Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-00561/USCOURTS-azd-2_09-cv-00561-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1331 Fed. Question: Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Ajilon Professional Staffing, LLC, a

Delaware company, 

Plaintiff, 

vs.

Shad and Jane Doe Griffin; and The

Lucas Group, a limited liability

company, 

Defendants. 

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No. CV-09-561-PHX-DGC

TEMPORARY RESTRAINING ORDER

Plaintiff Ajilon Professional Staffing, LLC (“Ajilon”) provides staffing services

to businesses seeking financial professionals for part-time and permanent placements.

In January 2009, Shad Griffin left his position as an executive recruiter for Ajilon and

immediately began working as a recruiter for Lucas Associates, Inc. (“Lucas”), one of

Ajilon’s competitors. Ajilon filed a complaint against Griffin and Lucas on March 20, 2009.

Following a hearing on March 24, 2009 (Dkt. #18), the Court entered a stipulated

temporary restraining order that essentially prohibits Griffin from breaching confidentiality

and non-solicitation provisions in his employment agreement with Ajilon. Dkt. #17; see

Dkt. #13 at 4-5. On April 7, 2009, the Court held a hearing to address whether the temporary

restraining order should be extended to include the non-compete provision in the agreement.

Dkt. #24. On the basis of that hearing, and having considered the parties’ briefs (Dkt. ##22-

Case 2:09-cv-00561-DGC Document 27 Filed 04/10/09 Page 1 of 7
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23), the Court concludes that the temporary restraining order should include most of the

restrictions contained in the non-compete provision.

To obtain a temporary restraining order, a plaintiff must show “that he is likely

to succeed on the merits, that he is likely to suffer irreparable harm in the absence

of preliminary relief, that the balance of equities tips in his favor, and that an injunction

is in the public interest.” Winter v. NRDC, --- U.S. ---, 129 S. Ct. 365, 374 (2008); see

Am. Trucking Ass’n, Inc. v. City of L.A., --- F.3d ---, 2009 WL 723993, at *4 (9th Cir.

Mar. 20, 2009). The Court will address each of these requirements.

I. Success on the Merits.

The non-compete provision in Griffin’s employment agreement provides, in pertinent

part:

For a period of one year after the termination of this Agreement, Employee

will not, within a radius of fifty (50) miles from the present place of business

of the Employer, . . . directly or indirectly own, manage, operate, control, be

employed by, participate in, or be connected in any manner with the

ownership, management, operation or control of any business similar to the

type of business conducted by Employer.

Dkt. #13 ¶ 11. The provision then defines a “similar” business. Id. Ajilon argues that the

work Griffin performs for Lucas constitutes a clear breach of the non-compete provision.

Dkt. ##3, 23. Defendants concede that Lucas’s business is “similar” within the meaning of

the agreement, but contend that the provision is unreasonable and unenforceable as a matter

of law. Dkt. #22.

Griffin’s employment agreement is governed by New Jersey law. See Dkt. #13 ¶ 17.

New Jersey courts “have consistently utilized a reasonableness test to determine the

enforceability of restrictive covenants.” Cmty. Hosp. Group, Inc. v. More, 869 A.2d 884,

895 (N.J. 2005). The determination of whether a non-compete provision is reasonable

involves a three-part inquiry: (1) whether the provision protects legitimate business interests,

(2) whether it would cause undue hardship, and (3) whether enforcement of the provision

would be consistent with public policy. See id. at 897; see also Solari Indus., Inc. v. Malady,

264 A.2d 53 (N.J. 1970); Whitmyer Bros., Inc. v. Doyle, 274 A.2d 577 (1971); Karlin v.

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Weinberg, 390 A.2d 1161 (N.J. 1978). The Court will address each part of the New Jersey

test.

A. Legitimate Interests.

As part of the first inquiry – whether the provision protects legitimate business

interests – New Jersey courts recognize three possible interests: the protection of

confidential information, the protection of clients and client referral sources, and the

protection of an investment in an employee. See Cmty. Hosp., 869 A.2d at 897. The noncompete provision in this case protects the second and third categories of legitimate business

interests. First, it appears that Ajilon will be able to show that Griffin’s competition in the

Phoenix area will draw away existing and potential Ajilon clients, even if Griffin undertakes

no effort to actively solicit them. This likelihood is created by the skills, reputation, and

visibility Griffin developed in the business during his twelve years at Ajilon, and by efforts

he made before this litigation to advertise his departure from Ajilon and his affiliation with

