DraftKings has ended its legal fight with Michael Hermalyn, a former executive who faced accusations of breaking non-compete clauses and stealing trade secrets when he jumped ship to join Fanatics. The deal closes lawsuits filed in Massachusetts and California, which focused on Hermalyn’s switch to the competing company in early 2024.
Hermalyn’s Transition to Fanatics Ignites Legal Conflict with DraftKings
The conflict started when Hermalyn stepped down from his role as Senior Vice President of Growth at DraftKings in February. He joined Fanatics, a company that had just launched its sportsbook and was putting together a team to focus on high-value customers. DraftKings took legal action against Hermalyn arguing that he broke his non-compete and non-solicitation agreements by taking sensitive information to Fanatics and trying to hire his old coworkers.
At first, DraftKings tried to stop Hermalyn from working at Fanatics under a preliminary injunction. A Boston court gave the go-ahead for the injunction in April 2024 limiting the kinds of work Hermalyn could do at his new job for a year. However, the court did not ban him from working. Even with the legal battle going on, Hermalyn kept his job at Fanatics throughout the case.
DraftKings and Hermalyn Conclude Lawsuit with Confidential Agreement
Following the First Circuit Court of Appeals’ decision to uphold DraftKings’ non-compete clause in early 2024, both parties began to work toward a settlement. In late December, they announced a confidential agreement that resolved the lawsuits and allowed Hermalyn to continue working at Fanatics. However, this arrangement remains subject to the original non-compete clause’s restrictions. Both DraftKings and Hermalyn agreed that he would stick to his contractual obligations with the company.
Spokespersons for both companies verified that the legal battle had ended, although they did not reveal the exact details of the agreement. Fanatics released a statement that matched what Hermalyn’s attorney, Russell Beck said. Beck mentioned that the lawsuit had been thrown out and Hermalyn would honor his obligations to DraftKings, as reported by Reuters.
The lawsuit has put the spotlight on how tricky non-compete agreements can be and the legal issues that pop up when workers switch jobs between rival companies. DraftKings wanted its contract terms to be enforced according to Massachusetts law, but Hermalyn tried to use California law, which does not enforce non-compete clauses. Even with these differences, the deal ends the expensive court battle allowing both sides to get on with their business.
