Sports betting operator DraftKings has sued former executive Michael Hermalyn in Massachusetts federal court over allegedly stealing confidential business information and taking it to competitor Fanatics.
DraftKings told the court on Monday that Hermalyn, who had been a senior Vice President with the company, left abruptly last week, ten days before the Super Bowl. The company also asked the court to block him from using its secrets to “divert its most valuable customers” before “one of the most business-critical weekends” for sports betting.
Hermalyn separately filed a lawsuit in California state court against Boston-based DraftKings last week, arguing that it was illegally trying to prevent him from moving to Fanatics based on unenforceable non-competition, non-solicitation, and other employment agreements.
A spokesperson for Fanatics, which is not a defendant, said in a statement on Tuesday that the Massachusetts lawsuit was “just sour grapes.”
The spokesperson said: “This is just sour grapes. DraftKings is understandably upset that one of its employees left for the greener pastures at Fanatics. 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.”
Fanatics, a brand popular for selling sports jerseys and merchandise, launched its sportsbook last year. DraftKings told the court that Hermalyn, who oversaw its relationships with its largest VIP customers, secretly met with Fanatics leadership at last year’s Super Bowl to first discuss working there.
“There are a handful of online gaming businesses that compete for the small number of high-net-worth players who drive substantial revenue,” the lawsuit said. “These competitors jealously guard the customer relationships that they establish, the technology that they create, and the marketing strategies that they develop.”
The lawsuit also noted that Hermalyn traveled to Fanatics’ Los Angeles offices last week, where he took a nearly identical position and downloaded DraftKings’ Super Bowl business plans to share with his new employer.
USA Today reported that DraftKings tracked Hermalyn’s whereabouts on January 29th and 30th using geolocation and access account records. DraftKings alleged that he lied to the company saying that he was gone “mourning the loss of a friend from Pennsylvania” at the time.
“DraftKings has since learned, through geolocation data and access account records, Hermalyn had in fact traveled to California and visited Fanatics offices in Los Angeles on January 29th and 30th,” the lawsuit says. “While there, and while still employed by DraftKings, Hermalyn accessed and downloaded confidential and important DraftKings information—some of which only a handful of other DraftKings employees could access.”
DraftKings also accused Hermalyn of encouraging his subordinates to meet with Fanatics’ CEO about employment there, while at the same time urging DraftKings to pay himself and his subordinates large retention payments, valued in the millions of dollars, according to the cited publication.
The company further accused him of spending thousands of dollars of DraftKings’ money to enter into an agreement with a restaurant group with which Hermalyn had, on information and belief, an undisclosed personal affiliation.
The case is DraftKings Inc v. Hermalyn, US District Court for the District of Massachusetts, No. 1:24-cv-10299.
