ADP, LLC v. LYNCH
OPINION. Signed by Judge William J. Martini on 6/30/16. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civ. No. 2:16-0 1053 (WJM)
Civ. No. 2:16-01111 (WJM)
WILLIAM J. MARTINI, U.S.D.J.:
ADP, LLC (ADP”) has accused former employees Jordan Lynch and John Halpin
(collectively, “Defendants’”’) of violating restrictive covenants contained in certain
employment agreements. This matter comes before the Court on motions to dismiss filed
by Defendants. In the alternative, Defendants ask that the Court transfer this matter to a
different venue. In addition to opposing Defendants’ submissions, ADP has filed motions
seeking preliminary injunctive relief. For the following reasons, Defendants’ motions to
dismiss, or alternatively to transfer venue, will be GRANTED in part and DENIED in
part, and ADP’s motions for preliminary injunctive relief will be GRANTED in part and
DENIED in part.
Unless otherwise noted, the following facts are alleged by ADP. ADP is a Delaware
LLC with its principal place of business in Roseland, New Jersey. Halpin Compit. at ¶ 2.
Lynch is a Colorado resident, while Halpin is a Michigan Resident. Lynch Cornplt. at ¶ 3;
Halpin Compit. at ¶ 3. ADP provides “business outsourcing and software services to
clients, including human resources, payroll, tax and benefits administration services.
Halpin Cornplt. at ¶ 6. Lynch was an ADP employee from August 24, 2009 to January 4,
2016. Lynch Complt. at ¶ 10. 37. Halpin was an ADP employee from March 30. 2009
to December 23, 2015. Halpin Complt. at ¶J 10, 30. This case concerns Defendants’
alleged violation of certain restrictive covenants they entered into with ADP. Below are
the relevant allegations as to each Defendant.
Lynch was initially hired by ADP as an Associate District Manager and eventually
climbed the corporate ranks to the position of Up Market District Manager. See Lynch
Complt. at ¶ 10. In his positions at ADP, “Lynch was responsible for cultivating,
developing, and maintaining business with clients and prospective clients in assigned
areas.” Id. at11.
Shortly before joining ADP, Lynch entered into a Sales Representative Agreement
dated July 2, 2009. Id. at 12. In the event Lynch leaves ADP, the Sales Representative
Agreement restricts him from engaging in any of the following: (1) soliciting business from
certain clients or prospective clients within one year of leaving ADP (2) disclosing any
confidential or proprietary information relating to ADP;’ and (3) using confidential
information concerning the identity of current, former, or prospective clients. See Id. at ¶I
12-1 5. At around that same time, Lynch also executed a Nondisclosure Agreement. In
addition to restricting Lynch’s use of company property in the event that his status as an
ADP employee terminate, the Nondisclosure Agreement also contains a non-solicitation
provision. See Id. at ¶ 16-12. According to ADP, prior to entering into the Nondisclosure
Agreement, Lynch had the opportunity to review the agreement’s terms with an attorney.
See Id. at 19.
During the course of his employment with ADP, Lynch agreed to participate in
ADP’s restricted stock award program (the “Plan”). As a condition of receiving stock
awards under the Plan, Lynch entered into a Restrictive Covenant Agreement dated
September 22, 2011 (the “2011 Restrictive Covenant”). The 2011 Restrictive Covenant
ADP alleges that Lynch received special training and knowledge as an ADP employee. Lynch’s status as an ADP
employee also allegedly gave him access to confidential ADP material and proprietary information. See Id. at ¶J 3032. ADP alleges the same against Ha]pin. See Halpin Comp]t. at ¶J 27.
contained a non-compete provision in which Lynch agreed that for the first year following
his termination from ADP, he would not work for an ADP competitor within the
geographic territory that he managed. See id. at ¶J 21. The 2011 Restrictive Covenant also
contained non-disclosure and non-solicitation provisions. See Id.
Lynch entered into similar agreements under the Plan in 2012 (the “2012 Restrictive
Covenant”) and 2013 (the ‘2013 Restrictive Covenant”). See id. at ¶ 24. The Restrictive
Covenants from 2011 to 2013 were included in documents that were separate from the
main stock agreements. However, in order to receive awards under the Plan from 2011 to
2013, Lynch was required to acknowledge a collection of grant documents, which included
the Restrictive Covenants. See Caban Cert. (Lynch Action) at ¶9. In fact, Lynch was
physically unable to click the “Accept Grant” button unless he had affirmatively checked
a prior box indicating that he had read all of the associated documents. See Id. at ¶‘ 11-12.
