Smooth Transitions : Rob Radcliff : Texas Non-Compete Lawyer & Attorney : Langley Weinstein LLP Law Firm : Dallas Employment & Employee Departures : Smooth Transitions Law Blog

Last week I wrote about Judge William Griesbach’s opinion and order in Smith Barney, Inc. v. Darling, et al. 

The Court considered the implications of the  protocol for broker recruiting, to which Smith Barney is a signatory:

Under the Protocol, these financial institutions have agreed that, if a financial advisor leaves one signatory or financial institution to join another signatory institution, the latter will have no monetary liability to the former if the departed financial advisor follows the terms of the Protocol and the new firm does not engage in “raiding.” The Protocol permits a financial advisor to leave one firm to join another and the departing financial advisor can take his or her client information including the address, telephone number, email address, and account title of their prior customers. They can also begin immediately to solicit their clients when they join a new firm as long as they do not do so before leaving.

The Protocol allows a broker moving from a Protocol Firm to another Protocol Firm (i.e., Smith Barney to Merrill Lynch etc.) to solicit their former clients while the previous employer will try to keep their business - also known as competition. 

Robert W. Baird & Co. (the new employer in the Smith Barney case), is not a signatory to the Protocol.  Nevertheless, it argued that Smith Barney's entry into the Protocol is a concession that former employees soliciting their former clients will not cause irreparable harm (a required element for a temporary restraining order). 

The Court seemed to believe there was some merit to this argument.  Though Smith Barney will likely continue with their lawsuit, it failed to obtain relief from the Court at the most critical time juncture, when the departing advisor is trying to move his business to his new employer.

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Judge William C. Griesbach, of the Eastern District of Wisconsin, recently denied a request for a temporary restraining order filed by Smith Barney against several departing brokers and their new employer, Robert W. Baird & Co.  Smith Barney sought a TRO in conjunction with Rule 13804 of the FINRA Code of Arbitration Procedure, meaning entry of a TRO by the district court would have triggered an arbitration within 15 days. 

 

The non-solicitation provision provided that the departing brokers would not:

solicit by mail, by phone, by personal meeting or by any other means, either directly or indirectly, any Account whom I served or whose name became known to me during my employment at Smith Barney in any office and in any capacity.  My agreement "not to solicit" means that I will not "during my employment and for a period of one year thereafter, initiate any contact or communication, of any kind whatsoever, for the purpose of inviting, encouraging or requesting any Account:

a) to transfer from Smith Barney to me or to my new employer, or b) to open a new account with me or with my new employer, or c) to otherwise discontinue its patronage and business relationship with Smith Barney

The Court ruled that the provision was overly broad and invalid under Wisconsin law because, among other things,  "it would prevent the financial advisor from contacting even individuals with whom he'd had no prior contact". 

Smith Barney stated it was considering its options following the ruling.

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I'll let the constitutional law scholars breakdown the Supreme Court's ruling in Massey Coal from Monday, but here is a synopsis from the Wall Street Journal Law Blog:

In a nutshell, the court ruled Monday that a West Virginia justice shouldn’t have participated in state court decisions overturning a $50 million judgment against Massey Coal, whose chief executive had been a major financial supporter of the justice’s campaign for office. The decision effectively creates a new constitutional recusal standard for judges who take contributions to fund their election campaigns.

So what does that mean for recusal cases here in Texas?  There has been plenty of scrutiny in Texas of donations to justices of the Texas Supreme Court but no change to our current system of electing judges.  But, we also elect our civil and criminal district court judges, county court judges, justices of the peace, and intermediate appellate court justices to name a few.  Since 1995, donations to Judge's campaigns have been limited to $5000 per family and $300,000 from political action committees.  Meaning, a donation of $3 million dollars, as was the case in Massey Coal, is unlikely. 

As long as campaigns are publicly financed there will always be allegations that donations lead to favorable rulings from the Texas Supreme Court on down to the justice of the peace.  The question remains does anyone actually care?  The solutions usually suggested are publicly financed elections, non-partisan elections, or retention elections.  It seems unlikely that the Massey Coal opinion will lead to the critical mass necessary to provoke such a change.  So for now the best rule of thumb is to make sure your donations to the presiding judge are equal to what the other party or lawyer on the other side of the docket has made.

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Picking up on last week's entry: 

Upon receiving the case, Eagle began an analysis of what documents Jones and Francis had accessed or stolen. The Court ordered the defendants to turn over any flash drives or laptops that they had. With the help of a former Treasury agent, Taylor and Walton found numerous documents Jones had taken on a flash drive. The most important item was an Eagle business plan that Paper Tiger took and simply changed the name. Walton paraded this document in front of the jury throughout the trial. Besides the documents that were produced, Eagle’s case also focused on documents that were not produced. He prepared a spoliation scorecard identifying all the documents that were missing.   Walton and Taylor successfully tried the case in front of a jury and obtained a multi-million dollar verdict that is now on appeal.

With respect to maintaining the integrity of trade secrets, Walton makes the following recommendations: (1) image the laptops or computers of any departing employees to determine what they have on their computers; (2) have policies in place that restrict access to company trade-secrets; (3) have a relationship with a vendor to perform any type of imaging or forensic services the company needs; and (4) don’t leave these tasks to the company IT person. With respect to new employees, Walton recommends that new employees sign off on some type of document that indicates they are not using former employers’ trade secrets.

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