2012 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-15-2012

Howmedica Osteonics v. Zimmer Inc

Precedential or Non-Precedential: Non-Precedential

Docket No. 11-2342

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Recommended Citation

"Howmedica Osteonics v. Zimmer Inc" (2012). 2012 Decisions. Paper 1413.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 11-2342

No. 11-2343

____________

HOWMEDICA OSTEONICS, 

a subsidiary of Stryker Corporation, a New Jersey corporation

v.

ZIMMER INC, a Delaware corporation; 

ZIMMER US INC; ZIMMER SPINE INC; PAUL GRAVELINE, an individual; 

CHRISTOPHER GIEBELHAUS, an individual; CHRISTOPHER LOUGHRAN, 

an individual; RYAN LIVELY, an individual; RYAN HERMANSKY, an individual;

ZACH HILTON, an individual; THOMAS FALLON, an individual; 

RUBEN BURCIAGA, an individual; ALEX POULEMANOS, an individual;

BRIAN ROWAN, an individual,

Christopher Giebelhaus, Paul Graveline, 

Zimmer Spine, Inc, Zimmer US, Inc., Zimmer Inc.,

 Appellants

____________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 11-cv-01857)

District Judge: Honorable Katharine S. Hayden

____________

Argued January 26, 2012

Before: AMBRO, CHAGARES and HARDIMAN, Circuit Judges.

(Filed: February 15, 2012) 
2

David M. Monachino

James S. Yu

Seyfarth Shaw

32nd Floor

620 Eighth Avenue

New York, NY 10018

Michael D. Wexler [Argued]

Seyfarth Shaw

131 South Dearborn Street

Suite 2400

Chicago, IL 60603

Attorneys for Plaintiff-Appellee

Dana E. Becker

Rebecca Hillyer

Thomas B. Kenworthy [Argued]

Kenneth L. Racowski

Morgan, Lewis & Bockius

1701 Market Street

Philadelphia, PA 19103-0000

James P. Walsh

Morgan, Lewis & Bockius

502 Carnegie Center

Princeton, NJ 08540-0000

Attorneys for Defendant-Appellants

Thomas F. Doherty

McCarter & English

100 Mulberry Street

Four Gateway Center, 14th Floor

Newark, NJ 07102-0652
3

Michael S. Elvin [Argued]

Heather J. Macklin

Edward F. Malone

Barack Ferrazzano Kirschbaum & Nagelberg

200 West Madison Street

Chicago, IL 60606

Attorneys for Defendant-Appellee

____________

OPINION OF THE COURT

____________

HARDIMAN, Circuit Judge.

A subsidiary of Stryker Corp., Howmedica Osteonics Corp. (Stryker), brought 

breach of contract and tort claims against Zimmer, Inc., Zimmer U.S., Inc., Zimmer 

Spine, Inc., Paul Graveline, and Christopher Giebelhaus (the Zimmer Defendants), and 

against Christian Loughran,1 Ryan Lively, Ryan Hermansky, Zach Hilton, Thomas 

Fallon, Ruben Burciaga, Alex Poulemanos, and Brian Rowan (the Individual 

Defendants). Stryker sought and obtained a temporary restraining order from the District 

Court. Stryker later obtained a preliminary injunction, from which the Zimmer 

Defendants and the Individual Defendants have appealed.

 

1 Christian Loughran was incorrectly named as “Christopher Loughran” in the 

pleadings.
4

I

Because we write for the parties, who are well acquainted with the case, we 

recount only the essential facts and procedural history.

Stryker designs, manufactures, and sells spine-related medical devices. It employs 

sales representatives to market its products to hospitals and surgeons. Sales 

representatives are supervised by sales managers and branch managers, who are 

responsible for building customer relations and improving sales.2

The spinal products industry is a competitive field that relies heavily on customer 

relationships. Stryker sales representatives receive lists of surgeons in their respective 

sales territories and are expected to meet those customers and establish connections with 

them. After gaining the surgeons‟ trust, representatives typically are invited to attend 

surgeries, where they provide technical support and advice regarding the use of Stryker 

products. Representatives familiarize themselves with surgeons‟ individual preferences, 

and they assist surgeons in a variety of ways. As a result, representatives foster close 

relationships with their customers, and that loyalty redounds to Stryker‟s benefit.

