The highest-profile corporate espionage case in hotel industry history has been settled, rivals Hilton Worldwide and Starwood Hotels & Resorts Worldwide have announced.
The settlement, announced late Wednesday, seemingly ends the dramatic two-year-old saga over the creation of Hilton’s since-cancelled Denizen lifestyle hotel brand. Starwood alleged that Hilton misused trade secrets stolen by former executives Ross Klein and Amar Lalvani—both of whom played a role in the formation and expansion of Starwood’s W Hotels brand and who joined Hilton shortly before the Denizen concept was made public.
Under the agreement, Hilton is barred from working on an entrant into the lifestyle hotels segment until 2013, and federal court-appointed monitors will be tasked with ensuring Hilton complies. Hilton will also pay Starwood a cash sum, reported to be US$75 million. Starwood is also entitled to another US$75 million worth of management contracts from Hilton, according to The New York Times.
Furthermore, Hilton is prohibited from acquiring or managing any lifestyle-branded hotels currently in the Starwood portfolio for the next two years, except in cases where Starwood’s branding is terminated without Hilton’s involvement.
“Starwood is proud of its leadership position in creating lifestyle brands that connect with consumers, drive loyalty and are highly profitable for our owners,” says Starwood President and CEO Frits van Paasschen. “Given the facts, we had no choice but to stand up and protect our brands on behalf of our investors, associates, owners and customers. This settlement reinforces this protection and restores a level playing field for fair competition.”
For its part, Hilton President and CEO Chris Nassetta says the company “regrets” the dispute with Starwood. “Hilton Worldwide is committed to fair, ethical and robust competition in the marketplace, and we will continue to focus on what we do best: providing exceptional services for all of our guests around the world,” Nassetta says.
As for Klein and Lalvani—both named defendants, along with Hilton, in the lawsuit—they are permitted under the settlement to seek employment in the hotel industry, provided it is not with any of a list of agreed-upon companies. That list remains sealed, however.
Hilton is barred from hiring any Starwood employee to work in its Luxury & Lifestyle Brands Group, which includes Waldorf Astoria Hotels & Resorts, Waldorf Astoria Collection and Conrad Hotels & Resorts, until 2013.
While the settlement ends the litigation between the two hotel industry powers, a criminal grand jury investigation into the case continues. However, prosecutors have privately told Hilton that it does not intend to bring criminal charges against the company, according to the Times.