Between late August and early October 2011, three Synthes USA spine sales representatives in San Francisco resigned from the company and promptly went to work for Stryker Corporation.
So began the game of musical chairs that started when Synthes and Johnson & Johnson, the parent company of DePuy Orthopaedics, announce a $21.3 billion dollar merger last April.
You Don’t Want to Be Left Standing When the Music Stops
When the acquisition was announced we wrote that the merger would likely set in motion a game of musical chairs among spinal implant sales people because there was significant product and territory overlap between DePuy Spine and Synthes Spine.
Speculation began immediately about how the two orthopedic giants would merge sales forces and how competitors in the market would take advantage of experienced and well connected device sales reps that may well want to try greener pastures or did not want to see their territories change. Speculation also arose about how Synthes would react in this game of musical chairs.
Synthes Files Suit
We got our first public view of one of Synthes’ strategies when the company filed suit on December 28 in Pennsylvania accusing the three former Synthes spine device sales reps in California of disloyalty and stealing company secrets. The company also sued Stryker Corporation for aiding and abetting the former sales reps, who now, allegedly, work for Stryker.
The three former Synthes employees are Michael Russell, Jonathan Sassani, and Kristen Phillips-Cheng.
The suit is filed in the U.S. District Court for Eastern Pennsylvania, where the U.S. offices of Synthes are based and where the employment contracts in question are physically located. Synthes is also accusing the defendants of breaking the Pennsylvania Uniform Trade Secrets Act.
“Raiding” Sales Force
According to the lawsuit, Synthes seeks damages for actions allegedly taken by Stryker to “raid Synthes’ 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….”
Synthes also seeks damages against these three former sales employees for their “misappropriation of Synthes’ trade secrets, as well as their breach of their contractual and common law fiduciary obligations to Synthes, including…non-solicitation and non-disclosure obligations, as well as damages for actions taken by Stryker to intentionally induce these contractual and statutory breaches.”
Sales Forces and Compensation
Synthes markets and sells its products through a sales force that is comprised primarily of regional Sales Consultants and Associate Sales Consultants who are assigned to specific territories. Synthes assigns Sales Consultants territories for which they are responsible, and generally pays Sales Consultants on a commission basis.
According to Sassani’s LinkedIn profile, he was a direct, commission-only Sales Consultant. There was nothing in the lawsuit that described Sassani, Russell or Phillips-Cheng’s employment or compensation arrangements with Stryker.
In exchange for employees executing Non-Disclosure Agreements and Non-Solicitation Agreements, Synthes provides its employees with access to confidential and proprietary information, customer relationships and related goodwill, and valuable training programs in which Synthes has invested significant time, effort, and money.
Michael Russell
According to the suit, Synthes hired Michael Russell as a Sales Consultant on September 14, 2005 and that continued until his August 31, 2011 resignation. While with Synthes he’d been assigned to the San Francisco territory and reported to Regional Manager Robert McGee.
Russell was assigned direct responsibility for sales in the San Francisco territory at UCSF Medical Center, San Francisco General Hospital, San Francisco VA Medical Center, and Marin General Hospital. Within those hospitals, Synthes alleges the company also entrusted Russell specifically to call on several key surgeon customers who perform surgery at those hospitals.
Synthes charges that on at least one occasion, Russell used Synthes medical devices to complete a surgery on behalf of Stryker, and without Synthes’ knowledge. Synthes also charges Russell with soliciting Synthes employees to work for Stryker.
Jonathan Sassani
Jonathan Sassani, according to the suit, was hired as an Associate Sales Consultant and worked for Synthes in that capacity from December 29, 2008 to June 31, 2009. In this position, Sassani supported Russell in the San Francisco territory and reported to Regional Manager Robert McGee.
On July 1, 2009, Synthes promoted Sassani to Sales Consultant for the Crystal Springs territory, also in northern California, reporting to McGee. Sassani had sole sales responsibilities in this territory and remained in this position until his resignation, which became effective on October 3, 2011.
Sassani had no previous work experience in the medical device sales industry.
