FanDuel Backers Ordered to Submit Documents for Review in New York Lawsuit

KKR and Shamrock Capital must submit select FanDuel-related communications for confidential review under a discovery order in the founders’ lawsuit in New York Supreme Court. The order does not establish wrongdoing or guarantee that the founders’ attorneys will receive the documents.

According to Casino.org, special master Alan Scheinkman issued the 33-page order concerning communications tied to FanDuel’s 2018 sale to Paddy Power Betfair.

Review focuses on valuation and founders’ proceeds

The confidential review covers three subjects: FanDuel’s valuation before the sale, the private equity firms’ drag-along rights, and the proceeds expected to go to Nigel Eccles and other co-founders.

Drag-along rights allow majority shareholders selling a company to require minority shareholders to sell on the same terms. Those rights, alongside the transaction’s valuation and payout structure, are among the issues addressed by the discovery order.

The acquisition valued FanDuel at approximately $465.5 million in equity, or $559 million including debt and preferred issues. KKR and Shamrock held a liquidation preference for the first $559 million of any sale, giving them priority over other shareholders for that amount.

Eccles founded FanDuel in Scotland with his wife and friends in 2009. He stepped down as CEO in 2017, before the sale.

Confidential review does not mean public disclosure

Scheinkman can determine how much, if any, of the reviewed material plaintiffs’ attorneys may see. Documents created specifically in anticipation of a lawsuit retain applicable privilege protections.

The order also says communications outside the confidential review are not protected solely because the defendants expected litigation. It leaves broader privilege questions and the merits of the founders’ claims unresolved.

New York Supreme Court previously denied the defendants’ motion to dismiss. Eccles described that July ruling as an “interim but important step.” Neither that procedural development nor the latest discovery order establishes that the defendants violated fiduciary obligations under Scots law.

Parties must set a review timeline

The parties must agree on a timeline for the confidential review before the court’s Dec. 18 discovery deadline. Which documents plaintiffs’ attorneys will ultimately be permitted to examine remains an open question.

The development concerns a corporate ownership dispute in a New York court, rather than a ruling on FanDuel’s gambling services or New York market operations.

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Source: As reported by Casino.org.

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