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ADP, LLC v. Pittman

United States District Court, D. New Jersey

October 18, 2019

ADP, LLC, Plaintiff,
v.
SUMMER PITTMAN, Defendant.

          OPINION

          Hon. Kevin McNulty United States District Judge.

         Defendant Summer Pittman spent nine years employed in various sales positions by Plaintiff ADP, LLC. During that time, she and ADP signed several restrictive covenants in which she agreed that in the event of her non-employment by ADP, she would for a period not (1) compete with ADP, (2) disclose its confidential information, or (3) solicit its clients. In June 2019, Pittman abruptly left ADP and accepted a position with one of its competitors. ADP considers this a violation of several provisions of the restrictive covenants and now moves this Court for entry of an order enjoining Pittman from: (1) continuing to breach her non-compete obligations; and (2) breaching the other restrictive covenant obligations owed to ADP. (DE 3).

         For the reasons that follow, APD's motion is GRANTED.

         I. BACKGROUND [1]

         A. Pittman's Employment

         ADP employed Pittman for about nine years in various sales positions, always in the Pacific Northwest. (DE 3-5 ¶ 3) ADP first hired her on February 22, 2010. (Id.). On September 12, 2016, the company promoted her to Pacific Northwest district sales manager in its Global Enterprise Solutions division. (Id.). Pittman remained in that role until she voluntarily left ADP on June 14, 2019. (Id.).

         As a district sales manager, Pittman sold ADP's products and services to existing and prospective clients. (Id.). Her market and territorial designation consisted of companies employing between 1, 000 and 10, 000 people, in Alaska, Oregon, Vancouver, and Washington.[2] (Id. ¶ 4). In that role, Pittman was responsible for cultivating, developing, and maintaining business relationships with existing and prospective clients. (Id.). She was also charged with marketing and selling products that provide payroll, time and attendance, human resources management, and other tools to employers. (Id.). These products included WorkForce Now, Vantage, Global View, and Lifion. (Id.). However, Pittman primarily sold WorkForce Now. (DE 13-2 ¶ 5). She rarely attempted to sell other ADP products and even more rarely succeeded. (Id.).

         After Pittman would close a deal, ADP expected her to move on to the next deal. (Id.). She was expected not to "waste time getting close to a client." (DE 13-2 ¶ 10). Instead, that responsibility was passed on to client relationship managers, the employees ADP specifically tasked with maintaining those ongoing relationships. (Id.).

         B. The Nondisclosure Agreement and the Sales Representative Agreement

         On March 1, 2010, when Pittman was hired, she and ADP-as a routine matter-signed a non-disclosure agreement ("NDA").[3] (DE 1-1). The NDA is intended to bind ADP and its new employee before the associate is exposed to ADP's confidential business information and other data about ADP's existing or prospective clients. (Id. ¶ 9). The NDA contains restrictions designed to protect those confidences and client goodwill, as well as other protectable business interests. (DE 3-5 ¶ 10). The NDA also contains a return-of-property provision. (DE 1-1 ¶ 1(a)-(b)).

         ADP requires new sales associates to sign the NDA because it wants to protect the confidential information that sales associates obtain in the course of their duties. (DE 3-5 ¶ 11). In this manner, ADP hopes to protect the client relationships and goodwill that sales associates develop during their time at the company. (Id.).

         At the same time, Pittman also signed a Sales Representative Agreement ("SRA"), which includes non-solicitation, non-disclosure, non-use and non-hire provisions.

         C. ADP's Training

         After Pittman began working for ADP, the company provided her with specialized training. (DE 3-5 ¶ 17). ADP claims that this training is unique and unmatched by its industry competitors. (Id.). In the course of training, ADP provides sales associates like Pittman significant information about ADP and its products and services. (Id. ¶ 14). Sales associates also obtain information about the specific clients they service. (Id.). The training information includes the strengths and weaknesses of ADP's products and services; the strengths and weaknesses of other ADP sales associates; the way ADP sells its products and services; the way ADP differentiates its products and services from its competitors; the relative advantages and disadvantages between ADP's products and services and those of its competitors; the methods by which ADP effectively competes with its competitors; ADP's pricing models and costs; ADP's planned improvements and expected new products; and complaints made by ADP customers. (Id.). This information is generally confidential to ADP, and ADP prohibits its disclosure or use by former employees. (Id.). During her time at ADP, Pittman gained substantial access to this sort of confidential information. (Id. ¶ 17). She also had significant and direct contact with ADP's existing and prospective clients. (Id. ¶ 17).