 

2 Before this suit began, Stryker‟s Arizona branch manager was Loughran, its

Arizona sales manager was Lively, and its Arizona sales representatives included 

Hermansky and Hilton. Stryker‟s Las Vegas branch manager was Fallon, and its Las 

Vegas sales representatives included Burciaga, Poulemanos, and Rowan.
5

Sales representatives are responsible primarily for servicing their own clients, but 

they “cover” one another‟s surgeries when conflicts arise. In such cases, the assigned 

representative typically informs the substitute of the surgeon‟s protocols and preferences 

to ensure the best possible service. This preserves the loyalty and trust that the assigned 

representative has cultivated with the surgeon.

Both managers and representatives sign non-compete agreements prohibiting

“direct or indirect” competition with Stryker. For example, the agreements prohibit them 

from inducing Stryker‟s employees to resign or soliciting Stryker‟s customers, both 

during their employment with Stryker and for one year thereafter.3 Stryker maintains that 

these agreements protect it from its competitors, like Zimmer, which also use 

representatives to sell spine-related products.

In December 2010, Zimmer had virtually no market presence in Las Vegas or 

Arizona. Kevin Brothen, Zimmer‟s Area Director for the West and a former Stryker 

manager, developed plans to acquire all but one of Stryker‟s branch managers, sales 

managers, and sales representatives in Arizona and Las Vegas. These plans were called 

Project Sun Devil and Project Viva, respectively. Brothen began by contacting Stryker‟s 

 

3

Some of the agreements vary in what they expressly prohibit. For example, 

managers‟ agreements prohibit them from competing in their former “Sales and 

Marketing Regions,” while representatives‟ agreements prohibit them from soliciting 

business from Stryker‟s “customers” whom they “had contact with or serviced, directly 

or indirectly” in their respective sales territories.
6

Las Vegas branch manager (Fallon) and its Arizona branch manager (Loughran), both of 

whom gave him compensation data and sales information. Brothen used this information 

to calculate what he would offer Stryker employees to induce them to join Zimmer.

Brothen devised a “flip-flopping” scheme to facilitate the employees‟ compliance 

with their non-compete agreements while still working for Zimmer. Pursuant to this 

scheme, Fallon would manage Zimmer‟s Arizona branch, while Loughran would manage 

its Las Vegas branch. Sales representatives would remain in their respective branches but 

would service different customers. This scheme was feasible because of Stryker 

representatives‟ personal familiarity with each other‟s customers.

Around this time, Giebelhaus, a representative in Stryker‟s Chicago branch, also 

spoke to Zimmer about defecting from Stryker. Giebelhaus received permission to bring 

along two other representatives, William Williams and Brian Miller. As in Projects Sun 

Devil and Viva, the plan was for all three to “flip-flop” sales territories to avoid violating 

their non-compete agreements.

Brothen‟s plans were so successful that on March 21, 2011, eleven employees 

resigned en masse from Stryker‟s Arizona and Las Vegas branches.4 In Chicago, 

however, only Giebelhaus resigned.

 

4

Three employees ultimately changed their minds and decided to stay with 

Stryker. The eight who did not return are the Individual Defendants in this case.
7

On April 1, 2011, Stryker filed a complaint, along with a motion for a temporary 

restraining order and preliminary injunction, in the United States District Court for the 

District of New Jersey, alleging breach of contract and several business torts. The 

District Court issued a temporary restraining order that same day. A preliminary 

injunction hearing followed, and on May 13, 2011, the Court issued an oral opinion and 

entered a written order granting a preliminary injunction. The Individual and Zimmer 

Defendants both filed timely appeals, which we have consolidated for review.

II5

A preliminary injunction may be issued if “„(1) the plaintiff is likely to succeed on 

the merits; (2) denial will result in irreparable harm to the plaintiff; (3) granting the 

injunction will not result in irreparable harm to the defendant; and (4) granting the 

injunction is in the public interest.‟” P.C. Yonkers, Inc. v. Celebrations the Party & 

Seasonal Superstore, LLC, 428 F.3d 504, 508 (3d Cir. 2005) (quoting NutraSweet Co. v. 

Vit-Mar Enters., Inc., 176 F.3d 151, 153 (3d Cir. 1999)). “[W]e exercise plenary review 

over the district court‟s conclusions of law and its application of law to the facts, but 

review its findings of fact for clear error.” Id. (citing Duraco Prods., Inc. v. Joy Plastic 

Enters., Ltd., 40 F.3d 1431, 1438 (3d Cir. 1994)). We review the grant of a preliminary 

 

5

The District Court had jurisdiction pursuant to 28 U.S.C. § 1332, and we have

jurisdiction under 28 U.S.C. § 1292(a)(1).
8

injunction for abuse of discretion. E.g., Stilp v. Contino, 613 F.3d 405, 409 n.3 (3d Cir. 

