DraftKings landed the latest punch in the ongoing legal battle between the sportsbook and its former VP of VIP, Mike Hermalyn.
The Massachusetts Federal Court today granted DraftKings’ request for a temporary injunction limiting the scope of Hermalyn’s new role with Fanatics Betting and Gaming. The court also denied Hermalyn’s request to dismiss the case.
The same court previously granted a partial restraining order on Hermalyn’s involvement with Fanatics in February but DraftKings filed for another injunction after new information came to light about Hermalyn allegedly stealing trade secrets and soliciting DraftKings employees.
Hermalyn can stay with Fanatics but role is further limited
“Hermalyn will not be enjoined from working for Fanatics; rather, he will be enjoined from providing services to Fanatics that relate to any aspect of DraftKing’s business for which he performed services or received confidential information, as defined in the agreement, during the six months before Feb.1, 2024,” the ruling read.
In Judge Julie A Kobick’s decision, she sided with DraftKings on several fronts, agreeing the company had a reasonable chance of success on merit on several facets of the case, including that the non-compete, the non-solicitation agreement and the non-disclosure agreement will be deemed enforceable.
Kobick did say the scope of the non-solicitation agreement was better served to be applied nationally versus internationally given that DraftKings did not offer the court significant information about international operations.
The judge also elaborated extensively on why Massachusetts was the appropriate venue for the case despite Hermalyn’s claims it should be settled in California state court.
Judge found several conflicts in Hermalyn’s testimony
In the lengthy ruling, Kobick summed up both parties’ claims of what happened. In that recap, she did note there were certain conflicts that seemed to indicate Hermalyn was trying to mislead his former employer and, potentially, the court.
For example, Hermalyn was explicitly told by DraftKings IT staff that file transfers from old to new work computers had to be done through One Drive but Hermalyn insisted to the court that he transferred files using Slack as part of an “ordinary course migration”.
She was similarly unconvinced that Hermalyn was not part of a campaign to solicit two current DraftKings employees, Andrew Larracy and Hayden Metz, to come work with him at Fanatics. She noted that Larracy applied online for a position at Fanatics allegedly because Hermalyn told him to do so. Even though Larracy only filled out minimal information and did not even attach a resume, he was promptly contacted the next day and scheduled for several different job interviews.
According to Kobick, it seems unlikely that Larracy, who previously applied for roles at Fanatics but was never contacted, would be able to generate such a fast response from Fanatics without Hermalyn putting in a word or being involved.
Given all of that, the ruling is to enforce a temporary injunction that allows Hermalyn to continue working at Fanatics but further limits the scope of what he can do for the company to not run afoul of his non-compete.
Fanatics responds to court decision
While Fanatics applauded the court’s decision to allow Hermalyn to keep his role with the company, it had harsh words for its competitor and what it deemed as a “toxic” work culture in the official statement it provided to SBC Americas:
“Although we disagree with certain aspects of the Court’s ruling, we appreciate that the Court rejected DraftKings’ efforts to prevent Mike from working for Fanatics. Mike is looking forward to rolling up his sleeves and building Fanatics’ business consistent with the Court order. The Court’s order is preliminary, and Mike eagerly awaits his opportunity to present his case on the merits based on a full record,” said a Fanatics spokesperson.
“It’s unfortunate that DraftKings’ cheap attempt at petty retribution against a former employee – who simply wanted to take advantage of a better opportunity for himself and his family – will now undoubtedly continue to be used to instill fear and intimidation across DraftKings’ entire employee base. Those employees, now scared into staying in that toxic culture, will be the real losers in this case. We’re also a bit dismayed at the breadth of the Court’s ruling in light of the FTC’s recent rulemaking designed to promote employee mobility and free competition – but Mike is committed to advocating for what is fair and just in the final resolution of this matter.”
DraftKings highlights court’s assessment of Hermalyn
DraftKings did not mince words either in its statement to SBC Americas and highlighted the most negative comments the judge made about its former employee:
“Today’s ruling by the Court is another victory for DraftKings in its effort to hold Mr. Hermalyn accountable for his brazen attempt to clone DraftKings’ successful VIP program by stealing DraftKings’ employees and trade secrets.
We are pleased the Court enforced Mr. Hermalyn’s non-competition obligations in the United States, including ordering him to cease providing services for Fanatics relating to the work he performed for, or the information he obtained from, DraftKings.
The Court also correctly ordered Mr. Hermalyn not to solicit DraftKings employees, not to use any confidential company information, and not to destroy or delete documents containing DraftKings’ confidential information.
In reaching this result, the Court rightly saw through Mr. Hermalyn’s lies and deception, noting that the evidence suggests that Mr. Hermalyn ‘struggled with candor to the court’ and describing his testimony as ‘not credible,’ ‘evasive,’ and ‘[a]t best…highly misleading.’
Finally, the Court denied Mr. Hermalyn’s motion to dismiss or stay the case against him.
DraftKings looks forward to continuing to prosecute its claims against Mr. Hermalyn to ensure he is held fully accountable for violating his legal obligations.”
