An Annapolis digital commerce agency, Compass Marketing Inc., has filed a lawsuit in Maryland Federal Court after two former executives left to launch a competing business, Flywheel Digital, LLC. Compass claims the two executives stole proprietary information and diverted clients to the new business.
The lawsuit for supposed trade secret theft, racketeering, and a litany of state law claims was filed on February 14, 2022, nearly eight years after James C. “Chip” DiPaula, Jr. and Patrick Miller left Compass to found Flywheel Digital LLC, and almost four years after Flywheel was sold to a subsidiary of UK-based Ascential plc. The purchase price was for up to $400 million, with an initial payment of $60 million and the rest as contingent earn out payments over the following three years, according to the lawsuit.
Compass hired DiPaula in 2010 and Miller in 2011. Both men resigned in 2014, one day after they had formed their new company, the complaint claims.
A motion to dismiss the case describes it as “simply a lawsuit by a failed competitor looking to cash in on Flywheel’s success.” A memorandum of law in support of the motion to dismiss was filed on May 25, 2022, the latest entry in the court docket.
The lawsuit has attracted some of the biggest names in the law community, with one media outlet describing it as a “Battle of Legal Titans.” Rockville-based Stein Sperling commercial litigation attorneys Jeff Schwaber and Judy Cornwell were highlighted in the BayNet online news, which first broke the story, for their role supporting defendants in the complex, multi-party federal trade secrets lawsuit.
Also on the Flywheel and Ascential defense team are attorneys with the D.C. and Baltimore offices of Venable and a team from New York City’s Fried Frank Harris Shriver and Jacobson LLP, including Michael Keats, known for serving as the managing director of Goldman Sachs’ litigation and enforcement during the 2008 financial crisis.
Serving as legal counsel to Compass Marketing are notable attorneys such as former U.S. Deputy Attorney General Rod Rosenstein of King and Spaulding LLP, marking Rosenstein’s first case since leaving the Department of Justice. The suit was filed by Morgan, Lewis and Bockius, a global law firm with attorneys listed from Washington, D.C., Chicago, Philadelphia and Houston, on behalf of Compass Marketing.
According to the Compass Marketing website, “Our unique approach tightly integrates sales, marketing, creative, and digital services to help our clients succeed.” Service areas include a digital practice, creative agency, technology and specialty-customer business teams, offering “expertise and precise analytics to drive multi-channel sales penetration.”
With offices in Baltimore’s Locust Point, Seattle, London and Tokyo, Flywheel Digital markets itself as “a managed services company focused on accelerating brand growth in digital retail…We’ve spent years solely focused on deconstructing the eCommerce machines, helping hundreds of brands exceed fair share. Flywheel is the global leader in retailer paid search planning, execution, and optimization, partnering with more than 400 brands.”
Honorable Judge Michael White, his son (a Maryland State Trooper) George White, and St. Mary’s County Deputy States Attorney Daniel White have all been named as defendants in the suit being brought by Michael and Daniel’s brother, Compass Marketing CEO John White. More in the coverage by BayNet which broke the story.