A former DraftKings Inc. executive, Michael Hermalyn, has appealed a Massachusetts federal judge’s decision to enforce a noncompete agreement preventing him from joining rival Fanatics. Hermalyn argues that the judge should have applied California law, which is more favorable to workers and generally does not enforce noncompete clauses, instead of Massachusetts law.

Hermalyn, who led a unit focused on high-value VIP customers at DraftKings, was set to take a similar role at Fanatics in Los Angeles. He claims the lower court erred in using Massachusetts law as stipulated in his contracts, instead of considering California’s strong policy against noncompetes.

In February, Hermalyn and DraftKings filed lawsuits against each other, with Hermalyn seeking to invalidate his noncompete agreement under California law, and DraftKings suing in Boston to enforce the contract terms. The district court granted DraftKings a preliminary injunction, halting Hermalyn’s move to Fanatics.

Hermalyn argues that U.S. District Judge Julia Kobick improperly applied Massachusetts choice-of-law rules by undervaluing California’s interest in protecting employees and overemphasizing Massachusetts’ interest. He asserts that the application of Massachusetts law undermines California’s public policy, which seeks to ensure the free movement of workers.

Appeal Arguments

In his appeal, Hermalyn contends that the district court should have acknowledged California’s significant policy interest and applied California law. He also suggests that the preliminary injunction should exclude California to respect the state’s policy.

Judge Kobick had found Hermalyn’s testimony about a call with former colleagues, where he allegedly tried to lure them to Fanatics with multimillion-dollar offers, “not credible.” The judge also doubted Hermalyn’s denial of taking sensitive company documents to Fanatics.

DraftKings accused Hermalyn of gathering sensitive materials and seeking employment with Fanatics after learning he was under investigation and facing a demotion. Hermalyn denies these claims, calling them “character assassination.”

DraftKings attorney Orin Snyder stated that Hermalyn’s filing does not adequately address Judge Kobick’s findings, which include misappropriation of trade secrets and violations of nondisclosure, nonsolicitation, and noncompetition agreements. Snyder emphasized the thoroughness of the judge’s decision and expressed confidence in presenting their arguments to the First Circuit.

DraftKings is represented by attorneys from Gibson Dunn & Crutcher LLP and WilmerHale. Hermalyn is represented by Quinn Emanuel Urquhart & Sullivan LLP and Beck Reed Riden LLP.

The case is DraftKings Inc. v. Hermalyn, case number 24-1443, in the U.S. Court of Appeals for the First Circuit.