In a suit filed last week, R.L. Mlazgar Associates, a company with a reputation of suing manufacturers that it once represented, filed a complaint against HLI, Litecontrol and Progress Lighting, claiming the defendants began working with Mlazgar’s direct competitor, JTH Lighting Alliance, and began withholding commissions due Mlazgar and thwarted Mlazgar’s ability to perform.
The suit claims Defendants conspired with JTH to recruit Mlazgar’s employees, steal Mlazgar’s confidential, proprietary, and trade secret information, and interfere with Mlazgar’s contracts and business relationships. According to the complaint, Defendants obtained hundreds of thousands of Mlazgar’s confidential, proprietary, and trade secret documents for their own use and for use against Mlazgar with JTH.
The suit further states that In October 2020, alleging a breach of contract, Defendants began withholding commissions and other amounts due Mlazgar and revoked Mlazgar’s access to Defendants’ sales resources. Mlazgar also alleges that Defendants broadcast to the lighting industry that Mlazgar no longer represented Defendants, thereby thwarting Mlazgar’s ability to sell Defendants’ products and imposing significant, undue costs on Mlazgar.
The suit claims that in a letter dated 17 NOV 2020, Hubbell told principal Mark Mlazgar that the contract would terminate on 16 FEB 2021 unless certain alleged defects were fixed by 17 JAN 2021. In essence, there was a two-month “cure period” where Mlazgar had the opportunity to improve—although the suit states a month earlier HLI “broadcast to the lighting industry that Mlazgar no longer represented Defendants.”
According to the complaint, during this “cure period”, HLI engaged Mlazgar’s direct competitor, JTH, to represent them in Eastern Wisconsin, even though JTH had no sales presence there. To staff and jumpstart JTH’s new Eastern Wisconsin office, the suit claims Defendants and JTH approached and recruited seven Mlazgar Employees to work for Defendants and JTH and, before leaving Mlazgar, to misappropriate Mlazgar’s confidential, proprietary, and trade secret documents.
There are a few strange things about this suit.
(1) Defendant Hubbell is a Connecticut corporation with its headquarters in Shelton, Connecticut, and its principal place of business in Greenville, South Carolina. Hubbell was formerly known as Hubbell Lighting, Inc. We find no mention of Current in the suit as Current is the current owner of HLI. As EdisonReport reported, Current completed their acquisition of HLI on 1 FEB 2022. I would think Mlazgar would sue Current, instead of Hubbell.
(2). Defendant Litecontrol is a Massachusetts corporation, wholly owned by Hubbell, with its headquarters in Shelton, Connecticut, and its principal place of business in Plympton, Massachusetts. Same thing. Litecontrol was also sold to Current.
(3) Defendant Progress is a Delaware corporation, wholly owned by Hubbell. Upon information and belief, Progress’ headquarters are in Shelton, Connecticut and Progress has a principal place of business in Greenville, South Carolina. Progress was not sold to Current, so this makes sense.
The next part of the complaint is quite damning. The suit claims “Defendants, JTH, and the Mlazgar Employees together stole hundreds of thousands of Mlazgar’s confidential, proprietary, and trade secret documents and induced numerous vendors and customers to breach their contracts and end relationships with Mlazgar—all while the Mlazgar Employees remained employed by Mlazgar.”
Mlazgar is accusing the seven employees of stealing confidential information and encouraging existing customers to end relationships with Mlazgar while they are still employed by Mlazgar. Stealing employees is wrong and we hate to see that. But it is a free market and it’s not illegal (unless there are non-competes). The accusation of document and data theft is the real issue. Also, if it is true that Mlazgar employees, were trying to shift business away from Mlazgar while being paid by Mlazgar, then that is unforgivable. But if you believe seven employees stole data, why not pursue litigation against the former employees?
The suit alleges that “Defendants provided JTH with advance bridge funding and Mlazgar’s historic sales data with Defendants.” Bridge funding is done all of the time in our industry, and I would expect HLI to share their historical data with JTH. Nothing wrong with that.
The suit really boils down to a basic question in our industry. Whose customer is it? Reps view contractors, distributors, and users as “their” customer. Unfortunately, most manufactures also view those same channels as “their” customer, too.
When it comes to our industry, the manufacturers have huge leverage over the reps and it is good to see reps fight back. But in this case, I think the fight belongs against the 7 former employees who are accused of stealing documents.
EdisonReport reached out to HLI and Mlazgar. Neither company commented on the litigation.
Read the complaint below
R_L_Mlazgar_Associates_Inc_v_HLI_Solutions_Inc_et_al__scdce-22-04729__0001.0