Lynch then executed similar agreements under the Plan in 2014 (the “2014
Restrictive Covenant”) and 2015 (the “2015 Restrictive Covenant”). See Id. at ¶ 27-29.
ADP acknowledges that the process for accepting Plan awards in 2014 and 2015 was
different from what occurred from 2011 to 2013. See Caban Cert. (Lynch Action) at ¶ 14.
However, as was the case from 2011 to 2013, Lynch could not receive his 2014 and 2015
awards without assenting to the corresponding restrictive covenants. See Id.
ADP alleges that Lynch breached the Sales Representative Agreement,
Nondisclosure Agreement, and the above-mentioned Restrictive Covenants (collectively,
the “Agreements”) shortly after he voluntarily left the company in January of 2016. See
Lynch Compk. at ¶I 36-37. Specifically, shortly after he left ADP, Lynch became
employed by The Ultimate Software Group, Inc. (“USG”), which provides services that
are substantially similar to those provided by ADP. See Id. at ¶J 3 8-39. In light of Lynch’s
new employment status, ADP accuses him of violating the non-compete, non-disclosure.
and non-solicitation provisions contained in the Agreements. See id. at ¶J 40-42.
Halpin began his tenure at ADP as a Major Accounts Sales Trainee. He was
eventually promoted to Up Market District Manager in ADP’s Major Accounts Division.
See Halpin Compit. at ¶ 10. While Hatpin is not alleged to have entered into the Sates
Representative Agreement or Nondisclosure Agreement, he is alleged to have entered into
a number of restrictive covenants under the Plan. Specifically, Halpin (like Lynch) entered
into the 2011 Restrictive Covenant, the 2012 Restrictive Covenant, the 2013 Restrictive
Covenant, the 2014 Restrictive Covenant, and the 2015 Restrictive Covenant. See id. at ¶
14-22. Like Lynch, Halpin had to acknowledge that he read the Restrictive Covenants
before he could accept his grants under the Plan. Indeed, Lynch and Halpin were required
to undergo the same exact steps before receiving their grants. See Caban Cert. (Halpin
Action) at ¶ 9-15.
ADP accuses Halpin of breaching the Restrictive Covenants by joining USG. In
particular, ADP alleges that as a USG employee, “Halpin will be responsible for selling
the same or substantially similar services as he sold on behalf of ADP in the same
geographic area as that which he was responsible for while working at ADP.” See Halpin
Cornph. at ¶ 32. Just as it has in its case against Lynch, ADP accuses Halpin of violating
the non-compete, non-disclosure, and non-solicitation provisions contained in the
Restrictive Covenants. See Id. at ¶ 29-33. Specifically, Halpin is accused of soliciting
ADP clients through social media outreach. See Id. at ¶ 34.
DEFENDANTS’ MOTIONS TO DISMISS
Defendants move to dismiss for a lack of personal jurisdiction. In determining
whether personal jurisdiction exists, a court will conduct a two-step inquiry. First, it will
determine whether the state’s long-arm statute provides that personal jurisdiction exists
over the defendant. Second, it will determine whether the exercise of personal jurisdiction
over the defendant would violate the Due Process Clause of the Fourteenth Amendment.
See, e.g., IMO Industries, Inc. v. Kiekert AG, 155 F.3d 254, 259 (3d Cir. 1998). The
exercise of personal jurisdiction does not violate the Due Process Clause of the Fourteenth
Amendment where “the defendant purposefully avails itself of conducting activities within
the forum state, thus invoking the benefits and protections of its laws.” Burger King Corp.
v. Rttdzewicz, 417 U.S. 462, 475 (1985) (quotingHanson v. Denckla, 357 U.S. 235 (195$)).
However, in some cases a defendant may waive its rights concerning personal
jurisdiction. See, e.g., Ins. Corp. of Ireland v. Compagnie des Bauxites de Guiiiee, 456
U.S. 694, 703 (1982). For example, a defendant may waive its personal jurisdiction rights
by entering into an agreement containing a forum selection clause that also includes a
waiver of objections to personal jurisdiction. See, e.g., Nationdil Equipment Rental, Limited
v. Szukhent, 375 U.S. 311, 316 (1964) (“parties to a contract may agree in advance to
submit to the jurisdiction of a given court....”); Park Inn Intern., L.L. C. v. Moody
Enterprises, hic., 105 F.Supp.2d 370, 374 (D.N.J. 2000).
