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DraftKings Gets Big Court Win In Case Against Fanatics

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2024-05-01

DraftKings Gets Big Court Win In Case Against Fanatics

Cash the DraftKings moneyline over Fanatics.

That’s according to a federal judge on Tuesday, who pumped the brakes on what Michael Hermalyn, a former DraftKings VIP executive, could legally do for his new employer, Fanatics.

U.S. District Court Judge Julia Kobick found Hermalyn likely mishandled trade secrets from his former employer before signing onto Fanatics, according to a Reuters report.

Hermalyn can continue to work for Fanatics, but cannot work in the VIP division — or, for that matter, basically do anything relating to anything he worked on during his time at DraftKings — until Feb. 1 of next year.

The judge said the preliminary injunction was called for due to the evidence showing Hermalyn almost certainly broke a non-compete agreement he signed while working at DraftKings and had likely misappropriated confidential information when he came over to Fanatics.

According to Reuters, the judge said “the evidence submitted at this stage in the proceedings suggests that Hermalyn has struggled with candor to the Court” and that his story suffered from “memory lapses” and “inconsistencies.”

Predictably, DraftKings was pleased by the ruling.

Today’s ruling by the Court is another victory for DraftKings in its effort to hold Mr. Hermalyn accountable for his brazen attempt to clone DraftKings’ successful VIP program by stealing DraftKings’ employees and trade secrets,” read a statement from DraftKings. “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 Court also correctly ordered Mr. Hermalyn not to solicit DraftKings employees, not to use any confidential company information, and not to destroy or delete documents containing DraftKings’ confidential information,” 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.’ Finally, the Court denied Mr. Hermalyn’s motion to dismiss or stay the case against him. DraftKings looks forward to continuing to prosecute its claims against Mr. Hermalyn to ensure he is held fully accountable for violating his legal obligations.”

Meanwhile, Fanatics issued their own statement to the press, slamming DraftKings for bringing the suit in the first place.

“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 statement read. “Mike is looking forward to rolling up his sleeves and building Fanatics’ business consistent with the Court order. The Court’s order is preliminary, and Mike eagerly awaits his opportunity to present his case on the merits based on a full record.

“It’s unfortunate that DraftKings’ cheap attempt at petty retribution against a former employee – who simply wanted to take advantage of a better opportunity for himself and his family – will now undoubtedly continue to be used to instill fear and intimidation across DraftKings’ entire employee base,” the statement continued. “Those employees, now scared into staying in that toxic culture, will be the real losers in this case. We’re also a bit dismayed at the breadth of the Court’s ruling in light of the FTC’s recent rulemaking designed to promote employee mobility and free competition – but Mike is committed to advocating for what is fair and just in the final resolution of this matter.”

This all started back in February, when DraftKings filed a federal lawsuit alleging Hermalyn plotted to steal customer data and take it to Fanatics where he recently took a similar role. The suit claimed Hermalyn met with Fanatics’ CEO Michael Rubin about a job over a year ago and lied about reasons for traveling to California to finalize the deal in January.

It also alleged he downloaded DraftKings’ confidential data. DraftKings sought to block Hermalyn from working for Fanatics due to a non-compete clause, which Hermalyn claimed is void since he now resides in California.

The judge ruled that Hermalyn could not use DraftKings’ confidential information or solicit its employees or customers but allowed him to work at Fanatics in a preliminary hearing back in February.

This injunction further limits what Hermalyn can do for Fanatics.

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