         During her time at ADP, Pittman also had access to, and regularly used, ADP's confidential, proprietary, and trade secret information. (Id.). This information included ADP's confidential business methods; procedures, pricing, and marketing strategies; client information, including names, preferences, and needs; and information regarding the terms of client contracts. (Id.). ADP attempts to maintain the secrecy of this proprietary information by requiring employees to sign NDAs; limiting access to proprietary information on a need-to-know basis; requiring security and password protection on its work systems; and reminding and training its employees about the sensitive nature of this information. (Compl. ¶ 21).

         D. ADP's Restricted Stock Award Program and Restrictive Covenant Agreements.

         As an incentive program, ADP offers to certain high-performing employees the opportunity to participate in a stock-award program. (DE 3-5 ¶ 12). Under the terms of that program, sales employees who meet their sales targets are annually offered restricted stock in ADP. (Id.). ADP conditions the receipt of restricted stock awards on the acceptance by eligible sales associates of restrictive covenants. (Id. ¶ 13). The restricted stock is designed to be a reward to attract, retain, and motivate ADP employees and to strengthen the mutual interest between the employees and ADP. (Id. ¶ 12).

         As part of the electronic acceptance process in connection with the award of stock, ADP requires employees to accept the terms of these restrictive covenants. (DE 3-8 ¶ 7). An employee is unable to accept an award of restricted stock without first acknowledging that he or she has read the associated agreements and has accepted the restrictive covenant agreement. (Id.). This acceptance scheme is designed to require acceptance or rejection of the entire agreement associated with the award. (Id. ¶ 11).

         E. Terms and Conditions of the RCA

         The restrictive covenants associated with the the receipt of restricted stock are more extensive than those found in the standard NDA. (DE 3-5 ¶ 13). ADP believes that sales associates who achieve annual sales targets have demonstrated that they maintain the strongest relationships with ADP's existing and prospective clients, best utilize ADP's marketing strategies and resources, effectively leverage their knowledge about ADP's products and services and unique information about ADP's existing and prospective clients, use their external networks, and best trade on ADP's reputation in the marketplace. (Id.). Sales associates who receive restricted stock awards are generally involved with and have the most information about the largest numbers of ADP's existing and prospective clients. (Id.).

         During their duties, ADP sales associates obtain significant information about ADP and its products and services and about the specific clients they service. (Id. ¶ 14). Again, this includes the strengths and weaknesses of ADP's products and services; the strengths and weaknesses of other ADP sales associates; the way ADP sells its products and services; the way ADP differentiates its products and services from its competitors; the relative advantages and disadvantages between ADP's products and services and those of its competitors; the methods by which ADP effectively competes with its competitors; ADP's pricing models and costs; ADP's planned improvements and expected new products; and complaints made by ADP customers. (Id.). Most of this information is confidential to ADP and is thus never to be disclosed or used by former employees. (Id.).

         ADP also recognizes that the loss of a high-performing sales associate to a competitor poses a particularly high risk to ADP with respect to client and prospect relationships, ADP's goodwill, and the use and misappropriation of its confidential trade secret information relating to its operations, clients and prospects. (Id. ¶ 15).

         ADP thus requires more extensive restrictive covenants in exchange for its restricted stock awards, in recognition of the fact that those high-performing sales associates-because of their unique knowledge, skills, and job performance-have the greatest potential to disrupt ADP's relationships with its existing and prospective clients, to harm the goodwill ADP has generated in the market, and to misappropriate confidential and trade secret information about ADP and its existing and prospective clients. (Id. 16).

         1. Non-Solicitation

         The RCA imposes on its employee-signatories a greater burden than the SRA and NDA do, and the RCA's terms make it more difficult for a former employee to compete with ADP after he or she leaves the company. The RCA contains a non-solicitation provision that is stronger than the one found in the SRA. The RCA's provision prohibits employees, for one year after their departure from ADP, from soliciting any clients to whom ADP (1) provides; (2) has provided; or (3) reasonably expects to provide business within the two-year period following the employee's departure.[4]

         Unlike the SRA, which only prohibits solicitation of those ADP clients with whom the former employees were involved or exposed, the RCA also prohibits solicitation of all current and prospective ADP clients. IN addition, while the SRA prohibits former employees from soliciting ADP's marketing partners, the RCA also prohibits former employees from soliciting ADP's referral partners.[5]

         2. Non-Compete

         The RCA also contains a non-compete provision, which the SRA and the NDA do not have. The non-compete provides that, for one year after their departure from ADP, employees may not "participate in any manner with a Competing Business" in the geographic area where the employee worked or had contact with ADP clients if working in that area would require the employee to "provide the same or substantially similar services to a Competing Business as those which [they] provided to ADP while employed." The non-compete provision also prohibits (former) employees from using or disclosing ADP's trade secrets or other confidential information.

