Hilton Suspends Development of Denizen Pending Legal Probe

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. April 23, 2009

BEVERLY HILLS, CA, April 23, 2009 - Hilton is temporarily suspending the development of its new lifestyle brand Denizen Hotels, following legal action by rival Starwood claiming corporate espionage and theft of confidential information.

The Denizen team is led by Amar Lalvani and Ross Klein, former Starwood employees who were instrumental in developing its W lifestyle brand, and are named as co-defendants in the lawsuit.

The lawsuit alleges theft of trade secrets, computer fraud and unfair competition.

Starwood said in its complaint that it became aware of the alleged theft of its documents after Hilton voluntarily returned eight boxes of electronic and paper files to Starwood earlier this year, with a note saying it didn't believe the materials were sensitive or confidential.

But Starwood said it in its complaint that the matter amounted to "the clearest imaginable case of corporate espionage, theft of trade secrets, unfair competition and computer fraud."

The lawsuit sets the stage for a legal battle between two of the industry's fiercest competitors.

Hilton hasn't opened any Denizen hotels, but it was actively pursuing contracts and development deals and planned to open the first in 2010. It unveiled the Denizen concept in March.

In addition to suspending the Denizen project, Hilton said it has place Ross Klein and Amar Lalvani on paid administrative leave "pending Hilton's review of the situation." Hilton has also suspended the Denizen website.

Hilton launched Denizen at a conference in Berlin, saying active development talks were under way for hotels in cities including Abu Dhabi, Buenos Aires, Jerusalem, London, Miami, Mumbai and New York.