A federal judge last week let stand most of the claims alleged by Zimmer (NYSE:ZMH) in a lawsuit accusing Stryker (NYSE:SYK) and a former sales rep of scheming to insert a "Trojan horse" into Zimmer’s Texas sales operation.
The lawsuit, filed last January 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 alleged. "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."
Stryker moved to dismiss 4 of the counts in the suit, asking Judge Jon DeGuilio to strike claims for unfair & deceptive trade practices; tortious interference with contracts; tortious interference with contract & business relationships; and civil conspiracy. DeGuilio shot down Stryker’s bid to dismiss the unfair & deceptive trade practices and civil conspiracy claims, but dismissed the tortious interference with contract & business relationships and civil conspiracy claims, according to the documents. But the judge left the door open for Zimmer to collect damages on the conspiracy count.
"[A]lthough Zimmer cannot raise a separate claim against Stovall and Stryker for civil conspiracy, if it proves a civil conspiracy in the commission of 1 of the other torts it has properly alleged, then Stovall and Stryker would both be responsible in damages for the actions of one another," he wrote. "Accordingly, Stryker is correct that Zimmer cannot lodge a claim for civil conspiracy against it, and the motion will be granted on this claim. However, the allegations of the complaint do make it clear that Zimmer has properly alleged the existence of a conspiracy in the commission of the other torts raised in its complaint, relevant then as a potential and alternative theory for damages."