United States District Court, D. New Jersey
WILLIAM J. MARTINI, U.S.D.J.
MATTER comes before the Court upon an order
requiring Plaintiff ADP, LLC (“ADP”) to show
cause why the Court should not lift a preliminary injunction
enjoining former ADP salesmen, Defendants Jordan Lynch and
John Halpin (“Defendants”), from engaging in
certain conduct pursuant to several restrictive covenants
found in their employment agreements with ADP. The Court
entered the preliminary injunction on June 30, 2016, ECF No.
, and previously denied requests by Defendants to lift
the injunction over its nearly three-year tenure.
See ECF No. , , . , . Now,
with the cases stayed pending direction in related matters
currently before the Third Circuit, the Court revisits the
preliminary injunction. See ECF No. .
before the Court is ADP's motion for sanctions, ECF No.
, filed on March 25, 2019, alleging violations of the
preliminary injunction by Defendant Halpin. For the reasons
set forth below, the Court LIFTS the
preliminary injunction as to both Defendant Lynch and
Defendant Halpin and DENIES the motion for
Court assumes the parties' familiarity with this case and
writes only for their benefit. On March 13, 2019, this Court
entered an order staying four motions for summary judgment,
ECF Nos. , , , & , pending decision
in two related cases which are fully briefed and argued
before the Third Circuit, ADP, LLC v. Rafferty (No.
18-1796) and ADP, LLC v. Mork (No. 18-2603). In that
Order, the Court also requested briefing on two specific
issues in these consolidated cases related to the ongoing
1. Whether the tolling provision as applied in this case
continues to comply New Jersey law; and
2. Whether the one-year restrictive covenant has expired as
to either Defendant.
submitted a brief in support of continuing the preliminary
injunction, ECF No. , and Defendants submitted briefs in
opposition, ECF Nos.  and . On March 25, 2019, ADP
moved for sanctions against Defendant Halpin based on an
alleged violation of the preliminary injunction on October
18, 2018. ECF No. . The Court heard oral argument on the
order to show cause on March 28, 2019 and stayed briefing on
the sanctions motion pending this opinion and its
ARGUMENTS OF THE PARTIES
concedes that the preliminary injunction should be lifted
against Defendant Lynch. ECF No.  at 1. As to Defendant
Halpin, ADP argues that the preliminary injunction should
continue because ADP has not received the “full benefit
of the terms Halpin agreed to when he accepted awards of
restricted stock” and that it has not yet received
“full 12-month compliance by Halpin.”
Id. at 1-2.
addressing the first question posed by the Court, ADP argues
both in its brief and at oral argument that tolling
provisions are enforceable under New Jersey state law during
that time which Defendants are in violation of the
restrictive covenants. ADP points the Court to two cases
where courts ordered a one- or two-year restrictive covenant
period to begin running after summary judgment where the
defendant had continuously violated those covenants during
the pendency of the litigation. See ECF No.  at
3-5 (citing ADP, LLC v. Manchir, No.
M201602541COAR3CV, 2017 WL 5185458, at *8 (Tenn. Ct. App.
Nov. 8, 2017) (where defendant had never complied with the
restrictive covenants for the one-year period and no order
enjoining violation was ever sought, finding that
“requiring Manchir to adhere to the [a]greement for its
prescribed duration . . . is a reasonable remedy”);
Jackson Hewitt Inc. v. Childress, No. CIVA
06-CV-0909 DMC, 2008 WL 834386, at *10 (D.N.J. Mar. 27, 2008)
(finding plaintiff “is entitled to injunctive relief
for a period of twenty-four months beginning from the date of
[d]efendant's compliance with the covenant not to
the second question, ADP makes two arguments-without citing
to any authority-that the one-year restrictive covenant has
not expired as to Halpin. First, it argues that “Halpin
has continued his employment with ADP competitor [Ultimate],
in a territory that includes his former ADP territory . . .
.”, which ADP argues violates the preliminary
injunction and/or the restrictive covenants.
ADP argues that Halpin has continued to violate the
injunction by soliciting ADP clients. In support, ADP points
to a communication between Halpin and an ADP client on
October 18, 2018. ADP concedes that it has no evidence of any
violations between June 2017 and October 2018, but argues
that there could have been violations during that time which
would preclude expiration of the one-year restrictive
and Lynch filed individual briefs in response. ECF Nos.
, . Defendants argue that enforcing the one-year
restrictive covenants more than three years since Defendants
left ADP in December 2015 has given ADP “more than it
bargained for” under the restrictive covenants.
See ECF No.  at 2. Although not responsive to
the precise questions posed by the Court, Defendants also
argue that the preliminary injunction generally does not
comport with New Jersey law and note the split of authority
in this District and in New Jersey state courts related to
the enforceability of the restrictive covenants. Finally,
Defendants argue that law in this district does not generally
support equitable tolling of the restrictive covenants given
their disfavor, and that courts toll such provisions only
where the violation was continuous during the pendency of the
litigation. See The Cmty. Hosp. Grp., Inc. v. More,
183 N.J. 36, 41 (2005) (finding, under the plaintiff's
interpretation of the ...