Zimmer (NYSE:ZMH) accused Stryker (NYSE:SYK) of scheming to insert a "Trojan horse" into its Texas sales operation, alleging in a lawsuit filed this week that its orthopedics rival aims to lure Zimmer reps and their accounts over to Stryker.
The lawsuit, filed in the U.S. District Court for Northern Indiana against Stryker and an ex-Zimmer rep named Cory Stovall, alleges that Stryker agreed to pay Stovall a bounty for every Zimmer customer he converts to Stryker.
"Stryker has incentivized Stovall to breach his agreement by promising an enormous salary and large monetary bonuses based on the volume of Zimmer implant business he can transition to Stryker from his former Zimmer customers," Zimmer alleges in the documents. "Specifically, upon information and belief, in addition to a purportedly guaranteed $27,000 per month salary, Stryker has promised to pay Stovall $30,000 for every $500,000 worth of Zimmer business he is able to convert from his former Zimmer customers to Stryker."
Stovall began selling Zimmer products in February 2008 as an employee of Zimmer Southwest, a distributor that Zimmer in 2012 subsumed into its inside sales force, according to the lawsuit. Stovall, working in the Amarillo, Texas, territory under a long-time Zimmer sales rep named Carla Brittain, quit Jan 10 and now works for Stryker, according to the suit.
Stryker also allegedly sought to lure Brittain away from Zimmer with a similar offer, according to the lawsuit.
"Specifically, Stryker’s territory sales manager Lance Cowart offered Brittain a position with Stryker and an annual salary of $300,000 to participate in Stryker’s RegenKit Platelet-rich plasma spray scheme," Zimmer alleged in the suit. "Also, prior to his resignation, Stovall solicited multiple Zimmer sales representatives from Amarillo and Lubbock, Texas, to join him and Stryker in their plot to take Zimmer’s customers and to destroy Zimmer’s goodwill and business in northwest Texas. … Stovall and Stryker’s Cowart represented to Zimmer employees that Stryker has employed this same scheme to unfairly compete with Zimmer in other parts of the country."
Zimmer alleged that its all part of a Stryker scheme designed to poach its market share in the Amarillo territory, according to court documents.
"Similar to how the Greeks employed subterfuge, vis-a-vis a wooden horse, to attack Troy, Stovall and Stryker intend to employ subterfuge to usurp Zimmer’s customer relationships and goodwill in and around Amarillo, Texas. As shown in the supporting affidavits, Stryker recruited Stovall with promises of massive compensation to convert Zimmer business, and intends to try to contravene Zimmer’s enforceable restrictive covenants by assigning Stovall to ‘sell’ a product called RegenKit Platelet-Rich Plasma Spray – a biologic product that Stryker and Stovall contend somehow does not violate Stovall’s agreement," according to the documents.
Zimmer wants Judge Jon DeGuilio to impose injunctions on Stovall and Stryker barring contact with Zimmer customers and employees in and around Amarillo and preventing Stovall from working for Stryker in that area, according to the documents.