Cody Spiegel et al v. DraftKings, Inc. et al
Filing
38
TRANSFER ORDER re: pldg. ( 1 in MDL No. 2677) Transferring 14 action(s) to Judge Judge George A. O'Toole in the D. Massachusetts.Signed by Judge Sarah S. Vance, Chair, PANE L ON MULTIDISTRICT LITIGATION, on 2/4/2016. Associated Cases: MDL No. 2677, CAC/2:15-cv-08142, CAC/5:15-cv-02167, FLS/1:15-cv-23858, FLS/1:15-cv-23870, ILS/3:15-cv-01123, LAE/2:15-cv-05127, MA/1:15-cv-13559, MA/1:15-cv-13581, MA/1:15-cv-13602, NYS/1:15-cv-07963, NYS/1:15-cv-08110, NYS/1:15-cv-08119, NYS/1:15-cv-08123, NYS/1:15-cv-08165, NYS/1:15-cv-08181, NYS/1:15-cv-08193, NYS/1:15-cv-08234 (JG)
UNITED STATES JUDICIAL PANEL
on
MULTIDISTRICT LITIGATION
IN RE: DAILY FANTASY SPORTS MARKETING
AND SALES PRACTICES LITIGATION
MDL No. 2677
IN RE: DRAFTKINGS, INC., FANTASY SPORTS
LITIGATION
MDL No. 2678
IN RE: FANDUEL, INC., FANTASY SPORTS
LITIGATION
MDL No. 2679
TRANSFER ORDER
Before the Panel:* Before the Panel are three dockets involving allegations of improper or
illegal conduct by the nation’s two largest operators of online daily fantasy sports
contests—DraftKings, Inc. and FanDuel, Inc. (collectively, the DFS Defendants). While the actions
in this litigation involve a variety of allegations, these allegations generally fall into one of three
categories. First, the “insider trading” actions allege that the DFS Defendants allowed their
employees to participate in competitors’ fantasy sports contests using non-public information that
gave them an unfair advantage over other contestants.1 Second, the “illegal gambling” actions allege
that the online daily fantasy sports contests provided by the DFS Defendants violate the gambling
prohibitions of one or more states. Third, the “bonus fraud” actions concern a promotional scheme
by DraftKings in which it allegedly promised to match new players’ initial account deposits up to
*
At oral argument, it was announced that several Panel members have interests that normally
would disqualify them under 28 U.S.C. § 455 from participating in the decision of this matter.
Accordingly, the Panel invoked the Rule of Necessity, and all present Panel members participated
in the decision of this matter in order to provide the forum created by the governing statute, 28
U.S.C. § 1407. See In re Adelphia Commc’ns Corp. Sec. & Derivative Litig. (No. II), 273 F. Supp.
2d 1353 (J.P.M.L. 2003); In re Wireless Tel. Radio Frequency Emissions Prods. Liab. Litig., 170
F. Supp. 2d 1356, 1357-58 (J.P.M.L. 2001). Additionally, certain Panel members who could be
members of the putative classes in this litigation have renounced their participation in these classes
and have participated in this decision. Judge Charles R. Breyer took no part in the decision of this
matter.
1
A subset of these insider trading actions also allege that the DFS Defendants allowed a
small number of players (known as “apex predators” or “shark bettors”) to use statistical modeling
and computer programs and algorithms (variously called “bots,” “spiders,” “scrapers,” or “scripts”)
to manage hundreds of entries at once and identify weak opponents, and that the DFS Defendants
failed to disclose that such shark bettors have an unfair advantage over regular contestants.
-2$600. Plaintiffs allege that this promotional scheme was deceptive or fraudulent because, in practice,
the only way a player would receive the full deposit match was to pay thousands of dollars in
additional entry fees within a four-month period.
