SUPERIOR COURT OF NEW JERSEY

CHANCERY DIVISION

CHAMBERS OF COURT HOUSE

MIRIAM N. SPAN ELIZABETH, NEW JERSEY

PRESIDING JUDGE, CHANCERY 07207-6001

(908) 659-4186

June 25^th, 2002

George P. Stasiuk, Esq.

Clifton Budd & DeMaria, LLP

300 Broadacres Drive - Third Floor

Bloomfield, New Jersey 07003

Andrew M. Moskowitz, Esq.

76 South Orange Avenue - Suite 205

South Orange, New Jersey 07079

Coin Depot Corporation

v. Clifford R. Jordan, II, et al.

Docket No. UNN-C-56-02

LETTER OPINION

Counsel:

A Plenary Hearing on this matter was held before me on June 13^th and 19^th, 2002 on the Order to Show Cause for injunctive relief. After hearing all the testimony and reviewing the documents and written submissions, I reach the following decision:

Plaintiff Coin Depot Corporation is in the business of transporting currency for banks, various financial institutions and retail business. Defendant Clifford Jordan was employed by plaintiff until March 27^th, 2002 as the Vice President of Operations of Coin Devices Corporation, one of the plaintiff's subsidiaries. In February of 1996, when defendant Jordan began employment with plaintiff, defendant executed a non-competition agreement prohibiting defendant from working with any competitor in the armored car business during his employment and for three years after termination. Upon learning that defendant Jordan had become employed with defendant American Armored Car, one of the defendant's, plaintiff sent a letter dated April 3^rd, 2002 advising defendant American of the non-compete clause executed by defendant Jordan and that his continued employment was in violation or that agreement. Defendant Jordan had solicited two of plaintiff's major customers - Rite Aid and Daffy Dan's. Plaintiff asserts that defendant learned the pricing applied to those and various other customers while in plaintiff's employ and that the pricing is confidential information. Plaintiff therefore requests that defendant be restrained from continuing in the employ of defendant American and from soliciting plaintiff's customers in violation of the restrictive covenant.

Coin Depot's position is very simple. Plaintiff asserts that (1) defendant Jordan was employed by plaintiff in both marketing and operations in various positions of authority over the six years of his career; (2) when defendant began his employment with plaintiff he executed a restrictive covenant/non-competition agreement prohibiting defendant's employment with a competing armored car business for three years after termination of defendant's employment with plaintiff; (3) on or before April 3^rd , 2002 defendant Jordan became employed with defendant American; and, (4) two of plaintiff's largest clients have been solicited by defendant Jordan on behalf of American. Plaintiff maintains that the first three facts alone establish a likelihood of success on the merits of plaintiff's claim and when the fourth fact is added, plaintiff is entitled to injunctive relief to prevent defendant Jordan from soliciting more of plaintiff's customers, disturbing plaintiff's fragile financial position and possibly driving plaintiff out of business.

For a preliminary injunction to issue, plaintiff's claim must meet the standards of such an Order. A preliminary injunction is an extraordinary remedy to be utilized only where, in the court's discretion, it is clearly shown to be necessary. Tideback v. Rude, 138 N.J. Eq. 59 (Ch.) Aff'd. 138 NJ. Eq. 479 (E.&A. 1946). To be entitled to such relief, the movant must show: (1) the relief is necessary to prevent irreparable harm; (2) a reasonable probability of success on the merits; (3) that the relative hardships weigh in favor or the movant; and, (4) that the public interest favors granting the relief. Crowe v. DeGioia, 90 N.J. 126, 134 (1982); American Employers' Insurance Co. v. Elf Atochem N.A., Inc., 280 N.J. Super. 601 (App. Div. 1995).

An agreement not to compete should be enforced to the extent that it is reasonable in light of all the circumstances of the case. Solari Industries, Inc. v. Malady, 55 N.J. 571 (1970). To be deemed reasonable, the agreement must (1) protect a legitimate interest of the employer; (2) impose no undue hardship on the employee; and, (3) not be injurious to the public interest. Id. at 576, 585. It a restrictive covenant is deemed overbroad, it may be changed or "blue penciled" to the extent that the court believes restraints are reasonably necessary. Id. at 585.

While the principal purpose of a restrictive covenant cannot be to prevent competition as such, employers do have a legitimate interest in protecting their customer relationships. A.T. Hudson &Co., Inc. v. Donovan, 216 N.J. Super. 426, 433 (App. Div. 1987). An employer also has a legitimate interest in protecting confidential information, and trade secrets. Whitmyer Brothers v. Doyle, 58 N.J. 21, 31 (1971) (standing for the general proposition that while employer may protect its legitimate interest, it may not merely prevent competition); Raven v. A. Klein & Co., Inc. 195 N.J. Super. 209 (App. Div. 1984) (trade secrets and confidential information may be protected via non-competition agreement); A.T. Hudson & Co., Inc. v. Donovan, 216 N.J. Super. 426 (1987) (employer has legitimate interest in protecting ongoing client relationships). However, money expended in training an employee will not provide the basis for enforcement of a restrictive covenant. Ingersoll-Rand v. Ciavatta, 110NJ. 609, 635 (1988). With regard to training, courts recognize that "knowledge, skill, expertise and information acquired by an employee during his employment become a part of the employee's person." Id. And thus, the employee "can use those skills in any business or profession he may choose, including a competitive business with his former employer."

