St. Jude Medical Inc. has sued a former member of its innermost executive circle, alleging that he violated a noncompete agreement when he accepted a job with crosstown rival Medtronic Inc.
In a complaint filed Monday in Ramsey County District Court, medical device maker St. Jude alleges Joseph McCullough had "complete and unfettered" access to its "most sensitive and confidential" information concerning global operations. As one of two group presidents, McCullough reported directly to St. Jude CEO Daniel Starks.
Noncompete agreements are common in the hypercompetitive medical technology industry, and occasionally disagreements over their reach spill into the courts. Medtronic and St. Jude's businesses overlap in many areas, including devices that treat abnormal heart rhythms.
The lawsuit alleges that McCullough, 60, left the Little Canada company voluntarily in May and then went to work at Fridley-based Medtronic earlier this month with the title of international general manager, cardiovascular commercial operations, developed markets.
An industry veteran, McCullough began his tenure at St. Jude in 1994. He climbed the executive ranks in several posts with increasing responsibility, including a six-year stint as head of St. Jude's international business with "unrestricted access" to "confidential information" regarding the company's global growth plans and strategy, according to the complaint.
In his most-recent position as group president, he was responsible to managing marketing and sales of St. Jude's entire line of heart devices worldwide.
St. Jude argues in the lawsuit that it would "suffer substantial damage and irreparable harm if such information were to be disclosed or fall into the hands" of a competitor. That includes St. Jude's plans for entering the minimally invasive heart valve market, where Medtronic is an upstart competitor, as well as knowledge of each product's profit margin.
A woman answering the phone at McCullough's St. Paul home declined to comment. Medtronic spokesman Brian Henry said the company had no comment on the suit.
The complaint notes that McCullough was consistently one of St. Jude's top-paid executives between 2006 and 2008. It says that in 2008 he received approximately $5 million in compensation, including a base salary of $1.2 million and about $4.2 million from exercised stock options.
In October 2007, he entered into a noncompete agreement which, the suit alleges, barred him from accepting employment with competitors and from revealing confidential business information.
St. Jude claims the agreement is supposed to run through May 2011.
In 2009, as several of its core businesses slowed, Starks and McCullough "agreed it would be appropriate" for McCullough to step down. St. Jude agreed to keep him on the payroll at an annual salary of $500,000 through December of this year, as he waited for stock options to vest. In return, the complaint states, McCullough agreed to honor his noncompete agreement.
But on May 10, McCullough allegedly notified St. Jude that he "no longer was an employee ... effective immediately" and exercised stock options worth $2.1 million. St. Jude said it believes McCullough was induced by Medtronic to "switch sides" with a signing bonus, guaranteed compensation and stock options.
St. Jude spokeswoman Angie Craig said in an e-mail statement, "It is unfortunate that after a long and successful career with St. Jude Medical we are forced to compel Mr. McCullough through legal means to honor his contract with us. While the situation is unfortunate, we intend to aggressively pursue this case."
The suit includes two counts of breach of contract, and one count of unjust enrichment. It calls for McCullough to abide by what St. Jude sees as the terms of his noncompete agreement, and seeks to bar him from revealing confidential business information to Medtronic or any other competitor.
It also calls for the court to order McCullough to pay St. Jude any income or "other financial benefit or profit" from his alleged "misconduct."
Star Tribune staff writer Pat Pheifer contributed to this report. Janet Moore • 612-673-7752