DraftKings’ escalating battle with billionaire Michael Rubin, who started a rival sports-betting effort last year, spilled into a public court hearing this week with allegations of covert phone calls, promises of multimillion-dollar jobs, and stolen corporate secrets.
The legal case pits the Boston-based online sports-betting giant against one of its former senior executives, Michael Hermalyn, who defected to Rubin’s company, Fanatics, in February despite signing a one-year noncompete agreement while working at DraftKings. DraftKings previously tried to block Rubin from cracking the betting market by trying to outbid the billionaire for the US business unit of PointsBet. But Rubin won the day and started taking bets in some states, including Massachusetts, last August.
At Tuesday’s hearing in Boston federal court, DraftKings was seeking a preliminary injunction to block Hermalyn from working for Rubin. DraftKings also alleged that Hermalyn downloaded confidential corporate documents before leaving and tried to attract two of his former coworkers in violation of a nonsolicitation agreement.
Hermalyn swore he had not taken any documents or solicited his former coworkers. It was the former senior vice president’s first personal appearance in the Boston lawsuit.
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“I operated with extreme caution,” he said. Asked if he solicited his former coworkers, he replied: “Absolutely not.”
Hermalyn ran DraftKings’ program to keep its biggest gambling customers, famed athlete partners, and other corporate VIPs happy. But Rubin wooed him away after lawyers for Fanatics told Hermalyn he could escape the noncompete by moving to California, where such agreements are illegal, according to court documents.
During almost two hours of testimony, Hermalyn also maintained that his copying of internal DraftKings documents in the weeks before his departure was because he had been issued a new work laptop and was moving needed files from his old laptop. He also said he deleted files on the old laptop that were personal documents, like family photos.
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“This was my personal computer,” he said. “I’ll never do this again in my career.”
The two former coworkers, Andrew Larracey and Hayden Metz, separately testified that Hermalyn offered them jobs at Fanatics during a series of phone calls starting on February 1, Hermalyn’s first day on his new job.
The pair said they called Hermalyn that afternoon from a conference room in Boston. Hermalyn asked them to switch to a FaceTime video call and show him that no one else was in the room, Larracey said. Hermalyn said he didn’t remember the request and that it was “not something I would do.”
Larracey, currently director of VIP operations at DraftKings, discussed notes he had taken on his phone at the time of the alleged job offers from Hermalyn, including compensation packages.
“It was a big ask,” Larracey said, noting he and his family would have to move from Boston to Los Angeles to work for Fanatics. “I said it would have to be multiples of what I make today.”
Metz testified that he had to attend a dinner with DraftKings customers that night at Contessa, followed by a Celtics game against the Lakers. But after the game, he and Larracey discussed the job opportunities and decided to ask Hermalyn for more details.
Hermalyn’s alleged initial offer included salary, annual bonus, signing bonus, and equity in Fanatics worth a total of more than $3 million, as recorded in Larracey’s notes. An offer for Metz, who took over Hermalyn’s job running the VIP program at DraftKings, was worth more than $5 million.
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Their calls stretched past 1 a.m. as Hermalyn offered richer packages, including $8 million for Metz, the latter testified.
Hermalyn said his former coworkers and close friends called him and asked about working at Fanatics without his encouragement.
Metz said he did not pursue the job offer. Larracey applied for the job Hermalyn offered and had a series of interviews on Sunday, Feb. 4, with top Fanatics executives, but the company never formally offered him a job.
US District Judge Julia Kobick, who is overseeing the case, issued a temporary restraining order preventing Hermalyn from soliciting DraftKings employees or customers on Feb. 8.
Kobick did not indicate during the Tuesday hearing how she planned to rule on DraftKings’ request to block Hermalyn from working at Fanatics for one year.
Hermalyn declined to comment after the hearing. In a statement, his lawyer Russell Beck said Hermalyn had acted properly in all his dealings. “DraftKings created a false narrative based on a series of misrepresentations in order to conduct a second-rate hit job on an employee who dared to leave its toxic culture,” the statement said.
This story was updated to reflect the proper timing of the alleged compensation offers.
Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him @ampressman.