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Reverses for Infogroup in Gupta Suit

April 10 2015

Database giant and former ORC parent Infogroup has suffered a setback in its lawsuit against former CEO Vin Gupta for illegal practices at his new firm DatabaseUSA, including the alleged theft of Infogroup's database. Attempts to throw out DatabaseUSA's defence are among the pleas rejected.

Judge Throws Out Infogroup Claims against GuptaAfter being sacked from Infogroup, Gupta set up a new company called Database101 (trading as DatabaseUSA, Infofree.com and AtoZdatabases), with a team which included several of his former colleagues. A year later in 2011, Infogroup claimed that Gupta's firm had obtained its database from former employees, and was using it illegally. In the subsequent lawsuit, Infogroup said it had caught its competitor using one of the 'oldest tricks in the book'; inclusion of a made-up company on its database. Gupta's firm was alleged to have sent this company advertising material just days after its inclusion on the list. In addition, Infogroup's suit also claimed Gupta's firm had poached more than twenty of its employees, some with confidential information said to have been obtained 'prior to their departures'.

However, United States District Judge John Gerrard has now ruled against Infogroup on three initial counts. In a court document, the judge said that while some of the data in Infogroup's database may come from private sources or its own information-gathering, a 'substantial' amount of data had been compiled from publicly-available sources. The judge also stated that three of the five individual defendants were 'terminated' by Infogroup before the seed data had been inserted into the Infogroup database. Also none of the former Infogroup employees (with the exception of Gupta, who left Infogroup in 2008) had the necessary access to Infogroup's database to have 'perpetrated a heist'. As a result, DatabaseUSA's defence will be heard, the judge rejecting Infogroup's motions for a preliminary injunction, motion to strike the defence and its motion to dismiss counterclaims. The case now looks set to proceed to a full hearing.

In a separate case, back in February 2014, InfoGroup was forced to pay $13m to resolve investors' claims that directors had sold the company 'on the cheap', to bail out Gupta, its founder. Delaware Chancery Court Judge John Noble found that Gupta had used a 'pattern of threats and bullying' to force the Board to offload the company to CCMP in a 'quick sale', and that Gupta had disrupted the Board's attempt to find the best price for InfoGroup by 'influencing the list of potential bidders, conducting unsupervised negotiations, and leaking confidential information about the sale'. Gupta and other Board members acknowledged no wrongdoing under the settlement.

Please note that based on misleading information received (Infogroup Loses Lawsuit Against DatabaseUSA in Federal Court), we at first wrongly stated that Infogroup had 'lost the lawsuit', whereas in fact it is only the three initial motions that have been ruled out.

All articles 2006-20 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

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