The legal saga between VIP sports betting specialist Michael Hermalyn and former employer DraftKings will spill into another court.
Hermalyn appealed on May 22 the preliminary injunction handed down by the District Court of Massachusetts in April. The 129-page appeal filed with the US First Circuit Court of Appeals centers the appeal request around Hermalyn’s status as a California citizen, which the appeal argues should leave him free from his non-compete covenant with DraftKings based on state law.
“Although Hermalyn disagrees with numerous aspects of the injunction and will continue to challenge DraftKings’ claims in the district court, this expedited appeal focuses narrowly on two particularly consequential errors underlying the provisions of the preliminary injunction enforcing the non-compete covenant.”
Specifically, Hermalyn wants the section of the preliminary injunction that prevents him from competing with DraftKings to be vacated. Under the ruling, Hermalyn is allowed to work for Fanatics, but cannot be involved in any work similar to what he used to do for DraftKings through Feb. 1, 2025.
DraftKings injunction for more than non-compete
DraftKings is not only worried about Hermalyn sticking to the multiple non-compete agreements he signed while serving as the head of its VIP program. The company initially sued over concerns that Hermalyn would share confidential trade secrets with Fanatics before the Super Bowl, which would be a violation of his nondisclosure agreement.
The court said DraftKings is likely to succeed on the claim that Hermalyn breached his nondisclosure agreement. The court finds credible the testimony of two of its employees that say they spoke to Hermalyn about getting jobs at Fanatics and dismissed Hermalyn’s denials of the conversations.
The company suggested that those conversations used the company’s confidential information (employee salaries) to Fanatics’s benefit.
District Court ‘erred’ in applied law
The appeal claims the district court “erred by applying Massachusetts rather than California substantive law to DraftKings’ claims seeking to enforce the non-compete covenant.”
California’s “fundamental public policy against the enforcement of non-compete covenants” gives the state a “far greater interest” in this case than Massachusetts has, according to the appeal. But that is directly in contention with what the court stated in its ruling.
“Any harms flowing from Hermalyn’s likely violation of his noncompetition, non-solicitation, and non-disclosure agreements will be felt by DraftKings in Massachusetts, not California,” the court ruled.
