FILED: NEW YORK COUNTY CLERK 12/11/2015 09:53 AM
NYSCEF DOC. NO. 107

INDEX NO. 453054/2015
RECEIVED NYSCEF: 12/11/2015

  IS RESPECTFULLY REFERRED TO JUSTICE

FOR THE FOLLOWING REASONISI:

 

 

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY

 

 

PRESENT: MANUEL J. MENDEZ PART 13
Justice

THE PEOPLE OF THE STATE OF NEW YORK, By

ERIC T. SCHNEIDERMAN, Attorney General of the

State of New York, INDEX NO. 453056/15
Plaintiff, MOTION DATE 11-25-1 5

-against - MOTION SEQ. NO. 001
MOTION CALINO.

FANDUEL, INC..

Defendant.

 

The following papers, numbered 1 to 14 were read on this motion to/for lniunctive relief:

PAPERS NUMBERED

Notice of Motion] Order to Show Cause Affidavits Exhibits  1 - 7
Answering Affidavits Exhibits cross motion 8 - 13
Replying Affidavits 14

 

Cross-Motion Yes No

Upon a reading of the foregoing cited papers it is Ordered that the motion by Eric
T. Schneiderman, in his official capacity as Attorney General of the State of New York,
for an Order seeking injunctive relief, enjoining and restraining Fanduel, Inc. from doing
business in the State of New York, and from accepting entry fees, wagers or bets from
New York consumers in regards to any competition, game or contest run on defendant's
website. is granted. The motion by Eric T. Schneiderman, in his official capacity as
Attorney General of the State of New York, filed under Index #453054/2015, Motion
Sequence 001, seeking injunctive relief, enjoining and restraining Draftkings, Inc. from
doing business in the State of New York, accepting entry fees, wagers or bets from New
York consumers in regards to any competition, game or contest run on Draftkings, Inc.'s
website, is granted.

Fanduel lnc.'s motion filed under Index 161691/2015, Motion Sequence 001,
seeking an Order pursuant to CPLR ??6301 and 6313, granting a preliminary injunction
and temporary restraining order against the Attorney General of the State of New York
and the State of New York, from taking any enforcement action or other action derived
from any allegation that the operation of daily fantasy sports contests are a violation of
law, against Fanduel, lnc., and its employees, agents and suppliers of goods and services
is denied. Draftkings Inc.?s motion filed under Index Number 102014/2015, Motion
Sequence 001 seeking an Order pursuant to CPLR ??6301 and 6313 granting a
preliminary injunction and temporary restraining order against the Attorney General of the
State of New York and the State of New York from taking any enforcement action or
other action, against Draftkings, lnc., and its employees, agents and suppliers of goods
and services, and for expedited discovery, hearing and trial, is denied.

Fanduel, Inc. and Draftkings, Inc. are online Daily Fantasy Sports (DFS) companies

that operate websites. On October 6, 2015, the Office of the New York Attorney
General (hereinafter referred to as commenced an investigation into both

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Fanduel, Inc. and Draftkings, Inc.. related to allegations that employees of the competing
company websites utilized inside information to improve chances of winning competitions
on the competing sites. As a result of the investigation the NYAG determined that the
DFS competitions on Fanduel. Inc. and Draftkings, Inc. websites. are in actuality illegal
gambling operations. subjecting the public to the fraudulent perceptions that the games
are winnable.

On November 10, 2015 the NYAG served a "cease and desist" letter on both
companies, demanding that they, "cease and desist from illegally accepting wagers in
New York State in connection with 'Daily Fantasy Sports The NYAG's
investigation determined that DFS on Fanduel, Inc. and Draftkings, lnc., results in
customers placing bets on events they cannot control or influence. "on the real-game
performance of professional athletes" and that in reality the entrance fees are wagers on
a "contest of chance.? with the results depending on numerous elements of chance to a
?material degree." The NYAG also determined that the websites involve the companies
having full and active control with direct profit from the wagering, they set prizes. control
relevant variables such as athletes wages. and promote themselves like a lottery. DFS
on the companies websites was deemed to create public health and economic concerns
including the equivalent of gambling addiction, with advertisements misleading the public
with the lure of easy money while only the top one percent, typically professional
gamblers profit. The NYAG pursuant to General Business Law ??349 and 350, provided
five days for Fanduel. Inc. and Draftkings, Inc. to show why the NYAG should not initiate
any proceedings.

