Ex-DraftKings exec seeks overturn of court-imposed job restrictions at Fanatics

In a high-stakes legal battle between two sports betting operators, a former DraftKings executive has asked a U.S. appeals court to overturn a restrictive injunction limiting his work at rival company Fanatics. 

Michael Hermalyn, who joined Fanatics on February 1, filed a brief last Wednesday with the 1st U.S. Circuit Court of Appeals, seeking an expedited review of a federal judge's order issued last month, according to Reuters.

DraftKings had secured the injunction from a federal judge in Boston, arguing that Hermalyn violated a non-compete agreement and misappropriated trade secrets upon his departure. The company aimed to block Hermalyn, who previously managed relationships with DraftKings' top VIP customers, from transferring his expertise to Fanatics.

Fanatics, traditionally known for selling sports jerseys and merchandise, entered the sportsbook market last year. The move intensified competition with DraftKings, which feared Fanatics could benefit from Hermalyn's relationships with its largest customers.

Hermalyn, who relocated to California before assuming his role as president of Fanatics' VIP program, denies the allegations of trade secret theft. His legal team argues that the non-compete agreement is unenforceable under California law. "California has a fundamental policy against the enforcement of non-compete covenants," Hermalyn's attorneys stated in the filing.

In a parallel legal maneuver, Hermalyn and Fanatics sought a declaration in a California state court that the non-compete and non-solicitation agreements were void. However, DraftKings' attempt to move that case to federal court delayed proceedings, allowing the Boston lawsuit to advance.

U.S. District Judge Julia Kobick ruled in favor of DraftKings on April 30, issuing a preliminary injunction that did not entirely bar Hermalyn from working at Fanatics but imposed severe restrictions on his activities. Hermalyn's legal team contends that Judge Kobick erred by applying Massachusetts law instead of California's more employee-friendly statutes.

"California has a materially greater interest in the litigation than does Massachusetts," Hermalyn's lawyers argued, emphasizing that both Hermalyn's residence and the Fanatics subsidiary he leads are based in that state.

At the very least, Hermalyn's attorneys have requested that the 1st Circuit narrow the scope of Kobick's injunction to exclude California. A California judge, during a May 17 hearing, had preliminarily agreed with Hermalyn, stating that the non-compete agreement was void under state law. The judge scheduled a June 4 hearing, requiring DraftKings to justify why an injunction should not be issued to prevent enforcement of the non-compete agreement.

The case, titled DraftKings Inc v. Hermalyn, is being reviewed by the 1st U.S. Circuit Court of Appeals under case number 24-1443. DraftKings is represented by attorneys from Gibson Dunn & Crutcher and Wilmer Cutler Pickering Hale & Dorr. Hermalyn's legal team includes representatives from Quinn Emanuel Urquhart & Sullivan and Beck Reed Riden.