Exclusive: Alliance Data Sued DoubleClick Over E-mail Purchase

Epsilon’s recent agreement to buy Abacus has brought to light a little-known but nasty legal battle between the two firms' parents, Alliance Data Systems and DoubleClick, in which Alliance Data accused DoubleClick of some pretty sleazy behavior.

In a legal assault that at one point involved suits in New York, California and Texas, Alliance Data accused DoubleClick of secretly partnering with e-mail service provider Silverpop to launch an Abacus-branded e-mail product in violation of a non-compete agreement struck when Alliance Data bought DoubleClick’s e-mail business last February.

Alliance Data also accused DoubleClick of wrongfully luring key e-mail employees back to the company who should have gone to Epsilon.

The Texas-based marketing-data-services giant claimed DoubleClick’s actions were “all part of its plan, only now coming to light, to sell the business to Alliance for millions of dollars and then to wrongly keep or take back the business and the goodwill it purportedly sold,” according to an amended complaint filed Sept. 8, 2006. The lawsuits—which ended with the Abacus purchase—stemmed from a deal DoubleClick unit struck with Silverpop to develop and market a product called Abacus Email. The product would bundle Abacus’ database-marketing services with Silverpop’s e-mail delivery platform.

The two companies announced the partnership in June, but it would never get off the ground. Alliance Data sued DoubleClick in July.

The company claimed that while it was negotiating with DoubleClick to buy its e-mail business, DoubleClick was also secretly talking to Silverpop.

At one point, Silverpop offered to buy DoubleClick’s e-mail unit, but DoubleClick decided to accept Alliance Data’s higher offer, and then work with Silverpop to create and market a new e-mail software product to replace the business it was selling, according to Alliance Data.

Abacus and Silverpop struck the deal in December 2005, two months before DoubleClick sold its e-mail unit to Epsilon.

Alliance Data executives claimed DoubleClick kept the Silverpop deal secret until the partnership was publicly announced. Alliance Data executives also claimed they had no idea Abacus had partnered with Silverpop or they never would have bought DoubleClick’s e-mail unit.

“No one at DoubleClick told me (or to the best of my knowledge, anyone else at Alliance, Epsilon Interactive, or Epsilon) that DoubleClick intended to partner with a competitor in the e-mail marketing services business,” said Denise Parent, senior vice president of acquisitions and mergers, Alliance Data, in an affidavit.

In marketing the new product, DoubleClick began directly competing with Epsilon’s e-mail business by pitching its customers, “including those acquired through the purchase agreement,” Epsilon Interactive’s then president Al DiGuido claimed in an affidavit. “Alliance now faces exactly the situation the non-competition provision was intended to prevent,” he wrote.

DoubleClick, however, claimed it was operating within the guidelines set by the purchase agreement. According to court documents, DoubleClick executives understood going into the deal that Alliance Data would not buy its e-mail unit if it planned to simply turn around and recreate its own internal e-mail deployment capability.

However, Abacus had to be able to work with e-mail service providers in order to remain competitive, according to DoubleClick.

“So the parties negotiated a compromise,” DoubleClick said in a statement defending itself. “DoubleClick would not develop its own email deployment capability and directly compete with the email business it was selling. [Alliance Data] agreed that DoubleClick … could ‘bundle’ its data business products with the email deployment services of third party providers, including competitors of [Alliance Data].

“That is exactly what DoubleClick is doing,” the statement said. “[Alliance Data] is seeking to change the explicit terms of the purchase agreement in an attempt to gain a competitive advantage it did not bargain for.” DoubleClick also claimed that Abacus customers didn’t have to use Silverpop for their e-mail deployment services.

However, Alliance Data claimed that DoubleClick’s misdeeds went beyond violating a non-compete with a new product.

DoubleClick also violated a prohibition in the agreement against soliciting employees, Alliance Data claimed. DoubleClick used raises and promotions to lure a slew of key e-mail employees to stay who were supposed to go to Alliance Data, the company claimed.

Employees who were supposed to go to Epsilon but didn’t, according to Alliance Data, were: director Kelly Bullington, senior technical architect Ola Petersson, campaign management specialists Michael Czykun and Tara Ibach, platinum support account manager Kieran Madden, technical architect Stephen Rupp, lead engineer Nghi Doan, senior software engineer Rajiv Roopan, director of strategic partnerships Dave Frankland, manager, Windows system infrastructure Jerrod Jansonius, and an employee for whom no title was furnished, William Li.

Alliance Data claimed the employees would inevitably reveal trade secrets.

DoubleClick claimed the no-solicit agreement with Epsilon came into effect only after the deal closed and pertained only to employees who accepted jobs at Epsilon. All but one of the employees Alliance Data complained about had not accepted jobs at Epsilon, according to DoubleClick. And the one who received an offer from DoubleClick after the deal closed had approached DoubleClick without having been solicited, the company said.

In August, New York Supreme Court Justice Ira Gammerman granted Alliance Data a preliminary injunction against DoubleClick, barring Abacus from offering database services bundled with Silverpop’s e-mail technology.

Things got so rancorous that after the injunction, Alliance Data hauled DoubleClick back into court over a deal Abacus reportedly had with electronics cataloger Crutchfield because Silverpop was Crutchfield’s e-mail service provider.

In any case, somehow the two were able to negotiate a deal for Epsilon to buy Abacus and end the legal brawling.

Alliance Data announced on Dec. 28 that its Epsilon unit had agreed to buy co-op database concern Abacus from DoubleClick for $435 million in cash.

As part of its agreement to buy Abacus, Alliance Data agreed to drop lawsuits against DoubleClick and Silverpop.

It is unclear why Alliance Data sued Silverpop, since the Atlanta-based e-mail service provider apparently was under no contractual obligation to Alliance Data or Epsilon.

Kay Cavender, spokeswoman for Silverpop, declined comment beyond calling Alliance Data’s suit against her company “groundless.”