On November 13. 2015, Fanduel Inc. commenced an action against Eric T.
Schneiderman. in his official capacity as NYAG and the State of New York, under Index
#161691/2015. The complaint asserts two causes of action seeking declaratory and
injunctive relief and alleges that Fanduel Inc. operates in compliance with New York Law
and functions as a game of skill. Fanduel, Inc.. under Index #161691/2015. brought an
Order to Show Cause seeking a preliminary injunction and temporary restraining order
pursuant to CPLR ?6301 and ?6313. enjoining Eric T. Schneiderman. in his capacity as
NYAG. and the State of New York. from taking any enforcement action or other action
derived from any allegation that the operation of DFS contests are a violation of the law,
as against Fanduel, Inc.. and its employees, agents and suppliers of goods and services.
On November 16, 2015. this Court denied Fanduel lnc.'s application for a temporary
restraining order and reserved its decision on the injunctive relief. This Decision and
Order also addresses the defendant?s motion filed under Index #161691/2015. Motion
Sequence 001.

On November 13. 2015. Draftkings, Inc. commenced an Article 78 proceeding
under index #102014/2015, against the NYAG and the State of New York. The verified
petition alleges that the actions of the NYAG are arbitrary and capricious. in excess of
his jurisdiction. and seeks declaratory and injunctive relief. The petition asserts claims of
violation of the due process and separation of powers provisions in the New York State
Constitution and violation of equal protection provision and uncompensated takings in
violation of the New York State Constitution. the US. Constitution, and 42 U.S.C.
?1983. Draftkings, Inc. also asserted claims of tortious interference with a contract and
tortious interference with prospective business relations. Draftkings, Inc. brought an
Order to Show Cause seeking injunctive relief and a temporary restraining order. enjoining
the NYAG and the State of New York, from taking any enforcement action or other
action derived from any allegation that the operation of daily sports contests are a
violation of the law. together with seeking expedited discovery. hearing and trial. On

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November 16. 2015 this Court denied Draftkings, lnc.?s application for a temporary
restraining order and reserved its decision on the injunctive relief. This Decision and
Order also addresses Draftkings, lnc.'s motion filed under Index #102014/2015, Motion
Sequence 001.

The NYAG commenced an action against Fanduel Inc., under index
#453056/2015. on November 17. 2015. The complaint asserts nine causes of action
and alleges that plaintiff under the authority of Executive is entitled to
enjoin the defendants from illegal and fraudulent conduct and seeks injunctive relief
pursuant to Business Corporation Law (BCL) ?1303, General Business Law (GBL) 349
and 350. The motion filed under index 453056/2015. Motion Sequence 001.
seeks an Order pursuant to Executive Law ?63[12] GBL ??349 and 350.
and CPLR ??6301 and 6313 enjoining and restraining Fanduel, Inc., from doing business
in the State of New York as a result of its fraudulent and illegal practices. The NYAG
also seeks to enjoin the defendant from accepting entry fees. wagers or bets from New
York consumers in regards to any competition. game or contest run on its website.

The NYAG commenced a separate action against Draftkings. Inc., under index
#453054/2015, on November 17, 2015 asserting nine causes of action making the
same allegations as were asserted against Fanduel, Inc. The NYAG's motion filed under
index #453054/2015, Motion Sequence 001 . seeks an Order granting the same
injunctive relief against Draftkings. Inc., as is sought against Fanduel, lnc..

The NYAG on its motions filed under index #453054/2015 and 45305612015
argues that pursuant to Executive Law ?63[12]. the Attorney General has authority to
seek injunctive relief because of Fanduel, Inc. and Draftkings, lnc.?s repeated. ongoing.
illegal and fraudulent activities. The NYAG also seeks injunctive relief under the consumer
protection provisions of GBL 349 and 350. Pursuant to BCL ?1303, the NYAG
claims empowerment to sue to enjoin and restrain Fanduel. Inc. and Draftkings, Inc. as
foreign corporations registered in Delaware, and doing business in New York from doing
business in New York as a result of the fraudulent and illegal acts or practices.

Executive Law ?63[12]. permits the NYAG to bring an action for injunctive relief or
damages to remedy repeated fraud or illegality (State of New York v. Princess Prestige
Co.. 42 N.Y. 2d 104, 366 NE. 2d 61. 397 N.Y.S. 2d 360 [1977]). The NYAG is
entitled to injunctive relief pursuant to Executive Law 63 upon a showing that
there was a repeated statutory violation (Schneiderman v. One Source Networking, Inc.,
125 AD. 3d 1345, 3 N.Y.S. 3d 505 [4?1 Dept.. 2015]). A prima facie claim of fraud
pursuant to Executive Law 63 (12). is established by showing that, act
complained of has the capacity or tendency to deceive. or creates an atmosphere
conducive to fraud" (People ex rel. Spitzer v. Applied Card Sys.. lnc.. 27 AD. 3d 104.
805 N.Y.S. 2d 175 [1st Dept., 2005] and People ex rel. Spitzer v. General Electric
Company. Inc., 302 AD. 314. 756 N.Y.S. 2d 520 [1st Dept.. 2003]).

