118 F.4th 416
1st Cir.2024Background
- Michael Hermalyn, formerly employed by Massachusetts-based DraftKings, left his position to join a competitor, Fanatics, a California-based company.
- Hermalyn had signed a noncompete agreement with DraftKings that included a Massachusetts choice-of-law provision and a one-year noncompete clause.
- DraftKings sued Hermalyn in Massachusetts federal court to enforce the noncompete agreement, seeking to bar him from competing anywhere in the U.S. for one year.
- The District Court ruled the noncompete enforceable under Massachusetts law and issued a preliminary injunction barring Hermalyn from competing against DraftKings in the U.S., but declined a global injunction.
- Hermalyn filed an interlocutory appeal, arguing that California law— which broadly forbids noncompetes— should apply or, alternatively, California should be excluded from the injunction’s geographic scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law: which state’s law applies | Hermalyn: Use California law | DraftKings: Use Massachusetts law | Massachusetts law governs; CA’s interest not greater |
| Materially greater interest test (public policy) | Hermalyn: CA’s interest paramount | DraftKings: MA's interest not less | CA’s interest not materially greater than MA’s |
| Scope of injunction: exclude California? | Hermalyn: CA must be excluded | DraftKings: Don’t exclude CA | Including CA in injunction appropriate |
| Enforceability of noncompete in present context | Hermalyn: CA bans noncompetes | DraftKings: MA allows with limits | Noncompete enforceable under Massachusetts law |
Key Cases Cited
- NuVasive, Inc. v. Day, 954 F.3d 439 (1st Cir. 2020) (explains choice-of-law review standards and Massachusetts’s respect for contractual provisions, with exceptions)
- Oxford Glob. Res., LLC v. Hernandez, 106 N.E.3d 556 (Mass. 2018) (addresses when California’s noncompete policy supersedes a Massachusetts choice-of-law clause)
- Reicher v. Berkshire Life Ins. Co. of Am., 360 F.3d 1 (1st Cir. 2004) (confirms forum state’s law sets rules for choice-of-law questions in diversity)
- Feeney v. Dell Inc., 908 N.E.2d 753 (Mass. 2009) (explains process for determining when to override contractual choice-of-law provision based on public policy)