Legal News

Starwood Lodges New ?Corporate Espionage? Claims Against Hilton

By Ashby Jones

Oh how we love the Starwood-Hilton smackdown. Accusations of corporate espionage! Allegations of theft! Awful ideas for hotel-chain names! We wish there were a new filing in the case every day to write about.

Lucky for us, we’ve got one today. In an amended complaint filed Thursday, Starwood on Thursday raised new allegations about the role of top Hilton Worldwide executives in the escalating corporate-espionage case. Click here for the WSJ story, from Peter Lattman, and here for the amended complaint.

The quick backstory: Starwood sued Hilton and two former Hilton executives last April, alleging that they stole more than 100,000 documents containing “competitively sensitive information” and used it to pursue a rival to Starwood’s successful “W” hotel chain.

On Thursday, Starwood amended the complaint — filed in federal court in White Plains, N.Y., alleging that Hilton’s misconduct reached the highest levels of the chain’s management, including its chief executive officer, Christopher Nassetta, and its head of global development, Steven Goldman. The complaint says that the alleged theft was known to and condoned by at least five of the ten members of Hilton’s executive committee.

A Hilton spokeswoman declined all comment. A lawyer for Goldman, Dan Gitner, said: “The new allegations are false, and the U.S. attorney’s office has told us that Mr. Goldman is not a subject or target of its investigation.”

That said, the Law Blog reviewed a letter sent Thursday by Nassetta to other Hilton employees. The letter said, in part:

The amended complaint does not name any additional defendants beyond Ross Klein, Amar Lalvani and the company, nor does the amended complaint add any legal causes of action beyond those alleged in the original complaint.

. . .

As this is a legal matter, I am not able to provide you with further details, but I do want to assure you that we take these matters very seriously and they are being addressed at the highest levels of the organization.

To recap some of the key responsive steps taken by Hilton: In November 2008 when Hilton’s top management first became aware that former Starwood employees Mr. Klein and Mr. Lalvani had brought Starwood materials with them to Hilton, Hilton’s legal department commenced an internal investigation that resulted in Hilton returning to Starwood several boxes of materials that originated at Starwood. In April 2009, without any discussion with Hilton, Starwood filed its original complaint in this action and issued a press release. Since the original complaint was filed by Starwood, Hilton terminated Mr. Klein and Mr. Lalvani and has discontinued its Denizen brand.

Perhaps the feds aren’t looking at Goldman. But according to Lattman’s story, the U.S. attorney for Manhattan continues to investigate whether Hilton Worldwide and its former executives should face criminal charges for stealing trade secrets and other intellectual property. The Hilton spokeswoman said the company is cooperating with the U.S. attorney.

In February 2009, Hilton delivered to Starwood a batch of Starwood confidential documents, which included among other things details on development sites and marketing strategies. Hilton’s general counsel attached a letter to the boxes saying that much of the material appeared “to be neither sensitive nor confidential” and were being returned “in an abundance of caution.”

Thursday’s filing alleges for the first time that Nassetta had knowledge of the documents about three months before Hilton began returning them to Starwood. The complaint alleges that at least 44 Hilton managers were sent, received or copied on Starwood confidential documents.

Full post as published by Law Blog - WSJ.com on January 15, 2010 (boomark / email).