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Sprint, BellSouth Tiff Heads to Arbitration

Executives at telecommunications giant Sprint Corp. were breathing a sigh of relief Tuesday after a court ruling cleared the way for the hiring of BellSouth's Gary Forsee as chief executive officer.

Atlanta-based BellSouth had earlier won a temporary restraining order blocking the rival telco from hiring Forsee, arguing that a non-compete clause in his employment agreement barred him from working for a competitor.

However, Atlanta Superior Court Judge Stephanie Manis struck down restrictive covenants in Forsee's employment agreement and Sprint said afterwards that it intends to give the CEO job to Forsee after 30 days.

A statement from Kansas-based Sprint said it was happy with the ruling and plans to move ahead with the management chance once the 30-day arbitration period ends. But, it's not quite a foregone conclusion that Forsee will be allowed to accept the Sprint job.

A spokesperson for BellSouth told the Wall Street Journal that Monday evening's court ruling represented a victory because of the scheduled arbitration proceedings. An arbitrator can still effectively block Sprint from hiring Forsee because of BellSouth's stance that he would divulge its secrets to a rival.

If Sprint succeeds at arbitration, Forsee will replace chairman and CEO William Esrey, who is reportedly being forced out over tax shelters. Sprint's second in command, chief operating officer Ronald LeMay is also departing the embattled firm. Esrey is undergoing treatment for lymphatic cancer and was slated to depart before the tax shelter scandal broke last week, according to published reports.

The legal victory for Sprint centered around the geographic restriction in Forsee's non-compete clause with Judge Manis ruling they were "unenforceable." The judge also ruled that some sections of his agreement with BellSouth were "unreasonable" because they blocked Forsee from pursuing a wide range of employment activities.

A spokesperson for Sprint declined comment on the upcoming arbitration proceedings, saying the company's statement spoke for itself. In the statement, Sprint highlighted Judge Manis' findings "that the non-compete provision contained in...the (employment) agreement is void and unenforceable, and the TRO entered in regard to that provision is hereby DISSOLVED."

"The court ordered that the arbitration be scheduled and completed "within 30 days from the day and time of this order concerning the non-disclosure provision ONLY. Failure to do so will not result in any further continuation of the TRO, which shall expire by its terms 30 days from the date and time below, absent any further written extension by the Court," Sprint said.

Sprint and BellSouth compete in the long-distance and wireless markets.