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Starwood Accuses Hilton of Massive Thefts

MANHATTAN (CN) - Starwood Hotels & Resorts claims that Hilton Hotels sent "corporate spies" to steal "hundreds of thousands of electronic files" of confidential business information and have defied a court order to return them for almost a year.

And it claims that "virtually Hilton's entire senior management" is involved in the theft and defiance.

In its federal lawsuit, Starwood claims that a "mountain of undisputed evidence" shows that at least 44 Hilton employees, including five members of its executive committee, knew about the theft of information, used it to launch a new brand of luxury Denizen Hotels and "tried to cover up" the company's actions after they were discovered.

The complaint names only two Hilton employees as individual defendants: Ross Klein and Amar Lalvani, who allegedly left Starwood to give Hilton reams of their former employer's trade secrets.

According to the complaint, the private equity firm Blackstone Group paid more than $20 billion to acquire Hilton in a "top-of-the-market, highly leveraged buyout," which placed the new owners under "intense pressure to deliver immediate results."

"But 'intense pressure' - whether from Blackstone or otherwise - is no excuse for corporate espionage," Starwood states.

In April 2009, Starwood won an injunction ordering Hilton to turn over its confidential information and trade secrets. The complaint states: "on April 23, 2009, for good cause shown the Court entered a Preliminary Injunction ('Preliminary Injunction') ordering, among other things, that Defendant Hilton return to Starwood any and all Starwood Confidential Information in its possession, custody or control, wherever located, and enjoining Hilton, Klein, Lalvani and their respective officers, agents, servants, attorneys and employees, and all other persons who are in active concert or participation with them (including, without limitation, designers, architects, consultants and advisors) from knowingly using, directly or indirectly in any way, any Starwood Confidential Information, including any information derived therefrom. For good cause shown, on July 22, 2009, the Court ordered: 'The Preliminary Injunction shall, in its entirety, remain in full force and effect throughout this litigation.'"

Starwood claims that the order caused Denizen Hotels to be shut down and forced Hilton to return files, but still "there is no end in sight" to Hilton's legal obligations being fulfilled.

At the time of this complaint, "Deliveries of documents ... continue, and documents were received as recently as yesterday, nearly a year later," Starwood claims.

Starwood seeks damages for breach of contract, breach of fiduciary duty, tortious interference, misappropriation of trade secrets, unjust enrichment, theft, conversion, fraud and violation of the Computer Fraud and Abuse Act.

The company seeks another injunction and compensatory and punitive damages.

It is represented by Charles Gilman with Cahill Gordon & Reindel.

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