hospitalitystyle.com

(December 2010) posted on Thu Dec 23, 2010 EST

Pact prohibits Hilton from starting lifestyle chain for two years

Hilton Worldwide Inc. is banned for two years from creating a luxury "lifestyle" hotel chain under an agreement to settle a corporate-espionage lawsuit, The Wall Street Journal reports. The settlement stems from a suit filed last year by rival Starwood Hotels & Resorts Worldwide, which accused Hilton officials of stealing confidential Starwood documents to develop a new boutique-style chain.

Both companies issued news releases announcing the settlement, but provided few specifics on its terms. According to the Journal, the settlement continues a court order that Hilton cease development of its Denizen lifestyle chain. Under the new agreement, Hilton can never develop its Denizen lifestyle brand and can't start developing a similar brand for two years. Hilton also must allow a court-appointed monitor to review its marketing and branding materials to make sure they don't benefit from the information obtained from Starwood documents.

In its coverage of the settlement, The New York Times said Hilton has also agreed to make a $75 million cash payment to Starwood, and that Starwood is also entitled to another $75 million in hotel-management contracts.

Starwood's lawsuit alleged that Ross Klein and Amar Lalvani, two former Starwood executives who had joined Hilton, took more than 100,000 documents to re-create the success of Starwood's W Hotel. Both left Hilton after the suit was filed. Starwood said it discovered Hilton had the documents only after Hilton returned them. Hilton officials have said they returned the documents out of "an abundance of caution."

In Hilton Worldwide's news release on the settlement, president and ceo Christopher Nassetta said his company “regrets the circumstances surrounding the dispute with Starwood Hotels & Resorts Worldwide and is pleased to bring an end to this prolonged litigation. Hilton Worldwide is committed to fair, ethical and robust competition in the marketplace.”