Extended Stay America, Inc. (NYSE:STAY) announced today that it has resolved the lawsuit that it brought last fall against one of its competitors over the alleged misappropriation of confidential trade secrets.
As it previously announced on October 31, 2016, ESA sued WoodSpring Hotels LLC and two individuals claiming misappropriation of confidential and proprietary information for the purpose of unfairly competing against ESA. One of the individual defendants, Bernadette Ruby, was a former ESA sales executive; the other, Michael Docteroff, was an IT consultant. ESA claimed in the lawsuit that Docteroff, exploiting his position as a consultant to both ESA and WoodSpring and his access to ESA’s systems, provided Ruby with confidential information from ESA’s sales database, which was then used in the specific individual markets where ESA and WoodSpring have competing hotels.
In settling the lawsuit, the defendants will pay ESA a combined $1.2 million in damages, costs, and attorneys’ fees, including a requirement that Ruby repay to ESA a portion of the severance payment that she received when she left ESA. The defendants have also agreed to an injunction that requires the destruction or return of all of ESA’s confidential information, as well as to the prohibition of the future use of any ESA confidential information. For the next year, a court-appointed monitor will oversee compliance with the injunction and ensure that WoodSpring employees are aware of its requirements. Ruby is no longer employed with WoodSpring and Docteroff no longer provides services to ESA and WoodSpring.
ESA’s Chief Executive Officer, Gerry Lopez, commented: “Vigorous competition is the hallmark of our American enterprise system. We welcome it and celebrate it. But while we play hard, we play fair – and we will not tolerate unfair competition, either by our competitors or by our own employees. We are grateful to the whistleblower at WoodSpring who brought this to our attention so that it could be resolved before too much damage could be done, and hope that the message has been sent loud and clear that unfair competition will not be tolerated. We are aware that WoodSpring is under new leadership and we are confident that the current management team views these issues in the same way that we do.”
The case is Extended Stay America, Inc., et al. v. WoodSpring Hotels LLC, et al., United States District Court for the District of Kansas case number 2:16-cv-02744-CM.
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