DraftKings granted preliminary court injunction against ex-VIP acquisition chief

The District Court of Massachusetts has granted DraftKings a preliminary injunction against a former executive the firm has accused of stealing and sharing trade secrets with Fanatics.

The ruling means Mike Hermalyn, who was vice-president of VIP at DraftKings, will have his role restricted at Fanatics where he now serves as president of VIP.

The court also denied Hermalyn’s motion to dismiss or stay the case against him.

This was the same court that previously granted a temporary restraining order against Hermalyn in February, however DraftKings filed a new motion the following month accusing him of stealing confidential company information and soliciting DraftKings employees.

While Hermalyn is still able to work for Fanatics, he won’t be able to perform any duties that relate to his previous position at DraftKings, where he onboarded and managed high-value players.

Judge Julia E. Kobick said: “Hermalyn will not be enjoined from working for Fanatics; rather, he will be enjoined from providing services to Fanatics that relate to any aspect of DraftKings’ business for which he performed services or received confidential information, as defined in the agreement, during the six months before February 1, 2024.”

He has also been ordered not to solicit DraftKings employees, as well as not use any confidential company information for a 12-month period starting from 1 February 2024, and not destroy or delete documents containing confidential information belonging to his former employer.

This case stems from it being alleged that Hermalyn had “clandestinely met” with the leadership team of Fanatics – the parent company of Fanatic Betting and Gaming – in early 2023 to discuss potential employment.

Hermalyn is also accused of encouraging his subordinates to join Fanatics and that he allegedly downloaded DraftKings’ confidential business plan for the Super Bowl while at the Fanatics office in California.

Following the latest injunction, DrafrKings hailed it a “another victory” in its efforts to hold Hermalyn accountable for what the Boston-headquartered operator described in a statement as the “brazen attempt to clone DraftKings’ successful VIP programme by stealing DraftKings’ employees and trade secrets”.

The statement continued: “In reaching this result, the court rightly saw through Mr Hermalyn’s lies and deception, noting that the evidence suggests that Mr Hermalyn ‘struggled with candor to the court’ and describing his testimony as ‘not credible’, ‘evasive’ and ‘[a]t best…highly misleading’.  

“We are pleased the court enforced Mr Hermalyn’s non-competition obligations in the United States, including ordering him to cease providing services for Fanatics relating to the work he performed for, or the information he obtained from, DraftKings.” 

The statement concluded: “DraftKings looks forward to continuing to prosecute its claims against Mr Hermalyn to ensure he is held fully accountable for violating his legal obligations.”

In response, a Fanatics spokesperson said: “Although we disagree with certain aspects of the court’s ruling, we appreciate that the court rejected DraftKings’ efforts to prevent Mike from working for Fanatics.

“The court’s order is preliminary, and Mike eagerly awaits his opportunity to present his case on the merits based on a full record.”

However, the war of words between both parties intensified as Fanatics accused DraftKings of “a cheap attempt at petty retribution” against a “former employee who simply wanted to take advantage of a better opportunity for himself and his family”.

Fanatics added: “[This incident] will now be used to instil fear and intimidation across DraftKings’ entire employee base.

“Those employees, now scared into staying in that toxic culture, will be the real losers in this case.”