DraftKings Urges Judge to Keep Brakes on Ex-VP’s Job at Fanatics

DraftKings Inc. asked a federal judge to reject a former executive’s request to clarify a temporary order he claims is keeping him from performing most tasks at his new job with Fanatics Inc., the online fantasy sports betting company’s direct competitor.

Michael Hermalyn—who allegedly left his DraftKings job with a stash of trade secrets, client lists, and marketing plans shortly before the Super Bowl—is improperly asking Judge Julia Kobick to change her mind, the company said in a Tuesday filing in the US District Court for the District of Massachusetts.

Kobick, following a Feb. 8 hearing, temporarily blocked Hermalyn from transacting business with DraftKings’ current or potential customers, partners, or vendors, according to court records. She also blocked him from acting on any confidential information learned while with his previous employer. She didn’t, however, ban him from working in any capacity for Fanatics.

The former DraftKings vice president asked Kobick last week to clarify her written order, claiming it imposed the type of “backdoor noncompete” restriction the judge told lawyers she wanted to avoid. The order should clearly state Hermalyn is permitted to work with gambling clients and business partners that deal with both DraftKings and Fanatics, as well as to service Fanatics business relationships he doesn’t solicit, his filing said.

DraftKings’ filing Tuesday blasted Hermalyn’s request as a bid to “significantly water-down critical protections” that prevent him from profiting from stolen trade secrets.

“Hermalyn understands the order; he just does not like it or want to follow it,” DraftKings said in its filing, which called Kobick’s temporary restraining order “crystal clear.” The order imposes “guardrails” on Hermalyn’s conduct that “are more important today” than when it was issued, the company said.

“Since the hearing, Hermalyn has repeatedly demonstrated his determination to invalidate and escape the order,” as well as restrictive covenants in his DraftKings’ employment agreement, the filing said. Hermalyn has yet to turn over more than a handful of the business contacts, marketing plans, and internal records he allegedly downloaded before leaving, as Kobick ordered him to do, according to the filing.

DraftKings said it recently uncovered forensic evidence that Hermalyn downloaded “nearly a dozen highly sensitive documents containing DraftKings’ most highly confidential and propietary business information” to his personal Slack account before leaving the company. These files included an extensive spreadsheet of business contacts, VIP clients, and marketing plans related to his post as vice president of VIP management, according to the filing.

Hermalyn also tried to convince a California state court judge, in separate employment litigation between the two parties, to rule that his DraftKings’ employment contract is invalid under the state’s statute outlawing onerous noncompete agreements, thecompany said.

The former executive hopes such a ruling might “‘influence’ this court to reverse itself,” the filing said, although Kobick has twice determined that Massachusetts law governs restrictive clauses in employment contracts such as his.

Hermalyn isn’t confused by Kobick’s decision because he had “no problem summarizing the clear scope of the order” when he told the California state judge “the effect of this restriction on my ability to do my job at Fanatics is severe,” the DraftKings filing said.

“He remains gainfully employed by Fanatics and free to solicit and transact business with non-DraftKings’ business contacts so long as he does not use DraftKing’s trade secrets and confidential information,” the company said.

Kobick initially set the next hearing over how much Hermalyn should be restricted in his new job for late February, but she delayed that hearing until April 2 at the request of his lawyers, who cited conflicting vacation and birthday plans, according to the filing.

Hermalyn’s attorneys didn’t immediately respond to Bloomberg Law’s request for comment.

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

The case is DraftKings Inc. v. Hermalyn, D. Mass., Docket No. 1:24-cv-10299, Memorandum filed 2/20/24