There are four motions under 28 U.S.C. § 1407 to centralize pretrial proceedings in this
litigation. These motions were brought by three plaintiffs. In MDL No. 2677, plaintiff in an insider
trading action pending in the Southern District of New York (White) moves to centralize all the
actions against the DFS Defendants—regardless of whether those actions assert claims for insider
trading, illegal gambling, or bonus fraud—in the Southern District of New York. In MDL Nos. 2678
(pertaining to DraftKings) and 2679 (pertaining to FanDuel), plaintiff in two illegal gambling actions
pending in the Southern District of New York (Khirani I and II)2 seeks centralization of the illegal
gambling and insider trading actions in the Southern District of New York. Plaintiff Khirani now
maintains that the actions against these two defendants should proceed in one centralized proceeding.
Finally, plaintiffs in an action pending in the Southern District of Florida (Gomez) filed a second
motion in MDL No. 2678 to centralize all actions pertaining to the DFS Defendants (regardless of
the theory of liability) in the Southern District of Florida or, alternatively, in the Southern District
of New York.
The four Section 1407 motions now before us together encompass seventeen actions. MDL
No. 2677 consists of fourteen actions as listed on Schedule A. MDL No. 2678 consists of twelve
actions as listed on Schedule B. MDL No. 2679 consists of eight actions as listed on Schedule C.
Altogether, there are eighty actions at issue in these three dockets, either listed on the motion or
noticed as a related action,3 pending in thirty districts. All but one of these actions (the Wicksman
action pending in the District of Massachusetts) are common to all three dockets. Approximately
forty-two of these actions involve insider trading allegations, thirty-six involve illegal gambling
allegations, and eight involve bonus fraud allegations. Several actions allege both insider trading
and either illegal gambling or bonus fraud claims.
The responding parties take a variety of positions with respect to centralization and the
selection of the transferee district for this litigation. Plaintiffs in eleven actions and potential tagalong actions support centralization in the Southern District of New York. Plaintiffs in seven actions
and potential tag-along actions suggest centralization in the District of Massachusetts. The DFS
Defendants also support centralization in the District of Massachusetts.4 Plaintiffs in five actions
and potential tag-along actions suggest centralization in the Southern District of Illinois. The
2
Plaintiff Khirani filed two actions in the Southern District of New York—one against
DraftKings and one against FanDuel—alleging that defendants’ operation of daily fantasy sports
contests in New York constitutes illegal gambling under New York law.
3
4
These related actions are potential tag-along actions. See Panel Rules 1.1(h), 7.1, and 7.2.
Defendant Saahil Sud (an alleged shark bettor defendant named in some actions) does not
oppose centralization, but likewise supports selection of the District of Massachusetts as the
transferee district.
-3Northern District of Alabama, the District of Colorado, the District of Connecticut, and the Eastern
District of Louisiana are each supported by plaintiffs in one action or potential tag-along action.
Several parties propose the Southern District of Illinois and the Southern District of New York as
alternative transferee fora. As to the scope of the MDL, several of the plaintiffs and the DFS
Defendants support centralization of all the actions in a single MDL regardless of the theory of
liability. Several other plaintiffs request that the Panel exclude from the centralized proceedings
actions involving allegations of illegal gambling, bonus fraud, or both, arguing that those actions 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.5
Additionally, a number of plaintiffs oppose inclusion of their respective actions in any
centralized proceeding. Plaintiffs in three bonus fraud actions pending in the Southern District of
Illinois (Hemrich) and the District of Massachusetts (Gardner and Wicksman) argue that the bonus
fraud actions involve challenges to a discrete aspect of DraftKings’ marketing and, as a consequence,
these actions do not share common questions of fact with the insider trading or illegal gambling
actions and do not present a risk of duplicative discovery or inconsistent pretrial rulings. Plaintiffs
in Gardner and Hemrich also argue that informal coordination and cooperation among counsel and
the involved courts is a feasible alternative to centralization for the relatively few bonus fraud
actions.
