ADP, LLC v. LYNCH

Filing 132

OPINION. Signed by Judge William J. Martini on 4/17/18. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ADP, LLC,
Civ. No. 2:16-01053

Plaintiff,
v.
JORDAN LYNCH,
Defendant.

ADP, LLC,
Civ. No. 2:16-01111

Plaintiff,
v.
JOHN HALPIN,

OPINION

Defendant.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiff ADP, LLC brings this action against its former employees Jordan Lynch
and John Halpin (collectively “Defendants”), alleging violations of restrictive covenants
contained in their employment agreements. This matter comes before the Court on
Plaintiff’s motion for sanctions against Defendant Halpin for violating the Court’s June
2016 order enjoining Defendants from soliciting Plaintiff’s clients during the course of
litigation. (ECF No. 120). There was no oral argument. Fed. R. Civ. P. 78(b). For the
reasons set forth below, Plaintiff’s motion is GRANTED.
I.

BACKGROUND

The Court assumes the parties’ familiarity with the facts and will summarize below
only those facts relevant to the instant motion. On June 30, 2016, this Court entered a
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preliminary injunction (the “Injunction”) against Defendants, enjoining them from
soliciting Plaintiff’s existing clients. The Injunction also restrained Defendants from
soliciting Plaintiff’s prospective clients, but only those prospective clients known to them
while they were employed by Plaintiff. ECF No. 31. The Court, however, allowed
Defendants to continue working at Plaintiff’s competitor, Ultimate Software Group
(“Ultimate”), and to solicit Plaintiff’s prospective clients of whom they had no knowledge
during their employment. Id. The Third Circuit affirmed the issuance of the Injunction on
February 7, 2017, finding that the Court’s grant of preliminary relief was reasonable. Op.
6, ECF No. 69-1. Thereafter, Defendants moved on three occasions to vacate or modify
the Injunction, which the Court denied each time. See ECF Nos. 71, 84, 87, 105, 112, 121.
During this time, the parties engaged in discovery, which remains ongoing.
Plaintiff now moves the Court to impose sanctions against Defendant Halpin for
violating the Injunction. Pl.’s Br. in Supp. of Mot. for Sanctions (“Pl.’s Br.”), ECF No.
120-2. Plaintiff submits that Halpin admitted to soliciting eight of Plaintiff’s clients after
the Court’s issuance of the Injunction. Halpin allegedly made these admissions during his
deposition, which occurred on January 12, 2018. Id. at 2–3. Plaintiff claims that Halpin
knew that the eight companies at issue were Plaintiff’s clients and he solicited them
anyway, in direct violation of the Injunction. Id. at 3–5. Plaintiff argues that it “now has
clear and convincing evidence of Halpin’s repeated breaches of the [Injunction], and ask
that the Court to [sic] sanction Halpin appropriately, in [an] [sic] amount that will deter
future violations.” Id. at 2.
Halpin opposes, arguing that Plaintiff has failed to prove civil contempt against him
by clear and convincing evidence. See Def.’s Br. in Opp’n to Pl.’s Mot. (“Def.’s Opp’n”)
8, ECF No. 124. Halpin contends that he had no involvement with or knowledge of any of
the eight companies during his employment with Plaintiff. See id. at 8–9, 11–13. Once he
learned that certain companies were Plaintiff’s clients, Halpin submits that he transitioned
his sales efforts to other Ultimate employees or otherwise ceased further contact. See id.
at 9–14. Halpin also claims that he never learned at any point that some of the companies
were using Plaintiff’s services. See id. at 13. Nonetheless, on at least one occasion, Halpin
admits that an Ultimate inside sales representative told him that one of the named
companies was Plaintiff’s client but Halpin proceeded to meet with that company anyway.
See id. at 10. Importantly, Halpin does not deny that he solicited all of the named
companies at some point after the Court’s issuance of the Injunction.
In its reply brief, Plaintiff responds that Halpin failed to offer the same
“transitioning” explanation when confronted with his conduct during his deposition. See
Pl.’s Reply in Further Supp. of Mot. for Sanctions (“Pl.’s Reply”) 2, ECF No. 131. Plaintiff
further argues that whether Halpin had contact with the named companies while employed
by Plaintiff is irrelevant to his compliance with the Injunction; instead, the “determining
factor is that Halpin knew he was soliciting [Plaintiff’s] clients.” See id. at 3. Plaintiff
submits that Halpin’s deposition testimony as well as documents produced during
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discovery show that he knowingly solicited Plaintiff’s clients in direct violation of the
Injunction. See id at 4–7.
II.