Lucas. Second, this is not a case where Griffin simply brought his “tools of the trade” to

Ajilon and took them when he left. Cf. Coskey’s TV & Radio Sales and Service, Inc., 602

A.2d 789, 795 (N.J. Super. Ct. App. Div. 1992). Griffin’s work for Ajilon over the course

of twelve years has apparently established his reputation in the Phoenix community as a

recruiter for financial professionals. This investment by Ajilon – this training and

development of Griffin as a finance professional recruiter – would be used to the detriment

of Ajilon if Griffin were permitted actively to compete against Ajilon in the Phoenix

marketplace. See id. These legitimate interests are not adequately protected merely by

preventing the misuse of confidential information or the direct solicitation of Ajilon clients.

It appears likely that Ajilon will be able to show that Griffin’s competition in the Phoenix

area will unfairly draw away existing and future clients to Ajilon’s detriment.

Once a legitimate interest has been established, New Jersey cases consider three

additional aspects of the non-compete provision: “its duration, the geographic limits, and the

scope of activities prohibited.” Id. The Court finds that the one-year and 50-mile limitations

are “no broader than necessary to protect [Ajilon’s] interests.” Id. The Court further finds

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that it is reasonable to limit Griffin from competing against Ajilon in the business of

recruiting in the financial services field. This limitation is somewhat narrower than the terms

of the actual provision, which would limit Griffin from working for Lucas in any capacity,

but New Jersey courts have made clear that a restrictive covenant is “unenforceable if it

restricts the employee from engaging in activities not in competition with those of his former

employer.” Karlin, 390 A.2d at 1169.

Defendants contend that a court cannot “blue pencil” the scope of activities limitation.

Dkt. #22 at 10 n.10. The cases Defendants rely on contain no such prohibition, but simply

state that courts may change the geographical or time limits of a covenant so as to render it

reasonable. See id. (citations omitted). Other cases make clear, however, that a restrictive

covenant may be “given complete or partial enforcement to the extent reasonable under the

circumstances.” Cmty. Hosp., 869 A.2d at 897 (citing Whitmyer, 274 A.2d at 580); see Cost

Reduction Solutions v. Durkin Group, LLC, 2008 WL 3905679, at *3 (N.J. Super. Ct. App.

Div. Aug. 22, 2008). This includes limiting the covenant’s “application concerning its

geographical area, its period of enforceability, and its scope of activity.” Coskey’s, 602 A.2d

at 793 (emphasis added); see Kadi v. Massotto, No. C-101-07, 2008 WL 4830951, at *10

(N.J. Super. Ct. App. Div. Nov. 10, 2008).

B. Undue Hardship.

Once it is determined that the non-compete provision protects a legitimate interest and

that the time, geographical limit, and scope of the provision can reasonably be enforced,

New Jersey courts consider whether enforcement would impose undue hardship on the

employee. See Cmty. Hosp., 869 A.2d at 897. The reason for the termination of the parties’

relationship matters. See id. Where the application of the non-compete provision “results

from the desire of an employee to end his relationship with his employer rather than from any

wrongdoing by the employer, a court should be hesitant to find undue hardship on the

employee, he in effect having brought that hardship on himself.” Karlin, 390 A.2d at 423-24.

Because Griffin knowingly left Ajilon (as opposed to being fired), and actively

solicited Ajilon clients, he cannot be heard to complain about the hardship of enforcing the

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non-compete provision. It appears likely that Ajilon will be able to satisfy the second prong

by demonstrating that enforcement of the provision will not impose undue hardship on

Griffin. See Cmty. Hosp., 869 A.2d at 898; see also Karlin, 390 A.2d at 424 (“Ordinarily a

showing of personal hardship, without more, will not amount to an ‘undue hardship’ such as

would prevent enforcement of the covenant.”); Sunder v. Madalapu, No. ATL-C-171-00,

2003 WL 23484589, at *5 (N.J. Super. Ct. June 16, 2003) (same).

C. Public Interest.

“The final prong of the test is that enforcement of the restriction should not cause

harm to the public interest.” Cmty. Hosp., 869 A.2d at 898 (citing Karlin, 390 A.2d at 424).

Defendants have identified no public policy that would be violated by enforcement of

Griffin’s non-compete provision. See Dkt. #22.

