ADP, LLC v. LYNCH
OPINION. Signed by Judge William J. Martini on 4/24/17. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civ. No. 2:16-01053
Civ. No. 2:16-01111
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
Defendants’ motion to vacate the preliminary injunction issued by this Court on June 30,
2016, restricting Defendants from taking actions that would directly and irreparably harm
Plaintiff while litigation is pending. There was no oral argument. Fed. R. Civ. P. 78(b).
For the reasons set forth below, Defendants’ motion is DENIED. Plaintiff’s request that
the Court hold Defendants in contempt for allegedly violating the preliminary injunction
order is also DENIED.
Plaintiff is a Delaware company with its principal place of business in Roseland,
New Jersey. It provides business outsourcing and software services, including human
resources, payroll, tax and benefits administration services, to its clients. Op. 2, ECF No.
30. Halpin and Lynch are former employees of Plaintiff who voluntarily resigned from
their positions on December 23, 2015, and January 4, 2016, respectively. Br. in Supp. of
Defs.’ Mot. to Vacate the Prelim. Inj. (“Defs.’ Mot.”) 1, ECF No. 71. The Court assumes
the parties’ familiarity with the facts and will summarize below only those facts relevant
to the instant motion.1
On June 30, 2016, the Court issued an order (the “Order”) and opinion (the
“Opinion”), granting a preliminary injunction (the “Injunction”) against Defendants. See
Op. at 10–13; Order, ECF No. 31. The Injunction enjoined Defendants from using or
disclosing any of Plaintiff’s proprietary information, from soliciting Plaintiff’s current
clients, vendors, employees or partners, and from soliciting Plaintiff’s prospective clients
that Defendants gained knowledge of during the course of their employment. See Order at
2. Defendants were not enjoined from working at Plaintiff’s competitor. Id.
In its Opinion, the Court determined that Plaintiff “required its employees to
acknowledge reading all grant documents – including the Restrictive Covenants – before
accepting [stock] awards under the Plan.” Op. at 8. Notably, the Court expressly rejected
Defendants’ argument that the restrictive covenants were not enforceable because they
were not forced to review them. Id. at 7. The Court found that a preliminary injunction
was warranted because Plaintiff had shown a likelihood of success in showing that the
restrictive covenants are enforceable. Id. at 11. The Court also concluded that Plaintiff
would suffer irreparable harm by Defendants’ solicitation of its clients and use of its
proprietary information. Id. The Court did not enjoin Defendants from working for
Plaintiff’s competitor, however, because Defendants should “not be prohibited from
earning a livelihood while this litigation is pending.” Id. at 13. Defendants moved for
reconsideration and were denied. See ECF Nos. 51, 52.
Defendants subsequently appealed the Order to the Third Circuit. See ECF No. 55.
On February 7, 2017, the Third Circuit upheld the Order, finding that this Court’s grant of
the Injunction was reasonable. See ADP, LLC v. Lynch, No. 16-3617, 2017 WL 496089,
at *2 (3d Cir. Feb. 7, 2017) (ECF No. 69-1 at 6) [hereinafter “App’l Op.”].2 It further found
A more complete recitation can be found in the Court’s June 30 opinion. See Op. at 2–4.
The Court cites to the pagination from the copy of Third Circuit’s opinion found on the docket at ECF No. 69-1.
that this Court “correctly concluded that Lynch and Halpin were likely bound by the terms
of the noncompetes.” Id. at 6. Notably, it also rejected as irrelevant Defendants’ argument
that they were not bound by the restrictive covenants because they did not read them. See
id. at 5–6 (citing Stelluti v. Casapenn Enters., LLC, 1 A.3d 678, 690 (N.J. 2010) (“When a
party enters into a signed, written contract, that party is presumed to understand and assent
to its terms.”)).