ADP argues that this Court has personal jurisdiction over Defendants by virtue of
the jurisdictional clauses contained within the Agreements. For example, one such clause
provides that Defendant “agree[s] and consent[s] to the personal jurisdiction and venue of
the federal or state courts of New Jersey....” See Lynch Complt. at ¶ 26.
In response, Defendants argue that they did not receive adequate notice regarding
the terms of the Restrictive Covenants. Accordingly, Defendants contend that the forum
selection clauses that ADP cites are unenforceable.
The Court will decide this issue in the following manner. First, the Court will
provide the legal standards that govern the enforceability of the type of agreements at issue
in this case. Next, the Court will analyze each jurisdictional provision cited by ADP and
then determine whether that particular provision is enforceable.
Under New Jersey law, a contract term is binding only where the contract is
mutually agreed upon by the parties. Hoffman v. Supplements Togo Ygint., 419 N.J.Supcr.
596, 606 (N.J. Super. Ct. App. Div. 2011) (citing W Caldwelt v. Caidwelt, 26 N.J. 9, 2426 (1956)).2 Mutual assent occurs where there is a meeting of the minds. Id. (citing Fop’s
(N.J.Super.Ct.App.Div. 1998). In other words, “each party to the contract must have been
fairly informed of the contract’s terms before entering into the agreement.” Id. The
question here is whether Defendants assented to the jurisdictional provisions contained in
The Sales Representative Agreement and the Nondisclosure Agreement
As mentioned previously, Lynch entered into the Sales Representative Agreement
and Nondisclosure Agreement shortly after joining ADP. The Safes Representative
Agreement, which Lynch executed, includes a term indicating that the United States
District Court for the District of New Jersey shall have jurisdiction over the parties.
Therefore, this Court has personal jurisdiction over Lynch with respect to ADP’s claims
arising out of the Sales Representative Agreement. The Nondisclosure Agreement,
however, does not contain any terms providing for personal jurisdiction. Because ADP
does not contend that there is an alternative basis for jurisdiction other than the terms
contained within the Restrictive Covenants, the Court will GRANT Lynch’s motion to
dismiss the claims arising out of the Nondisclosure Agreement. However, the Court will
DENY Lynch’s motion to dismiss the claims arising out of the Sales Representative
The Restrictive C’ovenants
The jurisdictional provisions of the Restrictive Covenants are not contained within
the actual grant agreements that conferred benefits under the Plan. Instead, they are part
of a series of separate documents that ADP presented to Defendants in addition to the main
grant agreements. ADP argues that the jurisdictional provisions were incorporated into the
main grant agreements by reference and are therefore enforceable.
‘In order for there to be a proper and enforceable incorporation by reference of a
the party to be bound by the terms must have had ‘knowledge of and
assented to the incorporated terms.” Alpert, Goldberg, Butler, Norton & Weiss, P.C., v.
All parties have cited to New Jersey authority in their respective briefs.
Quinn, 410 N.J.Super. 510, 533 (N.J.Super.Ct.App.Div.2009) (citing 4 Williston on
Contracts § 30:25 (Lord ed. 1999)). Where the drafting party argues that a forum selection
clause has been incorporated into the main agreement, it must demonstrate that the nonSee Liberty
drafting party received adequate notice of that clause and assented to it.
Syndicates atLlovd’s v. WalmttAdvisoiy Corp., Civ. No. 09-1343, 2011 WL
(D.N.J. Nov. 16, 2011).
As explained in the prior section, Defendants were required to acknowledge that
they read all documents, including the Restrictive Covenants, before accepting stock grants
issued pursuant to the Plan. Therefore, the jurisdictional provisions at issue were part of
what other courts have referred to as “clickwrap agreements.” A clickwrap agreement
requires a computer user to affirmatively manifest her assent to the terms of contract. See,
e.g., Spec/u’ v. Netscape Communications Corp., 306 F.3d 17, 22 n. 4 (2d Cir. 2002)
(clickwrap “presents the user with a message on his or her computer screen, requiring that
the user manifest his or her assent to the terms of the  agreement by clicking on an icon.”)
