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Ex-DraftKings exec can work at Fanatics, can't solicit clients during Super Bowl: judge

Credit: REUTERS/Lucas Jackson

By Nate Raymond

BOSTON, Feb 8 (Reuters) - A federal judge on Thursday temporarily barred a former DraftKings executive from using the company's trade secrets or soliciting its clients or employees after he joined sports betting rival Fanatics just days before the Super Bowl.

But, U.S. District Judge Julia Kobick in Boston declined at a hearing to bar Michael Hermalyn, who had been a senior vice president with DraftKings, from working at Fanatics, at least for now.

DraftKings sued Hermalyn on Monday, accusing him of stealing confidential documents before quitting, including its plans for Sunday's Super Bowl matchup between the San Francisco 49ers and Kansas City Chiefs.

Kobick said that DraftKings' lawyers had established they would likely succeed in showing Hermalyn misappropriated trade secrets, pointing to evidence showing he accessed business records just days before quitting on Feb. 1.

He accessed the records while in Los Angeles, where he would be working for Fanatics, through a network that DraftKings traced to its rival, and after he had already received a job offer that Hermalyn said he had decided he was likely to accept.

"I'm convinced the evidence warrants the temporary restraining order," Kobick said.

She ordered expedited depositions and discovery and stressed that her order was to maintain the status quo ahead of an April 2 hearing on DraftKings' motion for a preliminary injunction, when Kobick could reassess her holdings based on further facts.

Representatives for Fanatics and Hermalyn did not respond to requests for comment.

"We are pleased that the judge granted a temporary restraining order in favor of DraftKings ordering Mr. Hermalyn not to solicit DraftKings employees or customers, and not to use any confidential company information," a spokesperson for DraftKings said.

Fanatics, best known for selling sports jerseys and merchandise, launched its sportsbook last year and hired Hermalyn this month to become the president of Fanatics' VIP program.

At DraftKings, he had overseen its relationships with its largest "VIP" customers, and his ex-employer in a lawsuit on Monday sought to block him from using its secrets to "divert its most valuable customers" before "one of the most business critical weekends" for sports betting.

Jason Schwartz, a lawyer for DraftKings at Gibson Dunn & Crutcher, during Thursday's hearing said Hermalyn's job was to "maintain relationships with the wealthiest gamers in the world."

Absent a temporary restraining order restricting Hermalyn's activities at Fanatics before the Super Bowl, Schwartz predicted Hermalyn would go to the gambling capital of Nevada and try to network with them during the game.

The company had also asked for an order blocking him from working at Fanatics, saying it would violate a non-compete he had agreed to, restricting his employment in its industry.

Kobick declined to go that far at this early stage in the case but said she would be open to revisiting that decision when deciding whether a preliminary injunction was warranted.

Russell Beck, a lawyer for Hermalyn, countered his client had done what he could before leaving DraftKings to limit his exposure to trade secrets to avoid trouble.

"There's no allegation he has that information, used that information or disclosed that information," he said. "Absolutely zero."

The case is DraftKings Inc v. Hermalyn, U.S. District Court for the District of Massachusetts, No. 1:24-cv-10299.

For DraftKings: William Lee and Drew Dulberg of Wilmer Cutler Pickering Hale & Dorr; Orin Snyder, Jason Schwartz, Harris Mufson and Justin DiGennaro of Gibson Dunn & Crutcher

For Hermalyn: Russell Beck and Stephen Riden of Beck Reed Riden

Read more:

DraftKings sues former executive for taking secrets to sports-betting rival

(Reporting by Nate Raymond in Boston)

((Nate.Raymond@thomsonreuters.com and Twitter @nateraymond; 347-243-6917; Reuters Messaging: nate.raymond.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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