ADP, LLC v. Eric Manchir
M2016-02541-COA-R3-CV
| Tenn. Ct. App. | Nov 8, 2017Background
- Eric Manchir, a former ADP sales manager, signed a New Jersey–governed restrictive covenant (non-compete and non-solicitation) in exchange for restricted stock options; covenant limited competition and solicitation for 12 months post-termination and included a tolling provision.
- After resigning in 2014, Manchir became Regional Sales Director at Paycor, supervising a sales team covering territories that partially overlapped his ADP territory; he received commissions on team sales.
- ADP sued in Tennessee chancery court for breach and sought specific performance; both parties moved for summary judgment.
- Trial Court granted ADP summary judgment, modified the agreement to carve out one solicitation clause, ordered specific performance, and later awarded ADP attorneys’ fees and costs; enforcement stayed on bond pending appeal.
- On appeal, the Tennessee Court of Appeals reviewed de novo, applying New Jersey law to assess (1) enforceability, (2) breach, (3) specific performance, and (4) fees.
Issues
| Issue | Plaintiff's Argument (ADP) | Defendant's Argument (Manchir) | Held |
|---|---|---|---|
| Enforceability of restrictive covenant under New Jersey law | Covenant protects ADP’s legitimate customer relationships and is reasonably tailored | Covenant is overbroad geographically and unduly burdens Manchir | Agreement (with limited carve-out) is reasonable and enforceable under New Jersey law |
| Whether Manchir breached the Agreement | Manchir indirectly competed and accepted commissions via supervised team sales to ADP customers | Manchir did not personally solicit or use ADP trade secrets; team activity is not his direct breach | Manchir breached: indirect competition/solicitation (through his team and commission) violates the covenant |
| Appropriateness of specific performance remedy | Damages are intangible/hard to quantify; specific performance prevents continued harm to ADP | ADP’s delay in seeking preliminary injunction shows lack of irreparable harm | Specific performance is appropriate; enforcement is not harsh or oppressive given limited scope and duration |
| Award of attorneys’ fees and costs | Fees recoverable per Agreement provision after prevailing on breach claim | Fees should be reversed if summary judgment is reversed | Fees and costs awarded to ADP are affirmed |
Key Cases Cited
- Solari Indus., Inc. v. Malady, 264 A.2d 53 (N.J. 1970) (seminal New Jersey precedent on enforceability of non-solicitation covenants)
- Whitmyer Bros. v. Doyle, 274 A.2d 577 (N.J. 1971) (framework for scrutinizing restrictive covenants)
- A.T. Hudson & Co. v. Donovan, 216 N.J. Super. 426 (App. Div. 1987) (protecting employer customer contacts developed during employment)
- Karlin v. Weinberg, 390 A.2d 1161 (N.J. 1978) (reasonableness test: employer interest, employee hardship, public interest)
- The Community Hosp. Group, Inc. v. More, 869 A.2d 884 (N.J. 2005) (citing Karlin factors for non-compete review)
- Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588 (App. Div. 2005) (standards for specific performance of restrictive covenants)
- Jackson v. Manasquan Sav. Bank, 271 N.J. Super. 136 (Law Div. 1993) (contract validity requirement for specific performance)
- Barry M. Dechtman, Inc. v. Sidpaul Corp., 89 N.J. 547 (1982) (requirements for enforceable restrictive covenants)
- Stehr v. Sawyer, 40 N.J. 352 (1963) (specific performance will not be ordered if it would be harsh or oppressive)
- Ridge Chevrolet-Oldsmobile, Inc. v. Scarano, 238 N.J. Super. 149 (App. Div. 1990) (considerations for ordering specific performance)