• by Wendy Davis  @wendyndavis, November 11, 2008

In a rare move for the online agency world, digital shop Agency.com has sued its former CEO, as well as rival digital shop iCrossing, for allegedly poaching employees and clients.

In a complaint filed in state court in Dallas last week, Agency.com alleges it was the victim of "massive employee raiding," as well as "gross acts of disloyalty" and "misappropriation of Agency.com's confidential information and trade secrets."

The digital shop named former President and CEO Don Scales--who left Agency.com in February 2006 and joined iCrossing shortly afterward-- as well as iCrossing and nine other Agency.com defectors, as defendants. Agency.com alleges it had to close its Dallas office as a result of the exodus. The shop is seeking $19.5 million in damages.

The heart of the complaint is that Scales and iCrossing violated an agreement with Agency.com--entered into in July 2006, after Scales was already working at iCrossing. That agreement called for Scales to refrain from soliciting employees of Agency.com, headquartered in New York, for 18 months. It also called for iCrossing, based in Scottsdale, Ariz., to refrain from hiring Agency.com employees for 12 months.

Agency.com alleges that Scales and iCrossing broke this latter promise by offering Agency.com employees jobs before the term expired.

But even if that's true, it's not clear that courts will enforce the no-hire provision, said employment lawyer Ronald Manthey, a partner Morgan Lewis's Dallas office.

Manthey said that courts in other cases have held that companies violate antitrust law when they agree to refrain from hiring each other's personnel because such agreements restrict employees' wages.

But, Manthey added, a court might rule that the agreement in this particular case was valid, if it was the only way to remedy whatever harm Agency.com suffered from Scales' defection.

Agency.com alleged in the lawsuit that Scales, as former CEO, was given confidential company information, including personnel evaluations and financial data.

The complaint itself also includes details that agencies normally keep under wraps. Among other tidbits are the specifics of the severance packages. When Scales and Agency.com decided to part ways in February, 2006, Agency.com agreed to pay Scales $180,000 in severance and another $180,000 to remain on the payroll for six months--during which time he allegedly was supposed to seek "non-conflicting employment."

Agency.com also alleged that defectors contacted clients and arranged for iCrossing to work for those clients. One former Agency.com employee allegedly helped iCrossing obtain two projects for Marriott/Ritz-Carlton, which was a client of Agency.com's Dallas office.