Zimmer Holdings, Inc. says there is a “Trojan Horse” being built in Amarillo, Texas to sneak sales reps into the operating room to attack their business and steal their money and customers. Who, allegedly, are the Greeks in this Trojan War? Stryker Corporation.
Cody Stovall Comes to Amarillo
The tale begins in February 2008, when a medical device sales rep from New Mexico named Cody Stovall joined Zimmer Southwest in Amarillo, Texas.
Zimmer Southwest was a former distributor of Zimmer products in the southwestern portion of the U.S. Stovall was assigned to be a sales representative in territory made up of Amarillo and the surrounding areas. He joined Team Brittain, led by long-time Zimmer sales representative, Carla Brittain. His job was to assist Brittain in managing and maintaining her Zimmer territory.
Brittain, along with other tenured Zimmer representatives from outside Amarillo, allegedly mentored and trained Stovall and introduced him to Zimmer’s long-standing and, according to Zimmer lawyers, “near-permanent” customer relationships.
Zimmer Invites Stovall Inside
In October 2012, Zimmer decided to bring its southwestern U.S. sales force inside and offered Stovall employment as a sales representative directly with Zimmer. One year later, Zimmer adjusted the Amarillo territory, allegedly at Stovall’s request, and split the territory between Stovall and Brittain.
After the split, Stovall was assigned and compensated for sales of reconstructive orthopedic implants to all of Zimmer’s surgeon customers in the Amarillo territory, with the exception of five specific surgeon customers who Brittain had called on for years.
By 2013, according to court documents, Stovall was earning nearly $240,000 a year and revenues generated by surgeon customers within his territory generated sales in excess of $6 million in that year.
Stovall Defects to Stryker, Zimmer Sues
But, according to a lawsuit filed against Stovall and Stryker in a Michigan federal district court on January 29, 2014, Stovall resigned from Zimmer on January 10, 2014 and went to work for Stryker.
In addition, says Zimmer, Stovall and Stryker came up with a scheme to steal Zimmer’s customers and, ultimately, revenue, by recruiting the top competitive sales representatives from Zimmer and by offering them a guaranteed six figure salary and a $30,000 bonus for every $500,000 in business they convert from their former Zimmer customers to Stryker.
Zimmer says they found out about the plan when Stovall allegedly bragged about the scheme to his former colleagues when he solicited them to join him, and when Stryker pitched this exact scheme to current Zimmer sales representative Carla Brittain—telling her, she too could switch to Stryker and attend surgeries with her former Zimmer customers by “selling” a Stryker RegenKit Platelet-rich Plasma spray.
The Plasma Spray Trojan Horse
Here is where Zimmer’s complaint gets original. According to Zimmer’s lawyers, Stovall initiated his and Stryker’s attack on Zimmer before he ever resigned from Zimmer. Says Zimmer’s lawyers, the plan of attack called for Stovall to sell the Stryker biologic plasma spray product in an effort to place him into joint replacement surgeries with his former Zimmer surgeon customers in violation, allegedly, of his post-employment restrictive covenants.
Sales Rep In Surgery / Photography by Andrew Huth
Zimmer claims Stovall meant to use that deception as a “Trojan Horse” to solicit reconstructive implant business away Zimmer’s customers on Stryker’s behalf.
Injunction Sought
Zimmer is suing for breach of contract, breach of fiduciary duty, tortious interference with contract, unfair competition and civil conspiracy. It also seeks damages from Stovall and Stryker for its lost business, and wants the court to issue an injunction to stop the alleged “Trojan Horse” attack.
Every surgeon has his or her own protocol and preferences in the operating room, which vary from surgeon to surgeon. Therefore, says the Zimmer complaint, a critical element in maintaining strong customer relationships is the knowledge of a surgeon’s preferences and method of operating to make the surgeon’s use of Zimmer’s products seamless.
The Hospitals in Question
Stovall, claims Zimmer, knew its confidential information, including: sales and marketing information, organizational and sales employee information, advertising information, pricing, customer lists, marketing and sales techniques, confidential consumer information, territory sales plans, product development and delivery schedules, and product technical information.
