Non-Solicitation TRO Denied in Broker Case

Posted on June 19, 2009 by Rob Radcliff
 

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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Prospective Employees with Non-Competes

Posted on March 24, 2009 by Rob Radcliff

With employers aggressively protecting customers and trade-secrets with non-compete agreements,  placement and human resource professionals will continue to encounter potential candidates/employees that have non-compete agreements and other restrictive covenants.   

Every employment interview should include exploration into these issues. 

Below are some suggested questions/considerations:

  • Has the candidate signed a non-compete, non-solicitation, or non-disclosure agreement?  If so, request a copy.
  • Does the scope of the non-compete conflict with the proposed employment? Is the candidate working in the same industry? Does the scope of the non-compete include the proposed geographic location?  What is the duration of the non-compete?
  • Is there a choice of law or venue provision in the non-compete?   The enforceability of a non-compete will vary from state to state.
  • Is the non-compete enforceable?  It may not be, but the best bet is to talk to a lawyer.  
  • Gather intelligence: has the former employer sued to enforce its non-compete previously? 
  • Is there any potential that the candidate could resolve the non-compete with a buy-out or some other agreement? 
  • Is litigation an acceptable risk for the new employer?
  • If there is a non-solicit, can the employee work within the parameters of the non-solicit?  Many times non-solicits are simply non-competes with a different name.  Some non-solicits only prevent the former employee from contacting former customers.  In that case, there is nothing that prevents the customer from contacting the employee. 
  • Remember, that any communications you have with a prospective employee might be subject to production in a lawsuit.  Be smart about email.

Going through the time and expense of hiring or placing someone to find out their ex-employer has filed a non-compete lawsuit would be devastating.  The questions above are a good starting point for screening, but a lawyer should always be consulted.

 

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Recruiters: Poach at your peril.

Posted on January 12, 2009 by Rob Radcliff


Most placement professionals try to stay away from taking employees from their company clients and in many instances it is prohibited by contract. More importantly, it can be bad business.

In a lawsuit filed in New York, JP Morgan Chase Bank v. IDW Group, Inc., JP Morgan brought suit against a firm that previously provided placement services and allegedly poached JP Morgan employees. It claims this was in violation of its contract with IDW and a breach of fiduciary duty. Here's blogger Kenneth Vanko's take on the case. It seems hard to believe that a business relationship evolved into a fiduciary duty relationship (very difficult to prove in Texas) but nevertheless, it is a claim.


Assuming there is no contractual provision in place, there is little a client can do to prevent a placement professional from soliciting its employees. Nevertheless, do you really want to have a reputation for poaching? Obviously, the facts and circumstances will vary and require individual analysis. Remember, there is little barrier to filing a lawsuit, basically a lawyer and a filing fee, and an irate client may seek legal redress like JP Morgan.

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Nebraska Non-Solicitation Case

Posted on December 22, 2008 by Rob Radcliff

Happy holidays to you and your family.

Below is a link to an article written by Seattle attorney Jill Pugh regarding a Nebraska Court of Appeals opinion affirming the enforceability of a non-solicitation agreement. Aon Consulting, Inc. sued to enforce the agreement against a former employee. The agreement was actually signed by the employee with a predecessor company that was acquired by Aon.

Here is a link to the opinion.

Here is a link to the blog.

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The Non-Compete Playbook: Preliminary Considerations

Posted on November 10, 2008 by Rob Radcliff


The Scenario
Assume the following: Jordan James, a successful legal recruiter employed at Company A has left to start her own placement firm. James signed a non-compete and non-solicitation with Company A and it is believed that James took her Microsoft Outlook contacts that contains all of her client information. What should Company A do and what should James anticipate?

Preliminary Considerations

(1) What are Company A's objectives? Is James worth the time and money from a cost/benefit analysis? Is James competing with Company A a threat? Even if not, has she taken information that is important to Company A? The reality is James will be able to compete some day against Company A but she should not be able to with information that does not belong to her or in violation of her contractual covenants.

(2) Is the non-compete enforceable? Before Company A instructs its lawyer to file a lawsuit and obtain a temporary restraining order (discussed in next week's entry), the next question should be what is the likelihood of enforceability of the non-compete? Obviously, no lawyer can predict what a Court can do, but they can give an educated guess. Hopefully, Company A already had this discussion with the lawyer who drafted the non-compete, but in many cases a lawyer wasn't involved and the law changes.

(3) Are James' documents in order? This includes any employment agreement, her employment file, and any company manuals that contain policies she is subject to. Can you capture (within the confines of the law) James' most recent communications (email/phone messages) with clients? Is there any evidence of James' contacting clients after her departure from Company A?

(4)What clients did James service? Were they serviced primarily by James or others at Company A? Would it make sense to contact the clients James worked with at Company A and let them know she has departed and who will be taking over her responsibilities? Not only will contacting them potentially protect business and preempt James, it is a means for developing allegations in a lawsuit and the basis for a temporary restraining order by finding out if she is talking to Company A clients and customers.

Next, the focus will be the filing of a lawsuit seeking a temporary restraining order.

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