(citations omitted). Clickwrap agreements impose that requirement by informing the user
that taking such action will comprise her assent to the displayed terms. Feldman v. Google,
Inc.. 513 F.Supp.2d 229, 236 (E.D.Pa. 2007) (clickwraps require that a user “consent to
any terms or conditions by clicking on a dialog box on the screen in order to proceed with
the internet transaction.”). If the user does not affirmatively manifest her assent to the
terms by taking the required action, she will not be able to proceed and obtain the offered
good or service, which in this case was a stock grant. See Liberty Syndicates at Lloyd’s,
2011 WL 5825777 at *4
Numerous courts, including courts in the Third Circuit, have enforced clickwrap
agreements. See James v. Global Tel*L ink Corp., No. 13-4989, 2016 WL 58976 (D.N.J.
Feb. 11, 2016) (citing cases). That is because clickwrap agreements that incorporate
additional terms by reference will generally provide “reasonable notice” that the additional
terms apply. Cf Holdbrook Pediatric Dental, LLC v. Pro Computer Service, LLC, Civ.
No. 14-6115, 2015 WL 4476017, *6 (D.N.J. July 21, 2015). Courts have even enforced
clickwrap agreements that did not physically require the signatory to actually review the
terms before assenting to them. For example, in Fteja v. facebook, Inc., 841 F.Supp.2d
a forum selection clause. An individual could not gain access to the service until he or she
was no mechanism that forced him or her to actually read them. Consequently, the user
acknowledgement box before using the social media service. Despite that feature, the court
held that the forum selection clause was enforceable. It noted that by requiring the user to
acknowledge the terms and conditions before using the service, while at the same time
making those terms and conditions available for review, the social media site adequately
alerted the user to the existence of the forum selection clause. See id. at 839-842.
At this stage in the litigation, the Court finds that the forum selection clauses are
encompassed by enforceable clickwrap agreements. The complaints unequivocally allege
that an employee could not accept any stock grants until acknowledging that he or she
reviewed all grant documents, including the Restrictive Covenants that contained the forum
selection clauses. See, e.g., Lynch Cornplt. at J 27; Halpin Cornplt. at ¶ 20. See also
Carteret Say. Bank, FA v. Shushan, 954 f.2d 141, 142 (3d Cir. 1992) (“[C]ourts reviewing
a motion to dismiss a case for lack of in personarn jurisdiction must accept all of the
plaintiffs allegations as true and construe disputed factors in favor of the plaintiff.”)3
Similarly, Beatriz Caban, ADP’s manager of Stock Plan Services, has provided a step-bystep rundown of how an employee would accept awards under the 2011, 2012, and 2013
grants. In order to accept those awards, an employee would have to affirmatively
acknowledge that he or she reviewed the Restrictive Covenants before proceeding. See,
e.g., Caban Ccii. (Halpin) at ¶ 9-13. Ms. Caban similarly indicated that Defendants could
not have accepted stock awards in 2014 and 2015 without acknowledging the Restrictive
Covenants issued for those years as well. See id. at ¶ 14. Therefore, this case involves the
type of clickwrap agreement that other courts have found to be enforceable.
Defendants’ arguments to the contrary are unavailing. First they argue against
enforceability on the grounds that they were not forced to review the Restrictive Covenants
at issue. However, that argument was squarely rejected in fteja; and vvhile that decision
is not binding here, the Court finds its reasoning persuasive. Other courts have similarly
rejected Defendants’ position. See, e.g., 538] Partners LLC v. ShareaSale.com, Inc., Civ.
No. 12-4263 (E.D.N.Y. Sept. 23, 2013); Zaltz v. JDATE, 952 F.Supp.2d 439, 454
(E.D.N.Y. 2013); Hubbert v. Dell Corp.. 359 Ill.App.3d 976, 984 (Ill. App. Ct. 2005).
Indeed, to hold otherwise would contravene the well settled principle that “[a]failure to
read a contract will not excuse a party who signs it, nor will the party’s ignorance of its
obligation.” Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th
Second, Defendants argue that mutual assent was lacking because the
acknowledgment box did not state “I agree to the terms of the grant documents”; rather, it
merely required Defendants to acknowledge that they had “read” those documents before
accepting the award. The Court considers this a distinction without difference. In order to
receive their stock awards under the Plan, Defendants were required to represent that they
had read the Restrictive Covenants. So long as their representation was truthful, they
would have reviewed unequivocal language indicating that acceptance of the stock award
constituted acceptance of the corresponding Restrictive Covenant. The 2014 Restrictive
Covenant, for example, unambiguously conveys that in exchange for good and valuable
consideration, the ADP employee agrees to the terms of the Covenant, including the
Defendants may be entitled to discovery concerning whether there was mutual assent to the Restrictive Covenants.
