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Former Obagi Medical Products majority shareholder sues

This article was originally published in The Rose Sheet

Executive Summary

ZO Skin Health Inc. has filed suit in California Superior Court against Obagi Medical Products, alleging anti-competitive practices. ZO founder Dr. Zein Obagi says OMP, which markets prescription-only skin care, is preventing ZO from marketing a new non-prescription anti-aging skin-care line, citing non-compete clauses. Obagi, a dermatologist, founded Worldwide Products Distribution Inc. in 1988, which would later "form the core" of prescription skin care pharmaceutical firm OMP. In 1997, Obagi sold a controlling share in OMP to a private equity firm, which took the company public. According to a release from Del Mar, Calif.-based ZO, Obagi offered OMP the option to market and distribute his new line, but the firm declined. OMP then "engage[d] in a far-reaching and legally improper campaign" to prevent the line's sale, and also stopped the sale of ZO to a Japanese pharmaceutical firm, claiming it would violate a non-compete clause. However, ZO maintains that clause is unenforceable

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