Ex-Stryker sales rep must face trial in Biomet poaching spat

A former sales rep for Stryker (NYSE:SYK) must face breach of contract and breach of fiduciary duty charges in a legal battle with Zimmer Biomet (NYSE:ZBH), a federal judge in Michigan ruled yesterday.

Stryker in 2013 sued a pair of former sales agents, Christopher Ridgeway and Richard Steitzer, accusing them of scheming to poach reps and business from Stryker in Louisiana and New York. Stryker fired Ridgeway in September 2013, after discovering that he was allegedly running a pair of medical supply businesses on the side. In June of that year, Stryker alleged, Biomet began courting Ridgeway, allegedly looking to bring his entire Stryker sales teams on board. 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.

Ridgeway asked Judge Robert Bell of the U.S. District Court for Western Michigan for summary judgment, arguing that he was not an employee of the Stryker subsidiary that filed the lawsuit, Howmedica Osteonics. Under Michigan law, he contended, only his employer Stryker Leibinger could issue a non-compete agreement.

Bell disagreed with the move to drop the breach of contract claim, according to court documents.

“Contrary to Ridgeway’s assertions, Michigan does not prohibit non-compete agreements outside of the employer-employee context. Michigan has a common-law rule of reason that contemplates the enforceability of non-competition agreements that qualify as reasonable,” he wrote.

The judge also ruled that Ridgeway’s alternative argument, that the subsidiary not party to the non-compete should not be able to enforce it, should be aired out at trial.

“The evidence is sufficient to create an issue of fact as to whether Ridgeway was ever employed by Stryker Leibinger,” Bell wrote. “Whether Ridgeway was ever employed by Stryker Leibinger, whether Stryker Leibinger had a reasonable competitive business interest justifying a non-compete agreement, whether the non-compete agreement was assigned to Howmedica Osteonics, and whether Stryker and Howmedica Osteonics were related or associated entities who could reasonably enforce the non-compete agreement all present questions of fact for trial.”

As for Stryker’s claim for breach of fiduciary duty, Bell found “sufficient evidence to create issues of fact as to whether Ridgeway had an agency relationship with Stryker and/or Howmedica Osteonics that would give rise to a fiduciary duty” in denying Ridgeway’s bid for summary judgment.

In July 2014, Biomet and Steitzer asked Bell to enforce an oral settlement they allege was reached between their lawyer and a Stryker attorney. But the judge found that Steitzer and Biomet failed to prove that an agreement was reached.

Last month, the U.S. Supreme Court agreed to consider whether Stryker’s $70 million patent infringement win over Zimmer Biomet should be tripled, after a federal appeals court rolled back a willful infringement verdict last year.

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