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ADP, LLC v. Ultimate Software Group, Inc.

United States District Court, D. New Jersey

March 5, 2018

ADP, LLC, Plaintiff,


          Kevin McNulty United States District Judge.

         Plaintiff, ADP, Inc. ("ADP"), is suing a competitor, defendant Ultimate Software Group, Inc. ("USG"), which has allegedly hired ADP's ex-employees in violation of their non-compete, non-disclosure, and non-solicitation agreements. USG has asserted counterclaims for tortious interference with its prospective business relationships and unfair competition. It alleges, in part, that ADP has sent pre-litigation letters warning these employees that violations of the agreements could result in legal action, creating a "cloud of fear" among prospective employees and clients.

         ADP now moves under Fed.R.Civ.P. 12(b)(6) to dismiss USG's counterclaims for failure to state a claim. For the reasons stated herein, ADP's motion is denied.

         I. Summary[1]

         On November 21, 2016, ADP filed a complaint against USG, alleging that USG engaged in a systematic process of hiring former ADP sales representatives. (Cplt. ¶¶ 1-4.) All of this was done, ADP says, with the goal of obtaining ADP's trade secrets and proprietary information and pirating ADP's current and prospective clients. (See id.) ADP's complaint asserts claims under the Defend Trade Secrets Act, 18 U.S.C. §§ 1832, 1839, the Copyright Act, 17 U.S.C. § 106, the New Jersey Trade Secrets Act, N.J.S.A. 56:15-4, -6, and the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201 et seq., as well as other common law claims. (See id.)

         USG disputes these allegations and has filed counterclaims against ADP. USG's first counterclaim is for tortious interference with prospective economic benefits. (Answer ¶¶ 164-71.) Its second is for unfair competition. [Id. ¶¶ 172-80.) USG bases its counterclaims on ADP's alleged intimidation of the employees USG has hired and seeks to hire from ADP. (See Id. ¶¶ 169, 173.) This intimidation, USG alleges, has taken the form of law suits and letters that threaten law suits ("pre-litigation letters") against those former employees who are now at USG. Such actions, according to USG, have created fear in its its current employees and have reduced the pool of potential employees. (Id. ¶¶ 147-49, ) As a result, USG has been impaired in its pursuit of lawful and permitted sales activities. [Id.) ADP has moved to dismiss these counterclaims for failure to state a claim. (ECF no. 77.)

         II. Standard of Review

         A motion to dismiss counterclaims is reviewed under the same standard as a motion to dismiss a complaint under Fed.R.Civ.P. 12(b)(6). In re Gabapentin Patent Litig., 648 F.Supp.2d 340, 346 (D.N.J. 2009) (citing Organonlnc. v. MylanPharm., 293 F.Supp.2d 453, 456-57 (D.N.J. 2003)). Under Rule 12(b)(6), a party may move for the dismissal of a claim, if it fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated. Animal Science Products, Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n. 9 (3d Cir. 2011). For the purposes of a motion to dismiss, the facts alleged in the complaint are accepted as true and all reasonable inferences are drawn in favor of the non-moving party. New Jersey Carpenters & the Trustees Thereof v. Tishman Const. Corp. of N.J., 760 F.3d 297, 302 (3d Cir. 2014).

         A counterclaimant's obligation to provide the grounds for entitlement to relief requires more than labels and conclusions; a formulaic recitation of the elements of a cause of action will not do. Bell Atl Corp. v. Twombly, 550 U.S. 544, 55 (2007). Thus, the counterclaimant's factual allegations must be sufficient to raise a counterclaimant's right to relief above a speculative level, so that a claim is "plausible on its face." Id. at 570; see also West Run Student Housing Assocs., LLC v. Huntington Nat. Bank, 712 F.3d 165, 169 (3d Cir. 2013). That facial-plausibility standard is met "when the [counterclaimant] pleads factual content that allows the court to draw the reasonable inference tiiat the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a 'probability requirement'... it asks for more than a sheer possibility." Iqbal, 556 U.S. at 678.

         In considering a motion under Rule 12(b)(6), I am confined to the allegations contained within the counterclaims, with some narrow exceptions. Courts may consider "document[s] integral to or explicitly relied upon in the complaint, " or any "undisputedly authentic document. . . attache[d] as an exhibit to a motion to dismiss if the [counterclaimant]'s claims are based on the document." In re Asbestos Products Liab. Litig. (No. VI), 822 F.3d 125, 134 n.7 (3d Cir. 2016) (citing In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)); Pension Ben. Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993)); see also Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) ("However, an exception to the general rule is that a 'document integral to or explicitly relied upon in the complaint' may be considered 'without converting the motion to dismiss into one for summary judgment."*) (quoting In re Burlington Coat Factory, 114 F.3d at 1426); Pension Ben. Guar. Corp., 998 F.2d at 1196). I may also take judicial notice of another court's opinion, "not for the truth of the facts recited therein, but for the existence of the opinion, which is not subject to reasonable dispute over its authenticity." S. Cross Overseas Agencies, Inc. v. WahKwong Shipping Grp. Ltd., 181 F.3d 410, 426-27 (3d Cir. 1999). See generally Fed. R. Evid. 201.

         III. Discussion

         ADP lists four reasons why USG's counterclaims should be dismissed. (PL Br. at 2-3.) First, it argues that claims premised on alleged litigation-related conduct and communications are protected by the First Amendment and thus exempt from anti-trust/unfair competition liability under the Noerr-Pennington. (Id. at 2.) Second, it argues that claims premised on litigation-related communications and conduct are barred by the absolute litigation privilege under New Jersey law. [Id.) Third, it argues that the New Jersey Rules of Professional Responsibility do not provide a private cause of action. (Id. at 3.) Fourth and finally, it argues that USG has failed to adequately allege that it has been harmed by ADP's conduct or that a causal link exists between ADP's conduct and any possible harm. (Id.)

         a. Noerr-Penntngton Bar

         "Rooted in the First Amendment and fears about the threat of chilling political speech, " the Noerr-Pennington[2] doctrine provides immunity from antitrust liability for parties who petition the government for redress. In re Lipitor Antitrust Litig., 868 F.3d 231, 264 (3d Cir. 2017) (quoting AD. Bedell Wholesale Co. v. Phillip Morris Inc.,263 F.3d 239, 250 (3d Cir. 2001)). The doctrine extends to "actions which might otherwise violate die Sherman Act because '[t]he federal antitrust laws do not regulate conduct of private individuals in seeking anticompetitive action from the government." Id. More broadly, "[government advocacy is protected by Noerr-Pennington immunity; seeking governmental approval of a private agreement is not." Id. The scope of Noerr-Pennington immunity depends on the source, context, and nature of the competitive restraint at issue. Id. Noerr-Pennington has been extended to provide immunity to private efforts to influence courts and agencies, whether federal or state, Bristol-Myers Squibb Co. v. IVAX Corp.,77 F.Supp.2d 606, 611 (D.N.J. 2000), and has been held to shield plaintiffs from liability for pursuing state common law claims such as tortious ...

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