DraftKings settles 'corporate espionage' lawsuit. former executive

Posted: January 3, 2025, 12:13 pm.

Last updated: January 3, 2025, 12:13 pm.

DraftKings has settled a legal dispute with its former head of VIP, Michael Hermalin, whom the operator accused of “corporate espionage” after the executive left to rival Fanatics.

Terms of the settlement have not been disclosed, but it comes three months after the First U.S. Circuit Court of Appeals in Boston rejected Hermalin's bid to overturn a lower court's injunction that severely restricted the type of work he did at Fanatics. Was formally banned.

A lower court determined last April that a non-compete clause signed by Harmalin while he was at DraftKings was enforceable.

'Stolen' Super Bowl plan

Boston-based DraftKings sued Harmalin in Massachusetts in February 2004, claiming he had conspired to join the Fanatics for more than a year before leaving. The lawsuit alleges that he took with him confidential information about his Super Bowl business plan as well as DraftKings' VIP customers.

Fanatics is best known as a platform that sells licensed sports merchandise, trading cards, and collectibles, but in late 2004, it launched a sportsbook. At some point, the company invited Harmalin to join them as president of their VIP program, although exactly when this happened is disputed.

He also denied sharing any documents with Fanatics or having access to DraftKings files after his resignation.

Hermalin further argued that California's Business and Professions Code prevents an employer from enforcing a non-compete agreement, even if the contract is signed outside California. While Fanatics is based in Jacksonville, Florida, Harmalin was appointed head of its Los Angeles office.

California Suite

As such, he filed his lawsuit in California to challenge the non-compete agreement. The judge in that case determined that Hermalin was likely to win under California law, but declined to take action because he said there would have to be extraordinary circumstances to interfere with a court's decision in another state.

Harmalin is prohibited from providing services to Fanatics related to any aspect of DraftKings business for one year from the date he starts his new job – this period is set to expire on February 1, 2025.

“All lawsuits between them have been resolved on confidential terms and have been dismissed, and Mr. Harmalin will abide by his contractual commitments to DraftKings,” Harmalin's lawyer Russell Beck said in a statement to Reuters.