Big Lots retailer sues Tampa research firm: Insider trading threat or just bullying tactic?
Wake up and good morning. If you're reading the national business headlines, federal prosecutors are now talking about an "epidemic" in insider trading and ever bigger Wall Street firms are getting dragged a widening investigation.
On the flip side, a small Tampa research firm is also entering the spotlight. According to the Wall Street Journal (story here), discount retailer Big Lots Inc. filed a lawsuit Monday in Florida state court aimed at Tampa's Retail Intelligence Group. The research group sells stock pickers on "realizing threats and declines ahead of other investors."
Big Lots alleges the firm pried information out of store managers, in effect stealing trade secrets and aiding and abetting employees' breach of fiduciary duty, according to the Journal. Big Lots has asked the court for an injunction to immediately stop what it calls "wrongfully induced" snooping. The Journal reports Retail Intelligence had not seen the suit as of Monday evening and director Derek Noce declined to comment.
Big Lots, based in Columbus, Ohio, claims it suffered in the wake of Retail Intelligence's disclosures, which show details on inventories, payroll and margins. In the highly competitive business of discount retail, this kind of disclosure can harm a company and its share price, Big Lots claims, the Journal reports. The story adds:
"When Big Lots caught wind of an Oct. 20 Retail Intelligence report, it found the breach of ethics 'jaw dropping,' recalls general counsel Chuck Haubiel, who filed the suit with lawyers from New York's Cravath, Swaine & Moore LLP. 'We're serious about protecting our confidential information,' Mr. Haubiel said. 'Legitimate research firms do not seek to obtain nonpublic information to tip off selected investors at the expense of others.' "
Ooooh, such a gray area for business research firms. This lawsuit ought to be most enlightening as to what constitutes aggressive, smart business intelligence gathering and what veers into insider trading.
A Reuters commentary suggests this lawsuit "looks like bullying to me. The researchers went out and got intelligence on individual store sales and pieced those datapoints into a picture of a company which was about to disappoint the stock market. They were right. And now, for their pains, they’re being sued by Big Lots, which—given its earnings and stock price—really ought to have bigger things to worry about."
More to come!
-- Robert Trigaux, Times Business Columnist