TLDR
- A New York special master ordered KKR and Shamrock Capital to submit previously withheld communications for confidential review.
- The documents relate to FanDuel’s valuation before the sale, drag-along rights, and expected proceeds for the founders.
- FanDuel co-founder Nigel Eccles and more than 100 co-plaintiffs are suing the private equity firms over the 2018 sale.
- The order does not say the defendants broke their fiduciary duties under Scots law.
- Both sides must agree on a review timeline before the Dec. 18 discovery deadline.
FanDuel co-founder Nigel Eccles and more than 100 co-plaintiffs won a small legal victory last week. A New York special master ordered that some private communications tied to the 2018 sale of FanDuel must be submitted for review.
The ruling came in a lawsuit against KKR and Shamrock Capital. The two private equity firms sold FanDuel to Paddy Power Betfair in 2018.
What the Special Master Ordered
Special master Alan Scheinkman issued a 33-page discovery order. It requires the firms to submit select communications that would normally be protected by legal privilege.
These include messages between FanDuel executives, board members, and their lawyers. The documents will be reviewed confidentially.
The order covers three topics: FanDuel’s valuation before the sale, the private equity firms’ drag-along rights, and the money the co-founders expected to receive.
Drag-along rights let majority shareholders force minority shareholders to sell their shares on the same terms. This allows the majority owners to complete an exit.
Paddy Power Betfair later became Flutter Entertainment. When it bought FanDuel, the deal was valued at about $465.5 million in equity, or $559 million including debt and preferred shares.
KKR and Shamrock had a “liquidation preference” on the first $559 million of any sale. That suggests the figure was the value of their drag-along rights.
Key Legal Details in the Ruling
Scheinkman found that the plaintiffs’ use of Scots law in the case has merit. Eccles founded FanDuel in Scotland in 2009 with his wife and friends.
He stepped down as chief executive officer of the company in 2017.
The order does not say that KKR or Shamrock broke their fiduciary duties under Scots law. It also does not comment on the overall strength of either side’s case.
Scheinkman ruled that communications are not protected just because the defendants expected a lawsuit. However, documents created specifically in anticipation of litigation keep their privilege.
For those documents, Scheinkman said he will decide whether the plaintiffs’ lawyers can see them, and to what extent.
The order is legally binding on both sides. The private equity firms continue to contest the lawsuit.
The ruling came three months after the New York Supreme Court rejected the defendants’ request to dismiss the case. Eccles called that July decision an “interim but important step.”
The two sides must now agree on a timeline for the document review. That must happen before the New York Supreme Court’s Dec. 18 discovery deadline.
