After an attempt to void a non-compete clause, a former DraftKings executive has failed

Michael Hermaylyn was a senior executive at DraftKings before he left the company for an identical role at Fanatics Sportsbook. By leaving DraftKings and going to a direct competitor in Fanatics, Hermalyn violated his non-compete clause. After a back-and-forth legal battle with DraftKings, he lost the appeal. 

Reports stated that a U.S. Court of Appeals rejected Hermalyn’s bid to apply under California law. Hermalyn was avoiding Massachusetts where DraftKings is headquartered. The back-and-forth legal battle between DraftKings and Hermalyn was contentious. 

DraftKings is one of the top two U.S. sportsbooks along with FanDuel. Fanatics Sportsbook is relatively new to the market and is still trying to build market share. That is a major reason why Michael Hermalyn is receiving scrutiny from within the industry. Fanatics obtaining a senior executive from DraftKings is a major asset to their company. However, the ethics behind how it was done comes into question.

Why was Hermalyn’s non-compete clause ineffective?

This is an extremely shady situation that Michael Hermalyn finds himself in. Throughout the industry, the use of the non-compete clause has skyrocketed in the last decade. In most cases, they do not hold up in court. There are some cases in states where employees can be temporarily barred from working within the industry. 

Michael Hermalyn lives in California, a state that often overturns non-compete clauses. DraftKings has its headquarters in Massachusetts, a state that often holds non-compete clauses in cases involving upper-level management. A three-judge panel last week decided that Hermalyn’s case should be governed by Massachusetts law.

What is the legal timeline of this case?

Ahead of the Super Bowl in February 2024, Michael Hermalyn left DraftKings for a position with Fanatics Sportsbook. That month, Hermalyn filed a non-compete clause in California. DraftKings quickly countersued Hermalyn and said he left with confidential client information and business plans. In March, DraftKings offered supporting evidence to prove Hermalyn was guilty. 

They had evidence that he downloaded stolen information while at the L.A. home of Fanatics CEO Michael Rubin. This happened when Hermalyn was still an employee of DraftKings. In April, Hermalyn denied he tried to poach other DraftKings employees to follow him to Fanatics. However, two employees claimed that Hermalyn offered them multi-million contracts to leave DraftKings. Now, Hermalyn will have to wait and see if the Massachusetts government holds his non-compete clause.