Defendants now move this Court to vacate the Injunction. Defendants argue that
the restrictive covenants have expired because they were only supposed to last for twelve
months from the date of Defendants’ resignations. Thus, Halpin’s covenant expired on
December 23, 2016, and Lynch’s covenant expired on January 4, 2017. Consequently,
according to Defendants, Plaintiff “has no presently enforceable contract agreement.” See
Defs.’ Mot. at 1. Plaintiff opposes, arguing that the covenants contain tolling provisions,
which toll the twelve-month time period from running while litigation is pending. See Pl.’s
Br. in Opp’n to Defs.’ Mot. to Vacate (“Pl.’s Opp’n”) 1, 5–7, ECF No. 79. Plaintiff further
argues that the Court should hold Defendants in contempt because they continue to violate
the covenants and the Injunction. Id. at 7–8. In their reply, Defendants raise for the first
time that Plaintiff breached the covenant of good faith and fair dealing by failing to provide
Defendants with notice of changes to their employment agreements, including the tolling
provisions, and that the restrictive covenants are, therefore, unenforceable. See Br. in
Reply to Pl.’s Opp’n (“Defs.’ Reply”) 12–15, ECF No. 81. Defendants further argue that
Plaintiff has not provided unrefuted evidence that Defendants violated the Injunction and
that a finding of contempt is unwarranted. Id. at 16–23.
“[T]he generally applicable rule for modifying a previously issued judgment is that
set forth in Rule 60(b)(5), i.e., that it is no longer equitable that the judgment should have
prospective application.” Bldg. & Constr. Trades Council of Phila. & Vicinity, AFL-CIO
v. Nat’l Labor Review Bd., 64 F.3d 880, 888 (3d Cir. 1995) (internal quotation omitted).
“A court of equity cannot rely on a simple formula but must evaluate a number of
potentially competing considerations to determine whether to modify or vacate an
injunction by consent or otherwise.” Id. “A Rule 60(b)(5) motion for relief from final
judgments or orders no longer equitable requires that there be a change in circumstances
from the time of the order necessitating relief.” Secs. & Exchange Comm’n v. Hatch, 128
F.R.D. 58, 61 (D.N.J. 1989) (emphasis original). “The evidentiary burden on the movant
is extreme.” Id. (emphasis original).
Defendants essentially make the same argument against the enforceability of the
tolling provisions as they did against the restrictive covenants as a whole in their previous
motion to dismiss. See Op. at 7–8. As before, the Court is unpersuaded. The tolling
provisions were included in the same documents that Defendants were forced to
acknowledge prior to accepting the stock awards, a fact which Defendants do not contest.
Instead, Defendants argue that Plaintiff’s conduct was unconscionable because it did not
provide them with additional notice of a change in their employment agreements. See
Defs.’ Reply at 15. This Court and the Third Circuit expressly rejected this argument in
holding that a preliminary injunction was warranted during the course of litigation. See
App’l Op. at 5–6 (“It is thus irrelevant that Lynch and Halpin contend that they do not
recall reading the documents.”); Op. at 10. The Court rejects the argument again here with
respect to the tolling provisions and finds them enforceable. See Stelluti, 1 A.3d at 690.
The restrictive covenants expressly state that “tolling shall include any time period
during which litigation is pending,” which is precisely where the parties find themselves
now. Whether Plaintiff has received the full benefit of its bargain and the enforceability
thereof is the very subject of this litigation, which has not yet concluded discovery or
reached the summary judgment phase. The Court, therefore, will continue to impose the
Injunction for the duration of the litigation.
Plaintiff asks this Court to hold Defendants in contempt for violating the Injunction.
Both parties rely on certifications made by persons interested in the instant litigation to
support the proposition that the facts favor their diametrically opposed positions. See ECF
Nos. 71-1, 71-2, 79-1, 79-2, 81-1, 81-2. This can only mean one thing: the facts are entirely
in dispute. Because Plaintiff has not shown clear and convincing evidence that Defendants
have defied the injunctive order, the Court will decline to hold Defendants in civil contempt
at present. See Robin Woods, Inc. v. Woods, 28 F.3d 396, 399 (3d Cir. 1994).
For the reasons stated above, Defendants’ motion to vacate the Injunction is
DENIED. The Court also DENIES Plaintiff’s request to hold Defendants in civil
contempt. An appropriate order follows.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: April 24, 2017
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