We posted last June about Amit Patel, a Jacksonville Jaguars employee who used his company’s credit card to gamble away over $20 million. He was sentenced to 6 1/2 years in prison for that criminal conduct. He was diagnosed with a gambling addiction. From prison, he sued Fan Duel, Inc. (FanDuel), alleging violations of a Florida statute that prohibits deceptive business practices, negligence, intentional infliction of emotional distress, and conspiracy to commit a tort.
Mr. Patel opened an account with FanDuel in 2014 so that he could play daily fantasy sports, a fantasy sports league in which participants both compete and gamble. At that time, he agreed to terms of use, which included an arbitration provision. Those terms were updated in 2020, and Mr. Patel agreed to the updated terms, which also included an arbitration provision. The Court treats the 2020 terms as governing here. FanDuel’s alleged predation on Mr. Patel’s gambling addiction, which as alleged is brazen, is recounted in the previous post.
In May, in Patel v. Fan Duel, Inc., the District Court for the Southern District of New York ruled on Fan Duel’s motion to compel arbitration and its separate motion to dismiss. The Court granted the motion to compel arbitration, staying the matter, and denied the motion to dismiss as moot.
The Court first had to establish that an arbitration agreement existed between the parties. FanDuel was able to establish that fact based on a sworn affidavit, and Mr. Patel did not provide a factual basis on which to challenge the affidavit’s claims. Next, the Court addressed whether the issue of arbitrability was one for the arbiter. Mr. Patel first argued that the arbitration clause at issue was so broad as to contemplate “infinite arbitration,” that is, “arbitration of any claims between the parties, including claims without any nexus to the agreements containing the clauses.” However, the Court did not have to rule on the enforceability of infinite arbitration clauses because here the nexus between Mr. Patel’s claims and the arbitration agreement was direct.
Mr. Patel argued that his particular claims were not subject to arbitration. Unfortunately for him, the arbitration clause at issue delegates all issues as to arbitrability to the arbiter, and courts give effect to such delegation clauses. And so, the Court granted FanDuel’s motion to compel arbitration and stayed the litigation.
The outcome looks like a defeat for Patel, but I’m not sure it’s such a terrible outcome for him. In arbitration, he will get to tell his story, and if this is considered consumer arbitration, FanDuel might have to bear the lion’s share of the costs. If his goal is exposure of FanDuel’s predatory conduct, he’s already accomplished that goal in part through filing the complaint and because his story garnered a lot of attention. On the other hand, Fan Duel definitely benefits from moving this case out of the public eye and into arbitration, where it stands a better chance of keeping the proceedings under wraps.
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