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The United States Law Week

DraftKings, FanDuel Can Force Conspiracy Plaintiffs to Arbitrate

Nov. 29, 2019, 4:02 PM

Daily fantasy sports websites DraftKings and FanDuel can force users to arbitrate their claims that each site conspired to give employees an insider advantage when playing on the other site, a Massachusetts federal court held.

The case involves a rare situation, where users who may not have signed an arbitration agreement may be compelled to arbitrate—when their claims are closely “intertwined” with claims that are contractually subject to arbitration. Here, users’ claims against one site aren’t just intertwined with claims against the other, they are “the very same,” the U.S. District Court for the District of Massachusetts said Nov. 27.

Eight potential class actions against DraftKings and FanDuel were consolidated and moved to the District of Massachusetts in 2016. The plaintiffs asserted that the sites conspired to let employees gain an unfair advantage by letting them use their insider information from one site to play on the other. For example, DraftKings employees weren’t allowed to play on DraftKings, but could play on FanDuel.

Subscribers to DraftKings and FanDuel were bound by the arbitration clauses in those sites’ terms of service, the court said. But in a “rare circumstance,” plaintiffs who subscribed to one website and sued the other were also required to arbitrate those claims, despite not being subject to the other site’s terms of service.

“A DraftKings player’s civil conspiracy claim against FanDuel is not just ‘intertwined’ with his arbitrable civil conspiracy claim against DraftKings, it is the very same claim,” the court said. “There is no good reason to split the prosecution of the player plaintiff’s conspiracy claims between arbitral and judicial forums,” the court said, citing “pointless” duplication of proceedings and a risk of inconsistent outcomes.

Claims against the sites’ payment processors are also intertwined with claims against the sites and must be arbitrated.

But claims brought by plaintiffs’ family members under state laws allowing a gambler’s family members to recover the gambler’s losses weren’t covered by the websites’ player agreements.

“The defendants’ theory is that these plaintiffs likely benefited from the agreements because they would have shared with their family member player plaintiff the financial rewards of the player’s winnings. This is rank speculation,” the court said.

Judge George A. O’Toole Jr. wrote the opinion.

The case is In re Daily Fantasy Sports Litig., D. Mass., No. 1:16-md-02677, 11/27/19.

To contact the reporter on this story: Blake Brittain in Washington at bbrittain@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com