Amazon could prevail in Target non-compete dispute

Photo: Arthur Valdez

Former Amazon executive Arthur Valdez is scheduled to start a high-level supply chain job at Target next week, but a lawsuit by the online retailer could prevent him from doing so while having a chilling effect on other retailers keen to poach talent from Amazon.



Several published reports on March 22 indicated that Amazon had filed suit seeking to block Target’s hiring of Valdez as the company’s new executive VP and chief supply chain and logistics officer. The hiring of Valdez, a 16 year Amazon veteran, was announced on Feb. 29. He is scheduled to join Target on March 28, reporting to COO John Mulligan, and seen as playing a key role in Target’s efforts to grow its online business.



The suit alleges that Valdez, who also previously worked at Walmart and Kmart, “cannot lead Target’s supply chain operations without referencing confidential information learned and developed by him at Amazon to drive superior performance in exactly the same areas.”



There could be some merit to that claim and if Amazon prevails its victory would not be without precedent. The best most recent example of a retailer blocking a former senior executive’s desired career path involved Walmart and CVS. In November 2010, Hank Mullany resigned from his role as president of Walmart’s northern U.S. division. A month later, CVS announced plans to hire Mullany as president of its pharmacy business.



At the time, Walmart was developing new small format store that contained a pharmacy and a drive through window – not unlike a traditional drug store. Walmart sued CVS claiming Mullaney’s hiring violated his non-compete agreement because the executive possessed intimate details about the retailer’s overall strategy and plans for the new format, which at the time was viewed as promising driver of growth for Walmart.



Walmart prevailed in the matter and Mullany ended up becoming CEO of ServiceMaster for two years until he left to become president of Toys “R” Us. He left the toy retailer last year and now leads his own consulting company advising private equity clients on acquisitions. Meanwhile, in an ironic twist, Walmart earlier this year announced plans to close all of the small format stores, known as Walmart Express, that it opened after scuttling Mullaney’s effort to join CVS.



Valdez’s aspirations to join Target, are reportedly barred by an 18 month non-compete agreement about. Mullany had a two year non-compete that precluded him from working at a competitor with annual sales greater than $5 billion. Inclusion of the annual sale stipulation in the non-compete agreement helps explain why a high-powered former Walmart executive like Duncan Mac Naughton, who once served as chief merchandising and marketing officer for the world’s largest retailer, recently accepted a position as CEO of Mills Fleet Farm, a privately held operator of 35 stores. Mac Naughton’s non-compete agreement with Walmart will lapse this November.