Inside This Issue - News
Legal battle begins
December 13th, 2010
WILMINGTON, Del. – A judge has temporarily blocked CVS Caremark Corp. from hiring Hank Mullany, former president of the northern division of Walmart U.S.
CVS had announced Mullany’s appointment as president of CVS/pharmacy, succeeding Larry Merlo, who will become chief executive officer of CVS Caremark in May, but Walmart immediately filed suit in Delaware Chancery Court to block the move, contending that it violated a noncompete agreement with Mullany. Judge Travis Laster issued a restraining order that prohibits Mullany from joining CVS in any capacity until a court hearing scheduled for December 15.
CVS told Bloomberg News that the company and Mullany consider the allegations to be without merit and intend to “aggressively defend” against the lawsuit.
Mullany, 52, joined Walmart in 2006 and in January of this year was promoted to executive vice president and president of the northern division of Walmart U.S., with responsibility for the operations of some 1,300 stores in 19 states. He had previously been president of the retailer’s northeast division and was credited with its growth into one of Walmart’s “best-performing, highest-growth businesses.”
Perhaps more significantly, Walmart’s suit contends that Mullany was “executive sponsor” of its recently unveiled smaller-format strategy and was intimately involved with all phases of the program, including merchandising, store layout, pricing strategies and real estate. The suit also claims that when Mullany was promoted to his most recent position, he signed a noncompete agreement that bars him from working for a competitor for two years after leaving Walmart, from which he resigned in October. The company further contends that his employment with CVS, which it describes as a direct competitor, would necessarily require him to disclose confidential Walmart information that would enable CVS to gain a competitive advantage.
While Walmart has not revealed details of all the smaller formats it plans to introduce, it is widely believed that some, at least, will include pharmacies. The world’s largest retailer already operates pharmacies in most of its 4,400 domestic outlets. Moreover, Walmart has announced it will finally begin rolling out its Neighborhood Market format, which essentially is a food/drug combination store.
CVS, which operates more than 7,000 pharmacies in the U.S., competes with Walmart not only in the prescription drug sector but in the general health and beauty aids field as well, including over-the-counter medicines and beauty care. Walmart, which reshaped the retail pharmacy business in 2006 when it launched a program offering generic drugs for $4 per script, recently announced plans to partner with Humana Inc. to offer the lowest-cost prescription drug plan in this country.