Pursuant to GBL ?349. a prima facie case is established by a showing of injury
resulting from ?consumer-oriented conduct.? and that the defendant is engaging in an act
or practice that is materially misleading or deceptive. likely to. a reasonable
consumer acting reasonably under the circumstances" (Oswego Laborers' Local 214
Pension Fund v. Marine Midland Bank. 85 N.Y. 2d 20, 647 NE. 2d 741 623 N.Y.S. 2d
529 [1995]). Pursuant to GBL ?349. an omission is deceptive. if a business possesses
material or information relevant to the consumer and fails to provide it to the consumer
(Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y. 2d 20.

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supral. GBL ?350, specifically applies to false advertising, otherwise the standard to
establish a prima facie case is the same as that for a claim, pursuant to GBL ?349.
(Goshen v. Mutual Life Ins. Company of New York, 98 N.Y. 2d 314, 774 NE 2d 1190,
746 N.Y.S. 2d 858 [2002]). GBL ?350, also requires an allegation of reliance on, or
knowledge of the defendant's advertisement (Non-Linear Trading Co. v. Braddis
Associates, Inc., 243 AD. 2d 107, 675 N.Y.S. 2d 5 [15? 

BCL ?1303, permits the NYAG to, an action to enjoin or annul the
authority of a foreign corporation which operates within this state contrary to law, has
done or omitted any act which if done by a domestic corporation would be a cause for its
dissolution under section 1101 (Attorney-general?s action for judicial 
(McKinney's Con. Laws Annotated, Business Corporation Law ?1303l. BCL ?1303, has
been applied to enjoin a foreign corporation from doing business in a fraudulent or illegal
manner and the court can grant a decree of forfeiture and annulment of the right to do
business in the state of New York (People v. American Ice. 00., 135 AD. 180, 120
N.Y.S. 41 [1st Dept, 1909]).

The NYAG argues that the DFS games played on the Fanduel, Inc. and Draftkings,
lnc. websites constitutes illegal sports gambling as defined in the New York State
Constitution Article I, and under Penal Law ?225.00-225.40, specifically Penal
Law z3225.05, ?225.10, ?225.15 and ?225.20 which are alleged to have been violated.
It is the NYAG's contention that Penal Law sections apply to the DFS
games played on Fanduel, Inc. and Draftkings, Inc.'s websites, which is ?gambling? as
defined in Penal Law ?225.00 with each player participating in a "contest of chance?
as defined in Penal Law ?225.00 not a game of skill.

New York State Constitution Article I, states in relevant part,

lottery or the sale of lottery tickets, pool-selling, book making or any
other kind of qamblinq. except lotteries operated by the state and the sale
of lottery tickets in connection therewith as may be authorized and prescribed
by the legislature, the net proceeds of which shall be applied exclusively to
or in aid or support of education in this state as the legislature may prescribe,
except pari-mutual betting on horse races as may be prescribed by the
legislature and from which the state shall derive a reasonable revenue for the
support of government, and except casino gambling at no more than
seven facilities as authorized and prescribed by the legislature, shall hereafter
be authorized or allowed within this state; and the leQislature shall pass
appropriate laws to prevent offenses aqainst any of the provisions of this
section." (Emphasis added) (McKinney's Con. Laws Annotated, Const. Art. I,


The provisions of New York State Constitution Article I, reflects the public
policy of the State of New York against commercialized gambling. The New York State
Constitution Article I, permits the legislature through the relevant sections of the
Penal Law to regulate gambling, the statutory provisions are subject to strict construction
and prohibit unauthorized activity. Laws authorizing gambling should not be extended by
implication beyond what is specified by the Legislature (New York Racing Ass'n, Inc. v.
Hoblock, 270 AD. 2d 31, 704 N.Y.S .2d 52 [1"t Dept., 2000]).