         F. The 2017 Restrictive Covenant Agreement

         The 2017 RCA contains the following pertinent provisions:

1. Definitions.
d. "Competing Business" means any individual (including me), corporation, limited liability company, partnership, joint venture, association, or other entity, regardless of form, that is engaged in any business or enterprise that is the same as, or substantially the same as, that part of the Business of ADP in which I have worked or to which I have been exposed during my employment with ADP (regardless of whether I worked only for a particular segment of that part of the business in which I worked-for example, business segments based on the number of employees a Client has or a particular class of business using an ADP product or service).
j. "Territory" means the geographic area where I worked, represented ADP, or had Material Business Contact with ADP's Clients in the two (2) year period preceding the termination of my employment with ADP.
3. Non-Competition. I agree that during my employment and for a period of twelve (12) months from the voluntary or involuntary termination of my employment for any reason and with or without cause, I will not, directly or indirectly, own, manage, operate, join, control, finance, be employed by or with, or participate in any manner with a Competing Business anywhere in the Territory where doing so will require me to (i) provide the same or substantially similar services to a Competing Business as those which I provided to ADP while employed, or (ii) use, disclose or disseminate ADP's Confidential Information or trade secrets. However, after my voluntary or involuntary termination of my employment for any reason and with or without cause, nothing shall prevent me from owning, as an inactive investor, securities of any competitor of ADP which is listed on a national securities exchange.
4. Non-Solicitation of and Non-interference with Clients, Business Partners, and Vendors.
a. Clients: I agree that during my employment and for a period of twelve (12) months following the voluntary or involuntary termination of my employment for any reason and with or without cause, I will not, either on my own behalf or for any Competing Business, directly or indirectly, solicit, divert, appropriate, or accept any business from, or attempt to solicit, divert, appropriate, or accept any business from any Client for the purposes of providing products or services within the United States of America that are the same as or substantially similar to those provided in the Business of ADP. I also agree that I will not induce or encourage or attempt to induce or encourage any Clients to cease doing business with ADP or materially alter their business relationship with ADP.
b. Business Partners: I agree that during my employment and for a period of twelve (12) months following the voluntary or involuntary termination of my employment for any reason and with or without cause, I will not, either on my own behalf or for any Competing Business, directly or indirectly engage, contract with, solicit, divert, appropriate or accept any business from, or attempt to engage, contract with, solicit, divert, appropriate or accept any business from any Business Partner for the purpose of providing to me or any Competing Business any product or service within the United States of America that is (a) the same as or substantially similar to the product or service provided to ADP and which ADP uses for, uses for obtaining, or distributes to, its Clients or (b) specialized, customized or designed by the Business Partner for ADP. This provision applies only to a Business Partner: (i) with whom ADP currently has a commercial or business relationship in connection with the Business of ADP; (ii) with whom ADP has had a commercial or business relationship in connection with the Business of ADP within the one (1) year period prior to my voluntary or involuntary termination of employment, for any reason, with or without cause, from ADP; or (iii) about whom I have any Confidential Information or trade secret information. I also agree that I will not induce or encourage or attempt to induce or encourage any Business Partner to cease doing business with ADP or materially alter their business relationship with ADP.
c. Vendors: I agree that during my employment and for a period of twelve (12) months following the voluntary or involuntary termination of my employment for any reason and with or without cause, I will not induce or encourage or attempt to induce or encourage any Vendor to cease doing business with ADP within the United States of America or materially alter their business relationship with ADP within the United States of America.
6. Non-Disclosure and Non-Use of Confidential Information and Trade Secrets. During my employment, except as authorized and required to perform my duties for ADP, and after the voluntary or involuntary termination of my employment for any reason and with or without cause, I will not access, disclose, use, reproduce, distribute, or otherwise disseminate ADP's Confidential Information or trade secrets or take any action causing, or fail to take any action necessary in order to prevent, any such information to lose its character or cease to qualify as Confidential Information or a trade secret. I agree to inquire with ADP if I have any questions about whether I am authorized or required to access, disclose, use, reproduce, distribute, or otherwise disseminate ADP's Confidential Information or whether particular information is Confidential Information or a trade secret before accessing, using or disclosing such information. I understand, however, that nothing in this Restrictive Covenant Agreement prohibits me from reporting possible violations of federal law or regulation to any governmental agency or entity or from communicating with any such agency or entity regarding the same. I also agree to immediately return to ADP all property and information belonging to ADP such as keys, credit cards, telephones, tools, equipment, computers, passwords, access codes, pin numbers, and electronic storage devices, as well as all originals, copies, or other physical embodiments of ADP's Confidential Information or trade secrets (regardless of whether it is in paper, electronic, or other form), including any such information in any programs, business forms, manuals, correspondence, files, databases, or on computer disks or any other storage medium, including but not limited to cloud storage, whether or not owned or controlled by me or ADP (e.g., social and business networking websites, web-based email servers, Notability, or cloud storage services), immediately upon termination of my employment or upon any earlier request by ADP, and I agree not to keep, access, disclose, use, reproduce, distribute, or otherwise disseminate any copies, electronic or otherwise, of any of the foregoing. I also understand that my obligations under this paragraph, as well as the other covenants in this Agreement, extend to my activities on the internet, including my use of business oriented social networking sites such as LinkedIn and Facebook. This shall include deleting any business related connections or contacts, including all ADP Clients and Business Partners, that I inputted in or with whom I connected on any business oriented social networking sites, my LinkedIn account, any cloud storage, any electronic device, or any cell phones while employed at ADP. Pursuant to 18 U.S.C. § 1833(b), and as set forth fully therein, notice is hereby given that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
