Claims that FanDuel was intentionally undervalued during its merger in 2018 will continue, following a ruling from a New York judge who dismissed attempts to throw out the case.
A judge from the New York Supreme Court has largely rejected motions to dismiss a lawsuit filed by FanDuel co-founder Nigel Eccles, along with over 100 former employees and investors, regarding the contentious sale of the company to Paddy Power Betfair in 2018.
In a decision issued on July 9, Judge Andrea Masley allowed several claims to proceed, including breach of fiduciary duty, fraud, conspiracy through unlawful means, knowing receipt, secret commissions, and aiding and abetting breach of fiduciary duty.
This ruling does not confirm the validity of the plaintiffs' claims but represents a significant legal victory for them, enabling the case to move forward to the discovery phase and possibly to trial.
In a post on X, Eccles described the ruling as “an interim but important step as we move towards being able to present all of the evidence in court.” He emphasized his ongoing fight for the founders and over 100 former FanDuel employees who he believes were unjustly deprived of their ownership in the company they helped build.
To recap, in 2018, FanDuel merged with Flutter’s U.S. operations, resulting in FanDuel shareholders receiving 40% of the newly formed entity.
The lawsuit originates from the merger with Paddy Power Betfair, now known as Flutter Entertainment, which established a new holding company called PandaCo. Paddy Power Betfair acquired a 60% stake in PandaCo, leaving the remaining 40% to former FanDuel shareholders.
Eccles initially filed a lawsuit in Scotland in 2018 before re-filing in New York in 2020, which now includes over 100 former employees and investors as plaintiffs.
The plaintiffs argue that the merger valued FanDuel’s 40% stake at $559 million, a figure they claim was deliberately set low enough to ensure that preferred shareholders, including private equity firms KKR & Co. and Shamrock Capital Advisors, would receive all proceeds from the merger, leaving common shareholders with nothing.
Eccles and the other plaintiffs maintain that the company's true worth exceeded $559 million, citing the U.S. Supreme Court's 2018 decision that overturned the Professional and Amateur Sports Protection Act (PASPA), which paved the way for nationwide sports betting.
In December 2020, Flutter acquired the majority of the remaining stake in PandaCo for around $4.2 billion, with plaintiffs arguing that those who benefited from the $559 million valuation later gained billions from their investment.
Judge Masley sided with the plaintiffs on key allegations, rejecting claims that a recent U.K. Supreme Court ruling undermined a previous New York Court of Appeals decision that allowed fiduciary-duty claims to proceed. The plaintiffs assert that certain FanDuel directors failed to uphold their responsibilities to common shareholders during the merger.
The judge also permitted claims that some investors and directors colluded to deprive common shareholders of their interests in the business and improperly profited from the merger.
Additionally, the court allowed allegations regarding undisclosed payments and conflicts of interest to remain in the case.