A Trenton, New Jersey, federal judge has denied a motion by Heartland Payment Systems to dismiss a former employee’s suit seeking to invalidate nonsolicitation provisions in his employment agreement as unenforceable.
Heartland moved to dismiss the declaratory judgment suit for lack of subject-matter jurisdiction, claiming the case presented no actual controversy because its former employee, Lawrence Bradfield, said he did not intend to violate the nonsolicitation provisions.
But U.S. District Judge Freda Wolfson said in Bradfield v. Heartland Payment Systems that Heartland’s stance conflicts with its stated intention to hold him accountable to the restrictive covenants. After applying a three-part test from a 1990 case from the U.S. Court of Appeals for the Third Circuit, Step-Saver Data Systems v. Wyse Tech, Wolfson concluded that Bradfield brought a ripe claim, pursuant to the Declaratory Judgment Act.
Bradfield resigned from his post as a relationship manager at Heartland on June 2, 2017, after three years on the job. He filed his declaratory judgment suit on June 30, 2017, and now works for Above and Beyond, a competitor to Heartland.
Bradfield’s employment agreement bars him from soliciting business from Heartland customers for 36 months after he left the company. It also restricts him from soliciting business affiliates of Heartland, such as trade associations or value-added resellers, for 24 months. The agreement also barred him for 24 months from soliciting, recruiting or hiring Heartland employees to work for another company.
Bradfield claims in his suit that the nonsolicitation provisions in his relationship manager agreement are void and unenforceable because they are overly broad and not needed to protect Heartland’s legitimate business interests.
Heartland, in its motion to dismiss, said Bradfield started his new job one week after leaving his former position. It said Bradfield has found success at Above and Beyond, as evidenced by the fact that he was the company’s “number one producer” in July 2017, and was recently promoted. Bradfield said in his deposition that he had no intentions to solicit any Heartland clients to terminate or modify their relationships with that company, Heartland said in court papers.
Wolfson said Heartland’s argument is premised on the notion that harm to Bradfield lies only in a scenario in which he violates his employment agreement, a scenario it deems unlikely. But the judge rejected that reasoning.
“In my view, Heartland’s premise is erroneous. The harm to Bradfield which he seeks to remedy by a declaratory judgment is the substantial, realized harm of his preclusion from obtaining clients he could otherwise pursue absent the various non-solicitation provisions in the parties’ agreement,” Wolfson said.
Applying the Step-Saver factors, Wolfson found the first factor was met because the parties’ interests are adverse to each other, and that a declaratory judgment would definitively decide the parties’ rights.
The second Step-Saver factor was met because a declaratory judgment would definitively decide the parties’ rights. Heartland asserted that Bradfield’s failure to breach the terms, and his stated intention not to breach the terms, meant that a ruling would not definitively define the parties’ rights. But Wolfson disagreed, noting that Heartland failed to account for the fact that it has not repudiated the nonsolicitation covenants. Plaintiff seeks to address the harm he now experiences from the prohibition on pursuing Heartland’s clients, Wolfson said. “A declaratory judgment in this case would bring about conclusive clarity as to the parties’ rights and obligations vis-a-vis the restrictive covenants,” Wolfson said.
The judge also said the third Step-Saver factor was met because a declaratory judgment would alleviate legal uncertainty, thereby providing practical utility to the parties.
Having met the three Step-Saver factors demonstrated that the plaintiff properly brought a ripe claim under the Declaratory Judgment Act, Wolfson said in denying Heartland’s motion to dismiss. She added, however, that the opinion “does not in any matter discuss or adjudicate the merits of Plaintiff’s claim.”
Steven Rosenwasser of Bondurant, Mixson & Elmore in Atlanta, who represents Heartland, declined to comment on the case. He represents Heartland along with Kerrie Heslin of Nukk-Freeman & Cerra in Chatham.
Jeffrey Carr and Matthew DelDuca of Pepper Hamilton in Princeton, who represent Bradfield, did not return calls about the ruling.