The definition of "gambling" is found in the Penal Law ?225.00 which defines
gambling as when a person,  stakes or risks something of value upon the outcome of

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a contest of chance or a future contingent event not under his control or influence. upon
an agreement or understanding that he will receive something of value in the event of a
certain outcome." (McKinney's Con. Laws Annotated, Penal Law Penal
Law ?225.00 defines ?something of value" as, form of money or 
or privilege of playing at a game or scheme without charge." the
award of a free game has been held a violation of the Penal Law. The term "something of
value." is established by the payment of cash to play, and the receipt of a cash award.
(Plato's Cave Corp. v. State Liquor Authority.68 NY 2d 791.498 N.E. 2d 420. 506
N.Y.S. 2d 856 [1986?.

It is the NYAG's contention that DFS played on Fanduel, Inc. and Draftkings. lnc..
results in customers placing bets labeled ?entrance fees" on events they cannot control
or influence, relying on the real-game performance of professional athletes. to win a
prize, which amounts to gambling as defined in Penal Law ?225.00 The NYAG
claims that the "entrance fee" is not returned in the event of a loss and because the
statute only requires "something of value.? not requiring that it be classified as a "bet or
wager? the "entrance fee" is sufficient to establish gambling.

In support of the contention, internet screen shots are submitted showing
the manner in which a potential DFS player may sign-up for each of the websites. The
published rules or terms of use for each website include statements of legality and the
finality of the roster. Terms of use and rules for each website establish that a player
selects a set number of professional athletes for their DFS team and once the DFS team
is selected. the players are "locked in," and the selections may no longer be changed.
Scoring for the DFS team is tallied by Fanduel, Inc. and Draftkings, Inc., who rely on
individual real game performances of the athletes selected for the DFS team by the online
player. The NYAG provided a copy of the DFS scoring system for professional football
but the scoring system varies with different types of sports. The terms of use and rules
for each website state that points allotted to the DFS team are affected if there is a rain
out. postponement. suspension. or shortened game for any of the DFS athletes selected
by the player as part of the DFS team. The final tally of a daily or weekly DFS
competition occurs when the final box scores of the sporting events of the respective
DFS team players have concluded.

The NYAG claims the "entrance fees" a DFS player can pay ranges from $.25 to
$10,600.00 on Draftkings. lnc.'s website and from $1.00 to $10,600.00 on Fanduel,
lnc.'s website. The amounts of the entrance fee is calculated in part on salary capped at
up to $50,000.00 and on the athletes perceived value. There are multiple types of
contests a DFS player may enter including, "head to head? match-ups involving a DFS
player betting that the line-up they choose will perform better than those picked by
another DFS player, and "Guaranteed Prize Pools" involving a pool with up to hundreds
of thousand other players. It is also the NYAG's contention that the types of games
played are more like "parlay? bets contingent on combinations of games and "prop" bets
relying on statistics. than ?contests of skill." The NYAG submits advertisements for
Fanduel, Inc. and Draftkings, Inc. as proof that they advertise themselves as legal,
operate in a manner similar to that of a lottery. and that they claim competitions are
"winnable" regardless of the level of skill, with instant gratification to DFS players.

It is the contention that both Fanduel, Inc. and Draftkings, Inc. take
between 6% and more than 14% of the "entry fee" as "commission" on every
competition. and equates this to the equivalent of a "rake". or "vig" charge taken on
wagers by a sports bookie. Their terms of use on entry fees are exactly alike, there is no

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specific set fee or percentage paid as an entry fee, DFS players participate in a contest
with the amount debited from their account determined by Fanduel, Inc. and Draftkings,
lnc.. There is no breakdown of fees per type of game, which across different sports can
potentially result in multiple entry fees paid daily by the same DFS player, allowing
Fanduel, Inc. and Draftkings, Inc. to profit from every entry fee being paid.

Penal Law ?225.00 defines "'Contest of Chance' to mean, contest.
game, gaming scheme, or gaming device in which the outcome depends in a material
degree upon an element of chance, notwithstanding that skill of the contestants may also
be a factor therein? (emphasis added). (McKinney?s Con. Laws Annotated. Penal Law


The NYAG contends that DFS played on the websites are "contests of chance"
because although the skill of the contestants is a factor. the outcome depends
substantially on chance and factors not within the DFS player?s control, including
whether the athletes chosen are injured, or the game is "rained out." Furthermore, once a
team is chosen for a contest there is no means of physically altering the outcome.

