Zimmer, Inc. v. Stryker Corp.
| Decision Date | 01 November 2016 |
| Docket Number | Case No. 3:14-CV-152 JD |
| Parties | ZIMMER, INC., Plaintiff, v. STRYKER CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
This is a commercial dispute between orthopedic implant manufacturers. Plaintiff Zimmer, Inc. alleges that Defendants Stryker Corporation and Stryker Orthopaedics (collectively Stryker1) recruited former Zimmer sales representatives to sell Stryker orthopedic implants in violation of their noncompetition agreements. It says this was a wide-ranging scheme in which former Zimmer representatives operated under the guise of selling Vitagel, which does not compete with Zimmer products, while really pushing orthopedics that do. The Defendants respond that there is no evidence to substantiate this scheme. Rather, they say that this is a straightforward case about alleged impropriety relating to a single employee, Cody Stovall (the only individual defendant in this case). They thus filed this motion which seeks partial summary judgment on three issues: (1) that the Plaintiff does not have any evidence of the use of Vitagel as a cover to sell competing products in violation of Zimmer representatives' noncompetition agreements (or any other evidence of wrongdoing beyond Stryker's acquisition of Stovall), (2) that Stryker is not liable for the purported misconduct of CrossLink, a Stryker distributor and (3)that any claims based on Chris Smith, a former Zimmer representative are barred by the statute of limitations. [DE 92]. The parties have now fully briefed this motion and it is ripe for review. [DE 93, 120, 124].
Summary judgment is appropriate when there "is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute as to any material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Cung Hnin v. TOA (USA), LLC, 751 F.3d 499, 504 (7th Cir. 2014) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). To survive a motion for summary judgment, the party with the burden of proof "must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact that requires trial." Hemsworth v. Quotesmith.com, Inc., 476 F.3d 487, 490 (7th Cir. 2007). The Court may consider a motion for partial summary judgment "as to particular issues or facts in a case, even if those issues are not in and of themselves dispositive of a claim or case." Chubb Indem. Ins. Co. v. 21 E. Cedar, LLC, No. 10 CV 7111, 2014 WL 2619469, at *4 (N.D. Ill. June 12, 2014); see also Hill-Jackson v. FAF, Inc., No. 1:10-CV-01296, 2011 WL 3902772, at *2 (S.D. Ind. Sept. 6, 2011) (). Since the Court is evaluating a motion for partial summary judgment filed by the Defendants, it will construe all disputed facts in the light most favorable to the Plaintiff. See Anderson, 477 U.S. at 255 ().
This case centers on Zimmer's allegation that Stryker has repeatedly poached its sales representatives and then used their relationships with physicians to sell Stryker orthopedics. While Zimmer requires its representatives to sign noncompetition agreements, it says Stryker subverted those agreements by hiring Zimmer personnel under the pretense of selling Vitagel (a spray used to control bleeding in surgery), which does not compete with Zimmer products. In reality, Zimmer says Stryker does not have much interest in trying to sell Vitagel since it is priced out of the market. Rather, Vitagel was merely a way to get sales personnel into the operating room with doctors they had serviced at Zimmer to surreptitiously hawk Stryker products.
Stryker allegedly employed this tactic with six of Zimmer's former representatives. First are Chris Smith and William Whilden. Smith worked for Zimmer Mid-Atlantic, a Zimmer distributor, from 2004 to 2012. Whilden worked for other Zimmer distributors, most recently Zimmer Triple Play, from 1992 to 2013. Both resigned to take positions selling Vitagel, Chris Smith for Stryker and William Whilden for CrossLink, a Stryker distributor. While there is evidence that they interacted with their former customers as Vitagel sales representatives, there is no direct evidence that they promoted competing products or that Stryker sales were adversely affected as a result. This order will devote little discussion to these individuals, because Zimmer does not seek damages relating to either of them.
Second is the Dickerson Team. This was a successful orthopedic sales group that worked for Zimmer Carolinas, a Zimmer distributor in South Carolina. It consisted of Leon Dickerson, Christopher Terrell and Jay Barnhardt. By 2012, these individuals generated roughly $12 million in annual revenue. They resigned on September 27, 2012 and accepted positions withCrossLink shortly thereafter. While the Dickerson Team purportedly came to CrossLink to sell Vitagel, there is evidence that its members maintained contact with their former Zimmer customers. Further, upon the Dickerson Team's transition, two of its key customers abruptly transitioned from Zimmer to Stryker products.
