Starwood Sues Hilton for Theft of Trade Secrets

Starwood Hotels & Resorts Worldwide, Inc. has filed a lawsuit against Hilton Hotels Corporation and its senior executives Ross Klein, global head of Hilton Luxury & Lifestyle Brands, and Amar Lalvani, global head of Hilton Luxury & Lifestyle Brand Development, in the U.S. District Court for the Southern District of New York.

The lawsuit alleges that Klein, former president of the Starwood Luxury Brands Group, and Lalvani, former senior vice president, Starwood Luxury Brands Group, aided and abetted by Hilton, stole proprietary and highly confidential Starwood information which was used to expedite Hilton’s entry into the lifestyle hotel market, reposition its luxury brands and substantially reduce its costs and risks of doing so.

Klein and Lalvani were recruited to Hilton in June 2008 following its $20 billion plus acquisition by Blackstone Group. The lawsuit alleges that Klein and Lalvani, directly and through other Starwood luxury brands employees they recruited to Hilton, stole more than 100,000 electronic files before and after they joined Hilton, in violation of both their contractual and fiduciary duties.

The lawsuit also alleges that among the stolen materials was confidential information about Starwood’s W hotel brand, which Hilton used in the development of its Denizen brand.

In November 2008, Starwood initiated arbitration with Klein over the non-solicitation provisions in his employment contract and separation agreement, and put Hilton on notice to preserve relevant information.

Starwood said that three months later, and just days before Hilton announced the launch of its new lifestyle brand, Starwood received from Hilton eight large boxes of hard copy documents as well as computer hard drives, zip drives, and thumb drives containing more than 100,000 electronic files downloaded from Starwood computers, much of it highly proprietary. It was at this point that Starwood first became aware of the theft.