Perot Barred From Competing With EDS for Profitable Deals

Times Staff Writer

In a ruling that seemed to place Texas billionaire H. Ross Perot’s new computer services company in legal limbo, a Virginia court Thursday sharply limited Perot’s ability to compete for business with archrival Electronic Data Systems, the company he founded and later sold to General Motors.

The judge ordered Perot and his new company to cease immediately “soliciting, negotiating for, entering into or performing any contract or other business relationship that contemplates or calls for any profitable return to (Perot or his firm) at any point in time.”

The judge said Perot’s new firm can only solicit not-for-profit work until December, 1989, the expiration date of agreement Perot made not to compete with EDS. The ruling appeared to preclude Perot from signing contracts before December, 1989, that would only produce profits after that date.


The ruling by Circuit Court Judge William G. Plummer in Fairfax, Va., followed three days of hearings in a lawsuit by EDS charging that Dallas-based Perot Systems had violated an agreement that he would not compete with EDS for at least three years after Perot severed all ties with GM in 1986.

Still, the impact of the ruling on Perot Systems, Perot’s Dallas-based firm, remained unclear Thursday. Both Perot and Dallas-based EDS, which filed the lawsuit against Perot, claimed victory after the ruling was handed down. Perot argued that his new venture could continue to operate as it has since he founded it in June.

“We are very pleased; we think it is a fair ruling,” Perot said in a statement. “Our customers and our prospects are delighted. And we look forward to getting out of the court and going back to work.”

By contrast, EDS officials said the ruling would effectively force Perot to stop work on any profit-making computer services business.

“He seemed happy, and we were happy too, so we will have to see what happens,” said Penny Pasquesi, a spokeswoman for EDS. “But we feel like we’ve won.”

Perot’s battle with GM’s EDS unit represents the most heated clash between the maverick Texan and General Motors since his controversial ouster from GM’s board in late 1986. As part of his $700-million buyout that year from GM, Perot agreed not to compete with EDS or hire away EDS executives for three years--until December, 1989.

But a loophole in the agreement allowed Perot to start up a not-for-profit company within 18 months of the buyout. When that deadline passed in June, Perot set up Perot Systems, hired a handful of top EDS executives and announced a new computer services contract with the U.S. Postal Service.

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The postal contract was structured so that Perot Systems would not make any money until December, 1989, thus, according to Perot, satisfying the terms of the buyout accord. He also sought to win the computer services business of the Texas Medicare system, a giant contract held by EDS.

Pasquesi said Thursday’s ruling should stop Perot from seeking any more business contracts before December, 1989, that, like the postal deal, are structured to defer profits. She also said the ruling should force “severe modifications” in the existing postal contract.

“I would take the ruling to include contracts already awarded for profit,” said Pasquesi.

Jim Vanloozen, a spokesman for the Postal Service in Washington, said the agency’s attorneys had not seen the ruling Thursday and could not comment on how it might affect the Perot contract. But as a result of a separate legal challenge brought by EDS and other competitors, that deal has already been suspended pending further review.

The text of the Virginia court’s final ruling is expected to be issued today, and attorneys for both sides are expected to pore over it to determine exactly how much freedom Perot has retained.