MAXLITE, INC. v. ATG ELECTRONICS, INC. et al
Filing
189
OPINION AND ORDER ADOPTING REPORT AND RECOMMENDATIONS for 185 Report and Recommendations in its entirety; that the Employee Defendants' application for leave to file their Crossclaimis GRANTED. The Employee Defendants' request for an entry of a preliminary injunctionis DENIED, etc. Signed by Judge John Michael Vazquez on 5/14/18. (cm, )
Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MAXLITE, INC.,
Plaint ff
Civil Action No. 15-1116 (JMV) (JBC)
V.
OPINION AND ORDER
ATG ELECTRONICS, INC., et al.,
Defendants.
John Michael Vazguez, U.S.D.J.
This matter comes before this Court on the March 15, 2018 Report and Recommendation
(“R&R”) of Magistrate Judge James B. Clark. D.E. 185. The R&R addressed an order to show
cause filed by Defendants James D. Steedly, Sophia D. Galleher, and Matthew Kim (collectively,
the “Employee Defendants”) requesting (1) leave to file a verified crossclaim seeking a declaratory
judgment that Defendant ATG Electronics, Inc. (“ATG”) is responsible for all past and future legal
costs incurred by the Employee Defendants in connection with this litigation; and (2) the entry of
a preliminary injunction compelling ATG to continue payment of the Employee Defendants’ legal
fees and costs until they are relieved of their obligation to pay by the Court (the “Application”).
D.E. 109. The R&R recommends that the Employee Defendants’ request for leave to file their
crossclaim be granted and the Employee Defendants’ request for a preliminary injunction be
denied. D.E. 185. The Court reviewed all relevant documents and submissions,1 and for the
reasons stated below, the Court adopts the R&R (D.E. 185) in its entirety.
I. FACTUAL BACKGROUND
The factual details of this dispute are explained in detail in the R&R. D.E. 185. In sum,
the current dispute centers on whether ATG is responsible for legal fees incurred by the Employee
Defendants after they left their former employer to join ATG. The Employee Defendants claim
that ATG is responsible for the fees because ATG previously agreed to take responsibility for legal
costs incurred by the Employee Defendants upon leaving to work for ATG. ATG argues that it is
not obligated to pay the Employee Defendants’ legal fees because (1) the dictates of In re Grand
Juiy Investigation, 200 N.J. 481 (2009) do not apply to this case, and because (2) even if Grand
Juiy applied, there is no formal agreement between ATG and the Employee Defendants under
which ATG agreed to pay the legal fees.
II. PROCEDURAL HISTORY
On September 9, 2015, the Employee Defendants submitted an application for an order to
show cause (the “Application”). D.E. 109. ATG filed opposition on October 16, 2015. D.E. 111.
On November 13, 2015 Judge Steven C. Mannion held oral argument on the Application. On
February 29, 2016, before a decision was made on the Application, the case was transferred to this
Court. D.E. 132. On April 8, 2016, Judge Clark stayed the Employee Defendants’ Application
pending disposition of ATG’s motion to dismiss. D.E. 139. On June 24, 2016, this Court denied
ATG’s motion to dismiss. D.E. 147, 148.
The Court reviewed the following documents: the Employee Defendants’ underlying
application (D.E. 109), ATG’s opposition (D.E. 111), Judge Clark’s Report and
Recommendation (D.E. 185), ATG’s objections to the Report and Recommendation (D.E. 187),
and the Employee Defendants’ reply (D.E. 188).
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Judge Clark set oral argument on the Application for March 30, 2017. D.E. 167. The oral
argument was adjourned until April 17, 2017 and the Court allowed the parties to submit
supplemental briefing. D.E. 170. Oral argument was again adjourned, and eventually held on
May 3, 2017. D.E. 179. Judge Clark issued his R&R on March 15, 2018. D.E. 185. ATG filed
its opposition to the R&R on March 29, 2018, D.E. 187, and the Employee Defendants replied on
April 14, 2018, D.E. 18$.
III. LEGAL STANDARD
Local Civil Rule 72.l(c)(2) allows a party to object to a Magistrate Judge’s report and
recommendation within 14 days of service. The district court “shall make a de novo determination
of those portions to which objection is made and may accept, reject, or modify, in whole or in part,
the findings or recommendations made by the Magistrate Judge.” L. Civ. R. 72.1(c)(2); see
Edelson V., L.F. v. Encore Networks, Inc., No. 11-5802, 2012 WL4891695, at *2 (D.N.J. Oct. 12,
2012). The district court “need not normally conduct a new hearing and may consider the record
developed before the Magistrate Judge, making his or her own determination on the basis of that
record.” L. Civ. R. 72.1(c)(2); see Edelson, 2012 WL 4891695, at *2. “As to uncontested portions
of the report, the district court has discretion to choose an appropriate standard of review. At a
minimum, what is not objected to, the district court reviews under the plain error or manifest
injustice standard.” Edetson, No. 11-5802, 2012 WE 4891695, at *3 (internal quotations, citations,
and brackets omitted). “[W]here no objections are made in regard to a report or parts thereof, the
district court will adopt the report and accept the recommendation if it is ‘satisf[ied]
.
.
