DraftKings, Fanatics settle dispute over executive Michael Hermalyn

DraftKings and Fanatics Sportsbook have settled their high-profile legal battle over former DraftKings executive Michael Hermalyn’s move to the rival sportsbook. The confidential settlement, as reported by Reuters, finalized on December 22, brings an end to the litigation. The U.S. District Court for the District of Massachusetts dismissed the case with prejudice, meaning the issue cannot be legally revisited.

The settlement resolves DraftKings' allegations that Hermalyn violated non-compete and non-solicitation agreements and misappropriated trade secrets when he joined Fanatics to lead its VIP client strategy.

“All litigation between them has been settled and dismissed on confidential terms, and Mr. Hermalyn will abide by his contractual commitments to DraftKings," said Russell Beck, Hermalyn’s attorney. 
 
DraftKings filed the suit against Hermalyn, its former senior vice president of growth, earlier last year, accusing him of potentially leveraging insider knowledge of its business operations to bolster Fanatics' nascent sportsbook operations. The case underscored the intensifying competition in the sports betting industry as new players like Fanatics seek to expand aggressively.  

In April, a preliminary injunction issued by U.S. District Judge Julia Kobick barred Hermalyn from working on areas related to DraftKings’ business or using its confidential information for 12 months. Hermalyn later challenged the enforceability of his non-compete agreement in California, where state laws are generally more restrictive of such clauses.  

Despite a favorable indication from a California state court judge, the Massachusetts litigation carried the day. In September, the 1st U.S. Circuit Court of Appeals upheld the preliminary injunction, further validating DraftKings’ non-compete enforcement.  

Fanatics, known for its sports merchandise, has recently entered the sports betting market, hiring seasoned executives like Hermalyn to build its VIP player base. The company has aggressively positioned itself as a competitor to established players like DraftKings and FanDuel.  

Fanatics echoed Hermalyn’s legal team in stating that he would abide by his prior contractual commitments.  

DraftKings argued that Hermalyn’s move posed a direct competitive threat, with the potential for poaching customers and employees while leveraging sensitive business strategies. The Boston-based company’s legal team included Gibson Dunn & Crutcher and Wilmer Cutler Pickering Hale & Dorr.  
 
The dismissal of the case with prejudice ensures that the dispute will not be revisited in court. Both parties now move forward, with Hermalyn remaining employed by Fanatics throughout the litigation and continuing to lead its Los Angeles office.