Legal Dispute between DraftKings and Fanatics Heats Up

The District Court of Massachusetts granted DraftKings a preliminary injunction against Mike Hermalyn, a former executive accused of stealing and sharing trade secrets with rival company Fanatics. Hermalyn, who served as vice-president of VIP at DraftKings and now holds the position of president of VIP at Fanatics, will face restrictions on his role at the latter company.

The Ruling Marks the Newest Chapter in an Ongoing Legal Battle
The case originated from allegations that Hermalyn clandestinely met with Fanatics’ leadership team in early 2023 to discuss potential employment. He also faces accusations of encouraging his subordinates to join Fanatics and downloading DraftKings’ confidential business plan for the Super Bowl while at the Fanatics office in California.

While Hermalyn remains employed by Fanatics, the injunction prohibits him from performing any duties related to his previous position at DraftKings, where he oversaw the onboarding and management of high-value players. Judge Julia E. Kobick stated that Hermalyn was forbidden from providing services to Fanatics related to any aspect of DraftKings’ business for which he received confidential information in the six months before 1 February 2024.

The court’s ruling also denied Hermalyn’s motion to dismiss or stay the case against him. This decision follows a previous temporary restraining order granted against Hermalyn in February. DraftKings subsequently filed a new motion, alleging that Hermalyn stole confidential company information and solicited DraftKings employees.

Hermalyn Will Remain Employed at Fanatics
DraftKings welcomed the court’s decision as another victory in its efforts to hold Hermalyn accountable for attempting to clone DraftKings’ successful VIP program. The company described Hermalyn’s actions as a “brazen attempt” to steal employees and trade secrets. DraftKings also alleges that the former executive violated his non-compete agreement, further complicating the case.

In response, a Fanatics spokesperson expressed disagreement with certain aspects of the court’s ruling but appreciated that DraftKings’ attempts to prevent Hermalyn from working for Fanatics were rejected. Fanatics characterized the incident as a “cheap attempt at petty retribution” and accused DraftKings of fostering a toxic culture of fear and intimidation among its employees.

The legal battle between DraftKings and Hermalyn continues, with both parties poised to present their cases. Hermalyn has challenged the enforceability of non-compete clauses, contending they were unenforceable and overly restrictive. DraftKings has since moved the case to federal court, remaining adamant in its position and ostensibly willing to see this dispute to its end.