On the morning of Friday, April 4, 2014, the managers at Stryker Corporation’s headquarters in Kalamazoo, Michigan, knew something was wrong. Something out of the ordinary was happening in Northern California.
Five Northern California sales representatives from Bakersfield and Fresno had gone AWOL and couldn’t be reached.
Over the course of that day, Stryker Sales Manager Burr Cota, and several other Stryker employees attempted to reach their sales reps by phone, email and text messaging multiple times. None of the five—Brett Sarkisian, Keegan Freeman, Michael Nordyke, Taylor Smith and Bryan Wyatt—returned any of the messages.
Defected to DePuy
The next day, Saturday, April 5, without any advance notice, the reps all resigned, effectively immediately, via resignation letters sent by FedEx.
The following week, Stryker discovered that all had taken jobs with DePuy Orthopaedics, Inc. and orthopedic surgeons who were previously Stryker customers were scheduling surgeries with DePuy through the five, now DePuy, reps. Prior to that time, none of those surgeons had apparently used DePuy products.
Stryker Sues
It immediately became “readily apparent” to Stryker managers that the missing five had breached their employment agreements and duty of loyalty to Stryker, and that DePuy had engaged in tortious conduct in connection with the “misdeeds” of the former employees. Those are the charges in a lawsuit filed by Stryker on May 30, 2014 against the five former reps and Warsaw, Indiana-based DePuy Orthopaedics.
Brett Sarkisian and Bryan Wyatt started at Stryker in February 2008 as Reconstructive Sales Representative. Michael Nordyke began in May 2011 as a Trauma Sales Representative. Taylor Smith and Keegan Smith were both hired as Reconstructive Sales Associates in December 2011 and June 2012, respectively. Both were promoted to Sales Representative in January 2014.
Before resigning, Stryker claims the defendants solicited at least five Stryker customers to terminate their business with Stryker in favor of DePuy.
Stryker “Decimated”
According to the suit, the above noted conversions of business, which happened over the course of a single weekend, could only occur if the defendants conspired with DePuy and with each other to transition those major customer accounts to DePuy while still employed by Stryker.
Stryker also said it discovered that all or some of the defendants solicited one another to leave Stryker en masse without prior notification to DePuy.
“It’s clear the Defendants engaged in a calculated and systemic attempt to decimate Stryker’s Recon and Trauma business in the territory, ” states the lawsuit.
As a result of the defendants’ “wrongful conduct, ” Stryker anticipates losing 90% of its recon business, 60-70% of its trauma business and has been unable to staff reconstructive revision and shoulder surgeries.
Given the loss of all of its recon sales reps, Stryker claims it will take years for the company to regrow its market presence in the territory. “It will take Stryker approximately 12 to 18 months to train new Recon sales reps and it will take at least that long, if ever, to rebuild relationships with the doctors in this market.”
The company projects it will lose $3.4 million worth of business in 2014 and additional amounts in later years-due to the wrongful conduct.
Premeditated Conspiracy Alleged
Stryker says it relies heavily on its sales representatives and the relationships they cultivate on Stryker’s behalf with the surgeons and hospitals in their respective territories. The reps provide technical product information and specifications, coordinate training for surgeons utilizing its products, and are frequently present during surgical procedures. As a result, the reps become the face of Stryker to its customers.
Those customers typically establish long-standing relationships with Stryker and abrupt changes to different manufacturers are uncommon. Typically the company and the surgeon or hospital enter into a contract containing certain terms and conditions. The negotiations of those terms typically take weeks, if not months. Therefore, argues Stryker, the defendants and DePuy must have been cooking up this scheme long before the reps resigned.
Before using DePuy products, the surgeons would be required to learn about the technical specifications and requirements of the new products and negotiate a contract between the company and surgeon. Stryker’s suit says none of these events could have occurred over the April 5th weekend. The transition period would take weeks, if not months. The defendants would have had to do all this before leaving Stryker.
Cover Up of Deception
In fact, claims Stryker, the reps purposely misled Stryker to cover up this “conspiracy.”
Before quitting, the defendants allegedly loaded a number of fictional surgeries into Stryker’s system. Following the resignations, Stryker learned those cases did not exist.
Stryker believes the defendants did this to hide their intent to leave Stryker en masse and their efforts to convert Stryker’s business to DePuy prior to their resignations. “They began soliciting Stryker’s customers to leave Stryker and move their business to DePuy before leaving Stryker, ” alleges the lawsuit.
On April 15, Wyatt covered five surgeries on behalf of DePuy with a surgeon who, prior to Wyatt’s departure, was a Stryker customer. The other defendants did the same, says Stryker. These customers had previously generated millions in annuals sales for Stryker. Before the resignations, DePuy had no presence in the territory. Stryker says DePuy didn’t even have a sales representative in the area.
Employment Agreements Cited
Stryker says it invested a lot of time and money in training and development of defendants, who were given access to confidential and proprietary information. Therefore, Stryker required all the defendants to enter into post-employment, confidentiality and non-compete agreements.
All the defendants, according to Stryker, agreed that they would not solicit, attempt to solicit, induce or influence, or assist another to solicit, induce or influence any Stryker customer to terminate its relationship with Stryker, for 12 months after employment.
They all agreed to the same thing regarding any Stryker employee, agent, or independent contractor. Stryker’s lawsuit exhibits all the former employees’ contracts. As we’ve seen in previous lawsuits, those agreements can become a point of dispute between the parties.
Stryker – Synthes Round One
This isn’t the first time these two aristocrats of orthopedics have clashed over sales reps in Northern California.
In late summer and fall of 2011, as DePuy and Synthes were merging, three Synthes USA spine sales representatives in San Francisco—Michael Russell, Jonathan Sassani and Kristen Phillips-Cheng—resigned from the company and promptly went to work for Stryker Corporation.
Synthes accused Stryker of raiding their sales force in the San Francisco area to “obtain an improper competitive advantage through the use and disclosure of Synthes’ confidential information and trade secrets by Synthes’ former sales employees….”
Stryker could have cut the language from the Synthes suit and pasted it into their current suit as they allege the same damages and conduct. Synthes claimed the defendants breached their contractual duties to Synthes by using confidential information and trade secrets to solicit Synthes’ customers in violation of the one year Non-Solicitation Agreements.
That lawsuit was eventually settled out of court in March 2012.
Demands
Stryker is demanding a jury trial to consider the following counts:
- Breach of Contract and Duty of Loyalty against the five former reps.
- Aiding and Abetting Breach of Duty of Loyalty, Tortious Interference With Contract and Prospective Economic Advantage with Stryker’s Workforce and Customers and Corporate Raiding, against DePuy.
- Stryker is also charging Unfair Competition against all the defendants.
Stryker is asking the court to stop the defendants from soliciting Stryker’s customers, prospective customers, and Stryker employees. The company is also seeking actual, incidental, compensatory, exemplary, punitive and consequential damages in an amount to be determined at trial.
Lawsuits Galore
As the number of orthopedic manufacturers continues to decline through consolidation and demand driven by newly insured patients climbs, it’s likely more reps and distributors will look around for their best deal.
Zimmer Holdings, Inc. recently accused Stryker of a “Trojan Horse” poaching scheme in Texas. Stryker sued Biomet, Inc. last fall accusing Biomet of poaching two sales reps from them in Louisiana and New York. Smith & Nephew sued a Biomet distributor in Austin, Texas in 2012.
In the meantime, if anyone has seen the five AWOL Stryker reps wandering around in Northern California, tell them to phone home.
