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

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

Reports indicate that a U.S. appeals court rejected Hermalyn’s request to apply under California law. Hermalyn avoided Massachusetts, where DraftKings is headquartered. The legal battle between DraftKings and Hermalyn was contentious.

DraftKings is one of the top two American sportsbooks along with FanDuel. Fanatics Sportsbook is relatively new to the market and still trying to gain market share. This is one of the main reasons why Michael Hermalyn is under intense scrutiny from the industry. Fanatics getting a top executive from DraftKings is a major asset to their company. However, the ethics behind how this was done are in question.

Why was Hermalyn’s non-compete clause ineffective?

This is an extremely questionable situation that Michael Hermalyn finds himself in. Across the industry, the use of non-compete clauses has exploded over the past decade. In most cases, they do not stand up in court. There are some cases in some states where employees may be temporarily barred from working in the industry.

Michael Hermalyn lives in California, a state that often voids non-compete clauses. DraftKings is headquartered in Massachusetts, a state that often enforces non-compete clauses in matters involving senior executives. A three-judge panel ruled last week that Hermalyn’s case should be governed by Massachusetts law.

What is the legal timeline of this case?

Before the Super Bowl in February 2024, Michael Hermalyn left DraftKings for a position at Fanatics Sportsbook. That month, Hermalyn filed a non-compete in California. DraftKings quickly countersued Hermalyn and said it walked away with confidential customer information and business plans. In March, DraftKings presented supporting evidence to prove Hermalyn was guilty.

They had proof that he downloaded stolen information while at the Los Angeles home of Fanatics CEO Michael Rubin. This happened while Hermalyn was still an employee of DraftKings. In April, Hermalyn denied trying to recruit other DraftKings employees to follow him to Fanatics. However, two employees claimed that Hermalyn offered them multi-million contracts to leave DraftKings. Hermalyn will now have to wait to see if the Massachusetts government maintains its non-compete clause.