Lawsuit challenging HP payout to Mark Hurd dismissed

The judge gave the plaintiffs 30 days to file an amended complaint

A federal judge dismissed a lawsuit challenging the payout in the separation agreement between Hewlett-Packard and its former CEO Mark Hurd in 2010.

The lawsuit filed by HP shareholders against Hurd and the company's board said that HP committed waste of corporate assets by approving the separation agreement because the amount given to Hurd was excessive at an estimated value of US$53 million, and one-sided.

But Judge Edward J. Davila of the U.S District Court for the Northern District of California, San Jose division ruled Tuesday that the plaintiffs have failed to demonstrate that the benefits and cash payment in the separation agreement were excessive, and also failed to provide specific facts sufficient to doubt that the approval of the separation agreement was taken honestly and in good faith.

The judge gave the plaintiffs 30 days to file an amended complaint.

In May 2010, HP received allegations of misconduct by Hurd, who is now president of Oracle Corp. Jodie Fisher a former independent contractor at HP, claimed through her attorney that Hurd had sexually harassed her and which exposed Hurd and HP to liability, according to court papers.

HP's board initiated and oversaw a formal investigation upon learning of the charges, and found that Hurd had at times submitted inaccurate expense reports that were intended to conceal or had the effect of concealing his close personal relationship with Fisher.

In August that year, HP announced that Hurd had resigned his positions as the company's chairman, CEO, and president, and had entered into a separation agreement and release with HP, which entitled him to receive a severance amount of US$12 million in cash, besides non-severance elements consisting of certain limited rights to previously granted equity awards.

The defendants argued that HP received valuable consideration in the separation agreement including a full release of claims against HP, an extension of certain protective covenants, including those concerning the use or disclosure of HP's trade secrets and those prohibiting solicitation of HP's customers, employees and suppliers, Hurd's cooperation post-employment with respect to transition matters, requests for information, and in any investigation or review, and Hurd's agreement to refrain from disparaging HP, its affiliates, subsidiaries, officers or directors.

Oracle announced in September, 2010 that Hurd had joined the company as president. HP which filed an action against Hurd asserting claims for breach of contract and threatened misappropriation of trade secrets in connection with his employment at Oracle, later in the month came to a resolution that required Hurd to forfeit his right to 346,030 shares of HP stock that were included in the separation package.

Plaintiffs' argument that the release of claims was illusory because there was no indication that Hurd had any claim against HP fails, the Judge wrote in his order. The argument ignored that if the board had not negotiated the terms of Hurd's departure and instead had fired him for cause or denied him severance, Hurd could have sued, bringing a claim for wrongful termination or violation of the severance plan, with attendant expense of litigation and negative publicity for HP.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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