New York Appeals Court Sides with FanDuel Founders in Acquisition Dispute

The founders, along with early executives and investors, claimed the acquisition was undervalued, causing them to miss out on $120 million in the deal’s aftermath.

Dispute Details

The lawsuit stems from FanDuel’s acquisition by Paddy Power Betfair, which occurred shortly after the US Supreme Court’s repeal of the Professional and Amateur Sports Protection Act in 2018.

This repeal opened the door for the legalization of sports betting across various states, positioning FanDuel to become the leading operator in the market by share.

The New York Appeals Court overturned a previous decision by a five-judge panel from 2022, which had dismissed the case. The court recognized the validity of the breach of fiduciary duty claims under Scots law, allowing the lawsuit to proceed.

The appellate court stated, “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.”

Implications

With the lawsuit now proceeding, the FanDuel founders and their legal team will continue to pursue their claims of undervaluation and breach of fiduciary duty.

The outcome of this case could have notable implications for similar disputes in the corporate world, particularly involving cross-border acquisitions and the valuation of rapidly growing companies in emerging markets.