Year in Review Continues; AVN Lawsuit Vs. XBiz Alleges Conspiracy and Sabotage; Rosenblatt Returns

In my opinion this had to be the industry’s story of the year when in Los Angeles Superior Court AVN Publications and its owner Paul Fishbein filed a lawsuit against its industry competitor XBiz, XBiz’s owner Alec Helmy and Sara Sazzman, AVN’s former director of advertising.

The suit alleged that Sazzman who had worked for AVN since 2002 before going over to XBiz, misappropriated the company’s trade secrets with the full knowledge and cooperation of Helmy and XBiz.

AVN’s complaint detailed, among other things, breach of written contract, breach of duty of loyalty, violation of computer fraud and abuse act; violation of California Penal Code 502; misappropriation of trade secrets and unfair competition.

Also named in the suit were Adnet Media aka XBiz and Webstar Marketing Group Inc., a corporation owned by Helmy. The suit identified Helmy as the president, chief executive officer and owner of the organizations identified in the complaint.

According to the allegations, Helmy and XBiz deliberately misappropriated trade secrets belonging to AVN.

“Because they could not fairly and ethically compete with AVN in the marketplace,” said the suit.

Lured by Helmy’s “promise of more money and greener pastures,” former AVN advertising account executive Sazzman conspired with XBiz to “misappropriate AVN’s protected trade secrets out of sheer greed,” the suit went on to state.

“Upon learning of Sazzman’s betrayal and XBiz’s cavalier taking of AVN’s lawful intellectual property, AVN promptly advised both of them in writing repeatedly of their wrongdoing and the consequences of their continued illegal use of AVN’s protected information.”

The suit also contended that both Sazzman and XBiz elected to ignore AVN’s warnings, not to mention its legal rights. The suit stated that AVN was left with no other choice but to avail itself of the protection of the law. AVN made its case by stating that it’s widely recognized as the preeminent source of news, information and advertisement in the adult entertainment industry in both print and electronic media.

AVN also contended that it has through great investment of time, money and effort, developed and maintained considerable confidential proprietary and trade secret information. It stores this information on its computer system and in other protected locations. This trade secret information is compiled in various ways including on a database known as “SalesLogix”.

According to the suit, this information includes detailed information, addresses and subscriber lists of 12,000 customers and potential customers.

The database also includes information, identification, e-mail addresses and other contact information regarding vendors, paid subscribers and advertising prospects as well as advertiser sales histories, account status, customer finances, vendor economic arrangements, budgets, analyses regarding sales volume potential, inventories, accounts payable and receivable, sales projections billing information, account representative commissions and information pertinent to the publication of AVN itself including sources of content and editorial procedures.

The lawsuit called XBiz a relative newcomer to the adult entertainment news and information space both in electronic and print media.

“XBiz was launched and continues to be operated on a copycat business model [to AVN],” stated the lawsuit.

AVN felt that Helmy was aware of Sazzman’s intent to “abscond” with AVN’s trade secrets and hired her for that specific purpose. AVN also believed that Sazzman, prior to her departure, deleted a majority of the electronic correspondence she had sent out to advertisers and potential advertisers via AVN’s e-mail system. AVN also believed that Sazzman “effectuated” the destruction of this information in such a way as to make recovery of the information impossible.

AVN also alleged that Sazzman deleted the information in an effort to destroy evidence of her unlawful procurement of their trade secrets. AVN says that by deleting that information, Sazzman knowingly caused the transmission of a command to AVN’s computer system thereby intentionally causing damage to the system. According to AVN, upon Sazzman’s commencement with XBiz, she began aggressively soliciting AVN’s current and prospective advertisers to bring their business to XBiz.

According to more allegations, Sazzman on behalf of XBiz and with Helmy’s knowledge and consent, made overtures to undercut AVN’s advertising rates in ways she could only have done so with access to and improper use of AVN’s trade secrets culled from the SalesLogix database. AVN also contended that Sazzman, in order to win confidence of AVN’s customers, passed herself off, by ruse, as Sara Harter, another advertising account manager who was working at AVN.

In the end, only one of these guys are going to survive because, when the dust settles, the industry cannot continue to support both entities.

But here’s an ironic postscript to that story. AVN this year re-hired Jennifer Rosenblatt basically to replace Sazzman who was replaced for a time by another employee who supposedly hurled epithets at Helmy.

Proof of what I said in a previous graph, AVN wasn’t cutting it sales-wise and brought Rosenblatt back, except that in September, 2004, then AVN advertising manager Jen-Jen sued AVN for the following:

Breach of Written Contract; Breach of Covenant of Good Faith and Fair Dealing; Wrongful Termination in Violation of Public Policy; Gender and Disability Discrimination; Harassment; Retaliation; Violation of Cal. Gov. Code 12940; and Violation of California Family Rights Act.

What prompted the suit was that Rosenblatt was fired after she requested time off to attend to a serious illness… she was replaced at work by a male. Rosenblatt had worked for many years as Senior Vice President and Sales Manager for AVN and TCI [Teddy Communications Inc]. She performed her job competently at all relevant times. At the time she was fired, she was earning more than $300,000 annually in salary, commissions and bonuses. On or about April 15, 2003, Rosenblatt was diagnosed with acute anxiety and provided with a doctor’s note recommending that she take a 30 a day leave from work.

Fishbein refused to allow her to take that leave.

But that’s not all. As detailed in her original lawsuit, within the year preceding her termination, and at times prior, co-defendant Darren Roberts repeatedly showed his dislike for women in positions of power in the workplace. Roberts, according to Rosenblatt spoke in a disparaging tone to female employees. Roberts also made inappropriate and offensive sexual remarks and gestures to women, including inappropriate and offensive remarks to Rosenblatt and persisted in such conduct.

Gene adds: The suit was settled late in 2005 for an undisclosed amount including a gag order. But from what I’ve been able to conclude, Rosenblatt got compensated enough for the average person to retire.

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