REPORT FROM THE U.S.—Federal prosecutors have requested that Starwood Hotels & Resorts Worldwide’s corporate espionage lawsuit against Hilton Worldwide be halted so as not to interfere with a criminal investigation into the matter.
Federal officials are seeking a six-month stay of discovery in the civil suit, according to a 14-page filing made 19 February by the office of Preet Bhara, U.S. Attorney for the Southern District of New York. The government, which has already begun interviewing “certain individuals,” intends to conduct more interviews with witnesses during the next several months, the filing said.
Federal officials are concerned about the potential ramifications of the similarity between the civil and criminal proceedings.
“A stay is appropriate, because, among other things, the plaintiff in this action has actively pursued discovery with a view towards finding out what has occurred between various witnesses and the United States Attorney’s Office,” the filing states. “Moreover, potential defendants in the criminal case would otherwise be able to use the broad civil discovery rules to obtain information that they could not obtain in the criminal case and then tailor their testimony and defenses to conform with the government’s proof.”
Among the evidence the government said Starwood has subpoenaed include: all documents between defendants concerning the criminal investigation; all documents concerning communication with the U.S. Attorney’s Office; and copies of subpoenas connected with the investigation.
“In sum, the government will suffer irreparable prejudice if the parties are permitted to obtain civil discovery prior to the conclusion of the government’s criminal investigation,” the filing reads.
Rebekah Carmichael, a spokeswoman for the U.S. Attorney’s Office for the Southern District of New York, declined to comment beyond what was disclosed in the filing.
A defendants’ response in the civil trial had been due by 6 February, but no such filing was made. A status conference in the case was scheduled for 17 March.
“Hilton Worldwide continues to fully cooperate with the government’s investigation and supports the government’s motion to stay discovery in the Starwood litigation matter,” a Hilton spokesperson said.
Starwood, the plaintiff in the case, objects to the government’s motion, according to the filing. A Starwood spokesman declined to comment.
Starwood last April sued Hilton and accused the hotelier along with former Starwood executives Ross Klein and Amar Lalvani, who were responsible for overseeing Hilton’s luxury and lifestyle brands and segments, of pilfering massive amounts of electronic files after being recruited to Hilton in May and June 2008.
Included in the allegedly stolen files were marketing documents, budgets, plans and other proprietary information related to Starwood’s own proposed lifestyle brand that it intended to launch in its W properties, “the Zen Den.” In March 2009, Hilton announced its own lifestyle brand: “Denizen.”
In a filing on 14 January in the U.S. Southern District of New York, Starwood claims Hilton executives—including CEO Christopher Nassetta and president of global development and real estate Steven Goldman—knew of and condoned the actions taken by Klein and Lalvani. At least 44 Hilton executives knew about the theft of Starwood materials, the filing alleges.