A federal judge in Michigan ruled on November 19, 2015 that a former New Orleans sales rep for Stryker Corporation must face the music of breach of contract and breach of fiduciary duty charges.
Christopher Ridgeway, the former rep, tried to make a technical argument that he worked for Stryker Leibinger, not Howmedica Osteonics, a Stryker subsidiary that is suing Ridgeway, and therefore only Leibinger could issue a non-compete agreement.
“Common-Law Rule of Reason”
The judge was having none of that. He said that Michigan does not prohibit non-compete agreements outside of the employer-employee context. “Michigan has a common-law rule of reason that contemplates the enforceability of non-competition agreements that qualify as reasonable.”
Ridgeway and Biomet Sued
Stryker fired Ridgeway on September 10, 2013 for allegedly engineering an elaborate scheme to take his Stryker customers to Biomet, Inc. Stryker then sued Ridgeway and Biomet for Breach of Contract and Fiduciary Duty, Misappropriation of Trade Secrets and Tortious Interference. In a 2013 article titled “Flippin’ Cakes and Poachin’ Reps in the Big Easy, “ we reported that Stryker said Ridgeway used secret code words to engineer the scheme. The “flipped” customers were allegedly referred to as “pancakes.”
Stryker claims that Ridgeway used his knowledge of Stryker’s confidential and proprietary information to enter the market and sell his genetic testing devices to Stryker’s customers and diverted Stryker’s funds to promote his personal business.
In early September 2013, Stryker said it learned that Ridgeway was devoting at least 50% of his time to operating two medical supply side businesses, through which he was “exploiting relationships with Stryker’s customers to sell other medical devices.” Stryker also said it learned that Ridgeway was requiring other Stryker employees to participate in such sales endeavors for his side businesses.
Non-Compete Questions
MassDevice reported that the judge also ruled that Ridgeway’s alternative argument, that the subsidiary not party to the non-compete should not be able to enforce it, should be aired out at trial.
“The evidence is sufficient to create an issue of fact as to whether Ridgeway was ever employed by Stryker Leibinger, ” wrote the judge. “Whether Ridgeway was ever employed by Stryker Leibinger, whether Stryker Leibinger had a reasonable competitive business interest justifying a non-compete agreement, whether the non-compete agreement was assigned to Howmedica Osteonics, and whether Stryker and Howmedica Osteonics were related or associated entities who could reasonably enforce the non-compete agreement all present questions of fact for trial.”
As for Stryker’s claim for breach of fiduciary duty, the judge found “sufficient evidence to create issues of fact as to whether Ridgeway had an agency relationship with Stryker and/or Howmedica Osteonics that would give rise to a fiduciary duty.”
