VMware is suing its former COO and now new Nutanix CEO Rajiv Ramaswami for contractual misdeeds.
The company’s complaint revolves around alleged secret talks between Ramaswami and Nutanix while he was working on “VMware’s key strategic vision and direction” with other VMware senior leaders.
In a statement, VMware said it has initiated legal proceedings in California, against Ramaswami “for material and ongoing breaches of his legal and contractual duties and obligations to VMware.”
Ramaswami joined Nutanix as CEO in December, two days after leaving VMware.
The VMware lawsuit alleges “Rajiv Ramaswami failed to honour his fiduciary and contractual obligations to VMware,” because he was “meeting with at least the CEO, CFO, and apparently the entire Board of Directors of Nutanix, Inc. to become Nutanix’s Chief Executive Officer.”
VMware declared it is not a litigious company by nature and has “tried to resolve this matter without litigation. But Mr. Ramaswami and Nutanix refused to engage with VMware in a satisfactory manner.”
Nutanix in a statement said: “VMware’s lawsuit seeks to make interviewing for a new job wrongful. We view VMware’s misguided action as a response to losing a deeply valued and respected member of its leadership team.”
The company added: “Mr. Ramaswami and Nutanix have gone above and beyond to be proactive and cooperative with VMware throughout the transition. Nutanix and Mr. Ramaswami assured VMware that Mr. Ramaswami agreed with his obligation not to take or misuse confidential information, and VMware does not contend otherwise.”
This was apparently not enough as “VMware requested that Mr. Ramaswami agree to limit the ordinary performance of his job duties in a manner that would equate to an illegal non-compete covenant, and it requested that Nutanix agree not to hire candidates from VMware in a manner that Nutanix believes would be contrary to the federal antitrust laws.”
Nutanix believes “that VMware’s action is nothing more than an unfounded attempt to hurt a competitor and we intend to vigorously defend this matter in court.”
The two company statements represent what they want to say in public about their dispute and we don’t know what they said in private. It seems apparent that VMware feels threatened, even betrayed, by Ramaswami’s move to Nutanix and wants to limit the damage it perceives could result from the move.
A US employment contract may have a non-compete clause in it which forbids the employee from leaving and working with a competitor until a certain amount of time has passed after their resignation.
However such non-compete clauses are not enforceable in California law and VMware’s statement does not mention the “non-compete” phrase. Instead it alleges Ramaswami has breached his legal and contractual duties and obligations.
That said, the VMware lawsuit appears similar in nature to a non-compete dispute, particularly as its statement mentions Ramaswami having talks with Nutanix when he was working on “VMware’s key strategic vision and direction”. This implies Ramaswami could direct Nutanix activities from a standpoint of knowledge of VMware’s strategies; the kind of thing non-compete clauses are designed to prevent.
Nutanix’s claim that VMware “seeks to make interviewing for a new job wrongful” sets the scene for a court decision on how far legal and contractual duties and obligations extend into seeking new employment.