Dick's Sporting Goods Accuses Rival Modell's of Spying

A lawsuit claims the CEO of Modell's used a disguise to spy on rival Dick's.

March 4, 2014 -- Did Modell's Sporting Goods spy on rival Dick's Sporting Goods? In court papers, Dick's claims it did -- and that the spy was no less than Modell's CEO himself.

According to the Bergen Record, the complaint, filed in New Jersey superior court for Mercer County, alleges that CEO Mitchell Modell and a female companion entered a Dick's store in Princeton on Feb. 8. Modell allegedly told a Dick's store manager that he was a senior vice president of Dick's, visiting in order to gather information and to meet with Dick's CEO Edward Stack.

The complaint alleges that Dick's personnel, believing Modell to be a bonafide senior executive, allowed him access to the store's private areas and gave him information about store operations.

Dick's complaint accuses Mitchell Modell of civil conspiracy and trespass. It seeks compensation for unspecified damages, according to the Record, plus a ruling that would bar Modell or any Modell's employee from again visiting the private areas of Dick's or making use of the information gained during the February visit.

According to the Record, the complaint alleges Modell wanted information on software Dick's uses to expedite shipping products to customers.

Retailer: rival CEO posed as exec to get secrets

Dick's, in response to a request by ABC News for comment, said through a spokesperson, "Dick's Sporting Goods takes seriously the protection of its confidential and proprietary information. As a matter of company policy, we cannot comment on pending litigation."

A request for comment from Modell's got no response.

If, as alleged, Mitchell Modell got information by pretending to be someone else, it would not be a first for the CEO. In 2012, appearing on the reality TV show "Undercover Boss," he shaved his head and donned a Yosemite Sam mustache in order to go undercover at his own company in order to get information from Modell's employees, including a sales associate and a truck driver, who did not know they were talking to their boss.

Sean Campbell, co-founder of Cascade Insights, a competitive intelligence-gathering firm in Oregon, tells ABC News that many retailers have codes of ethics that define what is and isn't permitted when one competitor snoops on another. Intelligence-gatherers who belong to SCIP (the Society of Competitive Intelligence Professionals), he says, must further abide by that organization's code of ethics, which expressly prohibits concealing one's true identity.

Attorney Richard Horowitz, an authority on trade secrets and competitive intelligence law, helped SCIP revise its code in 1999. He tells ABC News that, while he has not read Dick's complaint and cannot comment on pending litigation, he can speak to the general question of when snooping becomes illegal.

As a general rule, he says, it's illegal for an information-seeker to use "a misrepresentation, a trick or some gimmick" that causes the holder of a trade secret to breach their duty to keep it confidential.

Sports fans attempt escalator kayaking at Dick's

"That's the test: Have you induced someone to breach their duty of confidentiality?" he says, adding that if yes, then you've broken the law. "If I call you up and say, 'I'm working for the CEO, and he wants you to fax me Document X, which contains a trade secret,' and you do so, then my misrepresentation caused you to breach your duty of confidentiality."

It's both common and permissible, he says, for rival retailers to keep tabs on one another, to stroll around the public areas of one another's stores and make competitive use of whatever information they have gained. Nor are they under any obligation to declare themselves to be the competition, unless asked. "Companies generally have a policy that requires their employees to identify themselves truthfully," he says.

"A legal line is drawn where a misrepresentation induces a breach of confidentiality on the part of the information holder," he said.