Hilton, Starwood Settle Espionage Suit

Hilton Barred from Launching Lifestyle Brand until 2013

An agreement was reached in December between Hilton Worldwide and Star­wood Hotels and Resorts in the highly publicized trade-secrets case filed by Starwood in 2009. Under the terms of the settlement, Hilton cannot launch a new lifestyle brand for two years, among other restrictions.

According to papers filed Dec. 22 with the U.S. District Court for the Southern District of New York, a court-appointed monitor will ensure that Hilton complies with the conditions. Among them: Hilton cannot use or distribute any Starwood information; until 2013, Hilton cannot acquire, manage or own any Starwood Lifestyle Brand hotel currently owned, operated or licensed by Starwood; Hilton cannot hire any Starwood employee to work within or above the Hilton Luxury & Lifestyle group before 2013.

While Hilton said some terms of the settlement, including monetary payments, are confidential, the New York Times reported that Hilton agreed to pay Starwood $75 million to settle the case. "Hilton Worldwide regrets the circumstances surrounding the dispute with Starwood Hotels & Resorts Worldwide and is pleased to bring an end to this prolonged litigation," said Hilton president and CEO Christopher J. Nassetta in a statement.

Starwood filed suit in April 2009, alleging that former employees Ross Klein and Amar Lalvani took classified company information when they left to work for Hilton. (Both were placed on leave at the time of the suit.)

A former executive of both companies, who knew the players, was unsparing in hindsight: "The people involved brought a high degree of arrogance to anything they touched," said the executive, who wished to remain anonymous. "They didn't even need to take information in the first place, having worked with the W concept from its inception. It's a high price to pay for stupidity."

At this point it's unlikely Klein and Lalvani will be pursued for criminal charges, said M&C legal expert Jonathan Howe, Esq., president of Howe & Hutton. "In a sense, the timing was a little fortunate for Hilton," noted Howe. "It prevented them from opening a new brand just as the market went so far south."