The hospitals which are the subject of this lawsuit and account for approximately $6 million in annual revenue to Zimmer are:
Baptist St. Anthony’s
VA – Amarillo
Golden Plains Community Hospital
Coon Memorial Hospital
Hereford Regional Medical Center
Hutchinson County Hospital
Ochiltree General Hospital
Dr. Dan C. Trigg Memorial Hospital
Wilbarger General Hospital
Memorial Hospital of Texas County
Memorial Hospital
Childress Medical Center
Pamap Regional Medical Center
Amarillo Bone and Joint Clinic
Physician’s Surgical Hospital
Northwest Texas Healthcare System
Surgery Center on Soncy
Northwest Texas Surgery Center
Panhandle Surgical Center
Stryker’s Incentives
In addition to a purportedly guaranteed $27,000 per month salary, Zimmer is also accusing Stryker of promising to pay Stovall the same $30,000 promised other Zimmer sales representatives for every $500,000 worth of Zimmer business he is able to convert.
Then, says Zimmer, Stryker also made a similar offer to Carla Brittain while she was employed by Zimmer. In fact, continues the complaint, Stryker’s territory sales manager Lance Cowart offered Brittain a position with Stryker and an annual salary of $300,000 to participate in the “Trojan Horse” scheme.
Zimmer also alleges that Stovall and Stryker’s Cowart said that they’d employed this same scheme to unfairly compete with Zimmer in other parts of the country.
Trash Talking
And, of course, Zimmer is accusing its former sales rep of trash talking the company to its customers.
Finally, Zimmer is accusing its former rep of soliciting other Zimmer sales representatives in Texas to join him in the “plot” to take Zimmer customers and destroy Zimmer’s goodwill and business in northwest Texas.
We’re Shocked! Shocked! This Has Happened Before?
Actually, this is not the first time these two companies have tangled over sales reps and customer poaching.
In October 2013, Stryker and Zimmer settled a suit brought by a Stryker unit, accusing Zimmer of poaching its employees and stealing trade secrets. The settlement came the week before the suit was scheduled to go to trial.
In that suit, according to a Law360 story on January 30, 2014, Stryker unit Howmedica Osteonics Corp. lodged trade secrets and breach of contract claims against Zimmer and several people who had been employed by Howmedica but went to work for its competitor. Zimmer had allegedly convinced more than a dozen of Stryker’s managers and sales representatives to jump ship, a scheme that purportedly allowed Zimmer to create its own spinal products business based on expertise and company secrets developed by Stryker.
Zimmer Filed Six Counts Against Stryker
Zimmer’s lawsuit consists of six counts:
Count I: Breach of Contract Against Stovall
Count II: Breach of Fiduciary Duty Against Stovall
Zimmer claims that by virtue of his access to Zimmer’s confidential information and customers for nearly six years, Stovall owed Zimmer a duty of loyalty.
He allegedly breached his duty by:
Not devoting his best efforts to Zimmer
Diminishing the goodwill Zimmer has established with its customers by disparaging Zimmer and unexpectedly and immediately resigning and, thereby, leaving a profitable Zimmer territory unserviced and unsupported
Usurping sales opportunities from Zimmer
Planning a coordinated effort on behalf of Stryker to convert Zimmer’s customers during his employment and in contradiction to his Agreement with Zimmer.
Count III: Unfair and Deceptive Trade Practices Against Stryker and Stovall
In an intentional effort to destroy near-permanent business relationships in Stovall’s assigned territory, and knowing of the Agreement, Stryker allegedly recruited and hired Stovall.
Count IV: Tortious Interference With Contracts Against Stryker
Stryker allegedly knew Stovall had an agreement with Zimmer, but hired him anyway.
Count V: Tortious Interference With Contract and Business Relationships Against All Defendants
Zimmer says it had the reasonable expectation that relationships with customers would continue and would not be unjustifiably disrupted.
Count VI: Civil Conspiracy
Stryker and Stovall allegedly entered into an agreement to breach the agreement. They are accomplishing the aims of their conspiracy by using the plasma spray as a cover for Stovall to solicit his former customers.
Zimmer’s Demands
Zimmer wants Stovall to be permanently enjoined from:
Working with Stryker in the Amarillo area, or any sales capacity in which his knowledge would benefit Stryker
Contacting any Zimmer customers or active prospect
Solicit anyone at Zimmer to leave Zimmer
Disclosing any confidential information
Possessing any Zimmer confidential information
Additionally, Zimmer wants actual and punitive damages to be proven at a trial by jury, legal costs and anything else the Court deems “equitable and just.”
Stryker’s Answer
Stryker is still formulating its answer. Our guess? They’ll deny the vast majority of Zimmer’s allegations. Or not. We don’t know. But what we’re pretty sure of is that these two firms will figure out a way to settle this dispute and get back into the fray again on many other fronts.
Going out on a limb here, we’ll predict that this isn’t the last time two orthopedic companies come to legal blows over sales reps switching sides.