NuVasive, Inc., employees approached the dinner table at the China Poblano restaurant in Las Vegas on December 28, 2011. At the table sat Andrew Cappuccino, M.D., his partner Ryan DenHaese, M.D., and three former NuVasive reps now working for a new competitor named Lanx, Inc.
“Lanx is going after all [NUVA’s] guys, ” Dr. Cappuccino allegedly said to the NuVasive reps.
This all happened after Dr. Cappuccino had a very public break up with NuVasive and the reps defected from NuVasive to join the competitor.
NuVasive Charges Breach of Duty
In an August 12, 2012 lawsuit filed by NuVasive against its former reps Michelle Kirby, Blake Bednarz and Jason Gotham, the company claims Kirby was observed competing with NuVasive while working as a Lanx rep at the Lanx Lateral Lab in Las Vegas on January 27-28. On the 27th, Kirby allegedly accompanied Dr. Cappuccino to a Cirque de Soleil performance. NuVasive claims this was a violation of Kirby’s previous employment contract with them.
The company accuses the trio of breach of “intentional and malicious violations of their duties of loyalty to NuVasive, misappropriation of NuVasive’s trade secrets, and violations of their post-employment obligations, ” according to documents filed with the U.S. District Court for Western New York.
The Cappuccino/NuVasive Split
This encounter is symbolic of the multiple lawsuits resulting from Dr. Cappuccino’s 2011 departure from NuVasive as a consulting surgeon to join the new rival.
Dr. Cappuccino is a spine surgeon with Buffalo Spine Surgery in Lockport, New York, and has served on the medical staff of the Buffalo Bills for many years. In addition to his work on the artificial cervical disc, he has been one of the leaders in bringing minimally invasive and lateral spine surgery, disc replacement and spine motion preservation to the field of spine surgery.
Dr. Cappuccino attracted international attention as the orthopedic surgeon who treated Buffalo Bills football player Kevin Everett for his cervical spine injury suffered in a game in 2007. Cappuccino’s use of induced hypothermia garnered world-wide headlines for the technique may have staved off paralysis in the player.
NuVasive engaged Dr. Cappuccino to serve as an exclusive consultant and clinical advisor in 2003. The parties entered into various general consulting and services agreements which imposed confidentiality requirements regarding his work for NuVasive and assigned any rights he had to the intellectual property developed to the company.
Kirby, Bednarz and Gotham
Kirby was primarily responsible for working with Drs. Cappuccino and DenHaese. She was given confidential and proprietary NuVasive information which she allegedly failed to return to the company after Cappuccino allegedly lured her away from NuVasive to work with him at Lanx.
Gotham and Bednarz were her supervisors who also, allegedly, failed to return proprietary information.
NuVasive’s complaint said the employees lied to the company about Cappuccino’s plans to join Lanx and then followed him to work for Lanx, taking confidential and proprietary information with them.
Cappuccino Sues NuVasive Over Cervitech
While that lawsuit plays out in New York, Cappuccino recently filed a lawsuit against NuVasive accusing the company of failing to pay him a $660, 000 “milestone payment” tied to FDA approval of the cervical disc replacement device which NuVasive acquired when it bought Cervitech, Inc. in 2009 for $80 million.
NuVasive agreed to pay $47 million upfront and another $33 million when approval was granted. Dr. Cappuccino and his fellow Cervitech inventors were to receive payments within 30 days of FDA approval of the device. That approval was granted on October 26, 2012. All other former Cervitech shareholders were paid with the exception of Dr. Cappuccino. He is seeking the payment that he says was promised him under the share purchase agreement, as well as interest from the day of the breach and attorneys’ fees and costs.
Alan Bozer, Cappuccino’s lawyer told us that NuVasive has admitted that it owes Cappuccino the money, “but is withholding payment for reasons unrelated to the Cervitech matter.” Bozer wouldn’t elaborate about those “unrelated” matters when we called him. He encouraged us to ask NuVasive why the company wasn’t paying his client, “who has fulfilled every obligation of his contract with NuVasive.”
NuVasive Claims IP Violation
The company did not comment directly on Cappuccino’s lawsuit, but gave us a statement that said: “NuVasive has strong justification for its actions; Dr. Cappuccino violated intellectual property agreements with NuVasive and owes the company far more than the amounts reflected in his lawsuit.”
Might those “unrelated” matters noted by Bozer stem from Dr. Cappuccino leaving NuVasive to join Lanx and allegedly “going after” [NUVA] guys? The answer may lie in the lawsuit filed by NuVasive against their three former employees, Kirby, Bednarz and Gotham.