Fanduel, Inc. and Draftkings, lnc.. do not refute the evidence provided by the
NYAG, instead each seeks a preliminary injunction pursuant to CPLR 6301 and a
temporary restraining order pursuant to CPLR 6313. They argue that DFS games as
played on their websites are not illegal gambling. They claim that DFS is a "game of skill?
and not a "contest of chance," with DFS players acting like general managers and relying
on a team that does not exist in reality. They refer to Humphrey v. Viacom, Inc., 2007
WL 1797648, and the Federal Unlawful Internet Gambling Enforcement Act of 2006
(UIGEA) 31U.S.C. ??5362. 5363, as support for their contention that they have the
likelihood of success because. they argue, DFS is not illegal gambling as defined in the
New York Penal Law ?225.00.

CPLR 6301 grants this court the power to issue an order directing that a party
be enjoined from performing an act, or to refrain from performing an act which would be
injurious. The issuance of a preliminary injunction is within the discretion of the trial
court. A movant seeking a stay or injunction. is required to show. the likelihood of
ultimate success on the merits; (2) irreparable injury to him absent granting of the
preliminary injunction; and (3) that a balancing of the equities favors his position? (Doe
v. Axelrod. 73 N.Y. 2d 748, 532 NE. 2d 1272, 536 N.Y.S. 2d 44 [1998] and Nobu
Next Door, LLC v. Fine Arts Housing, Inc.. 4 N.Y. 3d 839, 833 NE. 2d 191, 800 N.Y.S.

2d 48 [2005]).

A preliminary injunction should not be granted unless its necessity and justification
is clear based on undisputed facts (Residential Board of Managers of the Columbia
Condominium v. Alden, 178 AD. 2d 121, 576 N.Y.S. 2d 859 [1st Dept., 1991]). The
likelihood of ultimate success on the merits requires a prima facie showing of the right to
relief (DiMartini v. Chatham Green, Inc., 169 AD. 2d 689, 575 N.Y.S. 2d 712 [1st Dept.,
1991]). Irreparable injury requires a showing that there is no other remedy at law,
including monetary damages, that could adequately compensate the party seeking relief
(Zodkevitch v. Feibush, 49 AD. 3d 424. 854 N.Y.S. 2d 373 [15? Dept., 2008]). The
balancing of the equities requires the Court to determine the relative prejudice to each
party accruing from a grant or denial of the requested relief (Ma v. Lien, 198 AD. 2d
186, 604 N.Y.S. 2d 84 [1st Dept., 1993]). CPLR ?6313 permits the imposition of a
temporary Restraining Order pending the determination of a motion for preliminary

injunction (People v. Asiatic Petroleum Corp., 45 AD. 2d 835, 357 N.Y.S. 2d 542 [1st
Dept., 1974]).

Fanduel, Inc. and Draftkings Inc., each refer to Humphrey v. Viacom, Inc., 2007
WL 1797648 2007]. an unreported decision from the New Jersey U.S.
District Court addressing the New Jersey Qui Tam statute permitting
illegal gambling losers to recover losses. This case has no application in this jurisdiction
and is distinguishable. The Court in Humphrey v. Viacom, Inc., granted a motion to
dismiss the complaint, and determined that the payment of an entry fee in order to
participate in seasonal fantasy sports is not an illegal "wager" or "bet" pursuant to the
New Jersey Qui Tam statue. The Court in Humphrey v. Viacom, Inc., stated that, "entry
fees do not constitute bets or wagers where they are paid unconditionally for the
privilege of participating in a contest, and the prize is for an amount certain that is
guaranteed to be won by one of the contestants (but not the entity offering the prize)."
Humphrey v. Viacom, Inc., involved seasonal fantasy sports in which the players paid a
nonrefundable one time entry fee. Contrary to Humphrey v. Viacom, Inc., the facts in
this action involve DFS, the participants pay a fee every time they play, potentially
multiple times daily instead of one seasonal entry fee, with a percentage of every entry
fee being paid to Fanduel, Inc. and Draftkings, lnc.. Furthermore the New York State
Penal Law does not refer to "wagering" or "betting," rather it states that a person, "risks
something of value." The payment of an ?entry fee" as high as $10,600.00 on one or
more contests daily could certainly be deemed risking "something of value." The
language of Penal Law ?225.00 is broadly worded and as currently written sufficient for
finding that DFS involves illegal gambling.

