DraftKings Escalates Prosecution against Former VIP Head

DraftKings, the prominent online sports betting giant, has intensified its legal battle against Michael Hermalyn, the former head of its VIP program, with fresh accusations of corporate espionage. The allegations come in response to Hermalyn’s recent appointment as the president of the VIP division at Fanatics. Hermalyn allegedly misappropriated trade secrets during his time with DraftKings, aiming to copy the operator’s VIP program.

Hermalyn Allegedly Sought to Misuse Trade Secrets

The legal drama between Hermalyn and DraftKings began in February when the former executive initiated a lawsuit against the operator, disputing the validity of his termination contract’s non-compete clauses. The feud between the two parties escalated quickly, with the court temporarily restricting Hermalyn from using information obtained during his position at DraftKings in his new position at Fanatics.

In a countersuit filed by DraftKings, the company asserts that it has uncovered compelling evidence of Hermalyn’s misconduct, warranting the enforcement of non-compete clauses in his contract through an injunction. According to DraftKings’ attorneys, new evidence reveals extensive theft, deception, and dishonesty on Hermalyn’s part, including the deliberate downloading of numerous documents containing confidential information and trade secrets.

Defendant’s theft, deception, and lies are far more extensive and alarming than anyone could have imagined several weeks ago.

DraftKings statement

The company alleges that Hermalyn solicited key DraftKings employees and companies for Fanatics and attempted to conceal his actions by destroying evidence. Moreover, DraftKings accuses Hermalyn of providing false statements in sworn declarations, interrogations, and depositions, in addition to failing to return all required confidential information. The operator also allegedly employed legal maneuvers to hinder Hermalyn’s defense.

The Gaming Giant Claims to Possess Compelling Evidence

DraftKings’ latest statement claims that Hermalyn’s actions were not only egregious but also part of a broader strategy orchestrated by Fanatics to replicate DraftKings’ VIP program. Rather than developing a unique reward scheme, Fanatics allegedly enticed Hermalyn with a lucrative compensation package to assume a similar role, prompting him to download sensitive documents to facilitate the copying process.

On January 16, Defendant… downloaded onto a non-DK device some of DK’s most sensitive business documents—everything Defendant would need to build a team and clone a business.

DraftKings statement

DraftKings claims that Hermalyn deleted hundreds of documents containing evidence of his misconduct, even after consulting with Fanatics’ chief legal officer. As a result, the company is urging the court to issue a preliminary injunction to enforce the non-compete clause in Hermalyn’s contract. In response, Hermalyn has moved to dismiss the suit, arguing that the non-compete covenants in his contract are not applicable under California law.

As the case unfolds, industry experts will closely monitor how the courts will adjudicate these complex and contentious allegations and their implications for the parties involved. This ongoing legal skirmish highlights the highly competitive nature of the online sports betting industry. The outcome of this lawsuit could have broad consequences for the sector, prompting operators to pay increased attention to safeguarding their intellectual property.