Legal Experts: VMware's Lawsuit Against Nutanix's New CEO Lacks Weight

Two legal experts say VMware‘s lawsuit against Nutanix CEO Rajiv Ramaswami holds little weight due to California’s rules concerning hiring among competitors.

Ramaswami is VMware’s former chief operating officer. The suit alleges material and ongoing breaches of his legal and contractual duties and obligations to VMware.

The suit was filed in the Superior Court of the State of California, County of Santa Clara.

VMware had to file its suit in California because it’s based there. But legal experts say having to file in California weakens the case.

Nutanix’s Rajiv Ramaswami

Nutanix appointed Ramaswami to president and CEO last month. VMware said Ramaswami “failed to honor his fiduciary and contractual obligations to VMware.”

VMware also alleges secret meetings between Ramaswami and Nutanix’s CEO, CFO — and apparently its entire board of directors about becoming that company’s CEO.

Few Legal Ramifications in California

We spoke with a person familiar with the matter, who chose to remain anonymous. He said unlike other states, California prohibits non-competition agreements. That means employees are free to leave one company to join a competitor without facing any potential legal ramifications.

The only exception is if intellectual property is taken and used in that competing organization, he said.

If an employee was to tell their employer they were interviewing with a competitor, they could end up fired, he said. Furthermore, if they don’t then get that other job, they could be out of work.

Unlike lower-level jobs, it can take a few months and more than one interview or meeting to get a C-level position, he said. Hence, the extended secrecy.

Since the 1800s, California has banned non-compete practices, he said.

Orly Lobel, a law professor at the University of San Diego, and an expert in intellectual property and employment and labor law, also told Data Center Knowledge there’s no conflict of interest when an employee interviews and is hired by a competitor.

During job interviews, employees can’t share sensitive information, such as their employer’s product plans, she said. However, they can “brainstorm” and show they are knowledgeable, are full of ideas, and have good experience.

VMware didn’t respond to the experts’ views.

VMware said it expects all employees to honor their commitments to the company, and executive officers should be held to an even higher standard.

This month, Intel announced that Pat Gelsinger is leaving his post as VMware’s CEO to become Intel’s chief executive.