If that is the case, Defendants may be able to reassert their personal jurisdiction defense at the summary judgment
stage. However, the Court currently takes no position with regards to that issue.
provision concerning jurisdiction. See Lynch Cornplt., Ex. F. At least one other district
court has reached this conclusion in a case involving similar language. See Guadagno v.
E*Trade Bank. 592 F.Supp.2d 1263, 1268-71 (C.D.Cal. 200$) (enforcing clickwrap
agreement requiring user to acknowledge that she “Reviewed the Agreement
Finally, Defendants point to testimony given in a separate proceeding4 that, in their
view, sheds doubt on the validity of the Restrictive Covenants. In general, Defendants
argue that the testimony demonstrates the following: the Restrictive Covenants were not
mentioned at group sales meetings; ADP did not provide its employees with additional
documents concerning the Restrictive Covenants; certain ADP employees did not
specifically recall accepting the Restrictive Covenants; Plan administrators did not have
discussions with ADP employees regarding the Restrictive Covenants; and Plan
administrators did not possess screenshots of individual ADP employees accepting the
Restrictive Covenants. See Lynch Reply at 2-6. None of this testimony, however.
undermines the well-pleaded facts that are currently before this Court. Namely, that ADP
required its employees to acknowledge reading all grant documents
Plan. Because ADP has
before accepting awards under the
sufficiently alleged that it required Defendants to affirmatively accept the Restrictive
Covenants (and their jurisdiction provisions), Defendants’ motion to dismiss the claims
arising out of the Restrictive Covenants is DENIED.
DEFENDANTS’ MOTIONS TO TRANSFER VENUE
Alternatively, Defendants seek to transfer this action to a different venue pursuant
to 2$ U.S.C. § 1404(a). They argue that the forum selection provisions at issue are
permissive because they merely indicate that ADP “may” bring an action in this judicial
district. Therefore, Defendants contend, the Court should transfer this consolidated action
to another venue, notwithstanding the forum selection clauses.
Under 2$ U.S.C. § 1404(a), a district court may transfer a case to another district
“[flor the convenience of parties and witnesses, [or] in the interest of justice...
district court has broad discretionary powers under [Section 1404(a)] to transfer any civil
action to any other district where it might have been brought.” Superior Oil v. Andrus, 656
F.2d 33. 42 (3d Cir. 1981). When exercising its discretion in connection with a Section
1404(a) motion, district courts will generally consider “public” and “private” factors. See,
e.g., Jumara v. State farm Ins. Co., 55 F.3d 873, $79 (3d Cir. 1995). Public factors include
enforceability of judgment; practical considerations that could make trial easier or more
efficient; administrative difficulties; the local interest in deciding controversies at home;
ADP, LLC v. Prossen, Civ. No. 2:15-06309.
Defendants also suggest that the Restricted Stock Award Agreements do not require recipients to agree to the
Restrictive Covenants at issue. This assertion is belied by language expressly indicating that acceptance of awards
under the Plan awards is contingent upon the execution of a restrictive covenant. See Schmidt Cert., Ex. H.
public policy considerations of the fora; and, in diversity cases, the trial judges familiarity
with the applicable state law. See Id. (citing 15 Charles A. Wright, Arthur R. Miller &
Edward H Cooper, federal Practice and Procedure: Jurisdiction and Related Matters §
384$, at 385). Private factors include the plaintiffs forum preference; the defendant’s
preferences; where the claim arose; the relative convenience to each party; the location of
books and records; and, to some extent; the convenience of the witnesses. See id.
In Atlantic Marine Const. Co., Inc. v. US. Dist. Court for Western Dist. of Texas,
134 S.Ct. 568 (2013), the Supreme Court explained how courts are to conduct the abovedescribed analysis where the operative agreement includes a forum selection clause. The
Court held that the existence of a valid forum selection clause should play a prominent role
in a court’s Section 1404(a) analysis. Where a plaintiff files a lawsuit in a district that
differs from what is specified in a forum selection clause, the plaintiffs choice of forum is
disregarded; the private interests are automatically considered to favor the contractually
agreed upon forum; and the original venue’s choice of law rules do not apply. As a result,
cases in which a court refuses to enforce a valid forum selection clause will be exceedingly
Defendants argue that Atlantic Marine is of little relevance because this case
involves only permissive forum-selection clauses. Accordingly, Defendants argue that
the traditional Section 1404(a) analysis applies, and under that analysis, the actions
should be transferred.
