HomeAway got sued a couple of months after acquiring Instant Software and the dispute has left up to 70 to 80 professional management companies of vacation-rental properties hoping their websites don't crash and scrambling to rebuild and redeploy them on new servers.
The controversy relates to HomeAway's Sept. 17, 2010, acquisition of Instant Software, which offers property managers an electronic distribution and online booking tool, ISI Link.
A week before the HomeAway-Instant Software deal closed, Instant Software allegedly entered into a partner agreement with Denver-based TravelStorm, according to an ongoing lawsuit that TravelStorm filed against HomeAway Nov. 24, 2010, in U.S. District Court in Denver.
TravelStorm's customers are professional managers of vacation rental properties and the company builds, hosts and powers 70 to 80 of these sites with its Rezolution software.
TravelStorm alleges that HomeAway breached its obligation to honor the Instant Software-TravelStorm contract, which required Instant Software to give TravelStorm access to "Princeton" proprietary software and ISI Link so TravelStorm could develop websites and listings for vacation rentals owned or managed by Instant Software customers.
TravelStorm was purchased from Instant Software in June 2010 by Phillip Hopcroft, son of Instant Software co-founder David Hopcroft.
Part of the suit revolves around intellectual property and another facet involves hardware. Neither party challenges the fact that when HomeAway purchased Instant Software's assets, HomeAway took control of the servers used by TravelStorm.
And, HomeAway now declines to maintain these servers because Phillip Hopcroft allegedly has not authorized them to do so. The TravelStorm suit alleges:
Although not included in the asset purchase, the Defendants [HomeAway and Instant Software] took control of six TravelStorm servers, a 'rack' which holds the servers, two switches, two firewalls, two load balancers and intellectual property known as a source code for Rezolution, Rezolution Edge and Rezolution FHS, that was the property of TravelStorm.
In a battle of dueling customer letters, obtained by Tnooz, Carl Shepherd, HomeAway co-founder and chief development officer, wrote to TravelStorm customers April 12: "We understand that TravelStorm customers have been given 30 days to move their websites to other facilities."
Shepherd said HomeAway intends to keep the servers powered up in the interim. "However, should your website fail, we do not have the right to make any code changes that may be required to start it back up," Shepherd wrote.
HomeAway has requested that TravelStorm retrieve the six servers which power the vacation rental websites in question, but TravelStorm has refused, Shepherd alleges.
For its part, TravelStorm's Phillip Hopcroft wrote to customers April 14 that TravelStorm has not issued a 30-day cancellation notice and won't pick up the servers because HomeAway allegedly won't give TravelStorm access to passwords for hardware and software. "... These issues will be resolved in a court of law," Phillip Hopcroft wrote.
Meanwhile, in an interview, Phillip Hopcroft says TravelStorm has run out of money and the six-member staff has been reduced to one employee, himself.
Phillip Hopcroft alleges that HomeAway sought to drive TravelStorm out of business because it has designs on the company's intellectual property, namely Rezolution and a successor product, Rezolution Edge. In the suit, TravelStorm even alleges that HomeAway hired away "David Machelya, who was responsible for the technical design and implementation of the TravelStorm products..." and that the company can't roll out new products in a timely manner without Machelya.
TravelStorm's complaint seeks a judgment in its favor and an undetermined amount of damages.
HomeAway answered the TravelStorm complaint with one of its own on Jan. 21, 2011.
In sum, HomeAway's complaint either denies the allegations or argues that it doesn't have enough information about the charges.
In a statement on May 4, HomeAway said:
Due to the ongoing litigation related to this matter, we are not able to fully comment on this subject. We can confirm HomeAway has not purchased TravelStorm or any of its assets. However, months ago we encouraged TravelStorm to retrieve its servers and offered them assistance in doing so, but as of today they still haven’t. We have also kept Travelstorm’s servers powered on even though we have no contractual obligation to do so and have not been compensated.
All of this leaves at least some of TravelStorm's customers, which include companies ranging from Maui Condos by Owner to Ocean Front Vacation Rentals and Mountain Laurel Chalets, hustling to transition their vacation rental websites to different technologies and hosts.
Michael Magliocchetti, a principal and general manager at TravelStorm customer Key to The Rockies, is very angry about the situation.
"I feel victimized because of their business deal," Magliocchetti says of the HomeAway-Instant Software transaction.
Magliocchetti says that with the TravelStorm servers currently subject to HomeAway's hands-off warehousing, Key to the Rockies has experienced operational problems maintaining some of the 100 or so vacation rental properties on its site and adding new ones.
And whether or not a 30-day deadline is in effect for transitioning TravelStorm-powered websites elsewhere, Magliocchetti says he's going to have to rebuild his company website and find a new host.
Several companies, including BlueTent Marketing, LiveRez and GuestStream, have been pitching their services as TravelStorm successors, Magliochetti says, with one recommending a new guest reservation system and accounting software.
"This would be a material change to the entire website aspect of my business," he adds.
"It is a big issue for a small company like mine," Magliocchetti says. "It's a curveball that is going to cost us money to make the change. It was handled haphazardly and with no respect to customers."
And, another TravelStorm customer, who declined to be identified, was similarly upset at his company's current predicament.
He says his website offers several hundred "separate and distinctly different properties" and he won't be able to build a new website in 30 days.
"If the site crashes, we'll sue," the property manager warns.