Printer Titans Clash Over Former Executive

Two titans of the printer industry--Lexmark and Hewlett-Packard--are waging a pitched legal battle over the future employment of veteran Bruce Dahlgren. The outcome could have serious repercussions for the printer industry and channel.

According to court papers filed by Lexmark's attorneys, Dahlgren, who served as Lexmark's vice president and general manager of Lexmark's North American Printing Solutions and Services divisions, allegedly violated his noncompete agreement in January when he jumped ship to work for rival HP, based in Palo Alto, Calif. (see Related Links, right).

Almost as soon as Dahlgren accepted the newly created HP post of senior vice president of worldwide enterprise sales on Jan. 6, HP lawyers filed a pre-emptive lawsuit in California superior court contesting the legality of Dahlgren's noncompete agreement. HP has also indemnified Dahlgren from any legal costs or losses incurred in the fight over the noncompete agreement.

Days later, Lexmark filed a countersuit in the Kentucky court, seeking an injunction to prevent Dahlgren from assuming his post at HP for at least 12 months. If he is allowed to work for HP, he should not be able to recruit other Lexmark employees for at least three years, the countersuit maintains.

Both HP and Lexmark declined to comment on the litigation.

So far, according to court papers, Lexmark has won the first round. While the lawyers argue which state has legal jurisdiction, the Kentucky court agreed that Dahlgren's defection would case irreparable harm to Lexmark and issued a preliminary injunction that prevents Dahlgren from working for HP in North America for at least one year.

"It really hurt them to lose him," says Ian Hamilton, printer analyst at Current Analysis. "Lexmark is really trying to protect everything right now; they feel like they are losing a lot."

Dahlgren is free to conduct non-North America business for HP, and he reportedly has set up an office in San Diego, where he now claims legal residence.

Dahlgren's legal residency is paramount, since California's employment laws are far more lenient than Kentucky's, and noncompete agreements are often not recognized by the California courts. Lexmark's complaint placed Dahlgren's residence as Lexington, Ky.

After six years as a Lexmark executive, Dahlgren reportedly earned $400,000 to $500,000 annually in salary and bonuses, according to court testimony reported by local newspaper Lexington Herald-Leader. He also received stock options, which boosted his annual compensation to nearly $750,000 a year.

Lexmark is seeking reparation of nearly $600,000 in stock options it paid Dahlgren. Dahlgren was to forfeit those options should he breach the terms of his employment agreement. According to the Herald-Leader, Lexmark has filed a lien on Dahlgren's Lexington home until the stock issue is resolved. Dahlgren's Lexington home is on the market with an asking price of $779,000.

NEXT: Implications for the printer industry.