingly aiding in the alleged misconduct.
Court Throws Out Two Claims
Not all of the plaintiffs’ claims survived.
First, Judge Masley dismissed a claim that the company’s minority shareholders had been treated unfairly. The judge ruled that this issue must be decided in the U.K. under British company law and therefore cannot be heard in New York. She did not rule on whether the allegations themselves were valid.
Second, the judge dismissed a claim that KKR and Shamrock breached FanDuel’s governing documents during the merger. The plaintiffs had argued that the firms improperly used their rights as preferred shareholders to force through the transaction. However, the court found that the merger complied with the procedures set out in FanDuel’s Articles of Association.
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