Trade secrets and counterclaims: DraftKings Hermalyn dispute

Lea Hogg March 25, 2024

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Trade secrets and counterclaims: DraftKings Hermalyn dispute

Michael Hermalyn has refuted these allegations in a court filing, describing the DraftKings’ lawsuit as nothing more than “character assassination.”

Hermalyn, a seasoned sports-betting executive, found himself at the centre of a legal dispute when his former employer, DraftKings, accused him of stealing trade secrets when he moved to his new role at Fanatics. Hermalyn, however, refuted these allegations in a court filing, describing the lawsuit as nothing more than “character assassination.”

Accusations and retribution

According to Hermalyn, DraftKings’ lawsuit reflects a “culture of retribution” against former employees. He believes the company’s intention is to “instill fear” in others contemplating leaving. This assertion was part of his motion opposing DraftKings’ request to preliminarily block him from working at Fanatics.

Orin Snyder, DraftKing’s lawyer, (in photo above), confidently stated that “the evidence against Mr. Hermalyn is open-and-shut.” However, representatives for Hermalyn did not immediately respond to requests for comment on the filing.

Fanatics, a company renowned for selling sports jerseys and merchandise, launched its sportsbook last year. DraftKings, a sports-betting giant, sued Hermalyn over his move to Fanatics. Hermalyn had been overseeing relationships with DraftKings’ largest “VIP” customers.

DraftKings alleges that Hermalyn secretly met with Fanatics in California, accepted a nearly identical position, and downloaded DraftKings’ Super Bowl business plans to share with his new employer. U.S. District Judge Julia Kobick temporarily blocked Hermalyn from using the company’s trade secrets or soliciting its clients or employees. However, she allowed him to continue his work at Fanatics. DraftKings accused Hermalyn of additional misconduct in a separate request to block him from working for Fanatics for the duration of a non-competition agreement.

Hermalyn responded by stating that he had gone “above and beyond” to return DraftKings documents and devices. He denied soliciting any DraftKings employees or clients and refuted the claim of taking any secrets. He also denied DraftKings’ allegations of engaging in a year-long “scheme” as a “double agent” for Fanatics. He stated that he had only “briefly met Fanatics’ CEO a few times in group settings” before 2024.

Fierce competition of sports betting industry

The DraftKings-Fanatics dispute sheds light on the fiercely competitive nature of the sports betting industry. Companies like DraftKings and Fanatics are constantly vying for market share, and the stakes are high. The industry has seen rapid growth in recent years, fuelled by legislative changes and technological advancements. As a result, companies are increasingly protective of their trade secrets and customer relationships.

The case also highlights the challenges faced by employees navigating non-competition agreements and the potential consequences of switching employers within the same industry. Employees need to observe their legal and ethical obligations towards their current and former employers.

This case is still ongoing, and it remains to be seen how the court will rule. Regardless of the outcome, the case raises questions about the importance of transparency and integrity in the workplace and the extent to which companies can and should go to protect their interests.