7. Prior Agreements and Disclosure of Agreement to Third Parties. I represent that I am not a party to any agreement with any former employer or any other person or entity containing any nondisclosure, non-compete, non-solicitation, non-recruitment, intellectual property assignment, or other covenants that will affect my ability to devote my full time and attention to the Business of ADP that has not already been disclosed to ADP in writing. I also agree to provide a copy of this Agreement to any subsequent employer, person, or entity to which I intend to provide services that may conflict with any of my obligations in this Agreement prior to engaging in any such activities and to provide ADP in writing the name and address of any such employer, person, or entity and a description of the services I intend to provide prior to engaging in any such activities. I agree that ADP may also provide a copy of this Agreement or a description of its terms to any Client, subsequent employer, or other third party at any time as it deems necessary to protect its interests, and I agree to indemnify ADP against any claims and hold ADP harmless from any losses, costs, attorneys' fees, expenses, fees, and damages arising out of my failure to comply with this paragraph or ADP's providing a copy of this Agreement or a description of its terms to any Client, subsequent employer, or other third party.
9. Choice of Law, Venue, and Jurisdiction. The interpretation, validity, and enforcement of this Agreement will be governed by the laws of the State of New Jersey, without regard to any conflicts of law principles that require the application of the law of another jurisdiction. I agree that any action by me to challenge the enforceability of this Agreement must be brought or litigated exclusively in the appropriate state or federal court located in the State of New Jersey. I also agree that any action by ADP to enforce this Agreement, as well as any related disputes or litigation related to this Agreement, may, but do not have to, be brought in the appropriate state or federal court located in the State of New Jersey. I agree and consent to the personal jurisdiction and venue of the federal or state courts of New Jersey for resolution of any disputes or litigation arising under or in connection with this Agreement or any challenge to this Agreement and waive any objections or defenses to personal jurisdiction or venue in any such proceeding before any such court.
11. Relief, Remedies, and Enforcement. I acknowledge that ADP is engaged in a highly competitive business, and the covenants and restrictions contained in this Agreement, including the geographic and temporal restrictions, are reasonably designed to protect ADP's legitimate business interests, including ADP goodwill and client relations, Confidential Information and trade secrets, and the specialized skills and knowledge gained by me and ADP's other employees during our employment. I acknowledge and agree that a breach of any provision of this Agreement by me will cause serious and irreparable damage to ADP that will be difficult to quantify and for which a remedy at law for monetary damages alone may not be adequate. Accordingly, I agree that if ADP should bring an action to enforce its rights under this Agreement and ADP establishes that I have breached or threatened to breach any of my obligations under this Agreement, ADP shall be entitled, in addition to all remedies otherwise available in law or in equity, to a temporary restraining order, a preliminary injunction, and a permanent injunction enjoining such breach or threatened breach in any court of competent jurisdiction without the necessity of posting a surety bond, as well as an equitable accounting of all profits or benefits arising out of any violation of this Agreement. I also agree that nothing in this Agreement shall be construed to prohibit ADP from pursuing any and all other legal or equitable remedies available to it for breach of any of the provisions of this Agreement, including the disgorgement of any profits, bonuses, commissions, or fees realized by me, any subsequent employers, any business owned or operated by me or to which I provide services, or any of my agents, heirs, or assigns. I also agree that that the knowledge, skills, and abilities I possess at the time of commencement of my employment are sufficient to permit me to earn a livelihood satisfactory to me without violating any provision of paragraphs three (3) through seven (7) above, for example, by using such knowledge, skills, and abilities, or some of them, in the service of business that is not competitive with ADP. I further agree to pay any and all legal fees, including without limitation, all attorneys' fees, court costs, and any other related fees and/or costs incurred by ADP in enforcing this Agreement.
12. Tolling. The restricted time periods in paragraphs three (3) through six (6) above shall be tolled during any time period that I am in violation of such covenants, as determined by a court of competent jurisdiction, so that ADP may realize the full benefit of its bargain. This tolling shall include any time period during which litigation is pending, but during which I have continued to violate such protective covenants and a court has declined to enjoin such conduct or I have failed to comply with any such injunction.
15. Electronic Signature. I agree that ADP may enforce this Agreement with a copy for which I have provided an electronic signature.
19. Opportunity to Review. I agree that I have read this Agreement before signing it, understand its terms, and that I have had the opportunity to have legal counsel review this agreement, prior to signing it, and I acknowledge that I have not been forced or coerced in any manner to sign this Agreement and do so of my own free will.

