- Deel and Rippling both sell human resources software.
- Rippling had unknowingly hired a person who would gather data and share it with Deel as the two startups were becoming more competitive, according to a new legal filing.
- The Rippling employee viewed and downloaded information on how to go up against Deel, and he also saw information on sales calls, demos and support requests, the filing says.
Human resources software startup Rippling sued competitor Deel in federal district court on Monday, claiming that “Deel cultivated a spy” to orchestrate a trade-secret theft.
The employee met with Deel executives and passed internal Rippling records to a reporter, according to San Francisco-based Rippling’s complaint in the U.S. District Court for California’s Northern District.
Rippling claimed in the filing Deel violated the 1970 Racketeer Influenced and Corrupt Organizations Act and misappropriated trade secrets.
The two startups are among the most world’s most valuable. Investors valued Rippling at $13.5 billion in a funding round announced last year, while Deel told media outlets in 2023 that it was worth $12 billion. Deel ranked No. 28 on CNBC’s 2024 Disruptor 50 list.
“Weeks after Rippling is accused of violating sanctions law in Russia and seeding falsehoods about Deel, Rippling is trying to shift the narrative with these sensationalized claims,” a Deel spokesperson told CNBC in an email. “We deny all legal wrongdoing and look forward to asserting our counterclaims.”
Rippling confirmed its findings earlier this month. The company’s general counsel sent a letter to three Deel executives that referred to a new Slack channel, and the Deel spy quickly looked for it. Rippling subsequently served a court order to the spy at its office in Dublin, Ireland requiring him to preserve information on his mobile phone.
“Deel’s spy lied to the court-appointed solicitor about the location of his phone, and then locked himself in a bathroom — seemingly in order to delete evidence from his phone — all while the independent solicitor repeatedly warned him not to delete materials from his device and that his non-compliance was breaching a court order with penal endorsement,” Rippling said in Monday’s filing. “The spy responded: ‘I’m willing to take that risk.’ He then fled the premises.”
Rippling hired the person whom it calls the Deel spy for a management role in 2023, as the two companies were becoming more competitive, the filing says. Deel had used Rippling’s software, but Rippling opted to not renew Deel’s contract, according to the legal filing.
The spy repeatedly accessed information about Rippling customers, quotes, sales calls, demos and support requests in internal Slack repositories, according to the filing. He found and downloaded Rippling’s guidance on how to go up against Deel for prospective business, too, the filing says.
Then, in February, a reporter at The Information sent an inquiry to Rippling that included Slack messages from inside Rippling, which the startup concluded were collected by the Deel spy, the filing says. Additionally, email records suggest that the spy met with Deel executives in December, Rippling said in the complaint.
“We always prefer to win by building the best products and we don’t turn to the legal system lightly,” Parker Conrad, Rippling’s co-founder and CEO, said in a Monday X post. “But we are taking this extraordinary step to send a clear message that this type of misconduct has no place in our industry.”
This isn’t Conrad’s first legal entanglement over data access. In 2015, ADP dropped a defamation lawsuit that claimed his previous HR startup, Zenefits, had obtained information from clients in order to provide them with payment processing services.
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