IBM suing to keep M&A chief away from Dell

IBM says that if its former head of mergers and acquisitions, David Johnson, were to depart for Dell it would be a violation of his contract, and last week sued Johnson in federal court.

IBM says it is concerned that Johnson working at Dell would cause him to divulge IBM trade secrets to Dell. Johnson worked for 27 years at IBM, most recently as vice president of corporate development, responsible for overseeing mergers and acquisitions. The papers filed in the U.S. District Court for the Southern District of New York on May 21 show IBM is specifically concerned because Dell competes with IBM in the enterprise server market.

"Mr. Johnson has possession of valuable confidential information and cannot undertake a senior strategy position at Dell without violating his obligations to IBM," an IBM spokesperson told Bloomberg News Wednesday. Johnson received "significant compensation" by agreeing not to work for competitors, IBM said.

In court papers, IBM says Johnson knows exactly what companies and technologies IBM plans to invest in and when, as well as what businesses or technologies it plans to divest itself of. IBM believes Johnson has accepted the position of senior vice president of strategy at Dell.

When reached for comment on the suit, Dell spokesman David Frink would only confirm that the Texas-based PC maker has offered Johnson a position in the company. He refused to say what that role is and called descriptions of what that position may be "speculative." He added, "Without exception, Dell respects the trade secrets and intellectual property of others."

This is the second time in less than a year that IBM has proved territorial about departing executives. Last year, the company sued Mark Papermaster to keep him from joining Apple. The lawsuit claims were nearly identical, with IBM charging that Papermaster's joining Apple would cause him to divulge trade secrets and was a violation of the non-compete clause to which he agreed. IBM and Papermaster settled after three months, and Papermaster finally started working at Apple three months after that.

[WalterAnonymous]

More typical moves by a company in the death-spiral vortex. Unimaginative dolts in management reacting poorly to a simple labor transaction, probably directly the result of unkept promises by said dolts to the subject in question. One thing for sure, IBM C-suite execs are amongst the biggest liars in world history, and sometimes people recoil in horror and flee upon recognition of that. No surprises here. Palmisano is a clueless idiot, and all of his underlings, without exception, are simpering sycophants. Gentlemen, prepare for septic system entry soon. I used to work for these jackasses, so I am certainly in a position to know. Smart folks will short them soon. Muahahahahah! I look forward eagerly to the merger of IBM with financial fecal matter. Gentlemen, start your fans!

[Maccess]

There ought to be a law that when a company requires a non-compete clause, it will pay the employee at least half his salary a month for every month the non-compete clause is in effect. People gotta eat and feed their families. As it is, a non-compete clause is a free rider for companies and a burden for employees.

[tech_crazy]

IMHO, there is in most states that hold non-competes valid. The former company (in its employment agreement) requires the employee to not work for a competitor for one year after leaving them, disclose to them the existence of this requirement and then if the new employer withdraws the offer, the former company will pay the (now left already) employee 1 year of salary provided they show that the existing non-compete was the basis of the new company not offering/withdrawing the offer. Companies cannot have the cake and eat it too. If you suffer a financial loss because of them, they have to make up for it.

[Mr. Dee]

Whats up with IBM lately and the paranoia?

[Deekman]

This has nothing to do with the economy or IBM's success or lack thereof. When you sign a contract, you are legally bound to the content that you agree to. When you violate the terms of a contract, the legal recourse is to bring suit against the person who has chosen to violate it. People think lawsuits are always unprovoked and single-sided; this is not so.

IBM has every right to bring suit against violations of a legal contract.

[Renegade Knight]

Contracts require consideration to be valid. They can't be one sided, and they can't enforced if signed under duress.

If this employee got nothing out of the non compete agreement, it's not enforceable. If they had to sign it just to keep their job, it's duress.

[unknown unknown]

@Deekman Enforceability of non-compete clauses varies by jurisdiction. In California, for example, they're not enforceable and in New York (where the suit was filed) their enforceability is heavily restricted.

@Renegade Knight independent consideration (getting something in exchange) does not apply in all states.

[paulej]

But what contract did he break? IBM is only saying that he will break the contract. They are predicting the future and staking claims on speculation. I think IBM should sit down and shut up unless it has material evidence of a breach of contract.

[solvback]

It's unconstitutional he has a right to eat!

[BSinton]

IBM must be doing something right , their shares have gone up from $73 to $ 102 in a week according the graph I got onto out of curiosity .

They don't seem to be on the verge of collapse as suggested above.

[puterhead]

I personally have a non-compete clause in my contract. As stated in this story, I also receive a higher salary than the industry standard in my field in exchange for having signed the contract. It was stated above that the company cannot have its cake and eat it to, but that goes both ways. If I were to leave of my own choice I would expect one of two things, either having to adhere to the contract or having to pay back every cent that I made specifically due to the non-compete clause.

[ittesi259]

This is different from the IBM and Apple dispute because in that one the IBm employee was not going to be serving in a chip design capacity. However, mergers and acquisitions? This isn't their top server guy, though at least in this case IBM can say without being completely stupid that Dell competes with them in enterprise servers. Apple doesn't exactly compete with IBM, especially with the iPod