Business

Charlotte-based hotel chain settles lawsuit alleging rival stole trade secrets

Charlotte-based Extended Stay America has settled a lawsuit against one of its competitors for $1.2 million over the alleged misappropriation of confidential trade secrets.
Charlotte-based Extended Stay America has settled a lawsuit against one of its competitors for $1.2 million over the alleged misappropriation of confidential trade secrets. dhinshaw@charlotteobserver.com

A Charlotte-based hotel chain has settled a lawsuit against one of its competitors for $1.2 million over the alleged misappropriation of confidential trade secrets.

Extended Stay America sued WoodSpring Hotels, a Wichita, Kansas-based hotel chain, and two of Extended Stay America’s former employees last October. It said the two former employees exploited their positions to acquire confidential sales database of the company, which was subsequently used in the markets where the two hotel chains compete with each other.

The confidential data includes customer lists, clients’ contact information and pricing by geographic market.

One of the individual defendants, Bernadette Ruby, was the company’s vice president of sales operations before she left the company to work for WoodSpring as a sales executive. The other former employee, Michael Docteroff, was an information technology consultant who had been with Extended Stay for more than 10 years.

In settling the lawsuit, the two former employees and WoodSpring will pay the company a combined total of $1.2 million in damages, costs and attorneys’ fees, Extended Stay said in a news release. The settlement also includes a requirement that Ruby repay Extended Stay America a portion of the severance payment that she received when she left the company.

An injunction was also issued that requires the destruction of Extended Stay America’s confidential information and the prohibition of the future use of this information. A court-appointed monitor is expected to oversee compliance with the injunction.

Neither Ruby nor Docteroff is currently employed by or providing services to WoodSpring, according to the news release.

In addition to Ruby, WoodSpring has hired at least a dozen other former Extended America Stay employees, including five in vice president, senior vice president, and executive vice president positions, according to the complaint Extended Stay filed in federal court in Kansas.

WoodSpring did not immediately respond to a request for comment.

“Vigorous competition is the hallmark of our American enterprise system,” said Gerry Lopez, CEO of Extended Stay America, in a statement. “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.”

Extended Stay America operates more than 600 hotels in the U.S. and Canada. It specializes in serving guests who stay for longer periods at hotels. Approximately 69 percent of the hotel chain’s total revenues come from guests who stay five nights or longer. Under a heavy debt load, the company filed for bankruptcy in 2009. A group of private equity firms, including Blackstone, bought the company out of bankruptcy in 2010. It went public again in 2013.

Share prices of Extended Stay America closed up more than 2 percent Monday at $18.62.

Wei Zhou: 704-358-5240

  Comments