(DE 3-8).

         G. Pittman's Acceptance

         ADP offered, and Pittman accepted, a restricted stock award on three separate occasions: September 19, 2012; September 2, 2014; and September 1, 2017. (DE 3-8 ¶¶ 5, 14 & 15). In each instance Pittman agreed to an RCA in exchange for an award of ADP restricted stock. (Id. ¶ 14-16). Each RCA contained non-competition, non-solicitation, non-disclosure, and non-use restrictive covenants.

         H. Pittman's Association with Ultimate

         Pittman left ADP on June 14, 2019 and accepted a position with Ultimate Software Group ("Ultimate") shortly thereafter. (DE 3-5 ¶ 6; Compl. ¶¶ 32-35;). At Ultimate, Pittman holds the title "Business Development Manager." (DE 13-2 ¶ 16). In that position, she solicits business from approximately 115 specifically identified prospective clients that each have more than 2, 500 employees. (Id.). Ultimate assigned each client to Pittman by way of a database it provided to her. (Id.). At Ultimate, Pittman's designated clients are located in Alaska, Hawaii, Idaho, Montana, Oregon, and Washington. (Id.). Pittman claims that none of her former ADP clients or prospective clients appear on her Ultimate database. (Id.).

         ADP and Ultimate are direct competitors. (Compl. ¶ 35). Ultimate's UltiPro product directly competes with an ADP product called Workforce Now. (Compl. ¶ 35). Unlike ADP, however, Ultimate sells UltiPro as a bundled product/service that includes payroll, human resource, and talent management products and services. (DE 13-2 ¶ 13-15). As a result, the cost to clients of UltiPro is nearly always greater than the cost resulting from a client's selection among the unbundled products and services provided by ADP. (Id.).

         ADP contends that Pittman's position at Ultimate is expressly forbidden by the non-compete provisions of the RCA. (Compl. ¶ 37). ADP further alleges that because Pittman performs on behalf of Ultimate the same job functions as those she performed for ADP in the same sales territory, it is inevitable that she has already or at some point will have used or disclosed ADP's proprietary information for the benefit of Ultimate and to the detriment of ADP. (Id. ¶ 39).

         Pittman claims that since she joined Ultimate, she has not solicited any of ADP's existing or prospective clients with whom she had any contact or communications while she was worked at by ADP. (DE 13-2 ¶ 16). She also claims not to have solicited any firms whose names appeared on my ADP database. (Id.).

         I. ADP Moves to Enjoin Pitt man's Employment

         On August 1, 2019, ADP filed a complaint for injunctive relief, (DE 1), and moved for a temporary restraining order, (DE 3). On October 1, the Court held a show-cause hearing as to why an order should not be entered preliminarily enjoining Pittman from competing with ADP in violation of her agreements. (DE 19). The hearing consisted solely of legal ...


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