Following lowered guidance for Silicon Alley’s “other” ad network, 24/7 Media has more bad news: it’s being sued by employees of a recent acquisition.
Three employees of Website Results, a company that boost clients’ placement in third-party search engines, filed a suit in Los Angeles Superior Court this week, holding parent 24/7 responsible for Website Results’ allegedly “failing to honor its employment agreements with staff.” The suit asks for damages in the “millions” — $850,000 for payment allegedly owed them, plus damages.
24/7 Media acquired Website Results back in August in an all-stock deal valued at $95 million at the time.
Marvin Mitchelson, the Los Angeles attorney best known for his work on celebrity divorce proceedings, is handling the case on behalf of the plaintiffs. The lawyer, who at one point counted Joan Collins and Robert De Niro among clients, had his license to practice law suspended in 1993 after a tax evasion conviction. He served two years in federal prisons in Texas and California, and was ordered to repay the government $2.25 million in taxes. This May, Mitchelson was reinstated into the California bar, and, apparently, is moving into the Internet realm.
Mitchelson is representing two former sales consultants, Christina Wells and Stephen Simkovich, as well as a former senior technical programmer, Garen Razoian, who the lawsuit said co-developed the technology that made Website Results possible.
The suit alleges that Website Results repeatedly gave false and untrue statements with intent to deceive and defraud employees for the purpose of financial gain. Further charges include breach of contract and misappropriation of funds.
According to Mitchelson, his clients were not fairly compensated for their work in bringing to Los Angeles-based Website Results “millions of dollars” in contracts and revenue from companies including eBay, Discover Card, and Doubleday Books. In addition, the suit alleges the plaintiffs secured major contracts with ad agencies and interactive firms including TBWA/Chiat/Day, Agency.com, and Organic.
If the suit is not settled, it will likely go to court within six to nine months.
Website Results did not immediately return phone calls. A spokesperson for 24/7 Media declined to comment for the company.
Thursday, executives at 24/7 Media had said that Website Results needed a major technological overhaul, costing about $2.5 million, and pointed to that as a reason behind reduced revenue expectations for the fourth quarter.
