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ADP, LLC v. Manchir

Court of Appeals of Tennessee, Nashville

November 8, 2017

ADP, LLC
v.
ERIC MANCHIR

          Session September 6, 2017

         Appeal from the Chancery Court for Davidson County No. 14-1043-III Ellen H. Lyle, Chancellor

         This appeal concerns an employment-related restrictive covenant. Eric Manchir ("Manchir") worked as a sales manager for ADP, LLC ("ADP"), a company that deals in human resources and business outsourcing matters. As a prerequisite to obtaining restricted stock options from ADP, Manchir consented to a restrictive covenant agreement ("the Agreement"). The Agreement contained, among other things, a noncompetition clause extending to twelve months after Manchir left ADP. New Jersey law governs the Agreement. Manchir later resigned from ADP and went to work for an ADP competitor, Paycor, Inc. ("Paycor"). ADP sued Manchir in the Chancery Court for Davidson County ("the Trial Court") for breach of contract and sought specific enforcement of the Agreement. ADP filed a motion for summary judgment, which the Trial Court granted. The Trial Court also awarded ADP, pursuant to a provision in the Agreement, attorney's fees and costs. Manchir appeals. We hold, inter alia, that the Agreement is reasonable and enforceable under New Jersey law, that Manchir breached the Agreement, and that specific performance is an appropriate remedy. We affirm the judgment of the Trial Court.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; Case Remanded

          Mekesha H. Montgomery and Jessica E. Hill, Nashville, Tennessee, and Matthew C. Blickensderfer, Cincinnati, Ohio, for the appellant, Eric Manchir.

          William S. Rutchow, Nashville, Tennessee, for the appellee, ADP, LLC.

          D. Michael Swiney, C.J., delivered the opinion of the court, in which Frank G. Clement, Jr., P.J., M.S., and Richard H. Dinkins, J., joined.

          OPINION

          D. MICHAEL SWINEY, CHIEF JUDGE

         Background

         ADP hired Manchir as an entry level sales representative in July 2006. Manchir initially worked for ADP in Atlanta. ADP later promoted Manchir to sales manager and assigned him to Nashville. Manchir's territory included southern Nashville metropolitan area, Knoxville, Chattanooga and Birmingham. Manchir managed a team of sales representatives that focused on businesses with fewer than 50 employees.

         In 2011, 2012, and 2013, ADP presented Manchir with a choice regarding restricted stock options. Manchir could obtain the stock options if he would consent to the Agreement containing, among other things, non-competition and non-solicitation clauses. Manchir consented electronically to the Agreement. We quote, as relevant, from the Agreement:

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, the Business of ADP for that part of the business 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).
***
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, 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 or disclose ADP's 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 that are the same as or substantially similar to those provided in the Business of ADP, for any Client: (i) whom ADP provides products or services in connection with the Business of ADP; (ii) whom ADP has provided products or services in connection with the Business of ADP and with whom ADP reasonably expects business within the two (2) year period following my termination of employment from ADP; (iii) whom ADP has actively solicited in connection with the Business of ADP within the two (2) year period prior to my termination of employment from ADP; or (iv) about whom I have any trade secret information. I also agree that I will not wrongfully induce or encourage or attempt to wrongfully 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 to provide to me or any Competing Business any product or service 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 any Business Partner: (i) whom ADP currently has a commercial or business relationship with ADP in connection with the Business of ADP; (ii) whom ADP has had a commercial or business relationship in connection with the Business of ADP and with whom ADP reasonably expects business within the two (2) year period following my termination of employment from ADP; (iii) whom ADP has actively solicited for a commercial or business relationship in connection with the Business of ADP within the two (2) year period prior to my termination of employment from ADP; or (iv) about whom I have any trade secret information. I also agree that I will not wrongfully induce or encourage or attempt to wrongfully induce or encourage any Business Partner to cease doing business with ADP or materially alter their business relationship with ADP.
***
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.

         In 2014, Manchir resigned from ADP and went to work for Paycor, an ADP competitor. Manchir serves as a Regional Sales Director for Paycor. Manchir manages a team of sales representatives focusing on mid-market and major markets, involving businesses with 10-75 or over 75 employees, respectively. Manchir receives a commission on all sales his team makes. Manchir's Paycor territory includes Tennessee, Bowling Green and Hopkinsville, Kentucky, and Huntsville, Alabama. These territories overlapped somewhat with Manchir's previous territories at ADP. Whether Manchir breached the Agreement by competing with ADP or soliciting ADP clients, even indirectly through his sales team, is the crux of the dispute on appeal.

         In July 2014, ADP filed suit against Manchir in the Trial Court alleging breach of contract. ADP requested that the Trial Court order specific performance. Discovery ensued in the matter. Both parties filed motions for summary judgment. The record contains the deposition testimony of, among others, Christopher Stratton, Manchir's boss when he worked at ADP. Stratton testified, in part, as follows:

Q. Of the information that you told me was what you would consider confidential, proprietary, trade secret information to ADP, was there any of that that Eric did not have access to?
A. Again, similar to the descriptions I have just given to the past few questions, at a certain level, his access would have been restricted as far as the scope of what he had access to. But everything that we have just discussed, he definitely had access to, you know, the clients and the referral sources and the revenue generated, et cetera, for his given geography and team.
Q. Do you have any evidence that Eric has used any of that information to harm ADP in any way?
***
THE WITNESS: I don't believe we have any specific instances where Eric has targeted an ADP client based on information that he may have had knowledge of prior, you know, to going over to Paycor. We do, as I mentioned earlier, after reviewing some data that was provided by Paycor, I did notice where there was quite a number of clients that Eric and his team converted to Paycor's services from ADP.
***
Q. Do you have any evidence that that conversion to Paycor had anything to do directly with anything that Eric did?
A. I don't. I mean, the list that I was provided, it sort of determined which clients Eric had involvement with the sales process, where they came from prior to, you know, going to Paycor, et cetera. And I don't remember exactly what the tie-in was there. I do remember the figure. It was roughly 185- to $190, 000 of ADP revenue that had been converted to Paycor's services. Again, since that time, whatever timeframe that list represented, that was essentially the sum of those former ADP clients.
Q. But you don't know if Eric had any direct involvement in converting those clients?
A. I personally do not, but his team did. And he was compensated for those conversions based on the data that I was looking at.

         Manchir also was deposed. Manchir testified that he never personally competed with ADP or solicited ADP clients. He instead directed his sales team, and he did not believe he had breached the Agreement. Manchir testified, in part, as follows:

Q. All right. At Paycor you said that you get a commission on the sales that your ...

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