Photo: Bloomberg

Fantasy sports websites DraftKings Inc. and FanDuel Inc. have failed to settle a raft of consumer class actions, setting the stage for a fight over arbitration.

Both websites allow players to create their own fantasy teams and win prize money based on the performance of real athletes. More than 80 class actions alleged the companies committed “insider trading” by allowing their employees to participate in contests using nonpublic information, or they enticed consumers to participate in illegal gambling.

In April, both sides asked U.S. District Judge George O'Toole of the District of Massachusetts to halt the litigation in hopes of settling the matter.

DraftKings, FanDuel in Settlement Talks Over Consumer Class Actions

But in June, lawyers notified the judge that they hadn't reached an agreement.

Plaintiffs now have cited the U.S. Court of Appeals for the First Circuit's June 25 opinion in Cullinane v. Uber to support their arguments that FanDuel's arbitration agreement wasn't clear to consumers when they signed up to use the site. FanDuel responded on Aug. 17, insisting that its arbitration contract was valid.

“Cullinane does not change the fact that, under the great weight of applicable, on-point authority, the parties here entered into a valid, binding agreement to arbitrate,” wrote FanDuel attorney David McDowell, a partner at Morrison & Foerster in Los Angeles. “FanDuel submits that that agreement should be enforced.”

McDowell did not respond to a request for comment. Co-lead plaintiffs attorney Hunter Shkolnik of Napoli Shkolnik in New York declined to comment.

O'Toole held a hearing a year ago, but has yet to rule on whether to grant motions to compel arbitration filed by both FanDuel and DraftKings.

Both sides submitted additional briefing after the Second Circuit ruled last year for Uber in Meyer v. Uber Technologies—a case challenging a similar online arbitration agreement. In supplemental briefs, plaintiffs said FanDuel's arbitration agreement had some screen details that differed from Uber's. FanDuel countered that its registration process was “substantially similar” to Uber's.

Plaintiffs lawyers now insist that Uber's screen format in Cullinane was “remarkably similar” to FanDuel's. In particular, according to a brief filed last month, the hyperlink was not blue or underlined and was less conspicuous than other aspects on the screen—in FanDuel's case, the large, green “Play Now” button.

In FanDuel's response on Aug. 17, McDowell added that Cullinane was decided under Massachusetts law, not New York law, under which the FanDuel customers agreed to resolve their disputes.

“Although plaintiffs try to brush this distinction aside, in fact, it matters,” McDowell wrote. “In fact, less than one year ago, the Second Circuit Court of Appeals reached the opposite conclusion of Cullinane and found that Uber's internet-based registration process provided sufficient notice of Uber's terms and service, including the arbitration agreement.”

Also, unlike Uber's screen in Cullinane, FanDuel's was “free of purported distractions,” like other buttons, hyperlinks or headers, he wrote. Those distractions—not a hyperlink that wasn't blue or underlined—are what led the First Circuit to conclude Uber's arbitration agreement wasn't valid.

Lawyers have cited both the Second and First circuit decisions in separate litigation over Uber's 2017 data breach.

Related stories:

Fantasy Sports Merger Collapse Could Motivate Settlement of Proposed Class Action

DraftKings, FanDuel Abandon Merger Plans in Wake of FTC Pushback