A New York court case will be resolved on the basis of Scottish law after a choice-of-law dispute between shareholders of a betting firm.

The claim was brought by the founders and over 100 common shareholders of Hubdub, a fantasy sports betting company which was founded in Scotland in 2007. A successive company FanDuel expended into the American fantasy sports market and established its headquarters in New York in 2011.  

The claimants alleged that other shareholders who held large amounts of the preferred shares in the company had engaged in a scheme designed to ensure that FanDuel’s preferred shareholders exclusively would benefit from a merger with Paddy Power.  

They had pleaded causes of action under New York law, alleging breaches of fiduciary duties against directors of the company and some of the preferred shareholders.

But the defendants had argued that under the internal affairs doctrine of choice of law, Scots law applied to plaintiffs’ claims, which arose from the relationships between and among the directors and shareholders of an entity incorporated in Scotland. 

The defendants therefore applied for the claimants’ claims to be dismissed, arguing that under Scots law, claims which sounded in alleged duties owed by directors to shareholders as well as duties owed among shareholders, were not claims which could be raised.  

Judge Madeline Singas, in the New York Court of Appeals, said Scots law was the correct law, stating there was a presumption that the law of FanDuel’s place of incorporation should apply to the claims. 

The judge added that FanDuel had ‘considerable contacts with Scotland’ and that the company had been registered under the Companies Act.

But Judge Singas declined to dismiss the claims, stating: ’We do not think a Scottish court, accepting the factual allegations as true and affording plaintiffs the benefit of every possible inference, would determine that plaintiffs had failed to state a cause of action. However, as we have explained, the existence and extent of any duty will be heavily dependent on plaintiffs proving the factual allegations in their complaint.’