GRAND RAPIDS — A lawsuit filed in late October by Grand Rapids-based public relations and investor relations firm Lambert, Edwards & Associates Inc. alleges that a former executive repeatedly breached his employment contract.
In the lawsuit filed with the 17th Circuit Court in Kent County, LE&A alleges that Stephen Linder breached his non-compete clause and engaged in fraudulent activities, violating his fiduciary responsibilities to the company.
Linder came to LE&A in 2014, when the company acquired Sterling Corp., his Lansing-based GOP political consulting firm. Sterling operated as a wholly-owned subsidiary led by Linder until his resignation in January 2017, according to court documents.
In a phone call with MiBiz, Linder declined to comment, saying the case “is a normal business dispute and things will work themselves out.”
LE&A claims it became “definitively” aware of Linder’s alleged actions on Oct. 10 after the former executive testified before the state Senate Health Policy Committee. At the hearing, Linder spoke in opposition to a bill related to the ongoing rollout of new licensing policies for companies in the medical marijuana industry.
The company alleged Linder’s testimony related to “issues and for clients that are in direct contravention of his contractual duties owed to LE&A.” His public testimony led LE&A to review Linder’s corporate email and calendar, where it discovered the executive had breached multiple parts of his contract, the company alleged in court documents.
LE&A sought a temporary restraining order against Linder and Dustin Road Company LLC — an approximately decade-old business entity registered to Linder — as various restrictive covenants such as a non-compete clause were set to expire at the end of October.
On Oct. 31, Kent County Circuit Court Judge Christopher Yates ruled in part on a motion barring Linder from using any trade secrets or confidential information owned by LE&A or its Sterling Corp. subsidiary, describing the situation as a “corporate marriage” that “has now ended in an ugly corporate divorce.”
According to LE&A CEO Jeff Lambert, the company filed the lawsuit to protect itself and its book of business.
“We have a duty to defend our business and our team,” Lambert told MiBiz, adding that the firm plans to seek a preliminary injunction and will continue to prove its underlying case. “We also believe people should abide by their contracts, and the business court’s issuance of the temporary restraining order validates our position.”
Linder said he had retained legal counsel for the case, but at the time this report went to press, he had yet to file court documents responding to the allegations.
In a statement emailed to MiBiz after this report went to press, Linder’s attorney, Deanna Swisher of Lansing-based Foster Swift Collins & Smith PC, said her client denies the claims in the lawsuit.
“The order’s prohibition regarding trade secrets and confidential information is a very common prohibition and, of course, Linder would not violate any obligation to keep trade secrets and confidential information secret,” Swisher said.
The 102-page complaint filed by LE&A and attorneys at Grand Rapids-based Oppenhuizen Law Firm PLC outlines eight different exhibits intended as evidence of Linder’s wrongdoing.
According to legal practitioners not involved in the case, lawsuits such as the one filed by Lambert, Edwards & Associates are driven largely by companies facing their fears of the unknown.
“In situations like this where you’ve got (restrictive covenants such as a valid non-compete clause in place), it’s the unknown,” said Jeshua Lauka, an associate at David & Wierenga PC, a Grand Rapids-based firm. “You’re left to speculate as far as the extent of the potential damage to your business. You don’t know who they’ve solicited, what they’ve taken from you. You don’t know, and so that is one of the factors that drives businesses to institute lawsuits like this.”
Terms of the 2014 acquisition were not disclosed at the time, but the court filings show that LE&A acquired Sterling Corp. for $600,000 in a deal that included an earn-out for Linder.
Linder resigned from the company in January 2017 once he received his last payment. Following his resignation, LE&A named Linder “of counsel” in case his services would be required in the future.
The LE&A acquisition of Sterling Corp. — which was named a finalist in the 2014 MiBiz M&A Deals of the Year Awards — allowed the political consulting firm’s national client base to have internal access to more PR services, Linder said at the time.
“This is a D.C. and New York model where large PR firms own issues that are in the public space,” Linder told MiBiz in 2014.
Executives at LE&A largely declined to discuss the lawsuit, but they expect the case will not affect the firm’s current roster of clients.
“Our Sterling division remains strong and this issue has no impact on our ongoing business or work for clients,” Lambert said.
Editor’s note: This story has been updated with comment from Stephen Linder’s attorney.