Finally there is Cody Stovall. Stovall worked for Zimmer as a sales representative in Texas from 2008 until 2014. In January 2014, he resigned and accepted a position selling Vitagel for Stryker. Zimmer presents significant evidence that Stovall's transition involved efforts to appropriate Zimmer business for Stryker. This includes, among other things, text messages in which Stovall discussed conversations he had with doctors about switching to Stryker products upon his resignation and testimony that Stovall provided Zimmer customers' instrument requirements to Stryker before he resigned. The Defendants contest this evidence with, inter alia, the testimony of Stovall and his customers, who indicate that Stovall never attempted to solicit Zimmer business.
Shortly after Stovall began his position with Stryker, the Plaintiff filed this lawsuit. Its amended complaint brings five claims: (1) breach of contract against Stovall, (2) breach of fiduciary duty against Stovall, (3) unfair competition against Stryker and Stovall, (4) tortious interference with contracts against Stryker and (5) tortious interference with business relationships against Stryker and Stovall.
The Defendants vigorously contest any wrongdoing. They say that all of the above employees were hired by Stryker or CrossLink with the legitimate intent that they promote Vitagel for the duration of their noncompetition obligations, which they did. Further, they say that the Plaintiff has overstated its case as regarding a nationwide scheme, when it should really be a straightforward lawsuit about a single employee in Texas. They thus seek summaryjudgment on three issues regarding Zimmer's third, fourth and fifth claims. First, they argue that those claims should be confined to events surrounding Stryker's hiring of Stovall in Texas and should not advance to the extent they are based on the unsubstantiated Vitagel scheme. Second, they say that Stryker is not liable to the extent CrossLink, a Stryker distributor, engaged in misconduct. Third, they say that any claims pertaining to Chris Smith are barred by the statute of limitations. The Court addresses each argument in turn.
The Defendants first assert that, to the extent the Plaintiff has any evidence of wrongdoing, it is cabined to Stovall. Further, they say that the assertion that Stryker used Vitagel to cover up noncompetition violations by former Zimmer representatives is baseless. The Plaintiff responds that the Defendants used Vitagel as part of a scheme to conceal noncompetition violations by sales representatives across the country.
Most notably, they point to the hiring of the Dickerson Team. Recall that this was a successful orthopedic sales group that transitioned from Zimmer Carolinas to Stryker distributor CrossLink in September 2012. The Defendants assert that this was an innocuous move, as CrossLink hired the Dickerson Team to sell Vitagel, which does not compete with Zimmer's products. Further, all three members of that team testified that they did not solicit their former customers in violation of their noncompetition agreements. [DE 93-14 at 11] (Barnhardt); [DE 94-9 at 14] (Dickerson); [DE 94-10 at 17] (Terrell).
Zimmer responds that the sale of Vitagel was a front for the Dickerson Team to maintaincontact with its former customers while covertly lobbying them to switch from Zimmer to Stryker orthopedics. They offer three pieces of evidence to support this conclusion.
First, there are the economics of the acquisition of the Dickerson Team. It came at a substantial cost. CrossLink paid Dickerson alone a $500,000 bonus (structured as a loan forgivable after three years) and a $486,000 guaranteed annual salary. [DE 120-3 at 20]. The Plaintiff asserts that this is suspicious, since Vitagel costs only about $500 per unit. [DE 120-3 at 28]. Furthermore, it was not a high volume product. In fact, it was not even approved for sale in the main hospitals that the Dickerson Team serviced. Ultimately, neither Dickerson nor his team members sold any of it in the first year that they were employed. [DE 120-3 at 21]. Terrell testified that it had been priced out of the market by competitors' offerings. [DE 120-5 at 10].
Second, the Dickerson Team's members maintained their relationships with their prior customers. Dickerson and Terrell testified that, after joining CrossLink, they began making sales calls to doctors they serviced at Zimmer within a matter of weeks. These included...
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