The actual lawsuits between DraftKings and its former employee Michael Hermalyn continue in both California and Massachusetts but Hermalyn’s challenge of the temporary injunction limiting the scope of his role at new employer Fanatics is over.
This week, the First Circuit Court of Appeals upheld the Massachusetts District Court’s ruling that Hermalyn can continue to work for Fanatics but he is limited in what he can do for them. The lower court determined in May that Hermalyn cannot contact former customers he worked with at DraftKings nor is he allowed to disclose any protected information he obtained while employed with the sportsbook operator.
Hermalyn and DraftKings have been at odds since shortly before the Super Bowl when Hermalyn abruptly resigned and took a similar position overseeing the VIP program for Fanatics. DraftKings alleges that, during his departure, Hermalyn absconded with sensitive and confidential information, including contact info for several VIP bettors.
Hermalyn asked the appeals court to reverse the injunction or at least carve out California, where Hermalyn now resides and works, from the agreement.
The three judges on the panel issued a ruling that largely disagreed with all of Hermalyn’s arguments, particularly the idea there was any sense in excluding California from the temporary injunction given that his job, while located in California, would still include interacting with customers from across the U.S.
“If he can join Fanatics in Los Angeles straightaway, he’ll inevitably interact with clients outside California where online sports betting is legal. Clearly his requested California carveout will give him a way to skirt the countrywide preliminary injunction’s one-year noncompete ban,” the briefing read.
The current preliminary injunction would limit Hermalyn’s role until Feb. 1, 2025, when his one-year noncompete would expire.
Both DraftKings and Fanatics declined to comment on the court’s ruling.
Hermalyn could appeal the decision to the Supreme Court. In the meantime, his California state case and Massachusetts federal case continue to move forward. At the heart of the legal debate is whether or not California law, which largely objects to noncompetes, or Massachusetts law, which is much more amenable to noncompetes, takes precedence in the case. So far, the courts have sided with DraftKings that Hermalyn signed an agreement that included an enforceability clause in Massachusetts so that state should take precedence.
