DraftKings Calls Former VIP Head’s Ask For Attorney Fees ‘Not Reasonable’

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DraftKings has nearly $1.3 billion in cash on hand, but former VIP head Michael Hermalyn and his lawyers will not get a piece of it easily in the battle over his departure.

Hermalyn asked for more than $310,000 in attorney’s fees that he said are related to the two removal attempts by DraftKings to have a case related to his defection to Fanatics right before the Super Bowl heard in federal court.

The former head of DraftKings VIP program had lawyers working for nearly 240 hours to fight back against the two removals. That, company lawyers noted in its opposition to the request, is far too much.

“If there were any doubt, Plaintiffs’ own request for attorney’s fees confirms that no fees are warranted,” the opposition filing said. “After all, no reasonable law firm would incur – and no reasonable client would pay – more than $300,000 for a handful of days’ work to seek remand of an objectively unreasonable removal (or even two).”

DraftKings explains removal attempts

The first removal attempt was based on diversity, as everything in Hermalyn’s first filing to a California state court repeatedly called Fanatics VIP a company based in California. It was not until after the removal request that DraftKings learned Fanatics VIP’s sole member was a Nevada corporation.

Then, the company learned that the Nevada member had been formed just one day prior to the first removal request. That led to its second removal attempt.

DraftKings also cited case law from Gardner v. UICI, which says in part: “whether a removal is improper is not dispositive in determining whether fees should be awarded under 28 U.S.C. § 1447(c).”

Lower the amount if ordered to pay

If the court does find that DraftKings owes Hermalyn any fees, those fees should be reduced “dramatically.”

The filing alleges Hermalyn is asking for reimbursement for hours spent on work that had nothing to do with the removal:

“The extent of the inflation is impossible to calculate because Plaintiffs lump together all time each attorney billed for each removal as a whole without specific time entries related to discrete tasks, meaning that Plaintiffs have not carried their burden to substantiate the reasonableness of their fees.”

Hermalyn denied twice in Massachusetts

The request for clarification of the temporary restraining order against Hermalyn in the District Court of Massachusetts, as well as an emergency motion to modify a discovery order, were both denied by the court on Wednesday.

Hermalyn’s lawyers argued this section of the TRO effectively placed the non-competition restraint on Hermalyn which the court rejected at the hearing:

“Mr. Hermalyn is hereby restrained and enjoined from directly or indirectly soliciting or transacting business, or attempting to solicit or transact business with, any of DraftKings’ customers, clients, vendors or partners, or with any of DraftKings’ prospective customers, clients, vendors or partners about which Mr. Hermalyn learned confidential information …”

The court said those limitations are qualified as they prevent the disclosure of any of DraftKings trade secrets.

DraftKings alleges more wrongdoing

In the opposition filing from DraftKings concerning the requested clarification, the company alleges even more wrongdoing had been uncovered.

“In fact, the need to maintain the status quo, and not modify the Order, is all the more urgent today in light of disturbing forensic evidence recently uncovered by DraftKings. … in the days before his departure, Hermalyn sent nearly one dozen highly-sensitive documents containing DraftKings most highly confidential and proprietary business information—including contact information for business partners and summaries of VIP program details—to his own Slack account, which he subsequently accessed, viewed, or downloaded.

“Plain and simple, this is further evidence of his pre-departure theft of trade secrets and other confidential information, and magnifies the risk of irreparable harm here.”

Recapping the arguments

The issues between Hermalyn, Fanatics and DraftKings started when Hermalyn accepted a job at the beginning of February to lead the Fanatics VIP program, a similar position to the one he held at DraftKings.

DraftKings alleges Hermalyn signed multiple non-compete agreements with its company. Also included in those agreements is the fact that the District Court of Massachusetts will hear any cases involving them.

Hermalyn, however, says he established legal residence in California and filed the initial lawsuit against DraftKings in state court because non-compete agreements are invalid in the state.

DraftKings, on the other hand, said Hermalyn had orchestrated a plan to steal company secrets to share with Fanatics right before the Super Bowl to disrupt its business.