Stryker (NYSE:SYK) accused the DePuy Orthopaedics subsidiary of Johnson & Johnson (NYSE:JNJ) of gutting its presence in the northern California orthopedic reconstructive surgery market with a "calculated and deliberate raiding" of its sales force there, according to a lawsuit filed last week in New Jersey.
The suit alleges that DePuy helped 5 Stryker Howmedica sales reps – Brett Sarkisian, Keegan Freeman, Michael Nordyke, Taylor Smith and Bryan Wyatt – defect and take their customers with them.
"These actions by DePuy and the employee defendants are anticipated to cause Stryker a 90% loss in its Northern California recon business and a 60% to 70% loss in its Northern California trauma business," to the tune of $3.4 million in 2014 alone, according to the complaint. "Given the loss of all its recon sales representatives, it will take years for Stryker to regrow its market presence in the territory. It will take Stryker approximately 12 to 18 months to train new recon sales representatives and it will take at least that long, if ever, to rebuild relationships with the doctors in this market."
The ruse became apparent April 4, when Stryker’s reps in the Bakersfield and Fresno areas "suddenly stopped responding to emails, phone calls, and text messages," according to court documents. The next day Stryker received nearly identical letters of resignation from the 5 reps, who also allegedly booked fake surgeries into Stryker’s books in an apparent attempt to conceal their defection, according to the documents.
By the next week the reps were allegedly scheduling surgeries using DePuy devices, having solicited at least 5 former Stryker customers to use DePuy’s products before they jumped ship, the complaint alleges.
"[S]uch a conversion of business – which happened over the course of a single weekend – could only occur if the employee defendants conspired with DePuy and with each other to transition these major customer accounts to DePuy while the employee defendants were still employed by Stryker and in violation of the employee defendants’ contractual and legal obligations to Stryker," according to the lawsuit. "Stryker also discovered that all or some of the employee defendants solicited one another to leave Stryker’s employ en masse and without prior notification to DePuy."
Stryker is seeking injunctions barring the defendants from soliciting Stryker customers and employees; actual, incidental, compensatory, exemplary, punitive and consequential damages; legal costs; disgorgement of compensation paid by Stryker "during the period of their tortious activities;" and pre-judgment interest, according to the lawsuit.
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