A federal judge has granted DraftKings a preliminary injunction, temporarily limiting the functions its former executive, Michael Hermalyn, can perform in his new role at rival company Fanatics.
On Tuesday, Massachusetts District Court Judge Julia E. Kobick issued her memorandum and order granting DraftKings’ motion for preliminary injunction and denying Hermalyn’s request for stay or dismissal. Notably, the preliminary injunction does not outright block Hermalyn from working at Fanatics. However, it will temporarily prevent him from providing services related to his previous role at DraftKings.
Per the judgment, DraftKings’ likelihood of winning its case against Hermalyn provided the grounds for Kobick’s decisions.
For the reasons to be explained, the Court will grant DraftKings’s motion for a preliminary injunction. DraftKings has established a substantial likelihood of success on its claims that Hermalyn breached his contractual commitments and misappropriated its trade secrets and that the remaining equitable considerations favor injunctive relief. The Court will also deny Hermalyn’s motion to dismiss or alternatively to stay this case.
Order Restricts Hermalyn’s Activity
The memorandum detailing Judge Kobick’s decisions explains that the injunction does not block Hermalyn from working for Fanatics. However, the ruling will impact his role for the twelve months following his resignation from DraftKings.
Hermalyn will not be enjoined from working for Fanatics; rather, he will be enjoined from providing services to Fanatics that relate to any aspect of DraftKings’s business for which he performed services or received confidential information, as defined in the agreement during the six months before February 1, 2024.
In its entirety, the injunction restricts Hermalyn in four ways.
First, as referenced above, Hermalyn was blocked for twelve months from providing services for any competing business, including Fanatics, related to “any aspect” of his DraftKings role during the six months before his resignation.
Additionally, until the restricted period ends next February, the order prevents Hermalyn from soliciting, hiring, or assisting with hiring anyone from DraftKings. Kobick’s decision also prohibits Hermalyn’s use of any confidential DraftKings information. Finally, the order forbids transferring, destroying, altering, or disposing of any “files, documents, and digital media” containing confidential details.
DraftKings Claims ‘Another Victory’
In a statement provided to Bonus, DraftKings said Tuesday’s ruling marks “another victory” in its “effort to hold Mr. Hermalyn accountable” for his “brazen” actions. The statement also noted that Kobick’s decision questions Hermlyn’s credibility.
Per DraftKings:
We are pleased the Court enforced Mr. Hermalyn’s non-competition obligations in the United States, including ordering him to cease providing services for Fanatics relating to the work he performed for, or the information he obtained from, DraftKings.
The Court also correctly ordered Mr. Hermalyn not to solicit DraftKings employees, not to use confidential company information, and not to destroy or delete documents containing DraftKings’ confidential information.
In reaching this result, the Court rightly saw through Mr. Hermalyn’s lies and deception, noting that the evidence suggests that Mr. Hermalyn “struggled with candor to the court” and describing his testimony as “not credible,” “evasive,” and “[a]t best…highly misleading.”
Finally, the Court denied Mr. Hermalyn’s motion to dismiss or stay the case against him.
DraftKings looks forward to continuing to prosecute its claims against Mr. Hermalyn to ensure he is held fully accountable for violating his legal obligations.
Fanatics Labels Complaint ‘Petty’
For its part, Fanatics shared a statement expressing disagreement with “aspects” of the judge’s ruling. However, it also said Hermalyn will continue to work for Fanatics in ways that are “consistent” with the injunction.
The statement also expresses Hermalyn’s eagerness to argue his case in court and calls DraftKings’ complaint a “cheap attempt” at “petty retribution.”
It also references a recent Federal Trade Commission (FTC) decision banning the use of noncompetes. However, while the FTC ruling invalidates existing noncompetes for most workers and blocks any new noncompetes, the change does not impact the Hermalyn case.
Fanatics response, in its entirety:
Although we disagree with certain aspects of the Court’s ruling, we appreciate that the Court rejected DraftKings’ efforts to prevent Mike from working for Fanatics. Mike is looking forward to rolling up his sleeves and building Fanatics’ business consistent with the Court order.
The Court’s order is preliminary, and Mike eagerly awaits his opportunity to present his case on the merits based on a full record. It’s unfortunate that DraftKings’ cheap attempt at petty retribution against a former employee – who simply wanted to take advantage of a better opportunity for himself and his family – will now undoubtedly continue to be used to instill fear and intimidation across DraftKings’ entire employee base. Those employees, now scared into staying in that toxic culture, will be the real losers in this case.
We’re also a bit dismayed at the breadth of the Court’s ruling in light of the FTC’s recent rulemaking designed to promote employee mobility and free competition – but Mike is committed to advocating for what is fair and just in the final resolution of this matter.
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