VMware Lawsuit: Nutanix CEO Showed 'Poor Judgment,' 'Conflict of Interest'

VMware‘s lawsuit against Nutanix CEO Rajiv Ramaswami relates to the intense competition between the two cloud computing vendors.

That’s according to Roy Illsley, chief analyst of IT and enterprise for Omdia. The suit relates to hyperconverged infrastructure (HCI), and the battle between the Nutanix software stack and the VMware stack.

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.

Nutanix appointed Ramaswami to president and CEO last month. He succeeded co-founder Dheeraj Pandey, who previously announced his plans to retire as CEO.

‘Secret’ Meetings

Nutanix’s Rajiv Ramaswami

VMware said Ramaswami “failed to honor his fiduciary and contractual obligations to VMware.”

“For at least two months before resigning from the company, at the same time he was working with senior leadership to shape VMware’s key strategic vision and direction, Mr. Ramaswami also was secretly meeting with at least the CEO, CFO and apparently the entire board of directors of Nutanix to become Nutanix’s CEO,” VMware said. “He joined Nutanix as its CEO only two days after leaving VMware.”

Ramaswami demonstrated “poor judgment” and had a “clear and extended period of conflict of interest,” VMware said.

“He should have disclosed this conflict of interest to VMware so that the company could have taken steps to protect itself,” it said. “But he did not notify VMware.”

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

VMware said it tried to resolve this without litigation, but Ramaswami and Nutanix refused to “engage … in a satisfactory manner.”

“VMware spends billions of dollars on its road map and R&D to bring market innovations to our customers and is committed to protecting our brand, the technological innovations behind our brand, and the value we bring to our customers,” VMware said.

Unique Lawsuit

Illsley understands why VMware isn’t happy.

Omdia’s Roy Illsley

“[I] think the issue is more to do with understanding the pricing and customers than the technology,” he said.

Illsley also said similar lawsuits don’t come to mind. For example, when Thomas Kurian vacated his long-time senior leadership role with Oracle and became Google Cloud’s CEO, no litigation followed.

The lawsuit doesn’t specifically name Nutanix; however, the company issued a statement saying the suit “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 said. “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. However, 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 said it’s “disappointing” to see VMware’s management sue Ramaswami “just because he chose to pursue an opportunity to become a public company CEO.” It also said the suit is “nothing more than an unfounded attempt to hurt a competitor and we intend to vigorously defend this matter in court.”