Gambling giant DraftKings and the legal team representing former senior executive Michael Hermalyn are “negotiating a potential resolution” to a federal lawsuit that began in February 2024, according to a Tuesday court filing.
When approached for comments about the possible settlement, representatives from both parties declined to provide further details.
A settlement would bring an end to the mounting legal expenses already incurred, which have reportedly reached hundreds of thousands of dollars for both Hermalyn and DraftKings. Within just two weeks of resigning, Hermalyn had racked up nearly $276,000 in legal fees.
U.S. District Court Judge Julia Kobick has allowed both parties to pause proceedings until Nov. 20 while Hermalyn pursues an attempt to invalidate his non-compete agreement, the contract specifying that an employee must not compete with a former employer after the employment period is over.
What has happened so far?
DraftKings filed a lawsuit against Hermalyn in February, accusing him of taking confidential business information to rival Fanatics Sportsbook. The company argued that Hermalyn devised a plan to disrupt DraftKings’ customer and business relationships by pursuing them at Fanatics. DraftKings told the court that Hermalyn, who served as the company’s senior vice president, resigned abruptly just 10 days before the Super Bowl to take a nearly identical role with Fanatics.
Hermalyn was “shocked and disappointed” by the claims. He argued that DraftKings’ allegations were “completely false and fabricated” attempts at undermining his reputation as he transitioned to Fanatics.
"DraftKings is understandably upset that one of its employees left for the greener pastures at Fanatics,” a Fanatics spokesperson said at the time. “The fact that they are trying to drum up ridiculous allegations on one of their well-respected executives in an attempt to ruin his reputation sheds some light on why employees may be choosing to leave that organization.”
Following the lawsuit, Judge Kobick ruled in favor of DraftKings and placed restrictions on Hermalyn’s work at Fanatics. While Hermalyn was allowed to remain employed, he was prohibited from using any confidential information obtained during his time at DraftKings and from soliciting the company’s clients and employees.
In March, DraftKings escalated the legal battle by filing another lawsuit after finding a “mountain of evidence” to prove that Hermalyn stole confidential information like customer lists and marketing strategies. The company suggested that Hermalyn attempted to lure two VIP employees from DraftKings via a phone call taken while at the residence of Fanatics CEO Michael Rubin.
Hermalyn’s team responded, labeling DraftKings’ accusations as “over-the-top” and causing “unnecessary character assassination.” Also claimed in the filing was that almost 200 DraftKings employees have applied for jobs at Fanatics since the company announced it was launching its online sportsbook in 2021.
What is happening now?
Hermalyn hoped to leverage California’s more lenient stance on non-compete agreements, having relocated from New Jersey to Southern California prior to his resignation from DraftKings. A U.S. Court of Appeals recently rejected his bid to apply California law rather than Massachusetts law.
Amid the ongoing legal challenges, Hermalyn continues to serve in his position as president, VIP, and head of the Los Angeles office at Fanatics.
