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HR Staffing Consultants, LLC v. Butts

United States District Court, D. New Jersey

June 2, 2015

HR STAFFING CONSULTANTS, LLC, and Upstream Healthcare Management of New Jersey, LLC, Plaintiffs,
Richard BUTTS, Defendant.


KEVIN McNULTY, District Judge.

This matter comes before the Court on the motion (ECF Nos. 4, 7, 17[1]) of Plaintiffs HR Staffing Consultants, LLC ("HR Staffing") and Upstream Healthcare Management of New Jersey, LLC ("Upstream"), pursuant to Fed.R.Civ.P. 65, for a preliminary injunction against Defendant Richard Butts. HR Staffing and Upstream request that this Court enjoin Butts from working for CarePoint Health Management Associates, LLC ("CarePoint") in violation of the non-compete clause of his employment agreement with HR Staffing.[2]

On Friday, May 8, 2015, I heard oral argument on HR Staffing's application for a temporary restraining order. On Monday, May 11, 2015, I entered an order granting limited temporary relief protecting certain allegedly confidential information. I authorized the parties to take expedited discovery and set the matter down for a hearing.

On May 22, 2015, I held an evidentiary hearing on Plaintiffs' motion for a preliminary injunction. By stipulation, affidavits submitted by both sides were accepted by the Court in lieu of direct testimony. I heard live testimony from three witnesses: Jennifer Dobin, Richard Butts, and Christopher Howard. Both sides submitted documentary exhibits, as well as designations from the depositions.

For the reasons set forth below, this Court is persuaded that HR Staffing and Upstream have met their burden of showing that an injunction is warranted. Their motion for a preliminary injunction will therefore be GRANTED.


a. Agreements between HR Staffing, Upstream, and CarePoint

1. CarePoint is a New Jersey for-profit hospital system operating three hospitals: Christ Hospital, Hoboken University Medical Center, and Bayonne Medical Center. (Howard Decl. ¶ 10.)

2. Upstream, a New Jersey limited liability corporation, co-manages healthcare service lines for hospital systems, including CarePoint's hospitals. (Id. ¶¶4-7, 10.)

3. Upstream and CarePoint are parties to a Master Management Services Agreement ("MMSA"). (Id. ¶ 11.)

4. Co-management services "usually entail[] recommending the adoption of new, and/or the amendment of the hospitals existing: (a) evidence-based medicine policies, procedures and protocols, in order to measurably improve quality of care; and (b) administrative and operational policies and procedures in order to be more cost-efficient." (Id. ¶ 6.)

5. HR Staffing is a healthcare staffing company that provides personnel to hospitals and healthcare facilities. (Id. ¶ 5.)

6. HR Staffing's primary resource is its personnel. (Id. ¶ 26.)

7. Paul Ingledue and Christopher Howard own and operate Upstream and HR Staffing. (Id. ¶ 3.)

8. Pursuant to a Preferred Staffing Services Agreement ("PSSA") between HR Staffing and CarePoint, HR Staffing has provided employees, including high-level management employees, to CarePoint. (Id. ¶¶ 10, 11, Pls. Ex. 27.)

9. HR Staffing and Upstream also provide employees for various joint ventures between Upstream, CarePoint, and others. (Id. ¶ 11.)

10. HR Staffing recruits, trains, and develops the employees that it places at its joint ventures between Upstream, CarePoint, and others. (Id. ¶¶ 13, 15, 33.) It is responsible for facilitating staffing and recruitment service, adherence to performance metrics, maintaining licensure and credentials, compliance with laws and regulations, maintaining insurance, providing pre-screened staff, and providing training. (PSSA § II).

11. HR Staffing bears the costs of recruitment, training, and development. (Howard Decl. ¶ 33.)

12. Upstream and HR Staffing assigned employees to work in various management level positions within CarePoint's hospitals. Assigned personnel remained employed by HR Staffing and were paid by HR Staffing, although the ultimate source of their salaries was the fee paid by CarePoint under the Staffing Services Agreement. (Id. ¶ 11; see also PI Tr. 64:19-65:1.) For permanent (LTP) staff, CarePoint paid HR Services on a cost-plus basis (PSSA Ex. B)

13. Richard Butts was one of the employees HR Staffing trained and assigned to work as a high-level executive at CarePoint. (Howard Decl. ¶ 12.)

14. At this time, Upstream and HR Staffing are in related litigation with CarePoint in the Superior Court of New Jersey, Law Division, Hudson County. Upstream Healthcare Management of New Jersey, LLC v. CarePoint Health Management Associates, LLC, No. HUD-L-1143-15 (Ingledue Decl. Ex. F, ECF No. 17-12; Pls. Ex. 18.)

b. Butts's agreement with HR Staffing

15. Butts, a North Carolina resident, was an HR Staffing employee. He was placed by HR Staffing at Peninsula Heart and Vascular Services, LLC ("PHVS"). (Howard Decl. ¶¶ 12-14.)

16. PHVS is a co-management joint venture owned by Upstream, CarePoint, and various physicians. (Id. ¶ 12.)

17. Butts became the Executive Director of PHVS in 2011. (Id. ¶ 14.)

18. On February 17-18, 2014, HR Staffing and Butts entered into the Employment Agreement. (Id. ¶ 23; Employment Agreement.)

19. Under the Employment Agreement, Butts agreed to provide services for "Client Engagements" to which he would be assigned by HR Staffing. (Employment Agreement § I.)

20. Pursuant to the Employment Agreement, HR Staffing placed Butts as the Vice President of Cardiovascular Services for CarePoint's Hospitals. (Howard Decl. ¶ 24.)

