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New York Court Revives Lawsuit Filed By FanDuel Founders

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The New York Court of Appeals on Thursday handed down a ruling that will allow a lawsuit filed by the founders of FanDuel to continue in a Manhattan Commercial District under Scottish law.

The 7-0 decision authored by Judge Madeline Singas said a lower court should not have dismissed a lawsuit filed in Scotland brought by 130 people, including founders and early employees of FanDuel, who claimed the mobile sports betting titan along with two private equity firms undervalued the worth of the company ahead of its 2018 merger with Paddy Power Betfair.

“Once a court determines that another jurisdiction’s law governs, it has significant flexibility and discretion in deciding whether to take notice of that foreign law and apply it to the case at hand.

In the present case, 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. 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.” — Associate judge of the New York Court of Appeals Madeline Singas.

The $120 million lawsuit was filed in 2018 shortly after the U.S. Supreme Court declared the Professional and Amateur Sports Protection Act (PASPA) unconstitutional, which paved the way for sports betting to expand in the United States on a state-by-state basis across nearly two-thirds of the country.

In the six years since, FanDuel has since emerged as the mobile sports betting marketplace leader in the U.S., with parent company Flutter expected to move its primary listing to the U.S. in the coming weeks.

Founders left with no money after payouts

The main point of contention in the lawsuit is that the individuals who founded FanDuel, including husband and wife Nigel and Lesley Eccles, received no compensation after Paddy Power Betfair (now Flutter) acquired a majority stake in FanDuel for $158 million in 2018.

The executive team at FanDuel sold the company after the Eccles left, and after preferred shareholders were paid first, there was no money left for the couple and other employees who launched FanDuel in 2009.

In 2022, a five-judge panel at the New York Appellate Division of the Supreme Court ruled in favor of FanDuel, saying the plaintiffs failed to make a valid legal claim in Scotland, where FanDuel was incorporated.

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The unanimous ruling Thursday reversed that decision, with Singas authoring the 28-page opinion.

Flutter’s stock price on the New York Stock Exchange closed at $199.76 in Thursday trading but has since rebounded to $204.49 per share in midday trading Friday.

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