The Court will deny Defendants’ motion to transfer. Even if Atlantic Marine does
not apply with full force to permissive forum selection clauses, the rationale supporting the
Supreme Court’s decision is persuasive here. See, e.g., ADP v. Uminderjit Bakshi, Civ.
No. 15-8385, 2016 WL 1223557, at *3.*4 (D.N.J. Mar. 29, 2016); Asphalt Paving Sys. v.
Gannon, Civ. No. 14-55 18, 2015 WL 3648739, at *3 (D.N.J. June 11, 2015);ADPLLCv.
Chase Admundson, Civ. No. 15-8951, ECF No. 121.6 That is because even under a
traditional 1404(a) analysis, the plaintiffs choice of forum should seldom be disturbed.
See, e.g., Yang v. Odom, 409 F.Supp.2d 599, 604 (D.N.J. 2006) (citing Jumara, 55 F.3d at
879). The parties expressly agreed that disputes arising out of the Restrictive Covenants
could be brought in this Court. Pursuant to that agreed upon term, ADP understandably
filed its suit in New Jersey. which is its home state. Therefore, it would serve the interests
ofjustice to honor the parties’ contractual commitments by keeping the case in this district.
Cf 28 U.S.C. § 1404(a). Moreover, other factors favor keeping this dispute in New Jersey.
for example, ADP is a New Jersey corporation that has allegedly been injured as a result
of Defendants’ breach of contract, which means that New Jersey has an interest in the
dispute. See Park Inn Intern., L.L.C v. Moody Enterprises, Inc., 105 f.Supp.2d 370, 378
(D.N.J. 2000). This Court will also apply New Jersey law pursuant to the choice of law
The Court acknowledges that other judges have held that a typical Section 1404(a) analysis applies when a forum
selection clause is merely permissive. See, e.g., Netwold Communications Corp. v. Croatia Airlines, D.D., Civ.No.
13-4770, 2014 WL 4724625, at *2 (D.N.J. Sept. 23, 2014) (citing cases)
provisions that govern the Restrictive Covenants. See, e.g., Heartland Payment Systems,
Inc. v. Steves, Civ. No. 15-3544, 2015 WL 7737344, *5 (D.N.J. Dec. 1, 2015). Therefore,
even if other factors arguably favor transfer, ADP’s chosen forum (which is the same forum
contractually agreed upon by the parties) will not be disturbed. Defendants’ motion to
transfer is DENIED.
ADP’S REQUEST FOR PRELIMINARY INJUNCTIVE RELIEF
A preliminary injunction is an extraordinary remedy that is not routinely granted.
See, e.g., Groupe SEB USA v. Euro-Pro Operating LLC, 774 f.3d 192, 197 (3d Cir. 2014);
Hoxworth v. Blinder, Robinson Co. Inc., 903 f.2d 186, 189 (3d Cir. 1990) (the preliminary
injunction remedy “must be reserved for extraordinary circumstances....”). Moreover, “the
decision to grant or deny a preliminary injunction is committed to the sound discretion of
the district court.” US. v. Price, 688 f.2d 204, 2010 (3d Cir. 1982). In order to obtain the
extraordinary remedy of a preliminary injunction, Plaintiffs must show (1) they are likely
to succeed on the merits; (2) denial will cause them irreparable harm; (3) granting the
injunction will not result in irreparable harm to Defendants; and (4) granting the injunction
is in the public interest. Nutrasweet Co. v. Vit-Mar Enterprises, 176 F.3d 15 1, 153 (3d Cir.
1 999). “The burden lies with the plaintiff to establish every element in its favor, or the
grant of a preliminary injunction is inappropriate.” P.C. Yonkers, Inc. v. Celebrations the
Party and Seasonal Superstore, LLC, 428 F.3d 504, 508 (3d Cir. 2005) (citations omitted).
A. Likelihood of Success on the Merits
With one notable exception, ADP has demonstrated likelihood of success on the
merits. Defendants do not deny that they have breached the Agreements by becoming
employed with USG. See, e.g., Barmasters Bartending School, Inc. v. Authentic
Bartending School, Inc., 931 F.Supp. 377, 385 (E.D.Pa. 1996) (likelihood of success
established where defendant undeniably breached restrictive covenant). Instead, they offer
theories for why the relevant portions of the Agreements are unenforceable.
first, Defendants argue that the Restrictive Covenants are unenforceable because
ADP surreptitiously slipped them into the Plan without providing adequate notice of their
existence. However, the Court has already rejected that same argument when it was made
in Defendants’ motion to dismiss. As already explained, the Restrictive Covenants are part
of enforceable clickwrap agreements that provided Defendants with adequate notice of all
Second. Defendants appear to argue that the restrictive covenants contained within
the Agreements are overly broad and therefore cannot be enforced as written. The Court
concludes that this argument has some merit, at least at the preliminary injunction stage.