Fanduel, Inc. and Draftkings, Inc. refer to the Federal Unlawful Internet Gambling
Enforcement Act of 2006 (UIGEA) 31U.S.C. ??5362, 5363, arguing it carves out an
exception for Fantasy Sports. UIGEA permits participation in, "any fantasy or
simulation sports game or educational game or contest in fantasy or
simulation sports team is based on the current membership of an actual team that is a
member of an amateur or professional sports ?5362 
The UIGEA language exempting fantasy sports has no corresponding authority under
New York State law as currently written. UIGEA creates an exception for state statutes,
specifically stating, ?The term ?unlawful internet gambling' means to place, receive, or
otherwise knowingly transmit a bet or wager by means which involves the use, at least
in part, of the Internet where such bet or wager is unlawful under any applicable Federal
or State Law in the State or Tribal lands in which the bet or wager is initiated, received
or otherwise made (emphasis added) (31U.S.C. ?5362 The exception found
in UIGEA does not apply under the current New York State statutory language. UIGEA
by its own language does not apply to receiving, or otherwise transmitting a
bet or wager where..(i) the bet or wager is initiated and received or otherwise made
exclusively within a single ?5362 UIGEA is not a
basis to find the NYAG exceeded its authority or to grant Fanduel, Inc. and Draftkings,
Inc., the injunctive relief sought.

Fanduel, Inc. and Draftking, Inc.'s claims of Iaches or estoppel cannot be invoked
against a government agency to prevent the discharge of statutory duties where the acts
the agency seeks to prevent could easily result in extensive public fraud (Parkview
Associates v. City of New York, 71 N.Y. 2d 274 77, 519 N.E. 2d 1372, 525 N.Y.S. 2d
176 [1988] and New York State Medical Transporters Ass'n, Inc. v. Perales, N.Y. 2d
126, 566 N.E. 2d 134, 564 N.Y.S. 2d 1007 [1990]). The possibility of estoppel against
a governmental agency is to be denied, in all but the, "rarest of cases" such as where,

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(1) there is no awareness of the law sought to be enforced and it could not be discovered
by reasonable diligence. (2) there is no potential for public fraud and (3) ?manifest
injustice? will result (New York State Medical Transporters Ass'n. Inc. v. Perales. N.Y. 2d
126. supra). The DFS corporations, have not stated a basis to find the "rarest of cases"
exception applies to the NYAG's claims. and the potential for public fraud has not been
eliminated. Defendant?s contention that plaintiff failed to seek restraint as to Seasonal
Fantasy Sports, is not relevant to the pending motion because that relief is not before
this Court.

Draftkings, Inc.. has asserted constitutional arguments of violations of due process
and equal protection in its Order to Show Cause seeking injunctive relief. Due process
requires notice and the opportunity to be heard (People v. Apple Health Sports Clubs,
80 N.Y. 2d 803, 599 N.E. 2d 279. 587 N.Y.S. 2d 279 [1992]). The NYAG conducted
an investigation over the course of a month and provided both notice and an opportunity
for Draftkings, Inc. to be heard in the November 10. 2015. "cease and desist letter."
Draftkings, Inc. commenced a special proceeding and brought an Order to Show Cause
seeking injunctive relief during the period provided by the NYAG. The due process
argument fails because Draftkings, Inc. has been provided with the opportunity to be
heard by both the NYAG and this Court. The equal protection argument also fails to
avoid injunctive relief. Draftkings, Inc. claims that the NYAG is selectively enforcing the
illegal gambling provisions of Penal Law ?225.00-225.40, solely against DFS as played
on the corporation's website. Draftkings, Inc. is required to provide evidence that other
DFS websites or corporations that are "similarly situated" have been exempted by the
NYAG from its investigation and enforcement to establish a violation of the equal
protection provisions of the Constitution (Dezer Entertainment Concepts. Inc. v. City of
New York, 8 AD. 3d 37. 778 N.Y.S. 2d 18 [1st Dept.. 2004]). Draftkings, Inc. failed to
provide evidence that "similarly situated" DFS websites were exempted from the
NYAG's investigation. such that injunctive relief should be denied.

Draftkings, Inc. asserted the constitutional argument of separation of powers in
its Order to Show Cause filed under index 102014/2015. It fails to establish that the
injunctive relief sought by the NYAG should be avoided under the separation of powers
doctrine. It is Draftkings, lnc.'s contention that the NYAG by its interpretation of the
New York State Constitution. Article I, ?9 and the Penal Law. is engaging in "Judicial
powers" and "legislative powers? instead of applying executive authority. Draftkings,
Inc. claims that the NYAG is applying judiciary power by determining whether a particular
individual or company has violated the law and seeking to shut the company down.

The November 10, 201 5. "cease and desist letter." was not a final determination, and
the NYAG in providing the opportunity for Draftkings, Inc. to be heard did not infringe on
"judicial powers." The injunctive relief sought by the NYAG is not seeking to determine
the ultimate issues raised by the parties.

