Stryker (NYSE:SYK) accused Biomet and a pair of former sales representatives of a scheme to poach reps and business from Stryker in Louisiana and New York.
Christopher Ridgeway and Richard Steitzer allegedly conspired with Biomet in the scheme, according to a lawsuit filed Monday in the U.S. District Court for Western Michigan. Steitzer quit in June to work for Biomet; Stryker fired Ridgeway Sept. 10, according to the lawsuit, after discovering that he was allegedly running a pair of medical supply businesses on the side.
"Over the past 2 weeks, Stryker uncovered an ill-conceived and long-planned scheme by Biomet, using Stryker representatives in both New York (Steitzer) and Louisiana (Ridgeway), to erode Stryker’s customer relationships and raid sales teams from Stryker’s Neuro Spine ENT business unit and craniomaxillofacial division. Complete with secret code words, Biomet’s scheme involved Ridgeway and Steitzer as proxies, while still Stryker employees [emphasis in original], to intentionally damage Stryker and sabotage its ability to compete in a highly competitive marketplace," according to the lawsuit.
The lawsuit also accuses Ridgeway of failing to make enough hires to keep his territory competitive, alleging that he turned down 33 applicants for Stryker but hired some for his sideline businesses. Ridgeway made the southern Louisiana branch "so hostile that 4 employees have resigned in the past 20 months, resulting in an 80% turnover rate during that time period," according to the complaint.
"During the course of his September 10, 2013 exit interview, Ridgeway brazenly announced that he devoted only 50% of his time to what he referred to as the ‘Stryker dog and pony show’ and instead parlayed his Stryker contacts to divert opportunities, and potential Stryker employees, to his personal side businesses," according to court documents. "These continuing malicious and opportunistic actions have resulted in the loss of significant business with expected losses exceeding $3 million."
In June, Stryker accused, Biomet began courting Ridgeway, allegedly looking to bring his entire Stryker sales teams on board.
"In June 2013, Ridgeway informed his sales representatives that Biomet expressed interest in bringing the Stryker CMF and NSE sales teams to Biomet and that Biomet would ‘offer us a lot of money,’" according to the documents. "Over the course of the next few months, Ridgeway was in conversations with Biomet regarding moving Stryker business to Biomet. He was nervous about Stryker finding out his plans, and used the code word ‘pancake’ to discuss the business he planned to "’flip.’"
Ridgeway also allegedly induced a 3rd Stryker employee, Sheldon Green, to jump ship for Biomet and forwarded Stryker’ Louisiana customer list to Green, according to the complaint.
Stryker also accused Steitzer of lying about his role at Biomet, saying he accepted severance payments pegged to his agreement not to work for a competing business at Biomet.
"Stryker discovered that not only had Steitzer misappropriated Stryker’s trade secrets and disclosed those trade secrets to Biomet, but Steitzer was further breaching his non-competition and non-solicitation agreement by soliciting and moving Stryker’s business to Biomet. This conduct is even more egregious insomuch as Stryker had, between June and present, been paying Steitzer to sit on the sidelines, per one of the terms contained in the non-compete agreement," according to the lawsuit.
Stryker wants Judge Robert Bell to grant injunctions and a temporary restraining order barring Ridgeway, Steitzer and Biomet from disclosing trade secrets, diverting customers and selling to customers they’ve already allegedly diverted, according to the complaint. Stryker also wants punitive damages and disgorgement of any profits made from the alleged scheme, plus legal costs.
Yesterday Bell denied the bid for a temporary restraining order, scheduling a hearing for Oct. 30 and ordering the defendants to show cause why the injunctions should not be imposed, according to the documents.
"Upon review of plaintiffs’ complaint and motion for temporary restraining order, the court finds that plaintiffs have shown a likelihood of success on the merits of their breach of contract claims. However, the court is not convinced that immediate and irreparable injury, loss, or damage will result to plaintiffs before defendants can be heard in opposition," Bell wrote. "Defendants are now on notice of plaintiffs’ assertions regarding their alleged breaches of their confidentiality agreements and non-compete agreements, and any temporary restraining order would merely require defendants to abide by the terms of those same agreements."
