Synthes, the orthopedic surgery specialists Johnson & Johnson (NYSE:JNJ) paid $21.3 billion for in April, and rival Stryker (NYSE:SYK) agreed to settle a lawsuit accusing Stryker and 3 of its former sales representatives of violating their non-disclosure pacts and stealing trade secrets.
Synthes USA Sales LLC sued Stryker, Michael Russell, Jonathan Sassani and Kristen Phillips-Cheng in the U.S. District Court for Eastern Pennsylvania, charging the former sales reps with breach of contract, breach of fiduciary duty and breaking the Pennsylvania Uniform Trade Secrets Act.
The three sales reps all quit and went to work for Stryker between August and October 2011, according to the lawsuit, which alleged that Russell and Sassani tried to recruit other Synthes reps for Stryker on their way out the door.
Judge Timothy Savage dismissed the case March 14, "it having been reported that the issues between the parties in this action have been settled,” according to court documents.
Synthes claimed to have repeatedly warned Stryker and its new hires of the non-compete and non-disclosure obligations in their contracts. Those provisions allegedly barred them from selling into the northern California hospital market for any companies competing with Synthes, according to the lawsuit.
“Immediately prior to Russell, Sassani, and Phillips-Cheng’s resignations, Stryker had little presence in the northern California territories previously assigned to these individuals by Synthes. More specifically, Stryker’s contract with a major, independent distributor of Stryker products, called Bioinitiatives, expired, and Stryker was looking to regain its business presence in the region,” the suit alleges. “Accordingly, Stryker decided to raid Synthes’ business by hiring multiple Synthes sales consultants and, as set forth below, disregarding all obligations owed to Synthes.”
The suit alleged that Russell, Sassani and Phillips-Cheng had access to detailed customer information, pricing and marketing strategies, product information and Synthes’ plans to expand its business and used that access to poach customers for Stryker. It also accused Stryker of helping the trio breach their contracts and fiduciary duties and of tortious interference with their contracts.
Johnson &Johnson put down $21.3 billion in April to acquire Synthes, its biggest-ever buyout. J&J has said it plans to integrate the Swiss firm into its DePuy orthopedics operation, which is based in Raynham, Mass.