Draftkings, Inc. claims that the NYAG is engaging in policy decisions that should
be restricted to the legislature. The separation of powers is implied in each of the three
coordinated branches of government: executive. legislative and judicial. The Legislature's
powers involve. "making critical policy decisions. while the executive branch's
responsibility is to implement those policies.? Although there is a "functional separation"
between the legislative and the executive branches they. neatly be divided into
isolated pockets" (Bourquin v. Cuomo, 85 N.Y. 2d 781, 652 N.E. 2d 171, 628 N.Y.S. 2d
618 [1995]). The four part test for infringement of legislative powers involves
determining if an agency. (1) is not authorized to. ?structure its decision making in a
cost-benefit analysis." (2) create a comprehensive set of rules without guidance from the

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legislature, (3) is acting to ?fill the vacuum" in an area the legislature had been unable to,
"reach an agreement on the goals and methods that should govern" and (4) the technical
competence necessary to provide details for broadly stated legislative policies (Boreali v.
Axelrod, 71 N.Y. 2d 1. 517 N.E. 2d 1350, 523 N.Y.S. 2d 464 [1987]). The four part
test requires proof that the statutory provisions, "have numerous exemptions.? there is
repeated attempts at legislative enactments with failure to reach an agreement in the
legislature after ?substantial public debate and vigorous lobbying," and a showing that
there is no special expertise or competence of the agency involved (Festa v. Leshen, 145
AD. 2d 49, 537 N.Y.S. 2d 147 Dept., 1989]). Draftkings, Inc. has not provided any
proof in support of the contentions that the NYAG has failed to meet the four part test.
The mere assertions that the NYAG fails to meet the requirements is not enough to avoid
the injunctive relief sought by the NYAG.

The NYAG in opposition to the separation of powers argument, argues that the
injunctive relief sought by Draftkings, Inc. amounts to the extraOrdinary relief of a writ of
prohibition. "The extraordinary remedy of a writ of prohibition lies only where ?there is a
clear legal right' to such relief, and only when the body or officer involved acts or
threatens to act in a manner over which he or she has no jurisdiction or where he or she
exceeds his or her authorized (Kimyagarova v. Spitzer, 791 N.Y.S. 2d 610
[2"d Dept., 2005]). Draftkings, lnc.'s argument that the NYAG has exceeded its
authority and misinterpreted the meaning and application of the New York State
Constitution Article I, ?9 and the Penal Law, does not require that this Court utilize the
extraordinary remedy of restraining the NYAG (Morgenthau v. Erlbaum, 59 N.Y. 2d 143,
451 N.E. 2d 150, 464 N.Y.S. 2d 392 [1983] and Matter of Johnson v. Price, 28 AD.
3d 79, 810 N.Y.S. 2d 133 [1st Dept., 2006]). Draftkings, Inc. has not established a
clear legal right to the injunctive relief sought, prohibiting the NYAG from taking
enforcement action.

The NYAG has established the likelihood of success warranting injunctive relief
under the authority provided in Executive to avoid fraudulent or illegal acts
and violations of GBL ??349 and 350. The NYAG has a greater likelihood of success on
the merits under the New York State Constitution Article I. and the definitions of
gambling and ?contest of chance" as currently stated in Penal Law ?225.00 The
NYAG has also established that both Fanduel, Inc. and Draftkings, Inc., as out of state
corporations, can be enjoined-pursuant to BCL ?1303-from their activities in the State of
New York. The NYAG is not required to show irreparable harm under Executive Law
?63[12], it is implied in the need to prevent the effects of fraudulent and illegal conduct
on the general public (People v. Apple Health Sports Clubs, 599 N.Y. 2d 803, supra).
The balancing of the equities are in favor of the NYAG and the State of New York due to
their interest in protecting the public, particularly those with gambling addictions.
Fanduel, Inc. and Draftkings, Inc., are only enjoined and restrained in the State of New
York, DFS is permitted in other states, and the protection of the general public outweighs

any potential loss of business.

Fanduel, Inc. and Draftkings, Inc. have not established entitlement to a preliminary
injunction, however, a granting or denial of a preliminary injunction does not constitute a
determination of the ultimate issues (Walker Memorial Baptist Church v. Saunders, 285
N.Y. 462, 35 N.E. 2d 42 [1941] and Jou-Jou Designs, Inc. v. International Ladies
Garment Workers' Union, Local 23-25, 94 AD. 2d 395. 465 N.Y.S. 2d 163 [1st Dept.,
1983]). Fanduel, Inc. and Draftkings, lnc.'s failure to establish entitlement to a
preliminary injunction, is not a final determination of the merits and rights of the parties.
therefore discovery is needed after joinder of issue. The relief saught by Draftkings, Inc.

