So, first Michael Hurd resigns as HP CEO because of minor accounting snafus related to his totally not sexually harassing a B-movie actress (snicker!). Then, Oracle hires him “allowing” one of the co-Presidents, Charles Phillips, to leave. Phillips apparently had his own public problems with a woman (snicker!) . Now, HP is suing Hurd because – now get this – they have a non-disclosure. Not a non-compete. An NDA. So HP is suing Hurd after they effectively forced him to resign over something he didn’t do with a woman because of something he has yet to do.
I couldn’t make this stuff up if I tried. The mind reels with questions here. Let’s choose a few major ones.
- Are technology executives of such low moral fiber that they keep getting into trouble with women other than their wives?
- Is Hurd just so good that Oracle is willing to deal with the inevitable lawsuits?
- If so, was HP just that stupid for letting him go?
- Can you really sue someone for something they might do but haven’t yet done?
Let’s tackle these in order. First off, I know a lot of technology executives. While some are ethically and morally challenged, as a class they don’t seem any worse than anyone else. I don’t mean no worse than other business executives. I mean no worse than the guy who delivers my mail or teaches my kids in school. Really, they are about the same as everyone else. Except politicians. Those folks don’t seem to know what ethics are at all. Oh, and Wall Street. Don’t get me started on Wall Street…
Next question - is Hurd just that good that he’s worth the trouble? Well, it’s possible that Oracle didn’t think he would be this much trouble. He didn’t, after all, have a non-compete. That still blows my mind but we’ll come back to that later. More likely, Larry Ellison just didn’t care. You see, Hurd has done some pretty remarkable things at HP. Mr. Ellison clearly thinks so, going so far as to send an email to the New York Times calling the HP board “idiots” for letting him go. That kind of tells me that he thinks Hurd is special.
The next question sort of answers itself. Given the mess HP made of Hurd’s departure it doesn’t look like they were doing the smart things. Really, didn’t they think they could deal with one aging actress who got hit on by an executive (if that even happened)? On the surface, it at least seems like cowardice. I’m willing to accept that there may be more to the story than is generally known. Maybe. Still, guys with Hurd’s track record are not exactly sitting around waiting for “The Call”. It does seem at least a little stupid.
Look at it this way: If they had tossed a tiny fraction of what they are going to spend on 3Par at the B-movie actress, this all could have gone away in an instant.
Finally, can they sue Hurd for not adhering to a non-disclosure when it hasn’t happened yet? A non-compete is different. The minute he took the job at Oracle he would have violated a non-compete. But he didn’t have a non-compete! I’m still trying to wrap my head around that. If you sell a bagel restaurant you sign a non-compete. This guy was CEO of a huge corporation. How did that one get through? But I digress (and rant a bit admittedly).
Hurd can’t violate the non-disclosure until he actually disclosures something and HP finds out about it. What would a court say here? “Mr Hurd is ordered not disclose trade secrets like he has already agreed to and has so far complied with”? Huh? He has to do something to harm them then they can go after him. What it looks like here is that the HP Board wanted but didn’t get a non-compete. I can’t believe they just forgot. Since they didn’t get the non-compete they want to make one out of the non-disclosure. It’s like legal alchemy. Take a base agreement and turn it into a golden one. The contract is what it is. It is not something else just because you want it to be.
Maybe the argument is that he can’t be an Oracle President and not disclose sensitive information. That’s a scary argument mostly because it assumes guilt. This suit assumes the inevitability of wrongdoing. Even if HP feels that Mr. Hurd has such low moral character that it’s likely he will disclosure something (see above) he still has to do the bad thing first. It’s not enough to say “we feel he might.”
This is not a trivial matter. Technology businesses cannot exist without confidentially. Everyone signs confidentiality agreements. Who will now if they can be turned into non-competes and other types of agreements by fiat. If you can be sued because you might do something but haven’t then would you sign an NDA? Will you enter into a confidentially agreement that is a non-compete in disguise? This has far reaching consequences in all aspects of business. Everyone signs non-disclosures when they go to work for a company, enter into partnerships, work with customers and vendors, etc. What if all of those magically turned into non-competes too? If you except the argument that you can’t work for someone else without disclosing trade secrets then you effectively do that and bind everyone to their current company. Like indentured servants only with cubicles.
So, the answer to the last question is “Yes. You can sue someone for something they haven’t yet done.” It doesn't mean you will win though. Hopefully HP won’t prevail. That would be devastating to all business.
And guys, stay away from the booth babes. You shouldn’t have them in the first place. They are insulting to men and women alike but clearly a minefield for the C-level executives. Protect your CEO. Don’t use booth babes.
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2 comments:
Tom,
Let me start by saying that I disagree with just about everything here. But hey, that's why they call them opinions, right?
For starters, I'm not snickering about the old-boys club shenanigans that happen in every industry. There's a difference between an affair and sexual harassment, and it has to do with power and consent. I suggest you read this essay - it'll help explain why this sort of thing happens!
Then there's the non-compete clause. As a California employee, Mr. Hurd would labor under very different circumstances than a New York or Massachusetts employee. Even though he resigned, he would not generally be barred from taking a competing position in CA.
As for the lawsuit, I suggest you look up the legal principle of inevitable disclosure. It explains why HP took this action.
I love a spirited discussion so...
A couple of things. One, the (snicker) was me being sarcastic about HP's hypocrisy. Like the Monty Python "nudge nudge wink wink". I'm making fun of them because it is silly to SAY that no sexual harassment happened then ACT like it did. As anyone who has worked with or for me can tell you, I take any type of ethical lapse really seriously. I'm a bit of a boy scout in that regard. This sort of thing happens when people are uneducated, arrogant, or just plain weak. Power has a lot to do with it. Still, it is no worse amongst tech executives than anyone else. I've seen junior call center agents harass women (and called them to the woodshed because of it).
As to the non-compete clause - there isn't a non-compete clause. Reread the Wall Street Journal article. It says "The agreement doesn't contain a non-compete clause". That's because they know it won't work in California. As others have pointed out, HP made these type arguments in getting Dave Donatelli's EMC non-compete vacated. That has got to come back and bite them. HP can't have it both ways.
California is much more stringent than NY when it comes to right to work issues. Non-competes are enforceable here.
Having spent a lot of years dealing with intellectual property (including a company called IP.com where IP stood for intellectual property) I'm familiar with the concept of inevitable disclosure. I also know that it is not universally accepted, has competing doctrines especially in right to work states, and is hard to prevail in. The article you site even says that it is used sparingly and "Some courts also have discussed requiring evidence of the former employee's and new employer's subjective intent to misappropriate the trade secret". So, some courts have required that you prove that the person intends to misappropriate trade secrets. How far will that go in a right to work state like California.
In the end, HP comes across as disingenuous. On top of that, they need this to go away. They should want us more interested in the 3Par acquisition and new products than Mr. Hurd. It just generated a bunch more bad PR.
Serve's to you. :-)
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