Key Points
- A special master has ordered that some of the secret legal advice held by FanDuel’s owners on its valuation, drag along rights, and payout structure be made available for review.
- Under Scottish law, the decision on whether or not this advice can be shared will have to go in the founders’ favour, that law allows the duty of care owed to shareholders to be taken into account.
- Discovery stops on 18 Dec, so the decision on what gets disclosed will have to be made in the next couple of months.
For years now, former shareholders of FanDuel have been trying to find out what went wrong when the company was sold for less than it was worth. And it looks like they are making progress at last, a special master has ordered KKR, Shamrock Capital and the other people who owned FanDuel at the time to hand over any withheld legal advice given to the company’s board while it was being sold off. We know about the order because NEXT.io reported it, the actual paperwork is 33 pages long and hasn’t been published online.
But the key thing to note is that nothing is going straight to the founders themselves. The special master, Alan Scheinkman, gets to look over everything first and decide what bits of it are fair game for the former shareholders to see, and some bits may remain totally sealed away.
The Three Questions That Need Answering
There are three big questions that the withheld advice falls under, and all three of them are central to the dispute. The first question is how much FanDuel was really worth in 2018, and the second question is about who had the right to take FanDuel’s shareholders for a ride. The last bit is about how the merger payout worked out.
Why a Scottish Rule Changed Everything?
Because FanDuel was a Scottish company when it merged, the judge has ruled that the Scottish law on privileged information is what applies here. And under Scottish law, there’s a rule that lets people who are owed a duty of care by another see advice that might otherwise be private. Scheinkman reckons the founders have a legitimate case, and that the Scottish rule is the reason they get to take a look at this stuff. But what he didn’t say is that the people who owned FanDuel at the time actually did owe their shareholders a duty of care.
The people who owned FanDuel still get some level of protection, and the order spells out what kind of documents are safe from being shared. The special master can decide to limit how much of the sensitive stuff is shared with the former shareholders, and he can even make sure that it’s only seen by the lawyers. But what he is saying is that having a lawsuit on the horizon isn’t a good enough reason for all the documents to be kept private.
Numbers Behind the Wipeout
FanDuel’s articles state that preferred shareholders will be compensated prior to other stakeholders up to the total amount of the subscription price of their shares. According to the Court of Appeals of New York decision, that sum is estimated at about $559m, while according to the 2024 defence memorandum – it is $559.4m. Any value beyond that line should have gone to ordinary shareholders such as founders and employees of the company. However, the board evaluated the value of the merger consideration at $465.5m, and thus, ordinary shareholders got nothing. As the court summarises, in accordance with the complaint, the board made no independent valuation of that value.
As for the calendar, it explains why plaintiffs press that point so strongly. FanDuel and Paddy Power Betfair agreed to non-binding merger terms on 28 April 2018. That term sheet established the value of both companies independent of the ruling of the US Supreme Court in question regarding sports betting. On 14 May, the court abolished the federal ban on that type of gambling and the merger was finalised in July. KKR and Shamrock, having drag-along rights, accepted the offer for all shareholders, hence, no vote took place.
Two years later, Flutter agreed to acquire the 37.2% stake of the investors’ vehicle called Fastball for $4.175bn. December 2020 press release from Flutter says that price implies the enterprise value of $11.2bn of FanDuel. Peter Jackson, the chief executive of Flutter, stated that the 2018 deal was “transformational for the shape of the Group.”
Two Stories, One Spreadsheet
Nigel Eccles and 100+ co-plaintiffs claim that the value was set in order to wipe out ordinary holders. 216-page complaint filed by them and summarised by Axios in 2024 claims that firms developed a separate spreadsheet regarding a model of sports betting. The complaint also claims that bankers were instructed to avoid valuation analysis and fairness opinion. None of those claims is verified yet and the defendants deny them.
The defence story begins quite differently: a company running out of money. As mentioned above, according to the same memorandum, FanDuel had lost $38.8m in 2017 and had accumulated losses of $232m. Moreover, the defendants argue that they owned more common shares than plaintiffs do together, and hence, low valuation would harm them too.
Eccles has never attacked the deal, but how the value of the merger was distributed.
Eight Long Years, Three Courts & An uphill Battle in Arbitration
Eccles joined a bunch of fellow shareholders in a Scottish standoff on 9th July 2018, trying to scupper the merger before it went through. Over 100 plaintiffs jumped into the fray in New York in February 2020, and an appeals panel knocked their case on its head in October 2022. But in May 2024 the Court of Appeals reversed that decision, ruling that Scots law applied and the fraud claims had been properly laid out.
The heat then started to be directed at Eccles himself, thanks to a contract he’d signed when he shipped out of FanDuel. In March 2025, the defendants launched an arbitration under the terms of his 2017 separation deal. They were looking for around $8m and an order to stop Eccles from sticking his oar in on behalf of his fellow plaintiffs. Judge Andrea Masley’s October 2025 order refused to put the arbitration on ice but did say it was causing problems for the main case. She also noted that Eccles had been, in effect, the public face of the case for a whopping eight years.
In July 2026 Masley mostly rejected the bid to ditch the case, allowing fraud and conspiracy claims to go forward. However she did throw out a contract claim, ruling that the merger was straightforward enough under FanDuel’s Articles of Association, Gambling Insider reported on the dismissal challenge.
The Clock Ticks Down to 18 December
The next step is that the defendants will have to dig up every relevant document and send them off for review by Scheinkman. Both sides will still need to agree on a timeline, and all fact discovery has to be wrapped up by 18 December. The fact that both sides still can’t agree on the litigation carve-out is slowing things down, file by tedious file. Whatever gets uncovered will doubtless be very interesting but it won’t on its own be enough to prove the defendants did anything wrong.
Expert Analysis: The Real Prize Is Finding Out Why, Not Just What
In our view this privilege ruling is way more important than that decision to allow the case to go forward in July, even though it got a lot less attention. Valuation cases are never won on the basis of spreadsheets alone they turn on what people in charge actually understood when they agreed to things. So the question of what was written down by the lawyers is a crucial one.
One of our biggest questions is about one firm that’s been on both sides of this story. Moelis & Company worked with FanDuel’s board when they were exploring their options back in 2018, according to the Court of Appeals. Fast forward to 2020 and Flutter’s announcement named Moelis as the exclusive financial adviser to Fastball when it sold out. Matthew King signed the 2018 contribution agreement as FanDuel’s chief executive, and Flutter later called him out as a Fastball member. And yes, King is among the defendants. Oh, and he disputes every single claim being made against him. We’re not suggesting he’s done anything wrong and to our knowledge, no court has found that he has we just think readers deserve to know that context.
We’re not going to pretend either that the defence case is weak. And it’s not as if a loss-making fantasy sports outfit with no sportsbook was guaranteed to be worth $11.2bn. Our own view is much simpler both stories can be true to a degree, which is why that withheld advice is so important.
Founders all over the world would do well to take a close look at this case, as it’s all about how waterfall clauses come into play when exits don’t go as planned. If the reviewed documents show that advisors were debating the $559m line, then the heat’s going to be on the defendants. If Scheinkman comes up with nothing at all, then that just settles the privilege fight it doesn’t in itself decide the case.
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