Plaintiffs in five illegal gambling actions pending in the Eastern District of Arkansas (Price
and Ritchie), the Middle District of Florida (Steiner), and the District of New Mexico (DeGroot and
Lahoff) argue that inclusion of those actions in the MDL would require the transferee court to
consider unique state anti-gambling prohibitions, which would undermine any potential efficiencies
gained through centralization. Plaintiffs in the Steiner and DeGroot actions also argue that inclusion
of their actions is inappropriate because they are brought under state private attorney general
provisions by plaintiffs who did not participate in defendants’ daily fantasy sports contests. The
New Mexico plaintiffs additionally argued at the hearing that a motion for preliminary injunction
has been filed in New Mexico state court and that the ruling on this motion would be determinative
of the actions pending in the District of New Mexico.
On the basis of the papers filed and the hearing session held, we find that these actions
involve common questions of fact, and that centralization in the District of Massachusetts will serve
the convenience of the parties and witnesses and promote the just and efficient conduct of this
5
Plaintiffs in two actions (the McDaid action in the Southern District of New York and the
Bandy action in the Northern District of Oklahoma) argue that all actions should be centralized
before a single judge, but that the insider trading, illegal gambling, and bonus fraud actions should
be coordinated, rather than consolidated. As we have explained before, the Panel determines only
whether actions sharing common questions of fact should be centralized under Section 1407. The
decision to coordinate or consolidate actions in an MDL is a matter of the transferee court’s
discretion. See In re Bear Creek Techs., Inc., (‘722) Patent Litig., 858 F. Supp. 2d 1375, 1377
(J.P.M.L. 2012).
-4litigation. These actions share factual questions arising from plaintiffs’ allegations that: (a) the DFS
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.
While these actions involve differing theories of liability, such differences are not a bar to
centralization where common factual issues exist. See In re Bank of New York Mellon Corp.
Foreign Exch. Transactions Litig., 857 F. Supp. 2d 1371, 1372-73 (J.P.M.L. 2012). 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. At oral argument, the parties represented that the DFS Defendants have
relatively few employees and that it is anticipated that at least some employees will be witnesses in
all the actions. Additionally, there is substantial overlap among the asserted putative classes in these
actions (the insider trading and bonus fraud actions are predominantly brought on behalf of putative
nationwide classes). Further, all of the actions involve plaintiffs seeking similar relief from the DFS
Defendants—namely, refunds of the losses that plaintiffs sustained while participating in the online
daily fantasy sports contests.6 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.
We acknowledge that the arguments to exclude the bonus fraud and illegal gambling actions
from this MDL have some logic. Nevertheless, we find that the benefits of centralizing all three
types of actions at issue in this litigation are significant. Alternatives to this approach, such as
informal coordination or cooperation among the parties and courts with respect to common discovery
or pretrial motions, are less practicable given the large number of actions and courts. And, as with
any MDL, the transferee judge may account, at his discretion, for any differences among the actions
through the use of appropriate pretrial devices, such as separate tracks for discovery or motion
practice. See, e.g., In re Androgel Prods. Liab. Litig., 24 F. Supp. 3d 1378, 1378-80 (J.P.M.L. 2014).
Should the transferee judge determine that discovery and other pretrial proceedings related to the
common issues has been completed, he may suggest Section 1407 remand of actions to their
transferor courts for more individualized discovery and trial, if necessary. See In re Darvocet,
Darvon & Propoxyphene Prods. Liab. Litig., 780 F. Supp. 2d 1379, 1381 (J.P.M.L. 2011).
Also, the arguments opposing inclusion of specific potential tag-along actions in this MDL
are premature. See In re DePuy Orthopaedics, Inc., Pinnacle Hip Implant Prods. Liab. Litig., 787
F. Supp. 2d 1358, 1360 (J.P.M.L. 2011). Should the Panel issue an order conditionally transferring
6
Even the Steiner and DeGroot actions are brought under private attorney general statutes
on behalf of citizens of Florida and New Mexico who lost money participating in the DFS
Defendants’ contests.
-5those actions to the MDL, plaintiffs at that time—informed by our decision here—may move to
vacate the conditional transfer order. See Panel Rule 7.1.