D. Success on the Merits Summary.

Because it appears that the non-compete provision in Griffin’s employment agreement

protects a legitimate interest of Ajilon, can reasonably be enforced as to time, area, and

scope, imposes no undue hardship on Griffin, and is not injurious to the public interest, the

Court concludes that Ajilon likely will succeed on its breach of contract claim.

II. Irreparable Harm.

It is “well-settled that injury to or destruction of a business constitutes irreparable

harm for which preliminary and permanent injunctive relief may be appropriate.” U.S.

Foodservice, Inc. v. Raad, 2006 WL 1029653, at *7 (N.J. Super. Ct. Ch. Div. Apr. 12, 2006)

(citing A. Hollander & Son, Inc. v. Imperial Fur Blending Corp., 66 A.2d 319, 326 (N.J.

1949)). Indeed, the loss of good will may “constitute irreparable harm, given the difficulties

in attempting to quantify future losses.” Global Transp. Logistics, Inc. v. DOV Transp., No.

BER-C-79-05, 2005 WL 1017602, at *3 (N.J. Super. Ct. Ch. Div. Apr. 5, 2005). Griffin’s

direct and local competition with Ajilon presents a likelihood of irreparable harm. Although

the drawing away of a single client might result in quantifiable damages, the effect of

Griffin’s local competition on existing and potential future clients of Ajilon cannot readily

be quantified.

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III. Balance of Equities.

The Court finds that the balance of equities tips in favor of Ajilon. Griffin signed the

non-competition provision and cannot now complain of significant hardship given his

voluntary departure from and competition with Ajilon. Ajilon, on the other hand, will

experience hardship in the form of irreparable injury if Griffin’s breach of the non-compete

provision is not enjoined.

IV. Public Interest.

The final element of the injunctive relief test requires consideration of the public

interest. As explained above, Defendants have identified no public policy that would be

violated by enforcement of the non-compete provision. The public interest generally favors

full and fair competition, but if Ajilon is successful on the merits and shows that Griffin

wilfully breached the non-compete provision, “then the public interest would favor

enforcement of the [provision] and restraint of [Griffin] from unfair competition[.]” Mercury

Cos., Inc. v. First Am. Corp., No. 08-cv-00911-WYD-CBS, 2008 WL 4861950, at *9 (D.

Colo. Nov. 10, 2008); see Universal Engraving, Inc. v. Duarte, 519 F. Supp. 2d 1140,

1149-50 (D. Kan. 2007) (there is “a public interest in upholding enforceable contracts” and

“the public interest is served where unfair competition is restrained”).

V. Conclusion.

Ajilon has satisfied the four-part test for injunctive relief: Ajilon is likely to succeed

on its breach of contract claim, Ajilon is likely to suffer irreparable harm if Griffin’s direct

and local competition is not enjoined, the balance of equities tips in Ajilon’s favor, and

injunctive relief is in the public interest. The Court concludes that the existing temporary

restraining order (Dkt. #17) should be extended to include Griffin’s direct or indirect

recruiting or managing of recruiters in the financial services profession.

A preliminary injunction hearing is set for May 26, 2009, at 9:00 a.m. As agreed to

by Defendants at the April 7, 2009 hearing, the temporary restraining order shall remain in

effect until the Court issues a decision following the preliminary injunction hearing. The

parties may engage in discovery to prepare for the preliminary injunction hearing.

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IT IS ORDERED:

1. Defendant Shad Griffin shall not disclose any Ajilon confidential

information (within the meaning of his employment agreement dated August 26, 1996) to

Defendant Lucas Associates, Inc., any employee of Lucas Associates, Inc., or any other

person not currently employed by Plaintiff Ajilon Professional Staffing, LLC.

2. Defendant Shad Griffin shall not knowingly solicit any Ajilon employee

or any Ajilon customer or applicant with whom he had contact on Ajilon’s behalf in the year

prior to his departure from Ajilon.

3. Defendant Shad Griffin shall not directly or indirectly recruit or manage

recruiters in the financial services profession within a 50-mile radius of Plaintiff Ajilon

Professional Staffing, LLC’s Phoenix office.

4. This temporary restraining order shall remain in effect until the

conclusion of the preliminary injunction hearing on May 26, 2009.

5. No financial security will be required for the restraining order.

6. A preliminary injunction hearing is set for May 26, 2009 at 9:00 a.m.

7. The parties may engage in discovery needed to prepare for the

preliminary injunction hearing.

DATED this 10th day of April, 2009.

Case 2:09-cv-00561-DGC Document 27 Filed 04/10/09 Page 7 of 7