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ADP, LLC v. Nicole Rafferty

United States District Court, D. New Jersey

April 2, 2018

ADP, LLC, Plaintiff,
v.
NICOLE RAFFERTY, Defendant.

          OPINION

          JOSE L. LINARES Chief Judge.

         This matter comes before the Court by way of Plaintiff ADP, LLC's Motion for a Temporary Restraining Order and a Preliminary Injunction against Defendant Nicole Rafferty pursuant to Federal Rule of Civil Procedure 65. (ECF No. 3). The Court has considered the submissions made in support of and in opposition to Plaintiffs motion, as well as the arguments made at the February 22, 2018 hearing, and finds that the Court has sufficient information to rule on the motion for both a temporary restraining order and a preliminary injunction. For the reasons set forth below, Plaintiffs motion is granted in part and denied in part.

         I. BACKGROUND

         Plaintiff is a provider of "business outsourcing and software services ... including human resources, payroll, tax, and benefits administration services." (ECF No. 1 ("Compl.") ¶ 6). Defendant worked for Plaintiff from 2010 until 2017. (Compl. ¶ 9). During the last three years of her employment with Plaintiff, Defendant worked as a "Comprehensive Services Manager" throughout Rhode Island, central and southern Maine, central Massachusetts, and the Greater Boston area.[1] (Compl. ¶ 9). In her capacity as a Comprehensive Services Manager, Defendant "sold business process outsourcing services, which are [Plaintiffs] most strategic and expensive products" to Plaintiffs "highest worth clients." (Compl. ¶ 9).

         Throughout Defendant's employment, Plaintiff claims that Defendant received unique specialized training, maintained substantial contact with current and prospective clients, and possessed "confidential, proprietary, and trade secret information." (Compl. ¶¶ 21-23). This information included, but is not limited to, business methods, pricing and marketing strategies, as well as information regarding sales, clients, compensation, and marketing partners. (Compl. ¶ 23). Plaintiff keeps a close guard over its proprietary information and takes steps to ensure that the information is kept secret, e.g., requiring employees to enter into confidentiality and restrictive covenant agreements. (Compl. ¶¶ 24-26).

         Defendant signed a Sales Representative Agreement ("SRA") and a Non-Disclosure Agreement ("NDA") when she began working for Plaintiff, which is standard practice for Plaintiffs new employees. (Compl. ¶¶ 10-11). The SRA provided in relevant part that, starting at the time Defendant begins working for Plaintiff and ending one year after she ceases her employment, the

Employee shall not, on Employee's behalf or on behalf of any other person, ... or other entity whatsoever (a "Person"), directly or indirectly, solicit, contact, call upon, communicate with or attempt to communicate with any Person which was a client, bona fide prospective client or marketing partner of [Plaintiff] before the date Employee ceases to be an employee of [Plaintiff] (the "Termination Date") that (i) was located in any territory Employee managed or to which Employee was assigned or covered during the two-year period prior to the Termination Date and/or (ii) Employee was assigned, managed and/or had knowledge of, contact or involvement with during the two-year period prior to the Termination Date, to sell license or lease any software, product or service competitive or potentially competitive with any software, product or service sold, licensed, leased, provided or under development by [Plaintiff] during the two-year period prior to the Termination Date, provided that the restrictions set forth in this paragraph shall only apply to clients, bona fide prospective clients or marketing partners of businesses of [Plaintiff] with which the Employee was involved or exposed.

         (ECF No. 1-1 at Ex. A ("SRA"), ¶ 4(a)) (emphasis added). The SRA also restricted Defendant from disclosing "any business methods, procedures, pricing and marketing structure and strategy, programs, forms, confidential information, trade secrets, the names and addresses of current, former clients and prospective clients of [Plaintiff], or other data and information relating to [Plaintiff]" or using or acting upon such information in anyway. (SRA ¶ 4(b)-(c)). Upon her termination or resignation, Defendant was required, under the SRA, to return "all copies of all materials" which belong to Plaintiff that are within her possession. (SRA ¶ 4(b)). The SRA prohibited Defendant from soliciting any of Plaintiff s employees for one year after the date she ceases to be an employee of Plaintiff. (SRA ¶ 4(d)). The SRA also stated that "a violation of the foregoing covenants not to solicit, not to disclose, not to use and not to hire or any provisions thereof will cause irreparable injury to [Plaintiff]." (SRA ¶ 4(e)). The NDA contained substantially similar terms. (See generally ECF No. 1-1 at Ex. B ("NDA")).

