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Woonsocket, R.I. -- A Delaware judge on Wednesday barred a former top executive for Wal-Mart Stores from taking a job as president of CVS Caremark Corp. until a trial is held on Wal-Mart's claim that the executive signed a noncompete agreement that prevents him from working for CVS. The trial is scheduled for early March.
Vice-chancellor J. Travis Laster granted Wal-Mart's request for a preliminary injunction following a hearing, which the nation's largest retailer argued that Hank Mullany possessed confidential Wal-Mart information that CVS, a competitor, could use to its advantage.
CVS announced earlier this month that it had hired Mullany, who until last month was president of Wal-Mart's Northern U.S. business.
Wal-Mart then sued CVS and Mullany, saying Mullany had signed a contract with Wal-Mart that forbids him from working for a competing company for at least two years.
According to Laster, CVS and Mullany took a calculated risk when entering into their employment agreement that Wal-Mart would not seek to enforce the noncompete agreement Mullany signed when he was promoted last January to president of Wal-Mart North.
The judge ruled that the scope and duration of the noncompete agreement appeared reasonable, and that Mullany, an experienced executive who consulted an attorney before signing the employment contract with Wal-Mart, should have know what he was doing.
Laster rejected CVS's argument that it should not be considered a competitor of Wal-Mart, and that the noncompete agreement should not be enforced because Mullany did not work directly for Wal-Mart's pharmacy business.
He said it was simply a "common-sense notion" that Wal-Mart and CVS, compete in the pharmacy sector, particularly when both are trying to expand and Wal-Mart is planning "small format" stores.
Lawrence Portnoy, an attorney for CVS, said that Mullany did not have any knowledge that would prove useful in the chain’s battling Wal-Mart's small-format initiative.
"Whatever Mr. Mullany knew about small format, it's old and cold already," Portnoy said, adding that CVS hired Mullany not for his knowledge about the pharmacy business, but for his general management experience.
But Laster noted that CVS and Wal-Mart were on "a collision course," and that Mullany was the executive sponsor of Wal-Mart's small-format initiative.