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in its motion papers filed under Index Number 102014/2015, Motion Sequence 001,
seeking expedited discovery, hearing and trial. is premature since the NYAG and State of
New York have not had an opportunity to answer.

Accordingly, it is ORDERED that the motion by Eric T. Schneiderman. in his official
capacity as Attorney General of the State of New York, for an Order pursuant to
Executive Law ?63[12], Business Corporation Law ?1303. General Business Law?? 349
and 350, and CPLR ??6301 and 6313. seeking injunctive relief and a temporary
restraining order, enjoining and restraining Fanduel, Inc. from doing business in the State
of New York in violation of the New York State Constitution Article I. and New York
Penal Law ?225.05, ?225.10, ?225.15 and ?225.20, and from accepting entry fees,
wagers or bets from New York consumers in regards to any competition, game or
contest run on defendant's website, is granted, and it is further,

ORDERED. that Fanduel, Inc., is temporarily enjoined and restrained from doing
business in the State of New York, including accepting entry fees, wagers or bets from
New York consumers in regards to any competition, game or contest run on Fanduel,
Inc.'s website pending a final determination, and it is further,

ORDERED, that Fanduel, Inc. shall have thirty (30) days from the service of a copy
of this Order with Notice of Entry to serve an answer or otherwise move in the action
filed under Index #453056/2015, and it is further,

ORDERED that the motion by Eric T. Schneiderman. in his official capacity as
Attorney General of the State of New York, filed under Index #453054/2015, Motion
Sequence 001, for an Order pursuant to Executive Law ?63[12], Business Corporation
Law ?1303. General Business Law?? 349 and 350, and CPLR ??6301 and 6313.
seeking injunctive relief and a temporary restraining order, enjoining and restraining
Draftkings, Inc. from doing business in the State of New York in violation of the New
York State Constitution Article I, Section?[9] and New York Penal Law ?225.05.
?225.10, ?225.15 and ?225.20, and from accepting entry fees, wagers or bets from
New York consumers in regards to any competition. game or contest run on defendant's
website, is granted, and it is further,

ORDERED, that Draftkings, Inc., is enjoined and restrained from doing business in
the State of New York, including accepting entry fees, wagers, or bets from New York
State consumers in regards to any competition, game or contest run on Draftkings, lnc.'s
website until a final determination, and it is further,

ORDERED, that Draftkings, Inc. shall have thirty (30) days from the service of a
copy of this Order with Notice of Entry to serve an answer or otherwise move in the
action filed under Index #453054/2015, and it is further,

ORDERED, that Fanduel, Inc.'s motion filed under Index Number 161691/2015,
Motion Sequence 001, seeking an Order pursuant to CPLR ??6301 and 6313, granting a
preliminary injunction and temporary restraining order enjoining Eric T. Schneiderman. in
his official capacity as Attorney General of the State of New York, and the State of New
York, from taking any enforcement action or other action derived from any allegation that
the operation of daily fantasy sports contests are a violation of law, against Fanduel.
Inc., and its employees, agents and suppliers of goods and services, is denied, and it is

further,

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ORDERED, that the office of Eric T. Schneiderman, in his offical capacity as
Attorney General of the State of New York, and the State of New York shall serve an
answer or otherwise move in the action filed by Fanduel, Inc. under Index
#161691/2015 within thirty (30) days of service of a copy of this Order with Notice of
Entry, and it is further, 

ORDERED, that Draftkings, lnc.'s motion filed under Index #102014/2015, Motion
Sequence 001 seeking an Order. granting a preliminary injunction and temporary
restraining order enjoining Eric T. Schneiderman. in his official capacity as Attorney
General of the State of New York, from taking any enforcement action or other action,
against Draftkings, lnc.. and its employees, agents and suppliers of goods and services,
seeking expedited discovery, hearing and trial, is denied, and it is further, -

ORDERED, that the office of Eric T. Schneiderman, in his offical capacity as
Attorney General of the State of New York, shall serve an answer or otherwise move in
the proceeding filed by DraftKinganc. under Index 10201412015 within thirty (30)
days of Service of a copy of this Order with Notice of Entry.



MANUEL J. MENDEZ


 

MENDEZ,

Dated: December 11, 2015 J.S. C. I
Check one: FINAL DISPOSITION NON-FINAL DISPOSITION
Check if appropriate: DO NOT POST El REFERENCE

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