DraftKings legal saga against former employee continues

Legal shots continue to be fired between DraftKings and a formal employee, who is now employed with Fanatics Sportsbook, a competitor, and who stands accused by his former employer of violating his non-compete clause, soliciting customers, and former colleagues to come work for Fanatics Sportsbook.

A court hearing on Tuesday covered by the Boston Globe saw the two parties come head-to-head over the ongoing saga that wants to see DraftKings block his former VIP of Operations, Michael Hermalyn, from working for the company’s newly emerged rival.

DraftKings’ lawsuit alleges several issues with the appointment, and argues that Hermalyn stole sensitive information, attempted to syphon off VIP customers from DraftKings and breached his non-compete agreement by assuming the same position he held for the sportsbook at rival Fanatics.

The practice of approaching VIP customers in one company and trying to offer them better deals elsewhere is not necessarily illegal. However, Hermalyn has denied all and any wrongdoing, and specifically explaining that his "downloading of sensitive files" was a customary transfer of files between computers, and not an attempt to divulge company secrets with his new employer.

Plus, he argued that his non-compete clause did not apply because he had moved to California for his new job.

Hermalyn said that he was issued a new work on a computer in the weeks leading up to his exit from the company, and he had to transfer some old files from his "personal laptop." However, he admitted that this was not something he would never do again in his career. The Boston Globe also reported in March that DraftKings alleged that the "downloading of files" happened at Michael Rubin’s house, who is the founder and CEO of Fanatics Sportsbook.

Hermalyn insisted that he operated with "extreme caution" and that he made no attempts to steer VIP customers away from DraftKings and added that he had not used secretive channels to try and poach employees from his former boss either.

However, at least two people have reportedly said that they were indeed offered jobs from Hermalyn on his first day at Fanatics. Both Hayden Metz and Andrew Larracey were reported to have said so, the Boston Globe wrote, and described the details of these approaches, and subsequent stages of the process.

Hermalyn doubled down on his defense, arguing that it was his former colleagues approaching him and not the other way around. The job proposals were significant, though, and Larracey was actually offered a signing bonus, equity in Fanatics, a salary, and an annual bonus, which put together were worth $3 million.

Metz was supposedly offered $5 million as part of a similar package. Both Metz and Larracey were initially interested in the job offer. Metz, for one, was offered $8 million in subsequent negotiations with Hermalyn, he claims, but he never followed up on the offer.

Larracey was more willing to explore this opportunity, as he attended meetings with Fanatics, and sat down with executives as part of the selection process, he said, but an official offer was never tabled after those negotiations.

Essentially, the lawsuit will now come down to whether Hermalyn may continue in his current role with Fanatics, or has to take a one-year leave as per his non-compete agreement.

Judge Julia Kobick who oversees the case has decided to agree with DraftKings at least partially in the matter, and order Hermalyn to not approach DraftKings VIP customers.

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