DraftKings Settles Dispute with Ex

The dispute began when Michael Hermalyn resigned from his position as senior vice president of growth at DraftKings in FebruaryImage Sources: Shutterstock.com

DraftKingshas ended its legal fight with Michael Hermalyn, a former executive who faced accusations of breaking non-compete clauses and stealing trade secrets when he jumped ship to join Fanatics. The deal closes lawsuits filed in Massachusettsand California, which focused on Hermalyn’s switchto the competing company in early 2024.

Hermalyn’s Transition to Fanatics Ignites Legal Conflict with DraftKings

The conflict started when Hermalynstepped down from his role as Senior Vice President of Growthat DraftKingsin February. He joined Fanatics, a company that had just launched its sportsbook and was putting together a team to focus on high-value customers. DraftKingstook legal action against Hermalynarguing that he broke his non-compete and non-solicitation agreements by ngaking sensitive information to Fanatics and trying to hire his old coworkers.

At first, DraftKingstried to stop Hermalynfrom working at Fanaticsunder a preliminary injunction. A Bostoncourtgave the go-ahead for the injunctionin April 2024limiting the kinds of work Hermalyncould do at his new job for a year. However, the court did not ban him from working. Even with the legal battle going on, Hermalynkept his job at Fanaticsthroughout the case.

DraftKings and Hermalyn Conclude Lawsuit with Confidential Agreement

Following the First Circuit Court of Appeals’ decision to uphold DraftKings’non-compete clause in early 2024, both parties began to work toward a settlement. In late December, they announced a confidential agreementthat resolved the lawsuits and allowed Hermalynto continue working at Fanatics. However, this arrangement remains subject to the original non-compete clause’s restrictions. Both DraftKingsand Hermalynagreed that he would stick to his contractual obligations with the company.

Spokespersonsfor both companies verified that the legal battle had ended, although they did not reveal the exact details of the agreement. Fanatics released a statement that matched what Hermalyn’s attorney, Russell Becksaid. Beckmentioned that the lawsuit had been thrown out and Hermalyn would honor his obligations to DraftKings, as reported by Reuters.

The lawsuit has put the spotlight on how tricky non-compete agreements can be and the legal issues that pop up when workers switch jobs between rival companies. DraftKingswanted its contract terms to be enforced according to Massachusetts law, but Hermalyntried to use California law, which does not enforce non-compete clauses. Even with these differences, the deal ends the expensive court battle allowing both sides to get on with their business.