DraftKings Sues Former VP for Being a Spy for the Competition

Article by : Erik Gibbs Feb 8, 2024

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DraftKings has filed a lawsuit against a former senior vice president, Michael Hermalyn, accusing him of acting as a “double agent” and colluding with Fanatics to misappropriate proprietary company information before joining the competitor, all in violation of his non-compete agreement.

The legal action comes shortly after Hermalyn left DraftKings to assume a similar role at Fanatics, overseeing VIP relationships for their new betting operation. Last week, Hermalyn sued DraftKings, challenging the enforceability of his 12-month global noncompete in California, where he claims to be residing now.

DraftKings presents an alternative narrative in its 49-page complaint, filed in the US District Court for Massachusetts, alleging that Hermalyn engaged in a “disloyal scheme” starting in early 2023, clandestinely meeting with Fanatics CEO Michael Rubin to discuss potential employment.

Hermalyn faces a long list of alleged breaches of his position while working for DraftKings. He is accused of breaching confidentiality agreements by accessing sensitive trade secrets, including bettor information and DraftKings’ strategies.

DraftKings believes that the former executive may have planned his actions in advance, expecting to use his position and access to data to his advantage. The gaming operator alleges that Hermalyn, upon accepting a position at Fanatics, used this information to Fanatics’ advantage, potentially aiding in recruiting from DraftKings.

The complaint further claims Hermalyn attempted to nullify his noncompete by establishing California residency. DraftKings’ internal investigation also revealed allegations of workplace misconduct and corporate credit card misuse.

DraftKings seeks a restraining order prohibiting Hermalyn from providing services to Fanatics in gaming-related business activities and from soliciting DraftKings’ clients and employees. Additionally, monetary damages reflecting the harm caused by Hermalyn are sought.

Hermalyn is expected to challenge the complaint, refuting DraftKings’ claims and asserting lawful conduct. His defense may emphasize adherence to duties and contest DraftKings’ effort to prevent his move to Fanatics.

Hermalyn’s lawsuit in California questions the enforceability of the noncompete, citing conflicts with state laws. The legal dispute, spanning two states, considers variations in California and Massachusetts laws on noncompete enforceability, potentially impacting the case’s resolution.