After trying to invalidate a non-compete clause, a former DraftKings executive was unsuccessful

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

Reports indicate that the U.S. Court of Appeals denied Hermalyn’s request to file under California law. Hermalyn avoided Massachusetts, where DraftKings is headquartered. The ongoing legal battle between DraftKings and Hermalyn has been controversial.

DraftKings, along with FanDuel, is one of the two best bookmakers in the USA. Fanatics Sportsbook is relatively new to the market and is still trying to build market share. This is the main reason why Michael Hermalyn is subject to industry scrutiny. Fanatics who have landed a senior management position at DraftKings are a major asset to their company. However, the ethics behind how this was done are questionable.

Why was Hermalyn’s non-competition clause ineffective?

This is an extremely confusing situation that Michael Hermalyn finds himself in. Across the industry, the use of non-competition clauses has increased dramatically over the last decade. In most cases, they do not hold up in court. In some states, employees may be temporarily banned from working in the industry.

Michael Hermalyn lives in California, a state that often invalidates non-compete clauses. DraftKings is headquartered in Massachusetts, a state that often has non-compete clauses in matters involving senior management. Last week, a three-judge panel decided that Hermalyn’s case should be governed by Massachusetts law.

What is the legal timeline for this case?

Before the Super Bowl in February 2024, Michael Hermalyn left DraftKings to work at Fanatics Sportsbook. This month, Hermalyn filed a non-compete clause in California. DraftKings quickly countered Hermalyn and said he had left the company, handing over confidential client information and business plans. In March, DraftKings presented evidence proving Hermalyn’s guilt.

They had evidence that he had downloaded the stolen information at Fanatics CEO Michael Rubin’s home in Los Angeles. This happened while Hermalyn was still an employee of DraftKings. In April, Hermalyn denied that he was trying to get other DraftKings employees to follow him to Fanatics. However, two employees claimed that Hermalyn offered them multimillion-dollar contracts to leave DraftKings. Now Hermalyn will have to wait and see if the Massachusetts government will uphold the non-compete clause.