Judge Lets Core Claims in Nigel Eccles’ FanDuel Suit Proceed

A New York Supreme Court judge on July 9 largely denied motions to dismiss the lawsuit filed by FanDuel co-founder Nigel Eccles and more than 100 former employees and investors over FanDuel’s 2018 sale to Paddy Power Betfair, now Flutter Entertainment. Justice Andrea Masley allowed several core claims to proceed, including breach of fiduciary duty, fraud, unlawful means conspiracy, knowing receipt, secret commissions and aiding and abetting breach of fiduciary duty. The ruling does not resolve the merits of the claims but permits discovery.

Eccles first filed a suit in Scotland in 2018 and refiled in New York in 2020. The plaintiffs argue the transaction that created a holding company called PandaCo unfairly deprived common shareholders and option holders of value while benefiting preferred investors.

The 2018 deal gave Paddy Power Betfair a 60% stake in PandaCo and former FanDuel shareholders 40%. The complaint says the 40% stake was valued at $559 million and that the valuation triggered payout rules in FanDuel’s Articles of Association that favored preferred shareholders, including private equity firms KKR & Co. and Shamrock Capital Advisors, leaving common shareholders with no payout.

Plaintiffs point to the U.S. Supreme Court’s May 2018 repeal of the Professional and Amateur Sports Protection Act (PASPA) as a change that increased FanDuel’s growth prospects from expanded sports betting. They contend the merger valuation did not reflect those future opportunities. In December 2020, Flutter acquired most of the remaining stake in PandaCo for about $4.2 billion; the plaintiffs allege the investors who benefited from the $559 million valuation later realized billions in gains.

Judge Masley rejected a defense argument that a recent U.K. Supreme Court decision undercut an earlier New York Court of Appeals ruling that had supported the plaintiffs’ fiduciary-duty claims. The court allowed allegations about undisclosed payments and conflicts of interest to remain and found the fraud claims were pleaded with enough detail to justify discovery into whether the merger valuation omitted FanDuel’s post-PASPA prospects.

Two claims were dismissed. The judge ruled a claim that minority shareholders were unfairly treated must be resolved under U.K. company law rather than in New York. The court also rejected a claim that KKR and Shamrock breached FanDuel’s governing documents, finding the merger followed the procedures set out in the company’s Articles of Association.

With the case proceeding to discovery, the next steps will include document production, depositions and expert reports. Those steps will determine whether the case moves to trial.

In a post on X, Eccles called the decision “an interim but important step” and wrote that he has been fighting on behalf of founders and more than 100 former FanDuel employees who he says were deprived of their ownership in the company they built.