DraftKings has filed a lawsuit against its former president of VIP, accusing him of stealing company secrets for Fanatics.
According to Front Office Sports’ A.J. Perez, DraftKings filed a civil complaint in Massachusetts on Monday accusing Michael Hermalyn of stealing “many of DraftKings’ most commercially sensitive documents” before defecting for Fanatics last week. Hermalyn had served as DraftKings’ president of VIP for the past three years — the same role, aimed at high-volume bettors, that he was hired for at Fanatics.
The alleged scheme dates back to a year ago, when Hermalyn is accused of “clandestinely” meeting with Fanatics executives, including CEO Michael Rubin, at the Super Bowl in Arizona. According to the lawsuit, Hermalyn later “improperly” encouraged his subordinates at DraftKings to also meet with Fanatics executives.
It is also alleged that Hermalyn timed his departure — nearly one week before this year’s Super Bowl — in an effort to maximize the damage it would cause to DraftKings.
“Hermalyn knows DraftKings’ playbook on how to engage and retain VIP clients,” the lawsuit reads. “On information and belief, Hermalyn, acting in concert with Fanatics, timed his departure and theft of confidential information to coincide with the critical days leading up to the Super Bowl to further a scheme to irreparably interfere with DraftKings’ customer and business relationships by pursuing those relationships at Fanatics using the confidential information and goodwill that he obtained at DraftKings.”
DraftKings is seeking a temporary restraining order against Hermalyn to prevent him from providing his services to Fanatics. You can read the full complaint, via Front Office Sports, here.
Meanwhile, Hermalyn has filed his own lawsuit against DraftKings in California in an effort to challenge his non-compete agreement with the company, according to the Daily Journal. In its own lawsuit, DraftKings responded by alleging that Hermalyn attempted to falsely establish residency during a two-day visit to California in an attempt to invalidate his non-compete agreement after resigning from the company. Hermalyn — who lives in New York — allegedly told DraftKings co-workers on Jan. 29 that he would be taking two days off after a “close friend” died, with geolocation data showing that he was actually at Fanatics’ headquarters in Los Angeles.
DraftKings’ lawsuit echoes similar sentiments to the antitrust lawsuit filed by trading card manufacturer Panini America last year, accusing Fanatics of raiding its employees and interfering with their contracts. Fanatics responded with a countersuit, with litigation in the two combined cases still ongoing.
Best known for its role as the largest online sports apparel and merchandise retailer, Fanatics ventured into sports betting last year with the launch of the Fanatics Sportsbook. This isn’t the first clash between Fanatics and DraftKings in the sports betting space, as the two companies publicly vied for the assets being sold by PointsBet, which Fanatics ultimately purchased to help launch its sportsbook.
Update: A Fanatics spokesperson told AA “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.”
[Front Office Sports, Daily Jornal]
