Former Workers At Packet Engines Are Suing Alcatel Class-Action Lawsuit Claims Paris Company Broke Promises

When Spokane-based Packet Engines agreed to be acquired by Alcatel SA of Paris last year, both companies touted the $325 million buyout as an ideal pairing.

Now, 11 months after the agreement was announced, the merger has been tarnished by lawsuits and lay-offs.

On Tuesday, 14 former Packet workers filed a complaint in U.S. District Court in Spokane naming Alcatel and three of its executives. The suit alleges that the French-based communications equipment maker violated state and federal securities laws. It also contains allegations of breach of contract, wrongful termination and misrepresentation.

Bob O’Brien, an Alcatel spokesman in Plano, Texas, said Wednesday the company does not comment on matters involving litigation.

Damages sought were not specified in the complaint, and plaintiffs referred inquiries to their lawyers at Lukins & Annis.

Bernard Daines, founder of Packet, which makes high-speed networking equipment in the Spokane Valley, already has filed two lawsuits against Alcatel in connection with $6 million being held in an escrow account. Daines left Packet earlier this year and is working on another start-up venture, Worldwide Packets.

Last Friday, Daines filed another complaint in federal court in Spokane seeking an estimated $350 million in damages as a result of the Packet acquisition. The suit names four top Alcatel executives and alleges securities law violations and misrepresentation.

In the former employees’ suit, they claim Alcatel executives made a series of guarantees that influenced how employee stockholders voted on the merger last December.

Daines’ suit contains almost identical allegations.

The promises, the complaints maintain, included offering Packet workers stock options in Alcatel; the assurance that Packet would remain independent; and a pledge that the Packet work force would increase significantly and jobs would be secure.

Since the buyout, however, Alcatel has laid off at least 42 Packet employees. Others have left the company on their own. About 150 are employed by Packet in Spokane, the company said Wednesday. That’s down from a high of about 210 after the sale.

Packet’s general manager, P.J. Singh, said hiring has taken place in recent weeks.

But Singh added, “Obviously, this has gone from an independent company to a more-integrated one,” which was part of the reason for selling to Alcatel.

Along with the layoffs, plans for a new Packet headquarters in Spokane have been shelved. And the suit also alleges Alcatel did not fully follow through on an employee stock-option proposal.

“The employees and Bernard Daines would never have voted in favor of this merger” if they knew what actually was going to happen, said Bill Hyslop, an attorney representing the former workers.

Although several venture capital companies had a sizable stake in Packet, Daines - based on his stock holding - could have scuttled the deal, said Jerry Trunkenbolz, Daines’ attorney.

Packet is now being rolled into a business group called the Alcatel Internetworking Division, based in Calabasas, Calif. Packet is expected to phase out its name and brand identity as part of the change.