21. Butts's Employment Agreement includes the following non-competition covenant, referred to by all parties as "the non-compete":

Employee acknowledges that if he/she were to compete with Company in the furnishing of the Services as contemplated herein it would cause serious harm to Company. Employee also acknowledges that the furnishing of the Services requires a significant commitment of time, that the marketplace for the services is extremely competitive, and that Company competes against other providers of Services located throughout the region.
Therefore, in consideration of, among other things, the compensation to be paid by Company to Employee hereunder and as a material condition and inducement for Company to enter into this Agreement, and without in any manner limiting the other restrictions imposed against Employee under other provisions of this Agreement, Employee hereby covenants and agrees that throughout the term of this Agreement and during the twelve (12) month period immediately following the expiration, termination or non-renewal of this Agreement for any reason (collectively, the "Restriction Period"), Employee shall not, except with Company's prior written consent, ... engage in the furnishing of any aspect of the Services as contemplated under this agreement and/or provide or enter into any contractual relationship relating to any aspect of such Services with any Client, hospital, health care facility, medical group, or other party or entity to provide consulting, management and/or other directorship services to, or participate in the management, operation or development of, any medical practice, hospital or other health care facility that provides such professional medical services, at any health care facility or other location (e.g., hospital, health care facility, medical office, etc.) anywhere with Hudson County and the surrounding counties (Bergen, Passaic, Union, and Essex Counties) in which Employee provided Services during the term of the Agreement at least twenty (20) percent of the time.
(Employment Agreement, Amendment § II.)

22. Butts's Employment Agreement also includes the following non-solicitation provision:

During the term of this Agreement and for a period of twelve (12) months following the termination of this Agreement, except with the prior written consent of Company's President or Managing Partner, which may be provided or withheld at his sole discretion. Employee shall not, anywhere in the United States, directly or indirectly, whether as an employee, consultant, owner, partner, director, officer, shareholder, member or in any other capacity for his/her account or for the benefit of any third person or entity which he/she is, or becomes, associated: (a) Solicit, direct, influence, or attempt to influence a Client for whom Employee provided Services under this Agreement, or with whom Employee became familiar as a result of Employee's relationship with Company under this Agreement, to: (i) employ, hire or do business with Employee or any third party with which Employee is associated for the provision or development of services or products that are the same as, similar to, or otherwise competitive with any of those offered, provided or performed by Company.
(Employment Agreement, Amendment to § IX.)

23. Section VIII of the Employment Agreement, titled Term and Termination, provides that "Employee may terminate this Agreement at any time on thirty (30) days written notice to the Company." (Employment Agreement § VIII.)

24. The Employment Agreement also includes the following provision, titled Injunctive Relief, warning that HR Staffing will seek injunctive relief in the event of a breach:

The parties agree that a breach of the agreements set forth in Sections VII and IX of this Agreement may cause irreparable damage to Company, the extent of which may be difficult to ascertain, and that the award of damages may not be adequate relief. Therefore. Employee agrees that, in the event of a breach or threatened breach of any provision of Section III or IX of this Agreement, Company may institute an action to compel the specific performance of such provision, and Employee agrees not to assert adequacy of money damages as a defense and agrees that such a remedy shall be cumulative, not exclusive, and in addition to any other available remedies.
(Employment Agreement § X.)

25. The Employment Agreement also included a provision titled Entire Agreement, Waiver, Modification and Notices, which provides:

This Agreement, including the Addendum, constitutes the complete and entire agreement of the parties with respect to its subject matter and supersedes and replaces any other written or oral agreement or understanding between the parties. This Agreement may be amended, modified, supplemented or waived only by a written instrument signed by both parties.
(Employment Agreement § XIX.)

26. Butts has resided in North Carolina and traveled some 600 miles to New Jersey almost every week in connection with his employment at HR Staffing and CarePoint. (PI Tr. 95:13-16; 96:2-97:3.) He has not looked into alternative employment within a similar distance from his home. (Butts Supp. Decl. ¶¶ 11-13; PI Tr. 97:8-21.)

c. Butts's resignation

27. In or about March 2015, Butts had discussions with Ingledue and Howard about CarePoint's interest in hiring him directly. (Butts Decl. ¶ 23-24.)

28. At that time, CarePoint was in the process of offering positions to certain HR Staffing employees. (Id. ¶ 28.)

29. In or about March 2015, Butts met with Jennifer Dobin, Executive Vice President of Human Resources for CarePoint, to discuss his potential employment with CarePoint. (Id. ¶¶ 27, 30.)

30. Butts advised Dobin that he was subject to a non-compete clause in his Employment Agreement with HR Staffing. (Id. ¶31.)

31. Dobin advised Butts to seek a waiver of his non-compete clause from HR Staffing. (Id. ¶33.)

32. On March 22, 2015, Butts signed a document in which he acknowledged that he was subject to a non-compete covenant under the Employment Agreement. (Howard Decl. Ex. E; Pls. Ex. 6.) The document, titled Notice of Meeting with CarePoint, includes the following paragraph:

We take this opportunity to remind you that your employment agreement with HR Staffing contains several restrictions, including a non-compete provision. The non-compete provision in your agreement with HR Staffing is meant to limit your ability to work for HR Staffing's clients, including CarePoint. Your meeting with CarePoint is not meant to limit or restrict HR Staffing's rights in any way, and HR Staffing reserves all of its rights, including its right to enforce the non-compete provisions of your employment agreement and any other rights it may have.
(Id. )

33. On March 31, 2015, CarePoint made an offer of employment to Butts. (Butts. Decl. ¶34.)

34. After receiving the offer, Butts disclosed it to Ingledue and Howard and asked them for a written waiver of the non-compete clause in his Employment Agreement. (Id. ¶35.)

35. Howard and Ingledue replied to Butts that they would not waive the non-compete clause in his ...

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