According to the lawsuit, the defendants were key members of NuVasive’s sales force in Western New York before “abruptly” resigning on October 2011 to work for Lanx, Inc.
Kirby started working for NuVasive as a senior spine specialist in Buffalo, New York, in March 2006. Bednarz started working for NuVasive as a spine specialist in New York in March 2008. From July 2010 until his resignation, he was the area business manager for upstate New York.
Gotham started at NuVasive as a spine specialist in Detroit in May 2007. He was divisional sales director east covering upstate New York, Maine, Vermont, New Hampshire, Massachusetts, and Michigan.
Cappuccino Joins Lanx
Unbeknownst to NuVasive, states the suit, Dr. Cappuccino decided to unilaterally end his relationship with NuVasive and entered into a similar agreement with Lanx with a contract dated September 15, 2011. “The defendants knew of this and failed to report it to NuVasive. They also actively concealed Dr. Cappuccino’s new relationship with Lanx from NuVasive, and misrepresented their efforts to maintain Dr. Cappuccino’s business to NuVasive, ” states the lawsuit.
Defendants Follow
On August 22, 2011, Bednarz and Gotham allegedly travelled to Lanx’s headquarters in Colorado and presented a business plan to Lanx’s CEO, chief financial officer, senior vice president of sales and the company’s general counsel.
The alleged plan called for them to form a company named Empire Medical Systems, Inc. which would distribute Lanx’s products in New York and move a substantial amount of NuVasive’s business in their sales region to Lanx. They also would solicit and convert NuVasive’s sales force to Lanx so that the surgeons in their sales regions would not see an interruption in their service. “They knew Dr. Cappuccino’s intended to sever his relationship with NuVasive and sign a new agreement with Lanx at the time they presented their business plan to Lanx, ” says the suit.
By September, Lanx’s director of recruitment and Gotham allegedly exchanged emails which address materials he and Bednarz needed to submit in order for Lanx to offer employment to them.
On September 16, 2011, one day after Cappuccino signed his agreement with Lanx, Lanx’s then senior vice president of sales directed his colleagues to prepare written employment offers for Bednarz and Gotham.
Four days later, Kirby allegedly emailed Bednarz and Gotham to inform them that Dr. Cappuccino was using Lanx’s products for surgery rather than the NuVasive products he historically used.
Bednarz and Gotham forwarded this email up the chain to senior NuVasive executives, and along with Kirby, “feigned surprise” that Dr. Cappuccino would utilize Lanx products. “They were trying to induce NuVasive into believing that they were still acting in NuVasive’s best interests, when in fact, they were keenly aware of Dr. Cappuccino’s intent to join Lanx.”
Lanx Offers Employment Contracts
Lanx allegedly emailed employment offers to Bednarz and Gotham the same day Kirby made her “discovery.” Lanx emailed similar offers to Kirby and two other members of NuVasive’s Buffalo-area sales force the next day. The offers were allegedly for “significantly” more money than NuVasive paid the recipients, and are “grossly excessive” of industry standard.
Cappuccino’s “Inducement”
Documents submitted by Kirby and the others to Lanx before September 21, 2011, “prove” that Dr. Cappuccino “encouraged them to leave NuVasive for Lanx, ” claims the lawsuit.
On October 3, 2011, Kirby allegedly emailed Bednarz and Gotham and other NuVasive managers about her inability to predict what Dr. Cappuccino would do. In response Gotham informed Kirby and various NuVasive executives that he would work to regain Dr. Cappuccino’s business.
“This was, at best, intentionally misleading because they knew Dr. Cappuccino’s intentions and were dedicated to joining [him] at Lanx.”
NuVasive claims Bednarz, Gotham, Dr. Cappuccino and Lanx induced Kirby to violate her non-compete by allowing her to continue to work with Dr. Cappuccino.
Kirby resigned from NuVasive on October 17, 2011. On October 18, Kirby and the other two members of the sales force entered into employment agreements with Lanx.
On October 25, her second day on the job at Lanx, she allegedly received an email from Lanx’s senior project manager regarding the Lanx products required to adequately serve Dr. Cappuccino.
Defections Complete
Fewer than six weeks after she left NuVasive, on December 2-3, 2011, Kirby allegedly accompanied Cappuccino to the didactic and cadaveric portion of the Cornell Weill MIS Spine Course in New York City. And then on to Vegas, dinner and Cirque de Soleil.
In addition to the case in New York, NuVasive is also in the Delaware Court of Chancery over other defection of former sales reps.
What happens next? Lawyers for the parties tell us that not much new has happened since the complaints were filed and various motions for evidence offered. No trial dates have been set.
All I can say is…… KARMA IS BITCH.