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 Plaintiff's motion for
sanctions against Defendant Halpin for violating the
Court's June 2016 order enjoining Defendants from
soliciting Plaintiff's clients during the course of
litigation. (ECF No. 120). There was no oral argument.
Fed.R.Civ.P. 78(b). For the reasons set forth below,
Plaintiff's motion is GRANTED.
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. ECF No. 31. The Court, however,
allowed Defendants to continue working at Plaintiff's
competitor, Ultimate Software Group (“Ultimate”),
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.
Thereafter, Defendants moved on three occasions to vacate or
modify the Injunction, which the Court denied each time.
See ECF Nos. 71, 84, 87, 105, 112, 121. During this
time, the parties engaged in discovery, which remains
now moves the Court to impose sanctions against Defendant
Halpin for violating the Injunction. Pl.'s Br. in Supp.
of Mot. for Sanctions (“Pl.'s Br.”), ECF No.
120-2. Plaintiff submits that Halpin admitted to soliciting
eight of Plaintiff's clients after the Court's
issuance of the Injunction. Halpin allegedly made these
admissions during his deposition, which occurred on January
12, 2018. Id. at 2-3. Plaintiff claims that Halpin
knew that the eight companies at issue were Plaintiff's
clients and he solicited them anyway, in direct violation of
the Injunction. Id. at 3-5. Plaintiff argues that it
“now has clear and convincing evidence of Halpin's
repeated breaches of the [Injunction], and ask that the Court
to [sic] sanction Halpin appropriately, in [an]
[sic] amount that will deter future
violations.” Id. at 2.
opposes, arguing that Plaintiff has failed to prove civil
contempt against him by clear and convincing evidence.
See Def.'s Br. in Opp'n to Pl.'s Mot.
(“Def.'s Opp'n”) 8, ECF No. 124. Halpin
contends that he had no involvement with or knowledge of any
of the eight companies during his employment with Plaintiff.
See id. at 8-9, 11-13. Once he learned that certain
companies were Plaintiff's clients, Halpin submits that
he transitioned his sales efforts to other Ultimate employees
or otherwise ceased further contact. See id. at
9-14. Halpin also claims that he never learned at any point
that some of the companies were using Plaintiff's
services. See id. at 13. Nonetheless, on at least
one occasion, Halpin admits that an Ultimate inside sales
representative told him that one of the named companies was
Plaintiff's client but Halpin proceeded to meet with that
company anyway. See id. at 10. Importantly, Halpin
does not deny that he solicited all of the named companies at
some point after the Court's issuance of the Injunction.
reply brief, Plaintiff responds that Halpin failed to offer
the same “transitioning” explanation when
confronted with his conduct during his deposition.
See Pl.'s Reply in Further Supp. of Mot. for
Sanctions (“Pl.'s Reply”) 2, ECF No. 131.
Plaintiff further argues that whether Halpin had contact with
the named companies while employed by Plaintiff is irrelevant
to his compliance with the Injunction; instead, the
“determining factor is that Halpin knew he was
soliciting [Plaintiff's] clients.” See id.
at 3. Plaintiff submits that Halpin's deposition
testimony as well as documents produced during discovery show
that he knowingly solicited Plaintiff's clients in direct
violation of the Injunction. See id at 4-7.
for civil contempt serve two purposes: ‘to coerce the
defendant into compliance with the court's order and to
compensate for losses sustained by the
disobedience.'” Robin Woods Inc. v. Woods,
28 F.3d 396, 400 (3d Cir. 1994) (quoting McDonald's
Corp. v. Victory Invs., 727 F.2d 82, 87 (3d Cir. 1984)).
“Where compensation is intended, a fine is imposed,
payable to the complainant. Such fine must of course be based
upon evidence of the complainant's actual loss, and his
right, as a civil litigant, to the compensatory fine is
dependent upon the outcome of the basic controversy.”
United States v. United Mine Workers of Am., 330
U.S. 258, 304 (1947). “But where the purpose is to make
the defendant comply, the court's discretion is otherwise
exercised.” Id. “It must then consider
the character and magnitude of the harm threatened by
continued contumacy, and the probable effectiveness of any
suggested sanction in bringing about the result
establish that a party is liable for civil contempt, three
elements must be proven: ‘(1) that a valid order of the
court existed; (2) that the defendant had knowledge of the
order; and (3) that the defendant disobeyed the
order.'” Berne Corp. v. Gov't of The Virgin
Isldands, 570 F.3d 130, 139 (3d Cir. 2009) (quoting
Roe v. Operation Rescue, 54 F.3d 133, 137 (3d Cir.
1995)). The moving party must prove these elements by clear
and convincing evidence. See Woods, 28 F.3d at 399.
does not seek compensatory sanctions; instead, Plaintiff
seeks to compel Halpin's compliance with the Injunction.
See Pl.'s Br. at 2. The first two elements are
obviously satisfied here: a valid order exists and Halpin
admits to knowing of its existence. See
Certification of H. Freier (“Freier Cert.”), Ex.
1, Halpin Dep. 165:15-166:16, ECF No. 120-1 [hereinafter
“Halpin Dep.”]. The Court notes that it
previously denied Plaintiff's request for sanctions
because it found that Plaintiff did not have clear and
convincing evidence of Halpin's violative conduct.
See Op. 4, ECF No. 84. At that time, Plaintiff
relied entirely on its own certification as its evidence,
which the Court found failed to meet the clear and convincing
standard. Plaintiff now provides Halpin's deposition
testimony and documents produced during discovery, citing
multiple instances where he admits to soliciting
Plaintiff's clients after the imposition of the
Injunction. See Pl.'s Br. at 2-5.
main defense is that once he learned of certain
companies' involvement with Plaintiff, he then
transitioned his efforts to other Ultimate
employees-i.e., Halpin did not willfully violate the
Injunction and made a good faith effort to comply.
See Def.'s Opp'n at 8, 14. Halpin cites to
Woods in support of his contention that
“substantial compliance” is a defense to civil
contempt. Id. at 8. The Woods court did not
so hold; it merely identified that some other out-of-circuit
courts have recognized the “substantial
compliance” defense. See Woods, 28 F.3d at 399
(noting the 9th Circuit's acceptance of substantial
compliance as a defense to contempt). In fact, the
Woods court expressly stated that “good faith
is not a defense to civil contempt” and that
“willfulness is not a necessary element of
contempt.” Id. (quotation and citations
omitted). Halpin's main defense, therefore, fails.
only relevant question is whether Halpin solicited any of
Plaintiff's clients after the Court's issuance of the
Injunction on June 30, 2016. The Court need look no further
than Halpin's own admissions to determine that he most
certainly did. See Halpin Dep. 164:1-167:8
(admitting conversations and meetings with the company Plasan
Carbon, some of which occurred in August 2016); 203:11-204:9
(admitting a conversation with the company Work Skills in
early 2017); 205:2-206:4 (referencing an internal email from
January 2017 in connection with admission of a conversation
with the company Barfly Ventures). Emails produced during
discovery also ...