We conclude that the District of Massachusetts is the appropriate transferee district for this
litigation. This district is supported by both defendants and plaintiffs in at least seven actions. 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. DraftKings is headquartered in the district and the individual
defendants reside either in the district or nearby, which will facilitate discovery. By appointing the
Honorable George A. O’Toole, Jr., to preside over this matter, we select an experienced jurist with
the willingness and ability to steer this litigation on an efficient and prudent course.
IT IS THEREFORE ORDERED that the actions listed on Schedules A, B, and C, and
pending outside the District of Massachusetts are transferred to the District of Massachusetts and,
with the consent of that court, assigned to the Honorable George A. O’Toole, Jr., for coordinated or
consolidated pretrial proceedings under MDL No. 2677.
IT IS FURTHER ORDERED that the motions in MDL Nos. 2678 and 2679 are terminated.
IT IS FURTHER ORDERED that MDL No. 2677 is renamed In re: Daily Fantasy Sports
Litigation.
PANEL ON MULTIDISTRICT LITIGATION
__________________________________________
Sarah S. Vance
Chair
Marjorie O. Rendell
Ellen Segal Huvelle
Catherine D. Perry
Lewis A. Kaplan
R. David Proctor
IN RE: DAILY FANTASY SPORTS MARKETING
AND SALES PRACTICES LITIGATION
MDL No. 2677
SCHEDULE A
Central District of California
SPIEGEL, ET AL. v. DRAFTKINGS, INC., ET AL., C.A. No. 2:15-08142
MARTIN v. DRAFTKINGS, INC., ET AL., C.A. No. 5:15-02167
Southern District of Florida
GOMEZ, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-23858
COOPER v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-23870
Southern District of Illinois
GUARINO v. DRAFTKINGS, INC., ET AL., C.A. No. 3:15-01123
Eastern District of Louisiana
GENCHANOK v. FANDUEL, INC., ET AL., C.A. No. 2:15-05127
District of Massachusetts
HAROLDSON, ET AL. v. DRAFTKINGS INC., C.A. No. 1:15-13581
BELTON v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-13602
Southern District of New York
JOHNSON, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-07963
WEAVER, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-08110
WHITE v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-08123
BROWN v. DRAFTKINGS, INC., C.A. No. 1:15-08165
MCDAID, ET AL. v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-08181
BELTON v. FANDUEL, INC., ET AL., C.A. No. 1:15-08234
IN RE: DRAFTKINGS, INC., FANTASY SPORTS
LITIGATION
MDL No. 2678
SCHEDULE B
Southern District of Florida
GOMEZ, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-23858
COOPER v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-23870
Southern District of Illinois
GUARINO v. DRAFTKINGS, INC., ET AL., C.A. No. 3:15-01123
Eastern District of Louisiana
GENCHANOK v. FANDUEL, INC., ET AL., C.A. No. 2:15-05127
District of Massachusetts
WICKSMAN v. DRAFTKINGS, INC., C.A. No. 1:15-13559
Southern District of New York
JOHNSON, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-07963
WEAVER, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-08110
KHIRANI v. FANDUEL, INC., C.A. No. 1:15-08119
WHITE v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-08123
BROWN v. DRAFTKINGS, INC., C.A. No. 1:15-08165
MCDAID, ET AL. v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-08181
KHIRANI v. DRAFTKINGS, INC., C.A. No. 1:15-08193
IN RE: FANDUEL, INC., FANTASY SPORTS
LITIGATION
MDL No. 2679
SCHEDULE C
Southern District of Florida
GOMEZ, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-23858
Southern District of Illinois
GUARINO v. DRAFTKINGS, INC., ET AL., C.A. No. 3:15-01123
Eastern District of Louisiana
GENCHANOK v. FANDUEL, INC., ET AL., C.A. No. 2:15-05127
Southern District of New York
JOHNSON, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-07963
WEAVER, ET AL. v. FANDUEL, INC., ET AL., C.A. No. 1:15-08110
KHIRANI v. FANDUEL, INC., C.A. No. 1:15-08119
WHITE v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-08123
MCDAID, ET AL. v. DRAFTKINGS, INC., ET AL., C.A. No. 1:15-08181
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