DraftKings Alleges Ex-VP Stole Secrets While Houseguest of Rival

DraftKings Inc. alleged it has uncovered a “mountain of evidence” that a former senior executive stole company secrets before bolting to a new job with competitor Fanatics Inc.

Former DraftKings senior vice president of VIP marketing Michael Hermalyn downloaded client files and and recruited co-workers while he was a guest at the home of his new boss, according to a new filing in Boston federal court.

DraftKings asked Judge Julia E. Kobick to convert a temporary restraining order against Hermalyn into a preliminary injunction that would block him from working at Fanatics for the full year of his DraftKings’ non-compete agreement, according to a March 14 filing at the US District Court for the District of Massachusetts.

Last month, Kobick refused Hermalyn’s request to loosen terms of that restraining order, which he complained prevent him from doing almost any work at his new job. Hermalyn was free to work for Fanatics as the lawsuit progressed if he didn’t use any of DraftKing’s confidential information, Kobick said.

DraftKings sued its former executive last month, accusing him of absconding with private client files, confidential marketing plans for the upcoming Super Bowl, and financing strategies he could use to clone his team at the rival fantasy sports and mobile gambling company. Hermalyn now works as head of Fanatics’ Los Angeles office and is in charge of VIP marketing, according to court records.

Hermalyn’s “theft, deception, and lies are far more extensive and alarming than anyone could have imagined several weeks ago,” DraftKings said in its motion asking for a preliminary injunction. The company claims to have proof its former employee went on a “deletion spree” that wiped hundreds of documents off his company-issued laptops, “repeatedly lied” in his deposition, and tried to lure away key co-workers “on his way out the door—including while staying at Fanatics’ CEO’s home in Los Angeles while still employed” by DraftKings.

Fanatics didn’t immediately respond to a request for comment on DraftKings’ allegations. Hermalyn’s attorneys also didn’t immediately respond to requests for comment.

DraftKings and Hermalyn have been battling since early February, when the company first suspected Hermalyn was copying confidential data for use in his new job. DraftKings sued Hermalyn on Feb. 5, four days after he quit and simultaneously filed a California lawsuit seeking to void his non-compete agreement under a state law designed to boost competition.

In a separate March 14 filing in Boston federal court, Hermalyn asked for DraftKing’s lawsuit to be dismissed or halted until the California court case is resolved. Hermalyn said he’s never worked in Massachusetts, where DraftKings’ headquarters is located, and only worked for them remotely from New Jersey or New York.

DraftKings has no right as an “out-of-state former employer” to “reach into California and circumscribe his employment and competitive rights,” Hermalyn said in his filing. “The resolution of this question belongs in California, not Massachusetts.”

DraftKings’ lawyers pointed to Kobick’s previous order rebuffing the executive’s request to dismiss their allegations in favor of the California case.

“The court has already rejected these same meritless arguments,” Orin Snyder, Gibson Dunn’s lead lawyer for DraftKings, said in an emailed statement. “We look forward to the upcoming hearing on DraftKings’ motion for a preliminary injunction, where we will present a mountain of evidence against Mr. Hermalyn.”

That hearing is scheduled for April 2.

DraftKings is represented by Gibson Dunn & Crutcher LLP and Wilmer Cutler Pickering Hall and Dorr LLP. Hermalyn is represented by Beck Reed Riden LLP.

The case is DraftKings Inc. v. Hermalyn, D. Mass., 1:24-cv-10299, motion filed 3/14/24