The first inquiry for this Court is determining if a non-compete agreement is reasonable in light of all the circumstances. Solari v. Malady, supra. The "CDC Standard Operating Procedure" signed by Clifford Jordan on February 191, 1996 is too broad on its face to be considered "reasonable". It would prevent any competition with plaintiff anywhere in the world for three years after termination. Therefore, on the return date of the temporary restraining order application I "blue-penciled" the relief to restrain Mr. Jordan and his new employer from soliciting or serving plaintiff's actual clients in the interim period before a hearing could be held. This was to prevent what plaintiff characterized as confidential information being utilized by defendants to compete with plaintiff.

I have now determined that neither this restraint nor any other is fair or reasonable in light of the facts uncovered during the hearing.

For some inexplicable reason, defendant Jordan was singled out as the only employee Diane Kavorik, the Co-Chief Executive Officer, was aware of who had to sign this broad agreement, separate and apart from any employment agreement. This was demanded on his first day of employment as a condition of employment. His testimony that he only agreed to sign it after he consulted with his attorney who opined that it was not enforceable, is irrelevant. If he signed it, it became a binding contract to the extent it was reasonable.

Ms. Kavorik testified that defendant Jordan was asked to sign to protect Coin Depot from his taking his knowledge to a competitor. She claimed that such information would be the customer list, pricing, security, technology programs and service issues. She acknowledged that Jordan was not a member of the Executive Committee, and therefore, would not have access to the confidential reports of Mr. Ginsberg and Mr. Maher, listing all the customers and the monthly revenues earned. She further admitted that Chip Strebek, who had been the Executive Vice President of Operations of Coin Depot until he left in November of 2000, was on the Executive Committee and would have been privy to all the Company's confidential information. He was not asked to sign any type of restrictive covenant until he was fired and it was made a condition of a six month severance package. He immediately went to work for defendant American Armored Car. After the six month period there were no restrictions on his competing with Coin Depot.

Ms. Kavorik testified as to another Operations Manager or Coin Depot who left its employ about six months ago, Tom Rafferty. He had no non-compete in place because the only one he signed expired six months to one year after he joined the company. Because (like Jordan) he had come from Princeton Armored Car, the plaintiff did not want him to leave to return there within a short period. That was the only reason stated for the non-compete.

Absolutely no reason was given by plaintiff for defendant Jordan's unique treatment. He was mid-level management with less access to information then Strebek or others above him. This Court is not satisfied from the evidence that there is any confidential information that defendant Jordan has that he can use to unfairly compete with plaintiff. As Ms. Kavorik admitted, Strebek had all the company confidential information that he could have given American Armored Car since he began work there on January of 2001. This Court finds that enforcement of the agreement against defendant Jordan does not protect a legitimate interest of plaintiff as required by Solan v. Malady, supra.

A court also has to weigh relative hardships when determining whether to enforce an employment restrictive covenant. The balance of the hardships in the instant case favor defendant Jordan as he would he required to uproot his family and move to another state (outside the NY/NJ/Conn metropolitan area) or attempt to apply his more than twenty years work of experience in another field. Defendant cites Coskey's Television & Radio Sales and Service v. Foti, 253 N.J. Super. 626, 636 (App. Div. 1992), for the proposition that the enforcement of a restrictive covenant that requires an employee to "uproot his family and move elsewhere to continue his employment, giving up the contacts he had personally developed over thirty-one years... [was neither a fair nor viable alternative." Therefore, this particular covenant should not he enforced, as there is an undue burden upon defendant. Coskey goes on to evaluate what constitutes an “undue burden” upon the breaching employee and conversely what constitutes a legitimate protectable interest on the part of the employer, noting that an “employer may not prevent an employee from using the general skills in an industry which nave been built up over the employee's tenure with the employer.” Coskey, supra, at 637, citing, Wkitmyer Brothers v. Doyle, 58 N.J. 21 (1971).

Clifford Jordan was an extremely credible witness. He has done nothing else during his adult life but work in the armored car industry - for eight years in his own Company. He lives with his family in Jackson, New Jersey and his parents and in-laws live nearby. He commutes now to Manhattan. Plaintiff seeks to keep him from working in the industry in New York, New Jersey and Connecticut. This would work a substantial, unjustified hardship on him.

From the evidence it would appear that employees move regularly between armored car companies. No compelling reason has been presented by plaintiff why defendant in particular should be restrained from doing so. This Court is not satisfied that he has any confidential information that he is using to harm his old employer, nor that he would do so. The limitation this Court had previously imposed upon him and his new company I know believe works an undue hardship, since it severely limits his ability to earn commissions. There is no evidence that he has or would disparage Coin Depot. I further find that defendant Jordan sincerely believed that the Agreement could not legally be enforced, so while his taking new employment was still "at his peril", it was not in bad faith.

The temporary restraints are, therefore, dissolved and the non-compete agreement is found to be unenforceable and cannot be reformed by this Court.

Very truly yours,

MIRIAM N. SPAN, P.J.Ch.

MNS/mg

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