Sep 8, 2010

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Mark Hurd, HP & Oracle: Adventures in Employment Law

It seems like Mark V. Hurd – former executive of HP, recent hire at Oracle – is gunning to become his own employment law exam question.1

Hurd recently resigned as CEO of HP, amid an ethical inquiry into whether he falsified expense reports to cover up an affair with a coworker (exam answer part 1) who filed a sexual harassment charge against him (part 2). His departure was lambasted by Larry Ellison, CEO of Oracle, who sent an email to reporters at the New York Times calling it “the worst personnel decision since the idiots on the Apple board fired Steve Jobs….” (part 3 – extra credit).

Yesterday, Oracle announced that it had hired Hurd as co-president and board member. Within hours, HP had sued Hurd and Oracle, claiming that Hurd’s severance agreement prohibited him from taking the job, because it would inevitably lead to disclosure of HP’s trade secrets (part 4). There seem to be some thorns in HP’s case, however, since Hurd never signed a noncompete agreement, and California – where the suit was filed – has sort of rejected the doctrine of “inevitable disclosure” (there’s the points that get you the A), upon which the case apparently relies.2

There is, of course, nothing wrong with an employee competing against his former boss in most states, unless some agreement or legal doctrine affecting you and your employer says otherwise. Even with language in Hurd’s severance agreement prohibiting him from sharing trade secrets, without a noncompete agreement, he can theoretically work for a competitor as long as he stays mum. This is where the doctrine of “inevitable disclosure” comes in. Some courts have acknowledge that, even without evidence that a former employee is going to divulge trade secrets, there are some positions he or she can take that would so hinge on the sharing of confidential information that disclosure is inevitable and can be assumed.

Sadly, California has pretty much rejected that theory.

So what’s all this really about? Who knows. Speculation is that Oracle will give Hurd control over Sun Microsystems, which it recently acquired. While Oracle is a software company (which actually has a lucrative partnership with HP for the time being), Sun does hardware, in direct competition with HP.

So it’s not unbelievable that whatever Hurd did to double HP’s stock price will come up in conversation at his new office. What remains to be seen is whether, under California law, there’s anything HP can do about it.

And law students – I’m putting you on notice. Any employment law professor worth her salt is going to tweak this into a nasty exam question come December.

1. For those of you lucky enough to have never read one, traditional law school exam questions are multi-paragraph stories, often involving ridiculous circumstances, where the characters engage in a plethora of legally-ambiguous acts, and the student’s job is to identify as many causes of action as possible. [↩]
2. Ed. Note: I’m trying to get my hands on a copy of HP’s complaint, and I’ll likely update this post after I can read it. [↩]