Class actions filed against daily fantasy sports websites consolidated

Class actions filed against daily fantasy sports websites consolidated

Nearly 80 class actions filed against the nation’s two largest operators of online daily fantasy sports contests will be consolidated in a Massachusetts federal court.

The U.S. Judicial Panel on Multidistrict Litigation issued a transfer order Feb. 4.

The six-member panel selected the U.S. District Court for the District of Massachusetts to handle the lawsuits against DraftKings Inc. and FanDuel Inc., saying the federal court will serve the “convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.”

“These actions share factual questions arising from plaintiffs’ allegations that: (a) the DFS (Daily Fantasy Sports) Defendants allowed their employees to participate in competitors’ fantasy sports contests using nonpublic information that gave them an unfair advantage over other contestants; (b) the DFS Defendants operate online daily fantasy sports contests in contravention of state anti-gambling statutes; (c) DraftKings conducted an allegedly deceptive and fraudulent initial deposit matching scheme; or (d) some combination thereof,” wrote Sarah Vance, chief judge of the U.S. District Court for the Eastern District of Louisiana and chair of the MDL panel.

A total of three dockets are being consolidated, according the panel’s eight-page order: one consisting of 14 actions, another of 12 actions and a third consisting of eight actions.

Altogether, there are 80 actions at issue in the three dockets — either listed on the motion or noticed as a related, or potential tag-along, action — pending in 30 districts.

All but one of the actions are common to all three dockets, the panel noted in its order.

Approximately 42 involve insider trading allegations; 36 involve illegal gambling allegations; and eight involve bonus fraud allegations. Several allege both insider trading and either illegal gambling or bonus fraud claims.

While many of the plaintiffs and the defendants supported centralization of all the actions in a single MDL regardless of the theory of liability, there are those plaintiffs who opposed it. They argued those actions involving allegations of illegal gambling, bonus fraud or both do not share sufficient common questions of fact with the insider trading actions to benefit from centralization and that efficient management of such disparate actions is not feasible.

While the panel agreed that the actions involve differing theories of liability, it said such differences are “not a bar” to centralization where common factual issues exist.

“Here, regardless of the theories asserted, the actions will involve common discovery regarding the nature of the DFS Defendants’ online daily fantasy sports contests, their advertising and promotions, and their internal policies and practices,” Vance wrote.

The panel also noted — as the parties represented during oral arguments — that the defendants have relatively few employees and that some most likely will be witnesses in all of the actions.

In addition, there is “substantial overlap” among the asserted putative class and all of the actions involve plaintiffs seeking similar relief from the defendants — namely, refunds of the losses that plaintiffs sustained while participating in the online daily fantasy sports contests.

“Centralization, therefore, will eliminate duplicative discovery, prevent inconsistent pretrial rulings, particularly with respect to class certification, and conserve the resources of the parties, their counsel, and the judiciary,” Vance wrote.

She said the alternatives to centralization — such as informal coordination or cooperation among the parties and courts — are “less practicable” given the large number of actions and courts.

The panel pointed out in its order that the District of Massachusetts is supported by both defendants and plaintiffs in at least seven actions. On top of that, a “significant” number of related actions that encompass all three theories of liability are pending in the district.

“The District of Massachusetts presents a convenient and accessible forum with a significant connection to this litigation,” Vance explained, adding that DraftKings is headquartered in the district and the individual defendants reside either in the district or nearby, facilitating discovery.

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