Under New Jersey law, a restrictive covenant will be enforceable “where it simply protects
the legitimate interests of the employer, imposes no undue hardship on the employee, and
is not injurious to the public.” Sotari Industries, Inc. v. Malady, 55 N.J. 571, 576 (1970).
Thus, New Jersey courts “recognize as legitimate the employer’s interest in protecting trade
secrets, confidential information, and customer relations.” Ingersoll-Rand Co. v. Ciavatta.
110 N.J. 609, 628 (1988). Moreover, employers may have a legitimate interest in
protecting material that is not a trade secret or proprietary, but involves “highly specialized,
current information not generally known in the industry, created and stimulated by the
research environment furnished by the employer, to which [an] employee has been
‘exposed’ and enriched’ solely due to his employment.” Id. at 638. However, a restrictive
covenant will not be enforced “merely to aid the employer in extinguishing the
competition....” See Id. at 635. In sum, a court evaluating a restrictive covenant must
balance “the employer’s need for protection and the hardship on the employee that may
result.” Id. at 639.
In AD?, LLC v. Jacobs. Civ. No.15-3710, 2015 WL 4670805. (D.NJ. Aug. 5.
2015), the district court assessed the enforceability of the same restrictive covenants that
are at issue in this case. The court concluded that the restrictive covenants were
enforceable, save for the provisions that prohibited the defendant from soliciting
prospective clients of which the defendant did not gain knowledge of through his past
employment with ADP. See Jacobs, 2015WL 4670805, *5 In doing so, the court cited to
state court decisions questioning the enforceability of restrictive covenants that cover
prospective customers. See Id. (citing Platinum Mgmt., Inc. v. Dahms, 285 N.J.Super. 274,
29$ (Ch. Div. 1995)). The Court finds this portion of Jacobs persuasive. Defendants
cannot be restrained from soliciting prospective ADP clients that they had no knowledge
of during their time at ADP. If the Court were to hold otherwise, it would deter Defendants
from interacting with almost all potential clients for fear that they may be unwittingly
violating restrictive covenants they entered into with ADP. Even after considering ADP’s
interest in upholding the prospective client provisions contained in the Agreements, the
Court concludes that those provisions place an unreasonable burden on Defendants’
business activities. See, e.g., Campbell So;tp Co. v. Desatnick, 5$ F.Supp.2d 477, 489
(D.N.J. 1999) (“To minimize the hardship imposed on the employee, the geographic,
temporal and subject-matter restrictions of an otherwise enforceable agreement not to
compete will be enforced only to the extent reasonably necessary to protect the employer’s
legitimate business interests.”) (citing Coskey ‘s Television & Radio Sales and service, Inc.
v. Fote, 253 N.J.$uper. 626, 634 (App. Div. 1992)). To the extent ADP wishes to enjoin
Defendants from soliciting prospective clients of which they gained no knowledge of while
at ADP, the motion for a preliminary injunction will be denied. However, ADP will likely
succeed in demonstrating that the remainder of the restrictive covenants at issue are
Defendants also appear to suggest that the non-solicitation provisions are unenforceable because they do not contain
geographic limitations. However, where a restrictive covenant “seeks to protect an established clientele,” rather than
prohibit competition altogether, the absence of a geographic limitation does not render the covenant unenforceable.
See Mailman, Ross, Toyes & Shapiro v. Edelson, 183 N.J.Super 434, 442 (Ch. Div. 1982).
3. Irreparable Harm
Having demonstrated that the Agreements are, for the most part, likely to be found
enforceable, ADP must now show that it will suffer irreparable harm in the absence of an
injunction. Specifically, ADP must make “a clear showing of immediate irreparable
injury.” See Hoxworth v. Blinder, Robinson & Co., 903 F.2d 186, 205 (3d Cir. 1990)
(quoting ECRI v. McGraw-Hilt, Inc., 809 F.2d 223, 225 (3d Cir. 1987)). Through their
motion. ADP seeks to enjoin Defendants from the following: (1) working for an ADP
competitor, including USG, within a defined territory; (2) soliciting business from any
ADP client or prospective client within a twelve month period; (3) soliciting any ADP
employee within a twelve month period; (4) using or disclosing any of ADP’s confidential,
proprietary or trade secret business information; (5) interfering with any current contract
or client relationship; and (6) breaching any duty of loyalty obligation to ADP.
