When the former head of M&A at IBM could only muster “I signed in the wrong spot on purpose so my noncompete wouldn’t count” as a defense, we said that was pretty lame, but as Ken Adams pointed out, there were some procedural quirks that could make it work.
After the jump, learn how Johnson pulled not one but two (alleged) fast ones on his former employer.
First, Johnson’s defense actually worked (sort of). Because IBM returned the original noncompete to him and told him to sign it again, which he never did, the court viewed that as “an unambiguous statement” of Johnson’s intention not to be bound by the contract. Thus, District Judge Stephen Robinson (SDNY) held that IBM was unlikely to prevail at trial on the issue of whether the contract was enforceable and denied IBM’s request for an injunction. Johnson will be able to work for Dell while the parties try to resolve the issue.
IBM would have been better off just filing the contract with the misplaced signature, but because they threatened to revoke his equity if he didn’t sign but never actually did anything, the judge thinks there was no contract.
That’s far from the strangest result in the decision.
Johnson, who held his last position at IBM for nine years, testified at a June 22 hearing he doesn’t have a “great deal” of IBM’s confidential information or trade secrets. Although Robinson ultimately agreed, he said Johnson has “inside strategic business information” and that IBM would be harmed without the injunction.
Robinson also sided with Johnson’s claim that if he were prevented from carrying out his duties at Dell, his skills would become obsolete and he would lose contact with his network of investment bankers and consultants.
“The damage to Mr. Johnson’s career and the risk that he will be sentenced to an early retirement, especially during these volatile economic times, cannot be underestimated,” Robinson said. “Due to the nature of his qualifications and skills, Mr. Johnson must deal with information that changes rapidly and requires constant attention.”
What??? Since when are general M&A skills, an address book that goes back 27 years, and fingers on the strings of a multi-billion dollar purse the sort of things that go out of style in a year? Instead, IBM now has to compete with the guy who was involved in developing and executing the strategic development plan while that information is fresh in his memory? Just so he doesn’t forget how to do a deal? People aren’t going to remember him if he takes a year off?
Yeah, we can just see Robert Kindler (head of M&A at Morgan Stanley, which just bumped Goldman from #1, and a former Cravath lawyer) refusing to take Johnson’s calls because Johnson has been out of the game for a year.
Anyway, turns out Johnson wasn’t just playing fast and loose with signatures.
IBM has added another claim: that Johnson “secretly misused IBM’s facilities, resources and personnel” in 2005 as he tried to start his own hedge fund, JSJ Capital. According to the amended complaint, IBM says Johnson spent “significant” time while he was working at IBM laying the groundwork for the fund by preparing investor presentations. Worst of all, he was allegedly pitching investors on the same investments he had identified for IBM.
IBM isn’t a particularly sympathetic plaintiff, and the company has certainly been down this path before, but it certainly seems like they missed on two issues that both could have gone the other way. The judge could have ignored the signature games and said that Johnson signed and delivered the contract, or he could have found that the harm to IBM outweighed Johnson getting a little risky.
Actually, maybe Kindler will refuse Johnson’s calls. IBM’s new head of corporate development is Elias Mendoza, who was hired three years ago from Morgan Stanley, and he might not like the bank doing business with Johnson.
Johnson’s lawyer, Ronald Richman (Cornell BS ‘78, Columbia JD ‘81) of Schulte, didn’t respond to Bloomberg’s requests for comment. IBM is represented by Evan Chesler (NYU AB ‘70, Hunter MA ‘73, NYU JD ‘75) of Cravath (of course).
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