An arbitration panel has turned down J.P. Morgan Securities’ request to permanently enjoin a former bank-based broker in Indiana from contacting his former clients from his new berth at Raymond James Financial’s employee channel.
The decision supersedes a temporary restraining order that a federal judge in the southern district of Indiana imposed against Erik Weiss in November after J.P. Morgan argued that the broker was aggressively soliciting clients in violation of his employment contracts. Judge Tanya Walton Pratt had ordered Weiss and J.P. Morgan to resolve the bank’s request for a permanent injunction and monetary damages in Finra arbitration.
Christopher Hagenow, an Indianapolis lawyer representing J.P. Morgan Securities, notified the Indianapolis court last week that arbitrators had denied the permanent injunction on December 16. His single-sentence notice about the unpublished decision did not elaborate on the status of the bank’s requests for damages and return of confidential data.
Weiss declined to comment on the arbitration decision and on the effect of the temporary restraining order on his book-building efforts at Raymond James. In court arguments, he had denied that he illegally solicited former customers, saying he recreated contact data from “casual memory and publicly available sources.”
A J.P. Morgan spokeswoman declined to comment on the arbitration decision, and Raymond James spokespeople did not respond to requests for comment. Jeffrey Csercsevits, a lawyer for Weiss at Fisher & Phillips LLP, did not return a request for comment on the status of the bank’s damage claims.
“A panel overturning a federal court is an indication that the defense raised material issues that contradict or refute what was put to the court,” said James Heavey, a New York employment lawyer. Heavey, who was not involved in the Weiss case, represented a former Edward Jones broker who convinced a judge in November that notifying clients of a job change was not solicitation.
J.P. Morgan asserted in its court arguments that Weiss had transitioned about 40 household accounts with about $27 million from the bank to Raymond James within weeks of his departure in September, using “trade secret” customer data. Weiss had a total book of about $197 million of client assets, the bank said.
Weiss’s case demonstrates a new tenacity of banks and discount brokers in attempting to tie the hands of departing brokers. Fidelity Brokerage Services on Tuesday reached a stipulated agreement prohibiting a Florida broker who jumped to Morgan Stanley from soliciting former clients pending the outcome of a parallel arbitration case.
Requests for restraining orders, injunctions and arbitration damages based on contract and trade-secret arguments came largely from national full-service brokerage firms prior to adoption of the Protocol for Broker Recruiting almost 15 years ago.
J.P. Morgan, Charles Schwab and others that are not Protocol members have recently adopted and enhanced the legal strategies to argue that they, not brokers, “own” clients. In-bank brokers and those hired by discounters rely much more heavily on referrals from bank colleagues and parent marketing than do brokers at conventional firms who largely built their books of business, their court filings typically argue.
“With firms competing more and more for the top-producing financial advisors, these trade secrets cases are becoming more common,” said George Miller, a southern California lawyer at Shustak Reynolds & Partners, who is not involved in the case. “It’s not only the erosion of the Broker Protocol, but an ongoing shift in the industry.”
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