St. Jude, Former Exec Settle Noncompete Dispute
St. Jude Medical, Inc., and former executive Joseph McCullough settled a lawsuit in which St. Jude accused McCullough of violating a noncompete agreement when he accepted a job with competitor Medtronic, Inc.
St. Jude and Medtronic representatives confirmed Wednesday morning that a settlement was reached-but neither company would specify the terms of the agreement or reveal McCullough's employment status.
In the lawsuit, filed in Ramsey County District Court in July, Little Canada-based St. Jude said that McCullough used to be one of two group presidents reporting directly to President and CEO Daniel Starks. In that role, he was directly responsible for managing the marketing and sale of St. Jude's entire line of cardiovascular products for the treatment of heart disease-and had “complete and unfettered” access to the company's “most sensitive and confidential information” regarding its global operations and long-term strategic plans.
McCullough joined St. Jude in 1994 and worked his way up the ranks. Between July 2001 and December 2007, prior to becoming a group president, he oversaw St. Jude's international business.
According to the complaint, between 2006 and 2008, McCullough was one of St. Jude's four highest-paid executives. In 2008, he received more than $5 million in total compensation, including a base salary of $1.2 million and stock options worth about $4.15 million.
On October 2, 2007, McCullough allegedly entered into a noncompete agreement under which he was prohibited from working for a St. Jude competitor in any capacity for at least a year. According to St. Jude, the noncompete agreement runs through May 2011.
In 2009, Starks and McCullough agreed that McCullough would resign and worked together to develop a transition plan, the lawsuit said. McCullough surrendered his responsibilities as group president, effective November 2009, and his annual salary was reduced to $500,000. St. Jude agreed to keep paying him through December 2010 to give him time for his stock options to vest. In return, McCullough agreed to honor his noncompete agreement.
But on May 10, 2010, McCullough allegedly told St. Jude that he was no longer an employee and exercised stock options worth $2.1 million. Earlier this month, McCullough went to work for Fridley-based Medtronic with the title of international general manager, cardiovascular commercial operations, developed markets.
In its formal complaint, St. Jude had requested a temporary restraining order preventing McCullough from working at Medtronic until May 2011. A couple of weeks later, in mid-August, District Court Judge M. Michael Monahan ruled that McCullough couldn't join Medtronic until November.
Monahan wrote in his order that both McCullough and Medtronic “recognized that they were embarking upon a relationship that was laden with serious legal and ethical problems” when McCullough began working at the medical-device company. He added, “Thankfully, I am not required to deal with the ethical.”