         Plaintiff offers stock awards to certain high performing employees, provided the employee accepts a Restrictive Covenant Agreement ("RCA") with more extensive terms than the SRA and NDA. (Compl. ¶ 16). Defendant accepted a restricted stock award in 2011, 2012, 2013, 2015, 2016, and 2017. (Compl. ¶¶ 18, 20). On each of those occasions, Defendant entered into an RCA with Plaintiff. (Compl. ¶¶ 18, 20). The most recent RCA that Defendant signed was on September 1, 2017 ("2017 RCA"), which stated that Defendant would not "participate in any manner with a Competing Business anywhere in the Territory where doing so [would] require [Defendant] to (i) provide the same or substantially similar services to a Competing Business as those which [she] provided to [Plaintiff] while employed, or (ii) use, disclose or disseminate [Plaintiffs] Confidential Information or trade secrets." (ECF No. 1-1 at Ex. C ("2017 RCA") ¶ 3). The "Territory" under the RCA is defined as "the geographic area where [Defendant] worked, represented [Plaintiff], or had Material Business Contact with [Plaintiffs] Clients in the two (2) year period preceding the termination of [Defendant's] employment with [Plaintiff]." (2017 RCA ¶ l(j)). The 2017 RCA also restricted Defendant from soliciting business from "any Client" of Plaintiff or encouraging "any Clients" to cease doing business with Plaintiff for a period of one year after Defendant stops working for Plaintiff. (2017 RCA ¶ 4(a)). The same restrictions applied to "any Business Partner" of Plaintiff. (2017 RCA ¶ 4(b)). The 2017 RCA contained a detailed non-disclosure clause for Plaintiffs confidential information and trade secrets, including any hard copy or electronic material in Defendant's possession. (2017 RCA ¶ 6).

         Defendant separated from Plaintiff on December 27, 2017. (Compl. ¶ 28). Soon thereafter, Plaintiff learned that Defendant accepted a position in the Greater Boston area with The Ultimate Software Group, Inc. ("Ultimate"), a direct competitor of Plaintiff. (Compl. ¶ 29). Plaintiff claims that Defendant is selling the same type of product and performing the same or substantially similar job functions for Ultimate as those she did for Plaintiff in the same geographic territory, which is expressly forbidden under the SRA, NDA, and RCAs. (Compl. ¶¶ 31-32). Plaintiff further claims that Defendant "has used or disclosed or will inevitably use and disclose" Plaintiffs proprietary information. (Compl. ¶ 34). Upon learning of Defendant's employment at Ultimate, Plaintiff sent Defendant a letter on December 29, 2017, which outlined her obligations and requested that she provide details regarding her new employment, as required by the 2017 RCA. (Compl. ¶ 35). Defendant did not deny working in the same territory as she did for Plaintiff, but responded that she '"has not and will not solicit business from any of the approximately 30 clients to whom she successfully sold [Plaintiffs] Comprehensive Services' and '[s]he will not otherwise solicit business from any [of Plaintiff s] clients with whom she dealt.'" (Compl. ¶ 36).

         Plaintiff then brought this action on February 9, 2018, alleging (1) Breach of Contract, (2) Breach of Duty of Loyalty, and (3) Unfair Competition. (Compl. ¶¶ 44-67). Plaintiff requests damages, a temporary restraining order, and a preliminary injunction. (Compl. at p. 19-21). Plaintiff seeks to enjoin Defendant from working for Ultimate for a period of twelve months, using or disclosing Plaintiffs confidential proprietary or trade secret information, interfering in any way with Plaintiffs current or prospective clients, or breaching any loyalty obligation she has towards Plaintiff. (Compl. at p. 19-21). Plaintiff also requests that the Court grant a temporary restraining order and a preliminary injunction enjoining Defendant from disposing of any paper or electronic documents relevant to this litigation and ordering Defendant to return any and all confidential, proprietary, or trade mark information or property in her possession. (Compl. at p. 19-21).

         II. LEGAL STANDARD

         Preliminary injunctions are extraordinary remedies that are not routinely granted. Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004) (citing Am. Tel. & Tel. Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1426-27 (3d Cir. 1994)). The decision to grant a preliminary injunction is within the sound discretion of the district court. eBay Inc., et al. v. MercExchange, L.L.C, 547 U.S. 388, 391 (2006) (citing Weinberger v. Romero-Barcelo, 456 U.S. 305, 320 (1982)). In deciding whether injunctive relief should be granted, the Court must determine (i) that the movant has a reasonable likelihood of success on the merits, (ii) that the denial of injunctive relief will result in irreparable harm to the movant, (iii) that granting injunctive relief for the movant will not result in even greater harm to the non- movant; and (iv) that the public interest favors granting the preliminary injunction. Kos Pharm., 369 F.3d at 708 (citing Allegheny Energy, Inc. v. DQE, Inc., 171 F.3d 153, 158 (3d Cir. 1999)).

         The movant bears the burden of demonstrating that the injunction it seeks should issue. Id. To obtain a preliminary injunction, the moving party must demonstrate both a likelihood of success and the probability of irreparable harm if relief is not granted. Morton v. Beyer, 822 F.2d 364, 367 (3d Cir. 1987) (quotations omitted); see also In re Arthur Teacher's Franchisee Litig., 689 F.2d 1137, 1143 (3d Cir. 1982) ("[W]e cannot sustain ...


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