Markets

Inside the Agency.com vs iCrossing Lawsuit

By Jim Edwards

Updated on: November 11, 2008 / 5:16 PM EST / MoneyWatch

The management at iCrossing are up to their eyeballs in trouble, if the $19.5 million lawsuit filed against them by Agency.com is to be believed. One should never trust legal complaints -- there's always another side to the story. But this one, in which Omnicom's Agency.com accuses its old managers of leaving the shop and poaching all their best employees and clients, is so detailed that it leaves one wondering what iCrossing's possible explanation could be.

You can read the complaint yourself here: It's full of names. But if you can't be bothered to do that, here's a digest of the claim:

Donald Scales [pictured] was Agency.com's CEO until 2006. When he left the business, he and Agency.com entered into a separation agreement. The complaint states:

Under the Separation Agreement, Scales was supposed to serve out a paid notice period during which he would remain an employee (with the duties of loyalty that go with being an employee) for a period of 180 days. This was provided to allow Scales time to look for non-conflicting employment.

That's a key accusation, because it establishes a paper trail that locks Scales into a timeline that his lawyers will have difficulty arguing does not exist. The suit goes on:

Scales took the Company's money but he did not remain loyal during the notice period or honor his promises. He quickly chose to pursue conflicting employment and became employed with a competitor, Defendant iCrossing, first as its Chief Operating Officer, then additionally as its President, and ultimately as its Chief Executive Officer. iCrossing, then under Scales' direction and control, promptly began raiding Agency.com's employees and customers.

OK, sounds serious but there's no dates here, so perhaps there's a hole in Agency.com's arguments...

This led to a dispute between iCrossing, Scales and Agency.com that culminated in a Confidential Settlement Agreement, Release and Covenant Not to Sue effective July 27, 2006 ... In the Settlement Agreement, Scales agreed to refrain from soliciting Agency.com employees and Agency.com customers for eighteen months - a term that did not expire until January 28, 2008

Yet, solicit employees and customers they did. The wide-spread employee raiding that Defendants engaged in led to the closing of Agency.com's Dallas office in November 2007, and decimated Agency.com's Chicago office.

Oops. Scales now appears to have signed two pieces of paper on two different dates, promising that he wouldn't do something that history indicates actually occurred. Again, Scales better have a good lawyer on this. But how does Agency.com know all this? Because it has already dragged a bunch of these guys through depositions:

Through these depositions, undisputed evidence was revealed showing that iCrossing and Scales extended offers of employment to at least a dozen Agency.com employees before the restriction against iCrossing soliciting or hiring Agency.com's employees had expired. It also was discovered that Scales and several former Agency.com employees had solicited customers of Agency.com on behalf of iCrossing. Further, [a bunch of Agency.com employees], all fiduciaries of Agency.com, participated in the solicitation of an Agency.com customer on behalf of iCrossing while still employed by Agency.

Ouch! Next comes the money part:

Scales received good and valuable consideration for his agreements in the Separation Agreement. Among other things, as part of the Separation Agreement, Agency.com agreed to employ Scales until August 3, 2006, and to continue paying through that date, a total of $180,000.00, while he looked for other employment that did not violate his agreements.

Agency.com also agreed to pay Scales an additional $180,000 in discretionary separation pay, commencing with the payroll period following the end of the Notice Period. Agency.com performed its side of this bargain and began making its payments to Scales in accordance with the agreement. In total, Agency.com made payments to Scales in excess of $145,000.00.

Nice work if you can get it. You can tell it's personal when the lawyers print your compensation details -- they're trying to drive wedges between Scales and his lesser-paid colleagues. Scales' behavior seems strange here: With golden eggs in hand, Agency.com alleges that Scales set about trying to kill the goose that was laying them for him:

On or about June 15, 2006, Scales returned Agency.com's laptop computer to Agency.com in an inoperable state. All files were inaccessible. In fact, the computer could not even be turned on. Not only was this a violation of his contractual obligations to preserve the information on the computer, it probably destroyed evidence regarding what Scales had been doing with the computer.

It could be in innocent error; maybe he dropped it. But destroyed evidence never looks good in court.

How else is Agency.com so sure of the key accusation, that Scales solicted employees and clients when he had signed legal agreements not to? Because, the suit states, Scales posted the news of his successes on iCrossing's web site!

News articles posted on iCrossing's website, based in part on interviews with Scales, credited the hiring activities to Scales saying Scales "snared key executives" and was "bringing on staffers" of Agency.com, and generally described the circumstances as a raid of Agency.com. iCrossing ratified and promoted the media's characterization of its hiring activities by posting links to the news articles on its website.

Agency.com's lawyers also have some persuasive eye-witness detail:

Upon information and belief, Scales attended a dinner in Chicago in March 2007, ... at which Scales announced how well iCrossing was doing and indicated that he could really use a great web development team like the folks at the table. ... Scales further said ... he would just love to "back up the bus" at Agency.com's doors and load Agency.com's team on the bus and take them over to iCrossing.... Of the nine Agency.com employees believed to have attended the dinner, seven resigned and went to work for iCrossing.

In addition to Scales, Agency.com is also furious with Marlin Jackson, who left Agency.com to become iCrossing's VP of new business:

To be clear, Jackson's primary duty as Vice President of Business Development of Agency.com was to develop and retain customers on behalf of Agency.com. Yet, it is apparent that before resigning from Agency.com, Jackson went as far as discussing specific iCrossing products with an Agency.com customer. And, while on Agency.com's payroll, Jackson actively tried to divert business from this Agency.com customer to iCrossing.

In Jackson's deposition on June 27, 2008, Jackson admitted to, among other things, the following: a. In the month prior to his last day of employment with Agency.com, Jackson assisted iCrossing in obtaining two projects for Marriott/Ritz-Carlton - a client of Agency.com's Dallas office. When this meeting was set up (on or around May 8, 2006), Jackson and [Lori] Wilson were still Vice-Presidents of Agency.com . Further, Wilson was an Agency.com employee until May 22, 2006. So, if she attended the May 17th meeting with Marriott/Ritz-Carlton, she did so while still employed by Agency.com. The e-mails to Marriott/Ritz-Carlton on May 8, 2006, refer to Jackson being VP, Business Development, South of iCrossing and to Wilson being Creative Director of iCrossing.

Again, if Agency.com really does have time-stamped emails establishing this, then Scales et al have problems. Agency.com concludes:

iCrossing and Scales gutted Agency.com's Chicago office - to the degree that the bus envisioned by Scales apparently was not big enough. For, on May 5, 2008, iCrossing announced that it had to move to larger offices in Chicago to accommodate all of the employees (many of them Agency.com employees) it had acquired in the year prior.

I look forward to iCrossing's brief in response.