Wal-Mart Sues CVS Caremark to Block Hiring of Former Executive VP Mullany

Wal-Mart Stores Inc., the world’s largest retailer, sued CVS Caremark Corp. to stop the drugstore chain from hiring its ex-executive vice president, Hank Mullany, and a judge temporarily barred him from joining the company.

CVS’s hiring of Mullany, 52, former president of Wal-Mart’s northern U.S. division, would violate a non-compete agreement, Wal-Mart said in the complaint filed yesterday in Delaware Chancery Court in Wilmington. Judge Travis Laster issued an order today blocking Mullany from taking his new post until after a Dec. 15 court hearing, according to court filings.

“Defendant CVS is hereby restrained temporarily from engaging Mullany in any employment or association in any capacity with CVS,” Laster said in the order.

Mullany, hired by Wal-Mart in 2006, oversaw operations at 587 Wal-Mart stores in 13 states including Pennsylvania, Virginia, New Jersey and New York, according to the suit. He was “privy” to Wal-Mart’s national strategies and responsible for implementing those strategies in the northeastern U.S., lawyers for the Bentonville, Arkansas-based retailer said.

Wal-Mart and CVS, the largest provider of prescription drugs in the U.S., compete over prescription and over-the- counter drugs, as well as beauty aids and health products, according to the complaint.

Disappointing Delay

“The company and Mr. Mullany believe the allegations in the lawsuit are without merit” and “intend to aggressively defend the lawsuit,” Carolyn Castel, a spokeswoman for Woonsocket, Rhode Island-based CVS, said today in an e-mailed statement.

CVS officials are “disappointed” that Mullany’s tenure at the drugstore chain is being delayed by Wal-Mart’s lawsuit, Castel said in a second e-mailed statement.

Mullany signed a non-compete agreement in December 2009 when he was promoted to president of Wal-Mart North, according to Wal-Mart’s complaint. That role put him in charge of real estate and supply-chain functions for 1,312 stores in 19 states, according to the complaint. The non-compete agreement barred him from working for a competitor for two years after leaving Wal- Mart. He resigned in October and left the company on Nov. 5.

“Mullany’s employment with CVS will necessarily require Mullany to use and disclose Walmart’s confidential information,” the retailer said in its suit. “Knowledge of Walmart’s confidential information would be extremely valuable to CVS and will be used by CVS to gain competitive advantage.”

Wal-Mart has used its purchasing power to offer lower-cost drugs and compete with CVS, analysts say. In October, it announced plans to team up with health insurer Humana Inc. to offer the lowest-cost prescription drug plan in the U.S.

Wal-Mart started filling generic drug prescriptions for $4 an order in September 2006 and has more than 4,000 pharmacies in the U.S.

The case is Wal-Mart Stores Inc. v. Mullany, CA No 6040, Delaware Chancery Court (Wilmington)

To contact the reporters on this story: Sophia Pearson in Wilmington at spearson3@bloomberg.net; Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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