During his tenure with Synthes until the time of his resignation, Sassani was assigned responsibility for the accounts in Russell’s area while he served as an Associate Sales Consultant, and was assigned direct responsibility for sales at El Camino Hospital, Kaiser Redwood City, Peninsula Hospital, Saint Francis Medical Center, San Mateo Medical Center, Sequoia Hospital, Seton Medical Center, and Stanford Medical Outpatient Center.
Sassani was also assigned responsibility for UCSF Medical Center after Russell’s departure from Synthes. Within those hospitals, Synthes also entrusted Sassani specifically to call on several key surgeon customers who perform surgery at those hospitals.
According to Sassani’s LinkedIn profile he listed the following accomplishments while at Synthes:
32% growth, 128% to quota first half 2011
127% to quota with 45% (>$300k) growth 2010
85% (>$400k) growth first 12 months in new expansion territory
Led region in percent growth; 2nd in dollar growth and percent to quota 2010
Rookie of the Year Nominee
Promoted to Sales Consultant after 6 months of 1-2 year Associate position
Valedictorian of intensive training class with 98% average
Kristen Phillips-Cheng
Synthes hired Phillips-Cheng as an Associate Sales Consultant on January 14, 2008 until November 10, 2008. In this position, she supported Russell in the San Francisco territory and also reported to Regional Manager Robert McGee.
On November 10, 2008, she was promoted to Sales Consultant for the San Jose territory, also in northern California and reporting to McGee. She had sole sales responsibilities in this territory and remained in this position until her resignation on August 31, 2011.
Phillips-Cheng had no previous work experience in the medical device sales industry.
During her tenure with Synthes until the time of her resignation, Phillips-Cheng was assigned the responsibility for accounts in Russell’s area while she also served as an Associate Sales Consultant, and was assigned direct responsibility for sales at Bascom Surgery Center, El Camino Hospital in Los Gatos, Silicon Valley Surgery Center, Regional Medical Center of San Jose, Forrest Surgery Center of San Jose, Good Samaritan Hospital, Kaiser Permanente San Jose Medical Center, O’Connor Hospital, Santa Clara Valley Health and Hospital System, Kaiser Permanente Santa Clara Medical Center, Palo Alto Medical Foundation, and Bay Area Surgical Group.
According to Phillips-Cheng’s LinkedIn profile, she began working as a Spine Sales Consultant for Stryker Spine in September 2011.
Stealing Secrets
Synthes claims the defendants took and then used and disclosed Synthes’ trade secrets without express or implied consent for the benefit of themselves and Synthes’ direct competitor, Stryker, in the course of their employment with Stryker.
According the suit, the trio improperly sent information to their personal and/or family email addresses and failed to return information to Synthes after the resignation of their employment, including Synthes information stored on their personal computers.
Specifically, Synthes is suing for “actual, unjust enrichment, and/or reasonable royalty damages that Synthes is entitled to recover as a result of Defendants’ violation of the Pennsylvania Uniform Trade Secrets Act.”
Synthes claims the defendants have 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.
Furthermore, the suit claims that Russell soliciting Synthes employees, including Sean Murphy, Captain Hayes, and Sassani, to leave Synthes and/or join Stryker within less than one year of his resignation, in violation of his Non-Solicitation Agreement.
Other allegations include charges that the defendants “breached their contractual duties to Synthes by using and disclosing the identities and preferences of customers in the territories previously assigned to them by Synthes, information about Synthes’ products and their performance.”
“Russell, Sassani, and Phillips-Cheng breached their fiduciary duties to Synthes by plotting to deprive Synthes of future business opportunities, including without limitation by contacting Synthes’ customers to solicit their business on behalf of Stryker, all while still employed by Synthes, ” claims the suit.
Synthes Shocked
Synthes believes Stryker knew that the defendants, “prior to their resignation from Synthes, owed Synthes the fiduciary duty of loyalty. Stryker encouraged, supported, condoned, and otherwise aided and abetted Russell, Sassani, and Phillips-Cheng’s violations of their fiduciary duties of loyalty to Synthes.”
Finally, Synthes claims that Stryker’s “willful and intentional interference with Synthes’ contractual relations with Russell, Sassani, and Phillips-Cheng constitutes tortious interference with contractual relations.”
No trial date has been set by the court, but the game of musical chairs has clearly begun.
