Globus Medical (NYSE:GMED) has accused four former sales employees of wrongfully joining Medtronic (NYSE:MDT) and taking business with them, saying in a lawsuit that Medtronic knew what was happening.
Audubon, Pennsylvania-based Globus filed the lawsuit on Jan. 28 in Pennsylvania’s Eastern U.S. District Court against Medtronic, three former Globus spine territory managers and one former associate spine specialist.
Fridley, Minnesota-based Medtronic has not yet responded to the lawsuit in court, but offered a statement to Medical Design & Outsourcing today.
“The company believes its conduct has been proper and will defend itself vigorously against these claims,” Medtronic said in the statement. “Medtronic remains committed to fair competition and employment practices that comply with the law and enable the company to attract and retain a best-in-class, highly talented and innovative workforce dedicated to improving lives through medical technology.”
Globus said it requires all sales employees to sign a non-compete and non-disclosure agreement (NCNDA) when hired. After it terminated the employment of one of the managers, Globus said he joined Medtronic and then recruited another Globus sales manager to quit and bring some of the company’s employees and customers to Medtronic in violation of their contracts.
“Instead of fairly building a team to compete in the San Antonio market, Medtronic decided it would be easier to steal a Globus team, and induce them to violate their NCNDAs by using Globus’s confidential information and trading on the goodwill Globus had developed in the San Antonio Territory for its own benefit, and to the detriment of Globus,” Globus said in the lawsuit.
Globus said at least five surgeons whose business was worth more than $2.5 million for Globus in 2021 have cut off contact with the company.
Globus is also asking the court to enforce the contracts and order payment of other unquantified damages from the employees and Medtronic, including “all earnings, profits and benefits received” by the former employees and Medtronic as a result of their alleged conduct. Globus is also seeking recovery of more than $1.3 million characterized as advances from one of the managers who quit, citing payback provisions in his contracts.
These kind of lawsuits are common in competitive industries, and outcomes are difficult to forecast from initial filings, especially when employment contracts cross state lines. Even if unsuccessful, lawsuits like this one can send a message to rivals, employees and even customers as companies fight not only for business but for employees in a tight labor market.
Law firm Faegre Drinker Biddle & Reath filed the lawsuit on behalf of Globus. The case number is 2:22-cv-00383-BMS.