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Former Groupon Sales Reps Countersue Over ‘Abusive’ Tactics

Former Groupon Inc. (GRPN) sales managers countersued the company, which had accused them of taking trade secrets to Google Inc. (GOOG)

Groupon, the world’s largest online coupon site, sued two former managers in October after they left to join Google Offers, a competing venture. Lawyers for the managers accused Groupon of using “sham litigation” to bully and silence employees and obtain intelligence on a burgeoning competitor, according to court papers filed Jan. 25 in an Illinois state court.

“In its stop-at-nothing strategy to take itself public and further enrich its founders, Groupon has crossed the line,” lawyers for the managers said. “This counterclaim seeks to put an end to that abusive and illegal behavior.”

Groupon in November sold shares in the biggest initial public offering for a U.S. Web company since Google, selling 35 million shares for $700 million. The company, which was founded in 2008 and sells daily discounted deals, is facing competition from bigger rivals including Google and Amazon.com Inc. Groupon Chief Executive Andrew Mason said earlier this week that the company won’t be derailed by competition.

Julie Mossler, a spokeswoman for Chicago-based Groupon, didn’t immediately return a phone call and e-mail seeking comment on the counterclaims.

Confidential Information

Groupon claimed in its complaint that the managers, Michael Nolan and Brian Hanna, were privy to confidential information such as the company’s deal structure and pricing data and the identity of current and potential merchants.

Lawyers for Hanna and Nolan denied the two men had access to sensitive or proprietary information and argued that Groupon’s employment agreement, which bars employment by a competitor for two years, is invalid and unenforceable because its unnecessary.

“What Groupon sells, in fact, are coupons, not substantially different from the ones that have been clipped from daily circulars for over a century or printed from websites since the advent of the Internet,” Hanna and Nolan’s lawyers said in the filing. “Groupon’s clients are similarly not a secret ingredient in Groupon’s success.”

The filing accused Groupon of hiring “out-of-work young people” based on false promises and using a complicated compensation scale to undercut commissions and implement unrealistic sales quotas. As morale waned among employees ahead of the company’s initial public offering, Groupon filed the lawsuit and several others like it in an attempt to silence workers, lawyers for the managers said in the filing.

‘Rifle Through’

“This suit also signaled to employees that, should they leave, Groupon would aggressively attempt to prevent them from working for a competitor, regardless of the legality of Groupon taking such action,” lawyers for the managers said in the filing.

The men accused Groupon of using the litigation to “rifle through” its rival’s pockets by serving a third-party subpoena on Google demanding business model and pricing information for its Google Offers program.

The case is Groupon Inc. v. Hanna, 11CH36731, Cook County, Illinois, Circuit Court, Chancery Division (Chicago).

To contact the reporter on this story: Sophia Pearson in Philadelphia at spearson3@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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