.
that there
is no clear error on the face of the record.” Sportscare ofAm., P.C. v. Multiplan, Inc., No. 104414, 2011 WE 500195, at *1 (D.N.J. Feb. 10, 2011) (quoting fed.R.Civ.P. 72 Advisory
Committee’s Notes).
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IV. ANALYSIS
The Employee Defendants’ crossclaim seeks a declaratory judgment as to the following
relief:
(a) A temporary order enjoining and restraining Defendant ATG
from unilaterally terminating its obligation to pay the Employee
Defendants’ reasonable legal fees and costs
until and unless
[ATG] obtains the Court’s permission to be relieved of its obligation
by demonstrating sufficient “good cause” as required by New Jersey
law; and
(b) A permanent order compelling Defendant ATG to fulfill its
obligation by continuing to pay Pashman Stein P.C. its legal fees
and costs in connection with representing the Employee Defendants
for the duration of the litigation; and
(c) For such other and further relief as the Court deems just and
proper.
.
.
.
R&Rat 15.
Judge Clark explained that under Grand Juty, questions regarding third-party payment for
the representation of other parties are handled via “summary action,” but that there is no parallel
procedure in federal courts. R&R at 15-16. Accordingly, Judge Clark first granted the Employee
Defendants’ request for leave to amend their Answer to assert their crossclaim against ATG
seeking declaratory relief under Grand Juiy, and then examined the requested preliminary
injunction.
The Court agrees.
Neither party opposes the R&R’s recommendation to grant the
Employee Defendants leave, and the Court finds no clear error or manifest injustice in the decision.
Accordingly, the Court adopts Judge Clark’s recommendation to grant the Employee Defendants
leave to file their crossclaim.
Judge Clark then turned to the merits of the Employee Defendants’ request for a
preliminary injunction. As Judge Clark observed, in order to determine whether a preliminary
injunction should issue, a district court must find the following:
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(1) the plaintiff shows that it is likely to succeed on the merits; (2)
the plaintiff establishes that it is likely to suffer irreparable harm
absent issuance of the injunction; (3) the balance of equities does
not disfavor granting an injunction; and (4) public interest concerns
do not outweigh the interests advanced by issuance of the injunction.
fres-co Sys. USA, Inc. v. Hawkins, 690 F. App’x 72, 75 (3d Cir. 2017) (internal citation omitted).
Injunctive relief is “an extraordinary remedy” only granted “upon a clear showing that the plaintiff
is entitled to such relief.” Winter v. Nat. Res. Def Council, Inc., 555 U.S. 7, 22 (200$) (citation
omitted).
Judge Clark determined that while the Employee Defendants could show a reasonable
probability of success on the merits, the Employee Defendants could not make the requisite
showing of irreparable harm. “The irreparable harm requirement is met if a plaintiff demonstrates
a significant risk that he or she will experience harm that cannot adequately be compensated after
the fact by monetary damages.” Adams v. freedom forge Corp., 204 F.3d 475, 4$4-$5 (3d Cir.
2000). “In general, to show irreparable harm a plaintiff must demonstrate potential harm which
cannot be redressed by a legal or an equitable remedy following a trial.” Acierno v. New Castle
Cty., 40 F.3d 645, 653 (3d Cir. 1994) (quotation omitted).
Judge Clark reasoned that the Employee Defendants could not show irreparable harm
because generally fee disputes do not rise to the level of irreparable harm, because there are no
“existing or threated criminal charges against the Employee Defendants,” because the Employee
Defendants’ potential civil liability is not extraordinary, and because the claims in this matter and
their underlying facts are not particularly complex. R&R at 30-32. Additionally, Judge Clark
found that the matter is not particularly close to trial or any other critical period of litigation. R&R
at 32.
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Neither the Employee Defendants nor ATG2 object to the ultimate conclusion that the
Employee Defendants could not show irreparable harm. See D.E. 187, 188. Accordingly, afier
reviewing Judge Clark’s recommendation, and finding that it is not clearly erroneous or manifestly
unjust. the Court adopts Judge Clark’s recommendation to deny the Employee Defendants’ request
for a preliminary injunction.
V. CONCLUSION AND ORDER
for the foregoing reasons, and for good cause shown,
IT IS on this 14th day of May, 2018,
ORDERED that the Court adopts the Report and Recommendation (D.E. 185) in its
entirety; and it is further
ORDERED that the Employee Defendants’ application for leave to file their Crossclaim
is GRANTED; and it is further
ORDERED that the Employee Defendants’ request for an entry of a preliminary injunction
is DENIED.
Dated: May 14, 2018
/
John Michael Vazquez,.J.
2
ATG “agrees with the conclusion of the Report that a preliminary injunction should not issue”
but takes issue with Judge Clark’s underlying reasoning and “requests that the Court reject the
reasoning in the report which seeks to extend the application of Grand Juiy beyond what was
intended by the New Jersey Supreme Court.” D.E. 187 at 1. ATG contends that “Grand Juiy is
completely inapplicable to the facts at hand.” Id. While the Court need not address ATG’s
objections to Judge Clark’s underlying reasoning because ATG agrees with Judge Clark’s
recommendations, the Court notes that it finds no issues with Judge Clark’s analysis of Grand
Juty and its application to the facts of this case. With that said, the R&R merely finds a
reasonable likelihood of success on the merits, not actual success on the merits. In other words,
the issue has not yet been adjudicated to conclusion.
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