2010).

III

The District Court applied the proper test in concluding that Stryker was entitled 

to a preliminary injunction. First, the Court determined that Stryker was likely to succeed 

on the merits of its breach of contract and tort claims under New Jersey law because the 

record revealed solicitations of both its employees and customers in violation of its noncompete agreements with the intent to “decimate” its Arizona and Las Vegas operations.6

 

The Court also concluded that Stryker would be irreparably harmed without an injunction 

because it stood to lose nearly all of its customer relationships and goodwill in Arizona 

and Las Vegas. By contrast, the Individual Defendants had been indemnified and were

guaranteed contracts with Zimmer. And although Zimmer stood to lose the value of its 

customer relationships, the Court noted that such an injury could be discounted because 

Zimmer likely was at fault. Finally, the Court determined that the public interest in 

 

6

The Individual Defendants argue that New Jersey‟s “economic loss doctrine” 

bars Stryker‟s tort claims. By contrast, the Zimmer Defendants argue that New Jersey 

law does not apply and that the District Court should have analyzed Stryker‟s tort claims 

under Arizona or Nevada law. Both of these arguments have been waived because they 

were not raised below. See, e.g., Srein v. Frankford Trust Co., 323 F.3d 214, 224 n.8 (3d 

Cir. 2003) (“We have consistently held that we will not consider issues that are raised for 

the first time on appeal absent „compelling reasons.‟” (quoting Patterson v. Cuyler, 729 

F.2d 925, 929 (3d Cir. 1984))).
9

enforcing non-compete agreements and in promoting lawful competition supported an 

injunction.

Although we largely agree with the District Court‟s thorough analysis, we hold 

that portions of the injunction are overbroad. Accordingly, we will affirm in part and 

vacate in part the order granting a preliminary injunction and remand for proceedings 

consistent with this opinion.

A

We begin by holding that the injunction must be vacated as to Graveline, 

Giebelhaus, Rowan, and Poulemanos. “In an action tried on the facts without a jury . . . 

the court must find the facts specially and state its conclusions of law separately.” Fed. 

R. Civ. P. 52(a)(1). This requirement is not “hypertechnical.” Prof’l Plan Examiners of 

N.J., Inc. v. Lefante, 750 F.2d 282, 289 (3d Cir. 1984). “[T]he judge need only make 

brief, definite, pertinent findings and conclusions upon the contested matters; there is no 

necessity for over-elaboration of detail.” Fed. R. Civ. P. 52(a) advisory committee‟s note 

(1946). But if “the record does not provide a sufficient basis to ascertain the legal and 

factual grounds for issuing the injunction or if the findings are inadequate,” the injunction 

cannot stand. Educ. Testing Servs. v. Katzman, 793 F.2d 533, 537 (3d Cir. 1986) 

(quoting Lefante, 750 F.2d at 289).
10

The District Court made ample factual findings with respect to six of the 

Individual Defendants: Hermansky, Hilton, Burciaga, Lively, Fallon, and Loughran. The 

Court did not, however, explain why it enjoined Rowan or Poulemanos. Though the 

Court suggested that they resigned from Stryker and planned to participate in the “flipflopping” scheme, it did not cite any evidence that they actually breached their noncompete agreements or acted tortiously. Absent specific findings of fact, the injunction 

against Rowan and Poulemanos cannot stand.

As for Graveline and Giebelhaus, the District Court did not discuss either 

Defendant until after reading its order into the record, which prompted their counsel to 

ask whether they were included in the injunction. The Court then simply noted that it 

was “very reluctant to unhitch them from the corporate entity . . . and the individuals that 

are part of it.” Because the Court made no factual findings as to how Graveline or 

Giebelhaus engaged in tortious activity, the injunction was not proper as to them as well.

B

Defendants argue that the injunction is overbroad. We agree, but only with 

respect to paragraphs A and F of the injunction.

“District courts are afforded considerable discretion in framing injunctions,” but 

“„injunctive relief should be no broader than necessary to provide full relief to the 
11

aggrieved party.‟” Meyer v. CUNA Mut. Ins. Soc’y, 648 F.3d 154, 169–70 (3d Cir. 2011) 

(quoting Ameron, Inc. v. U.S. Army Corps of Eng’rs, 787 F.2d 875, 888 (3d Cir. 1986)).

