United States District Court, D. New Jersey
WILLIAM J. MARTINI, U.S.D.J
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
modify the preliminary injunction entered against Defendants.
(ECF No. 112). There was no oral argument. Fed.R.Civ.P.
78(b). For the reasons set forth below, Defendants'
motion is DENIED.
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 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. Order, ECF No. 31. The Court, however,
allowed Defendants to continue working at Plaintiff's
competitor 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. Shortly thereafter, Defendants moved to vacate the
Injunction, arguing that the one-year period of the
restrictive covenants had expired. Op. 3, ECF No. 84. The
Court denied the motion, finding that Defendants'
arguments mirrored those that this Court and the Third
Circuit previously rejected and reiterating that the
restrictive covenants were likely enforceable. Id.
at 4. The Court also denied Defendants' request for
reconsideration. Op., ECF No. 105.
now move to modify the Injunction, arguing that there has
been a significant change in New Jersey law on restrictive
covenants. See Br. in Supp. of Defs.' MOt. to
Modify (“Defs.' Br.”) 5-21, ECF No. 112.
Specifically, Defendants submit that four recent decisions
issued by the New Jersey Superior Court, Chancery Division,
which address the very same restrictive covenants at issue
here, establish that those covenants are overbroad under New
Jersey law. Id. at 6-7. They also argue that
collateral estoppel applies because Plaintiff fully litigated
the same issue now before the Court and these four decisions
determined that the restrictive covenants were unenforceable.
Id. at 19- 20. Defendants ultimately seek to modify
the Injunction to enjoin them from soliciting Plaintiff's
clients only within the same markets and geographic
territories in which they worked under Plaintiff's
employ. Id. at 6-8.
opposes, arguing that New Jersey Superior Court cases do not
amount to a change in law justifying modification. Pl.'s
Br. in Opp'n to Defs.' Mot. to Modify
(“Pl.'s Opp'n”) 2-5, ECF No. 113.
Plaintiff also argues that the decisions upon which
Defendants rely are inconsistent and wrongly decided.
Id. at 10-18. Plaintiff further argues that
collateral estoppel does not apply because the Court issued
its order from which Defendants seek relief before the New
Jersey courts' decisions. Id. at 18-19.
Defendants filed a reply, mainly reiterating their previous
points. See Defs.' Reply to Pl.'s Opp'n,
ECF No. 114.
modifying a preliminary injunction, a court is charged with
the exercise of the same discretion it exercised in granting
or denying injunctive relief in the first place.'”
Favia v. Ind. Univ. of Pa., 7 F.3d 332, 340 (3d Cir.
1993) (quoting Sierra Club v. Army Corps of
Eng'rs, 732 F.2d 253, 256 (2d Cir. 1984)). “In
order to prevail on a motion to modify, the movant must
establish a change in circumstances that would make the
original preliminary injunction inequitable: ‘The
purpose of the motion to modify an injunction is to
demonstrate that changed circumstances make the continuation
of the order inequitable. The motion does not force the trial
judge to permit relitigation of his original determination of
the injunction and should not serve as an avenue of untimely
review of that determination.'” Id.
(quoting Merrell-Nat'l Lab., Inc. v. Zenith Lab.,
Inc., 579 F.2d 786, 791 (3d Cir. 1978)).
“Modification becomes appropriate when the changed
circumstances turn the decree into ‘an instrument of
wrong.'” Id. (quoting United States v.
Swift & Co., 286 U.S. 106, 119 (1932)). “[A]n
intervening change in ‘statutory or decisional law . .
. to make legal what the decree was designed to prevent'
or make impermissible ‘one of the obligations placed
upon the parties'” is one such circumstance that
might warrant modification. See Democratic Nat'l
Comm. v. Republican Nat'l Comm., 671 F.Supp.2d 575,
597 (D.N.J. 2009) (quoting Rufo v. Inmates of Suffolk
Cnty. Jail, 502 U.S. 367, 384, 388 (1992)).
brings three New Jersey Superior Court cases to the fore, all
involving Plaintiff's attempted enforcement of the very
same restrictive covenants at issue here: ADP, LLC v.
Kusins; ADP, LLC v. Hopper; and ADP, LLC v.
Karamitas. The critical difference between these
opinions and the Court's lies in the analyses of the
provision prohibiting the solicitation of Plaintiff's
existing clients. This Court held that the covenants enjoined
Defendants from soliciting all of Plaintiff's existing
clients, regardless of Defendants' prior knowledge or
geographic location. The other opinions, authored by Judges
Kessler and Moore, decided that such a construction was
overbroad and unenforceable.
Kusins, Judge Kessler held that the covenants were
“anticompetitive because [they] only restrict ADP's
most successful sales representatives from competing in the
same sales territory and from selling products to any
customers or prospective customers.” See
Certification of J. Schmidt, Jr. (“Schmidt
Cert.”), Ex. 1 at 47, ECF No. 112-2. Judge Kessler
also found that the covenants were overbroad, in part,
because they restricted the defendant from soliciting any of
Plaintiff's existing clients throughout the world.
See id. at 52-54. Notably, however, Judge Kessler
found this Court's reasoning from its June 2016 opinion
“instructive” in limiting the solicitation of
prospective clients to only those known to Defendants while
employed by Plaintiff. See id. at 34-35, 52-53.
Ultimately, Judge Kessler limited the scope of that
injunction by holding that the defendant was only enjoined
from soliciting Plaintiff's existing clients known to him
during his employment with Plaintiff, which contrasted with
the Injunction here that restrained Defendants from
soliciting all of Plaintiff's existing clients
worldwide regardless of Defendants' knowledge.
Additionally, in alignment with this Court's Injunction,
Judge Kessler enjoined the defendant from soliciting
Plaintiff's prospective clients, but only those known to
him during his employment. See id. at 76- 77.
Hopper and Karamitas, Judge Moore issued a
bench decision where he similarly found the same provisions
prohibiting the solicitation of Plaintiff's existing and
prospective clients to be overbroad. Schmidt Cert., Ex. 2,
Tr. 28:3-31:2. Specifically, Judge Moore found that these
provisions must be limited to the geographic areas within
which defendants worked: “The protectable interest that
ADP seeks to enforce weakens as the geographic and market
share area expands and employee knowledge of customers
becomes very vague and not apparent to the Court.”
See id., Tr. 30:12-18.
all due respect to Judges Kessler and Moore, the Court finds
that their opinions do not equal “decisional law”
that justifies the modification of the Injunction for several
reasons. First, the Superior Court cases dealt with motions
for summary judgement after the parties developed a complete
factual record from which Judges Kessler and Moore could
determine whether Plaintiff's position warranted
permanent injunctive relief. There is no such
factual record before this Court and it has only issued a
preliminary injunction for the duration of
litigation. The instant Injunction only serves to preserve
the parties' positions prior to the commencement of
litigation, which is separate from the purpose of permanent
all of the aforementioned cases are currently on appeal to
the Appellate Division of the Superior Court. Any modification
of the Injunction made by this Court on the grounds of a
change in New Jersey law is subject to reversal by an adverse
decision from the Appellate Division. While the Court has not
found a precedential definition of “decisional law,
” reason commands that such law must be final in some
form. For example, if the Appellate Division decided in favor
of Defendants' and the Supreme Court of New Jersey either
agreed after its own review or denied a writ ...