UPDATE 1-Hilton gets subpoena over Starwood spying claims

* Hilton gets subpoena for files linked to Starwood suit

* Denizen Hotels brand temporarily suspended

* Two Hilton executives, luxury team on paid leave

NEW YORK, April 21 (Reuters) - Hilton Hotels Corp said on Tuesday it received a federal grand jury subpoena for documents related to allegations that the company and two executives stole documents from rival Starwood Hotels & Resorts HOT.N to develop Hilton's luxury brand, Denizen Hotels.

The privately held Hilton also said it has decided to suspend temporarily the development of its Denizen brand. It did not elaborate on why it was suspending development of Denizen.

Hilton received a subpoena from the U.S. Attorney’s Office for the Southern District of New York requesting documents related to the two executives, Ross Klein and Amar Lalvani.

The subpoena also requested documents related to materials that Hilton returned to Starwood in February of 2009, the company said.

Klein and Lalvani spearheaded Hilton’s attempts to launch Denizen Hotels, a luxury line intended to be Hilton’s answer to Starwood’s W Hotels chain. Klein served as head of luxury and lifestyle brands, and Amar Lalvani was head of development for the segment.

Last week, Starwood sued Klein, Lalvani and Hilton for corporate espionage, accusing its former employees of stealing trade secrets to expedite Hilton’s foray into the “lifestyle” market. For details, see [ID:nN16293349]

White Plains, New York-based Starwood said without those secrets Hilton would not have been able to launch the Denizen brand in less than a year.

Hilton said last week that the lawsuit was without merit and it intended to move forward on the development of Denizen Hotels.

It said on Tuesday, however, that it was suspending development on the brand.

Klein, Lalvani and their team are on paid administrative leave “pending Hilton’s review of the situation,” the Beverly Hills, California-based company said in a statement.

Both Klein and Lalvani were involved in the branding of Starwood’s top-end W hotel chain, but left for Hilton in June 2008.

Hilton, which was taken private by Blackstone BX.N, hired the pair to develop Hilton's own top-end chain and reinvigorate the Hilton name, which has been slow in entering the luxury market.

The case number is: U.S. 09 CIV 3862. (Reporting by Deepa Seetharaman, editing by Matthew Lewis)