LEGAL STANDARD

“Sanctions for civil contempt serve two purposes: ‘to coerce the defendant into
compliance with the court’s order and to compensate for losses sustained by the
disobedience.’” Robin Woods Inc. v. Woods, 28 F.3d 396, 400 (3d Cir. 1994) (quoting
McDonald’s Corp. v. Victory Invs., 727 F.2d 82, 87 (3d Cir. 1984)). “Where compensation
is intended, a fine is imposed, payable to the complainant. Such fine must of course be
based upon evidence of the complainant’s actual loss, and his right, as a civil litigant, to
the compensatory fine is dependent upon the outcome of the basic controversy.” United
States v. United Mine Workers of Am., 330 U.S. 258, 304 (1947). “But where the purpose
is to make the defendant comply, the court’s discretion is otherwise exercised.” Id. “It
must then consider the character and magnitude of the harm threatened by continued
contumacy, and the probable effectiveness of any suggested sanction in bringing about the
result desired.” Id.
“To establish that a party is liable for civil contempt, three elements must be proven:
‘(1) that a valid order of the court existed; (2) that the defendant had knowledge of the
order; and (3) that the defendant disobeyed the order.’” Berne Corp. v. Gov’t of The Virgin
Isldands, 570 F.3d 130, 139 (3d Cir. 2009) (quoting Roe v. Operation Rescue, 54 F.3d 133,
137 (3d Cir. 1995)). The moving party must prove these elements by clear and convincing
evidence. See Woods, 28 F.3d at 399.
III.

DISCUSSION

Plaintiff does not seek compensatory sanctions; instead, Plaintiff seeks to compel
Halpin’s compliance with the Injunction. See Pl.’s Br. at 2. The first two elements are
obviously satisfied here: a valid order exists and Halpin admits to knowing of its existence.
See Certification of H. Freier (“Freier Cert.”), Ex. 1, Halpin Dep. 165:15–166:16, ECF No.
120-1 [hereinafter “Halpin Dep.”]. The Court notes that it previously denied Plaintiff’s
request for sanctions because it found that Plaintiff did not have clear and convincing
evidence of Halpin’s violative conduct. See Op. 4, ECF No. 84. At that time, Plaintiff
relied entirely on its own certification as its evidence, which the Court found failed to meet
the clear and convincing standard. Plaintiff now provides Halpin’s deposition testimony
and documents produced during discovery, citing multiple instances where he admits to
soliciting Plaintiff’s clients after the imposition of the Injunction. See Pl.’s Br. at 2–5.
Halpin’s main defense is that once he learned of certain companies’ involvement
with Plaintiff, he then transitioned his efforts to other Ultimate employees—i.e., Halpin
did not willfully violate the Injunction and made a good faith effort to comply. See Def.’s
Opp’n at 8, 14. Halpin cites to Woods in support of his contention that “substantial
compliance” is a defense to civil contempt. Id. at 8. The Woods court did not so hold; it
merely identified that some other out-of-circuit courts have recognized the “substantial
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compliance” defense. See Woods, 28 F.3d at 399 (noting the 9th Circuit’s acceptance of
substantial compliance as a defense to contempt). In fact, the Woods court expressly stated
that “good faith is not a defense to civil contempt” and that “willfulness is not a necessary
element of contempt.” Id. (quotation and citations omitted). Halpin’s main defense,
therefore, fails.
The only relevant question is whether Halpin solicited any of Plaintiff’s clients after
the Court’s issuance of the Injunction on June 30, 2016. The Court need look no further
than Halpin’s own admissions to determine that he most certainly did. See Halpin Dep.
164:1–167:8 (admitting conversations and meetings with the company Plasan Carbon,
some of which occurred in August 2016); 203:11–204:9 (admitting a conversation with the
company Work Skills in early 2017); 205:2–206:4 (referencing an internal email from
January 2017 in connection with admission of a conversation with the company Barfly
Ventures). Emails produced during discovery also show Halpin communicating directly
with employees from the companies Padnos, Shinola and Asahi Kasei Plastics after the
issuance of the Injunction. See Freier Cert., Exs. 2–4.
Consequently, the Court finds Halpin guilty of civil contempt for violating the
Injunction. Accordingly, Plaintiff’s motion for sanctions is GRANTED. While
willfulness is not an element of contempt, the Court finds it to be an aggravating factor
here. Halpin knowingly violated the Injunction on more than one occasion where he
solicited companies that he knew to be Plaintiff’s clients. See, e.g., Halpin Dep. 164:1–
167:8 (admitting knowledge that Plasan Carbon was Plaintiff’s client), 152:25–153:14
(admitting knowledge that Padnos was Plaintiff’s client); Freier Cert., Ex. 2 (detailed email
exchange between Halpin and employee of Padnos in February 2017). For this reason, the
Court imposes a fine against Defendant Halpin in the amount of $1,000.00. The Court will
further impose an additional fine of $1,000.00 against Defendant Halpin for every future
violation of the Injunction until the end of litigation. The Court also holds Defendant
Halpin liable for Plaintiff’s legal fees arising out of the filing of the instant motion, an
accounting of which Plaintiff must submit to the Court no later than fourteen (14) days
from the issuance of the accompanying order.
IV.

CONCLUSION

For the reasons stated above, Plaintiff’s motion for sanctions is GRANTED. An
appropriate order follows.

/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: April 17, 2017

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