VMware sues Nutanix’s new CEO Rajiv Ramaswami for breach of contract

VMware says it’s been left with no choice but to take the litigious route in response to Nutanix’s recent hiring of Rajiv Ramaswami, VMware’s former chief operations officer.

In a Dec. 28 statement, VMware noted that Ramaswami had been meeting secretly with Nutanix executives and board members for at least two months prior to resigning from VMware. Nutanix hired Rawaswami as its CEO on Dec. 9, just two days after exiting VMware. Ramaswami replaces retiring Nutanix founder Dheeraj Pandey. VMware has filed litigation in the Superior Court of the State of California against Ramaswami. The lawsuit accuses Rawaswami of meeting with Nutanix executives in his bid for Nutanix’s opening CEO position during the same time he was tasked with building and running VMware’s cloud business.

“Rajiv Ramaswami failed to honour his fiduciary and contractual obligations to VMware,” VMware said. “VMware is not a litigious company by nature. Indeed, the company tried to resolve this matter without litigation. But Mr. Ramaswami and Nutanix refused to engage with VMware in a satisfactory manner.”

Nutanix has since released its own statement, suggesting VMware’s lawsuit “seeks to make interviewing for a new job wrongful.”

“Mr. Ramaswami is proud of his tenure at VMware and counts many VMware team members as friends,” the statement reads. “It is disappointing to see VMware’s management sue him just because he chose to pursue an opportunity to become a public company CEO. We believe that VMware’s action is nothing more than an unfounded attempt to hurt a competitor and we intend to vigorously defend this matter in court.”

Normal practice

A person familiar with the matter who did not wish to be identified says VMware’s litigation against Nutanix is puzzling, considering the frequency with which executives leave prominent positions with one company to form startups in Silicon Valley or join forces with the competition.

“If you’re a young engineer, you might go in for a couple of job interviews and then be gone. But if you’re trying out for a C-level position, it’s normal to expect that the process would need more of a runway. It’s a pretty serious decision for a big company to make, to hire a new CEO. It’s a big decision for an executive, too,” the source said in a phone interview. “And so what VMware is doing in their complaint … is they’re trying to make it sound sinister that someone would engage in job interviews while they’re still on the payroll.”

Board members are often involved in these types of job searches, the source confirmed, and that if someone was an automatic wrongdoer for attending job interviews or not telling their boss that they’re going to an interview, it would really create an “impossible conundrum” for workers at all levels, not just executives.

“Because if you tell your boss, Hey, I’m going for a job interview today. They’re probably going to fire you,” they said. The source also emphasized that California’s position on non-competition agreements is clear: Unless there’s serious evidence of foul play, a non-compete agreement will not be enforced.

Ramaswami was responsible for business units developing products, cloud services and cloud operations for VMware. During his tenure, Ramaswami led several important acquisitions and played a pivotal role in transitioning VMware toward a subscription and Software-as-a-Service (SaaS) model. VMware says during the two months prior to his resignation, Ramawswami was knee-deep in shaping the company’s strategic vision for the future.

“Mr. Ramaswami demonstrated poor judgement and had a clear and extended period of conflict of interest,” the statement from VMware reads. “He should have disclosed this conflict of interest to VMware so that the company could have taken steps to protect itself. But he did not notify VMware, and thus deprived the company of the ability to do so by concealing his Nutanix-related activities.”

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Jim Love, Chief Content Officer, IT World Canada

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Alex Coop
Alex Coophttp://www.itwc.ca
Former Editorial Director for IT World Canada and its sister publications.

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