Paragraph A states:

Defendants, and all parties in active concert or participation with them, are 

preliminarily enjoined from soliciting or moving the business of any current 

Stryker Spine customer of the Las Vegas and Arizona Branches, defined as 

any physician who was serviced by any of the Stryker employees who were 

solicited and acquired by Zimmer under Project Sun Devil and Project 

Viva, to Zimmer, for a period of 12 months, effective April 1, 2011[.]

We are concerned that the phrase “moving the business” might be read to completely 

preclude Stryker‟s customers in Arizona and Las Vegas from using Zimmer products, 

even when they have not been solicited by Defendants. In such cases, Stryker‟s business 

would be “moving” only because of fair competition. Restricting such competition 

would go beyond restoring the status quo as it existed before Projects Sun Devil and 

Viva, when Zimmer was free to service Stryker customers so long as it did so fairly. 

Insofar as the injunction now prohibits Zimmer from competing fairly, the injunction is 

overbroad.7

 

7

The District Court expressed concern that trying to return to the status quo would 

present a “problem in terms of capitalism and free competition” because the Individual 

Defendants already may have severed Stryker‟s customer relationships by soliciting 

surgeons in Arizona and Las Vegas. We agree that this is a valid concern, but Stryker 

can seek damages for business that was “moved” tortiously or in violation of noncompete agreements.
12

We also agree with Defendants that Paragraph F is overbroad. That 

paragraph states:

Defendants, and all parties in active concert or participation with them, are 

preliminarily enjoined from soliciting, inducing or influencing, or 

attempting to solicit, induce or influence, any person engaged as an 

employee, independent contractor or agent of Stryker to terminate his, her 

or its employment and/or business relationship with Stryker[.]

Paragraph F reasonably prohibits Defendants from soliciting Stryker‟s branch managers, 

sales managers, and sales representatives in Las Vegas and Arizona to terminate their

employment. But it also precludes them from soliciting any Stryker employees, 

independent contractors, and agents in any Stryker branch. The District Court made no 

findings to support such a broad injunction. Though the District Court found that some 

of Stryker‟s Chicago employees were solicited, it concluded that Stryker had not shown 

any irreparable harm there. No findings were made with respect to any other Stryker 

office outside of Las Vegas and Arizona, and there were no findings of fact relating to 

independent contractors or agents. Paragraph F must be circumscribed accordingly.

C

Finally, we consider Defendants‟ argument that the District Court erred by not 

establishing an injunction bond as required by Rule 65 of the Federal Rules of Civil 

Procedure. “The court may issue a preliminary injunction or a temporary restraining 

order only if the movant gives security in an amount that the court considers proper to 
13

pay the costs and damages sustained by any party found to have been wrongfully 

enjoined or restrained.” Fed. R. Civ. P. 65(c). The bond “serves to inform the plaintiff of 

the price they [sic] can expect to pay if the injunction was wrongfully issued.” Instant 

Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 804–05 (3d Cir. 1989). The 

amount of the bond is left to the district court‟s discretion. Zambelli Fireworks Mfg. Co.

v. Wood, 592 F.3d 412, 426 (3d Cir. 2010).

The District Court set the bond at $800,000 to secure the temporary restraining 

order but declined to require the posting of a new bond at the preliminary injunction 

hearing, reasoning:

We are recreating in this 12 month period a time during which Zimmer[,]

had it played fair according to the testimony shown in the prima facie 

showing . . . would have trained its own fleet. It has already trained 

people[,] which puts it [ahead] of the game. And what we‟re saying is, they 

are not going to go into action now. There‟s no loss that I see.

The Individual Defendants have been indemnified and guaranteed salaries, so they bear 

no financial risk if they are wrongfully enjoined. But concluding that the Zimmer 

Defendants bear no risk of loss assumes that Projects Sun Devil and Viva were improper 

and that the Zimmer Defendants were properly enjoined. The purpose of the bond 

requirement is to protect the enjoined party in the event the injunction should not have 

been imposed. Accordingly, the District Court must impose a new bond after considering 

what is necessary to protect Zimmer in the event the injunction is later deemed unlawful. 
14

We express no opinion as to the value of such a bond and leave that decision to the sound 

discretion of the District Court following a full hearing on the issue.

IV

For the reasons stated, we will affirm in part and vacate in part the District Court‟s 

order granting a preliminary injunction and remand the matter for further proceedings 

consistent with this opinion.