Uh oh - the new CEO of Nutanix may have made a few boo boo's on the way in

the more important question is, what kind of tech company would ever name themselves nutanix?

California completely prohibits covenants not to compete, so you don't have to have the debate about whether those are "good for business" or "bad for labor."

However, most states, including California, impose a duty of loyalty or "fiduciary duty" (sometimes a "lite" version compared to the normal trust/fiduciary relationship) on a current employee, especially if the employee is a high-level one.

And, of course, NDAs relating to confidential information are enforceable just about everywhere.

I'm not sure just seeking another job while employed violates this "fiduciary" duty.  Depends on what goes down.  There is an argument that doesn't have a whole lot of traction that certain persons in certain jobs will "inevitably disclose" confidential information and trade secrets to their new employer and this may be one of them.  One might assume that this guy knows so much about VMWares strategies that he is bound to use that information to their detriment in his new employment.

Like many or most "covenant not to compete" cases, this is probably going to boil down to trade secrets and were they misappropriated.

On the broader level, a guy like this probably has opportunities other than going to work for a direct competitor, so I don't think I'm shedding any tears for him if he gets enjoined from taking this position.

Edited December 29, 2020 by TwiceHorn

So interesting side note. I know Rajiv from when he was with Xros. For those not familiar with Xros, it is one of the seminal companies from the internet bubble. Xros had optical switching technology that didn’t work.

I got to know them when I was talking with them about merging their startup with ours. We immediately figured out it didn’t work and stayed away. Nortel came in and bought them for several billion dollars and Rajiv became super rich overnight. They built nothing of value and became insanely rich - the true mark of the Internet bubble for many.

1 hour ago, TwiceHorn said:

California completely prohibits covenants not to compete, so you don't have to have the debate about whether those are "good for business" or "bad for labor."

However, most states, including California, impose a duty of loyalty or "fiduciary duty" (sometimes a "lite" version compared to the normal trust/fiduciary relationship) on a current employee, especially if the employee is a high-level one.

And, of course, NDAs relating to confidential information are enforceable just about everywhere.

I'm not sure just seeking another job while employed violates this "fiduciary" duty.  Depends on what goes down.  There is an argument that doesn't have a whole lot of traction that certain persons in certain jobs will "inevitably disclose" confidential information and trade secrets to their new employer and this may be one of them.  One might assume that this guy knows so much about VMWares strategies that he is bound to use that information to their detriment in his new employment.

Like many or most "covenant not to compete" cases, this is probably going to boil down to trade secrets and were they misappropriated.

On the broader level, a guy like this probably has opportunities other than going to work for a direct competitor, so I don't think I'm shedding any tears for him if he gets enjoined from taking this position.

I think this has more to do with the 2 months of overlap at both EMT and Board levels. He was talking to both exec teams and both boards about strategy in the exact same space (Hyperconverged infrastructure). VMWare's big play right now is all in HCI. Nutanix is basically an HCI only company, between the 2 of them they own more than 80% of the existing HCI footprint in the world. 

There is no way he didn't talk about what he thinks the near future and far future hold with both at the exact same time while he was getting hired. It taints what they are trying to do at VMWare and it gives Nutanix a really crazy competitive advantage because the guy who feasibly came up with the strategy for VMWare left to "get it done" at Nutanix. 

If he was just a dude at VMWare I don't think this would be a big deal, the fact that he was the COO and led the group that is essentially the equivalent of what Nutanix is as a business is what makes the overlap really fucky. He should have just bailed on VMWare, interviewed for 2 months and taken the job, or at the very least let VMWare know that he was approached about a CEO offer from Nutanix.

1 hour ago, Dbeasy said:

So interesting side note. I know Rajiv from when he was with Xros. For those not familiar with Xros, it is one of the seminal companies from the internet bubble. Xros had optical switching technology that didn’t work.

I got to know them when I was talking with them about merging their startup with ours. We immediately figured out it didn’t work and stayed away. Nortel came in and bought them for several billion dollars and Rajiv became super rich overnight. They built nothing of value and became insanely rich - the true mark of the Internet bubble for many.

I was in Silicon Valley during that time selling semiconductors. Part of that time, I had the north bay territory (Petaluma, Rohnert Park, etc...) which had a shitload of  early stage networking startups up there. It was crazy how many were getting snapped up by Cisco, Nortel, et al...for insane valuations. 

2 hours ago, Dbeasy said:

So interesting side note. I know Rajiv from when he was with Xros. For those not familiar with Xros, it is one of the seminal companies from the internet bubble. Xros had optical switching technology that didn’t work.

I got to know them when I was talking with them about merging their startup with ours. We immediately figured out it didn’t work and stayed away. Nortel came in and bought them for several billion dollars and Rajiv became super rich overnight. They built nothing of value and became insanely rich - the true mark of the Internet bubble for many.

Fucking Nortel, man.  That whole time was so fucking insane.  Kept IP attorneys pretty busy with some of the most bullshit patents ever put to paper.

A lot of lawyers and law firms made some money by taking equity in lieu of, or in addition to, fees and getting bought out way disproportionate to the value.  In fact, it was the beginning of patent lawyers heading into biglaw firms for the purpose of attracting "equity" clients.

Maybe this will get them to stop spamming my work email every week with pointless updates.

5 hours ago, immamac said:

I think this has more to do with the 2 months of overlap at both EMT and Board levels. He was talking to both exec teams and both boards about strategy in the exact same space (Hyperconverged infrastructure). VMWare's big play right now is all in HCI. Nutanix is basically an HCI only company, between the 2 of them they own more than 80% of the existing HCI footprint in the world. 

There is no way he didn't talk about what he thinks the near future and far future hold with both at the exact same time while he was getting hired. It taints what they are trying to do at VMWare and it gives Nutanix a really crazy competitive advantage because the guy who feasibly came up with the strategy for VMWare left to "get it done" at Nutanix. 

If he was just a dude at VMWare I don't think this would be a big deal, the fact that he was the COO and led the group that is essentially the equivalent of what Nutanix is as a business is what makes the overlap really fucky. He should have just bailed on VMWare, interviewed for 2 months and taken the job, or at the very least let VMWare know that he was approached about a CEO offer from Nutanix.

That's exactly what I meant.  The information he conveyed to Nutanix probably constitutes actionable misappropriation of trade secrets, whether he did it before or after leaving employment at VMWare.

There doesn't need to be (and can't in California) a covenant not to compete, and VMWare doesn't need to rely on the employee fiduciary duty to hang him up on this.

I would expect any remedy in this to be designed to mitigate the communication of his knowledge to Nutanix.  If he's already disclosed it, I'd expect some serious damages and possibly an injunction against his employment there.

I don't think VMware would bring suit and so publicly if they weren't super confident in their legal recourse. They are not at all litigious from what I understand and know working in this sector. 

Full disclosure I work with both companies closely as a partner. 

I’m reminded of what happened over the summer when AWS sued GCP over poaching a VP. I think it was settled out of court which will likely be the case here if I had to guess. https://www.google.com/amp/s/www.geekwire.com/2020/amazon-settles-lawsuit-former-aws-marketing-vp-joined-google-cloud/amp/
 

That said Nutanix seems like the glory days are over, I think their stock was really distressed and I know most of their good sales guys had already bailed after making a ton of money, so curious to see how desperate they are for this guy.