Turns out that Starwood Hotels has finally decided to do something about Hilton's poaching of Ross Klein and Amar Lavalani around this time last year.
Starwood filed a lawsuit against Hilton yesterday accusing Hilton, Ross and Amar of stealing hundreds of thousands of documents from Starwood in regards to their W Hotel & St Regis hotel brands (probably the Luxury Collection as well - that brand was included in what Ross managed), as well as additional information about procedures and guides in how to train staff, convert hotels, and even financial details on that Starwood worked out with their development partners.
When I first saw news of this - I thought it was a desperate attempt by Starwood to try to get some "revenge" from Hilton in taking two of their top lieutenants and launching a boutique hotel brand which stands in direct competition with W, but after reading the news release that Starwood released today - I stand corrected. (And I'd like to point out - it's not very often that a company releases a news release when they are filing a lawsuit.)
Whenever an executive quickly jumps ship from one company to another - especially when the two companies are major competitors and essentially have the same core business, you somewhat expect a lawsuit. Company A - the company the executive worked at originally, will be worried that the executive will take compeitive information to their new employer, Company B - but there is a limit on how much recourse Company A has. Usually thats why there are non-compete clauses put into employment contracts, but it's not clear if Ross or Amar had that in their contract - or if there were - did they ignore it.
Additionally, you can prevent (and somewhat easily discover/track) an employee from taking documents and information directly from Company A to Company B - but you can't prevent the employee from simply utilizing the knowledge they have learned or experienced while working in Company A, and utilizing that knowledge in Company B.
A few years ago I was working at a boutique commercial real estate firm and when I left to focus back on my school work I remember a conversation I had with the President of the company who warned me (in a polite, gentle way) that I cannot use the information I learned while at his company wherever I end up working. I remember asking - "Thats essentially like asking me not to work in real estate", whereas his response was - "Well, no - you can't contact my clients, you can't use my procedures, and you cant use my forms, documents, etc. Obviously, I can't prevent you from using the knowledge of the real estate industry or how to make a deal work in a new company."
Ross & Amar seem to have gone the step further and actually taken - both physically and electronically over 100,000 documents, some of which they apparently openly used in their offices and other departments within Hilton. Normally you'd expect to have a small number of documents that were purposly taken - or perhaps forgotten about - then discovered, landing in Company B's hands - but its not so often that it includes 100's of thousands of documents as this lawsuit mentions.
The kicker is the only reason they were caught was when 8 boxes of that material was sent to Starwood from Hilton's legal team after finding them while preparing for arbitration on another lawsuit that Starwood filed against Hilton.
Some examples which made it clear that Hilton stole Starwood's idas is the Denizen's brand "den of zen" which apparently is VERY closely modeled after W Hotel's "Zen Den" - a product that hasnt even been rolled out in the W Hotel brand yet.
Starwood is asking that Hilton to certify that all documents have been destroyed, scrap development of the Denizen brand, and to start over in creating a boutiqe brandand prevent any more Starwood employees from jumping ship over to Hilton's corporate offices to work on their luxury brands and products.
Since Hilton's own lawyers found these documents and physically sent them back to Starwood, Hilton doesnt seem to have any way out of this sticky situation, unless of course all those documents were nothing more than PR material that's found in any hotel, website or PR persons desk in the hotel industry. Hilton is goign to have to prove somehow that alot of the concepts which went into the Denizen brand were created prior to Ross & Amar joining the Hilton team, or were concepts that are really unique to Hilton and Denizen.
Who knows what's going to happen in this case, as it has far reaching implications for Hilton - primarily the future of their boutique hotel brand, which has made alot of headway in a very short amount of time, and also the jobs of Ross, Amar, and certain other employees who they recruited from Starwood. It's possible that Hilton may be legally forced to let them go - or may fire them at anyway because of the illegalites they have committed and the precarious position that they have put Hilton in.
Looking back at all of this - things sort of make sense.. Prior to Ross & Amar joining Hilton, Hilton really was not any major competition to Starwood in the luxury/boutiuqe market. They had no boutique product, and the Waldorf Astoria Collection was slowly starting up, but didnt seem to be anything more than high end, individual hotels being part of this "Collection" which gave the customer suggestions that it was going to be super luxury because of its namesake.
Once they joined, it's obvious that alot of the changes which occured at Starwood over the past 10 years or so - creation of the Luxury Brands Group, extensive branding/expansion of the W Hotels name, is being rapidly reproduced at Hilton - their creation of the Prestige Portfolio (encompasing the Waldorf Astoria, Denizen, Conrad and Waldorf Astoria Collection) and creation of Denizen which looks like it's going to go through a branding/marketing machine that parallels W's.
That brings up the question - is it really those two individuals which set the course for Starwood's changes over the past few years, and then are making those same changes at Hilton, or is it the instituational knowledge that Starwood has created, with the help of hundreds of employees, developers, marketing consultants, etc - which Hilton became aware of via these stolen documents?
Thats the question. I'm going to be following this closely. Because with the launch of Denizen & the creation of the Prestige Portfolio, htings were really starting to turn around at Hilton - it was starting to look alot like Starwood, which as we all know - I admire and respect and feel is at the forefront of the lodging industry. It's possible that in one fell swoop - Starwood will look like Starwood again, and Hilton will have to start from scratch.
Or - and this has happened to other firms in the past - Hilton may end up purchasing Starwood (or vice versa - if they are able to find the capital) to put this lawsuit to rest, merge all the operations and create one super hotel brand.
andrew@alconic-inc.comAndrew Calvo is a 26 year old Commercial Real Estate Advisor in New Jersey. I live in Tinton Falls, NJ. This blog is about my passions - primarily hotels, commercial real estate, and development, etc.Since I have been in High School Ifve had numerous jobs, but the field which has always interested me is Real Estate, Hotel Development and Construction. I consider myself a zealot in that area - I try to absorb as much as I possibly can, take the experiences that I learn, or read about and use them in my life. www.passionsofazealot.com/2009/04/17/hilton-has-serious-issues-to-get-through-with-this-starwood-lawsuit 
