DraftKings close to settlement with former executive

DraftKings may be close to a settlement with a former executive who went to work for rival company Fanatics, and who the company alleges has done so while copying sensitive information about VIP and loyalty customers, which bred a year-long legal battle between the pair.

DraftKings and Hermalyn possibly closing in on a settlement

Although Michael Hermalyn, the named employee, went on to move for Fanatics as its President and Head of the Los Angeles Office, Fanatics itself has never been named in the lawsuit. Now, though, the legal saga, which evoked both Californian and Massachusettsian law, may be coming to an end.

According to a court filing from last week cited by Front Office Sports and multiple other media outlets, the two parties in the case are negotiating what appears to be a "potential resolution." The ongoing legal battle has been paused until November 20, 2024, during which time the parties may seek to solve their differences out-of-court.

Presently, Hermalyn is blocked from fully carrying out his duties at Fanatic Sportsbook as DraftKings won a temporary injunction, although Hermalyn is likely to win a case in California, where he insisted, the Bay State law does not apply.

Hermalyn started working with Fanatics in February, but he is still blocked through February 1, 2025, to assume his full duties within the company, as per the court developments so far.

However, Hermalyn is hoping that a settlement could speed up the time when he assumes his full responsibilities with Fanatics Sportsbook, and although there seem to be only four months until the non-compete clause expires, it seems that the executive and Fanatics are eager for this to happen ahead of schedule.

A settlement, though, could end the hundreds of thousands of legal fees that will be incurred over the coming months. So far Hermalyn is said to have incurred an estimated $276,000 in legal fees, and this sum is unlikely to be all that the executive pays. DraftKings is similarly going to incur additional legal fees, which the company may be inclined to put aside if it could.

DraftKings and Hermalyn do not admit fault nevertheless

Overall, DraftKings has insisted repeatedly that Hermalyn had been trying to "steal" high-value customers from his boss, and the company further alleged that Hermalyn had informal meetings with other DraftKings workers, offering them a position within Fanatics – this has been confirmed by the people who were reportedly approached by Hermalyn, but the executive never pressed on.

This is not his only transgression. In a court filing, DraftKings’ lawyers claim that Hermalyn has downloaded sensitive information and possibly shared it with Fanatics. A court document read:

"A mountain of evidence – forensics, witness testimony, and binding admissions by the defendant at his deposition – confirms that defendant knowingly and intentionally downloaded numerous documents containing… confidential information and trade secrets to his personal devices."

For his part, Hermalyn has insisted that DraftKings was saddened by the fact that his former employer would continue to make up allegations about him and would try to block him from working at Fanatics Sportsbook in the first place.

Although Fanatics has not been named a party in the case, the company has defended Hermalyn, calling DraftKings’ crusade against Hermalyn "petty" earlier this year. Fanatics suggested that this culture would make other employees think twice before working at the company.

"Those employees, now scared into staying in that toxic culture, will be the real losers in this case," the company said in a public statement previously. The good news is that all of this could now be coming to an end, although the terms of a potential settlement are not exactly clear.

Another case, which saw a former Aristocrat Leisure developer settle with his boss resulted in the person, Dinh Toan Tran, agreeing to pay financial compensation to the company.

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