March 26, 2024
Lighting Agencies Clash Over Alleged Trade Secrets Breach
Startup agent accused of exploiting confidential information, attempting to poach orders
In the tranquil landscapes of Hawaii, a legal conflict is unfolding between two competing lighting agencies. Solid State Lighting Hawaii (SSLH), the long-established Acuity Brands agent, saw Acuity Brands and other lines transition to a new competitor last summer. This shift occurred when SDLA, a San Diego-based lighting agent, expanded its partnership with Acuity Brands, extending over 2500 miles across the Pacific Ocean to establish the new agency, Hawaii Lighting Associates (HILA).
In a lawsuit filed in the United States District Court for the District of Hawaii, SSLH alleges that a key former employee and principal, Dionne Dos Santos, misused confidential information and insider insights to aid in founding the rival agency, thereby enabling the shift of Acuity Brands and numerous other lines to this new contender. In addition to Dos Santos' actions, SSLH also implicates HILA and SDLA in certain acts of wrongdoing
When Inside Lighting covered this agency shift in July 2023, we mentioned four employees of the HILA startup. What was not realized then was that two of these employees, principal DJ Diamond-Gonzalez and Chevelle Diamond-Gonzalez, are the son-in-law and daughter, respectively, of then-SSLH principal Dionne Dos Santos, who also later joined the startup agency.
The allegations
Dos Santos is accused of clandestine activities, specifically the downloading of over 21,000 files containing SSLH's trade secret information and other confidential and proprietary information. These unauthorized downloads allegedly occurred from March 29 through April 12, 2023, leading to a potential loss of competitive advantage for SSLH.
Another significant claim by SSLH involves the alleged breach of fiduciary duties by Dos Santos. The lawsuit accuses her of exploiting her access and position within SSLH to funnel crucial confidential information to HILA, thereby directly competing against SSLH while still working for the agency.
Additionally, the complaint outlines an alleged scheme to disrupt SSLH's business relationships, particularly with Acuity Brands. It is claimed that through a series of calculated moves and communications, the defendants sought to undermine SSLH's standing with Acuity Brands, thereby jeopardizing a key business partnership and revenue stream for SSLH.
The complaint also accuses SDLA and HILA of actively assisting, facilitating, or encouraging Dos Santos in breaching her fiduciary duties to SSLH. This includes allegations that SDLA and HILA were complicit in Dos Santos's misappropriation of SSLH's confidential information for their benefit.
SSLH is asking the court to to halt any misuse of its trade secrets and to recover losses stemming from the defendants' alleged actions.
The original opportunity for SSLH to join forces with SDLA
The lawsuit describes a series of events that reveal earlier discussions between SDLA and SSLH exploring possible partnership. An initial meeting in Hawaii, requested by SDLA, broached the possibility of SDLA taking an ownership stake in SSLH, a proposal that caught SSLH members off guard. Subsequent discussions in California and internally within SSLH led to the conclusion that a formal partnership with SDLA was not in SSLH's best interest, culminating in SSLH's rejection of SDLA's proposal.
These actions in Hawaii have slight resemblance to a previous situation in New Jersey where Philadelphia's Illuminations Inc. allegedly approached Liberty Lighting Group to explore the possibility to aquire the agency. Ultimately, Liberty Lighting reportedly refused the offer and lost the Acuity Brands line to Illuminations Inc.
The Delray Lighting Spec Locker
According to the complaint, HILA allegedly attempted to divert business from one of SSLH's represented manufacturers, Delray Lighting, using SSLH's confidential quotations information. A significant contention arose over the Schofield Barracks Shopping Center project, where SSLH had established a "specification lock" with Delray fixtures, ensuring SSLH's exclusive right to bid due to the unique mounting device required for the project.
HILA who was not the Delray representative, allegedly sent Delray a purchase order offering "at cost" / "0% commission price." Despite this effort, Delray refused to honor HILA's purchase order, contacting SSLH to affirm their ongoing partnership. HILA's bid, reportedly informed by SSLH's confidential pricing information, significantly undercut SSLH's initial quote, leading to HILA winning the Schofield project bid and securing an estimated $70,000 in commissions.
SSLH’s reported business trajectory
According to the complaint, SSLH's journey as the Acuity Brands agent started in 2015 with funding from Acuity Brands By 2016, SSLH met its sales targets with Acuity, achieving a level of performance that led to the "forgiveness" of its startup loan from Acuity, thereby eliminating the need for repayment.
By 2020, SSLH's financial performance reached new heights. The complaint details that SSLH's quoted and entered sales for the 2020 calendar year amounted to $3.5 million. This figure saw a significant increase in 2021, with sales reaching $7.7 million, more than doubling the previous year's performance. The upward trajectory continued into 2022, with SSLH achieving $10.1 million in sales, as recorded via AGILE, Acuity's order management system which might not include certain sales in certain channels such as showrooms, utility, and Holophane sales channels.
Today, SSLH is seeking damages from its former principal and the agencies HILA and SDLA, which now carry many of the lines previously associated with SSLH. Court records show that the defendants have not yet been served with a summons. Once served, they will have at least 21 days to file a response.
On Friday, Inside Lighting contacted Dos Santos as well as principals of SDLA, HILA, and SSLH, but none provided substantial comments on the issue.