Additionally. ADP requests that Defendants return all ADP property and refrain from
destroying any documents or other evidence that may be relevant to this litigation.
According to ADP, both Defendants have at least indirectly assisted USG with the
solicitation of ADP clients. ADP even goes so far as to say that Halpin has directly solicited
a former ADP client while at USG. ‘Generally, the loss of goodwill, the disclosure of
confidential and proprietary information, and the interference with customer relationships
may be the basis for a finding of irreparable harm.” See Laidlaw, Inc. v. Student Transp.
Of America, Inc., 20 F.Supp.2d 727, 767 (D.N.J. 1998) (citations omitted). Defendants
admit to working for one of ADP’s competitors. Thus, there is an imminent risk of
Defendants soliciting former ADP clients,8 if they have not done so already. Indeed. ADP
has offered evidence indicating that Defendants have reached out to entities they learned
of while they were employed with ADP. See Jacobs, 2015 WL 4670805,
if Defendants are successful in soliciting those clients, ADP would suffer irreparable harm.
See, e.g., Healthcare Services Group, Inc. V. fay. 597 Fed.Appx. 102, 104 (3d Cir. 2015)
(irreparable harm may exist where former employee solicits clients in violation of
restrictive covenant). Consequently. Defendants will be enjoined from soliciting AD?
clients, including prospective clients that Defendants gained knowledge of while working
Further, ADP accuses Defendants ofi at the very least, indirectly assisting USG’s
solicitation of other ADP clients. Specifically, Halpin and Lynch have allegedly supplied
USG with ADP’s confidential and proprietary information regarding those clients. Given
Defendants’ current employment status, there is an imminent threat that ADP’s proprietary
information will be disclosed to USG. Because such disclosure would inflict irreparable
harm on AD?. Defendants will be enjoined from using or disclosing ADP’s proprietary
information. Moreover, to the extent Defendants are still in possession of physical
This would include prospective ADP clients that Defendants gained knowledge of while working for ADP.
materials containing such information, they will be ordered to return it to ADP
However, the Court will not enjoin Defendants from working at USG altogether.
See Jacobs, 2015 WL 4670805, at *7 While the solicitation of clients and use of
proprietary information will cause irreparable harm to ADP, the mere fact of Defendants
working for a competitor, standing on its own, does not warrant the extraordinary remedy
of a preliminary injunction.
C. Balance ofinterests
The balance of interests supports the Court’s decision to enjoin Defendants from
soliciting ADP clients and/or using ADPs proprietary information. After reviewing
ADP’s motion, the Court has decided to take a middle road approach: Defendants will be
enjoined from taking action that will cause irreparable harm to ADP, but they will not be
prohibited from earning a livelihood while this litigation is pending. See, e.g., Bimbo
Bakeries USA v. Botticelta, 613 F.3d 102, 119 (3d Cir. 2010) (‘even a temporary injunction
prohibiting someone from pursuing his livelihood in the manner he chooses operates as a
severe restriction on him that a court should not impose lightly.”) After considering the
respective interests of each party, the Court believes that it has struck the appropriate
The Public Interest
‘Judicial enforcement of non-competition provisions of employment contracts
serves the public interest by promoting stability and certainty in business and employment
relationships.” Wright Medical Technology, Inc. v. Somers, 37 F.Supp.2d 673, 684 (D.N.J.
1999) (citing AmeriGas Propane, Inc. v. Crook, 844 F.$upp. 379, 390 (M.D.Tenn. 1993)).
That said, there is a public interest in a fluid and dynamic labor market that allows
individuals the freedom to choose where they work. See Bimbo Bakeries USA, 613 f.3d
at 119. The Court has therefore struck the appropriate balance by allowing Defendants to
continue their employment at USG, but prohibiting them from taking action that would
result in direct and irreparable harm to ADP.
For the foregoing reasons, Defendants’ motions to dismiss, or alternatively to
transfer venue, are GRANTED in part and DENIED in part. ADP’s motions for
preliminary injunctive relief are GRANTED in part and DENIED in part. An
appropriate order accompanies this decision.
RTINI, U. S D5E
Date: June, 2016
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