Appeals court: Ex-Orthofix rep broke non-disclosure pact

A former sales rep for Orthofix (NSDQ:OFIX) broke a non-disclosure agreement when he jumped ship for rival DonJoy Orthopedics (now DJO Global), a federal appeals court ruled yesterday.

The rep, Eric Hunter, worked for Orthofix for 12 years before joining DonJoy in 2012. According to the appeals court, Hunter and another Orthofix rep named Bob Lemanski negotiated their defection with DonJoy area vice president of sales Richard Spina, plotting for Hunter to solicit Orthofix customers through Lemanski.

“Upon joining DonJoy, Hunter would, through an introduction by Lemanski, sell bone growth stimulators to those doctors who were former Lemanski clients. Hunter would cease selling bone growth stimulators to his Orthofix customers and would instead introduce his customers to other DonJoy representatives,” according to the appeals court. “Orthofix’s damages expert calculated $2,224,490 in annual lost sales and $1,623,877 in total lost profits for accounts serviced by Hunter and Lemanski.”

Orthofix sued in 2013, alleging misappropriation of trade secrets and use and disclosure of confidential information covered by their non-disclosure agreement. Judge Jack Zouhary of the U.S. District Court for Northern Ohio found that Hunter was not liable because Orthofix failed to use reasonable measures to protect its trade secrets and the non-disclosure pact was unenforceable.

The U.S. Court of Appeals for the 6th Circuit yesterday found that Zouhary erred in conflating the disclosure of confidential information and misappropriation of trade secrets.

“This conclusion of law led the court to its subsequent conclusion that the ‘non-disclosure provision here [forms] a lifetime non-compete clause’ under Texas law because it prohibits Hunter from using his general skills and knowledge,” the appeals court found. “We conclude that Hunter breached his employment agreement with Orthofix by using and disclosing ‘confidential information’ that, while not necessarily qualifying as trade secrets, did not constitute his general skills or knowledge.”

The 6th Circuit court reversed Zouhary and remanded the case to his court for a damages calculation.

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