Raymond James advisors best JPMorgan in court battle over client contacts
In the scorecard of advisors versus firms, chalk one up for the brokers.
On Wednesday, a federal judge denied JPMorgan’s request for a temporary restraining order against three former employees, saying the bank’s effort to show that the advisors violated non-solicitation agreements was “far from persuasive, never mind conclusive.”
The firm went after a trio that departed for Raymond James in August, and which previously served clients with about $270 million in client assets. Nathan Shields, Mark Obrzut and Jackson Stewart had already moved more than 20 accounts totaling $30 million by the time JPMorgan filed its legal complaint in federal court in Indianapolis, according to the bank.
JPMorgan accused the Carmel, Indiana-based team of asking clients to move their accounts to Raymond James in violation of non-solicitation agreements they had allegedly signed. The trio had worked for the company’s bank channel, which is not a member of the Broker Protocol (the firm’s high-end broker, J.P. Morgan Securities, is a member, as is Raymond James).
JPMorgan claimed in its lawsuit that clients had complained to the bank of being contacted by the brokers. The bank also said that Shields and Obrzut had solicited one client in a JPMorgan branch.
The advisors denied doing any such thing, calling JPMorgan’s accusations “wholly without merit,” according to court documents.
Shields and Obrzut had chatted with a client in a JPMorgan bank branch, but the client had already transferred her accounts to Raymond James, they said. The team also said that “there has been no contractual violation, no removal of any client information.”
The advisors also reject the wirehouse’s claims they violated non-solicitation agreements.September 25
The firm claims it is also missing important documents related to a large institutional client.September 20
The advisors say they violated no contracts and took no confidential client information when they resigned from the bank.September 17
The advisors agreed not to solicit clients and to return confidential information to the bank.September 5
Judge Sarah Evans Barker of the U.S. District Court for the Southern District of Indiana agreed and denied the bank’s request for a temporary restraining order, a preliminary injunction and expedited discovery.
Barker said JPMorgan’s evidence of non-solicitation violations was lacking, adding that the bank’s “attempt to show that defendants in fact are violating or have violated the restrictive covenants is far from persuasive, never mind conclusive.”
She noted that the Raymond James team had submitted affidavits averring that they had not solicited clients, but had called clients to tell them that they had left JPMorgan — and that they did so only relying on their own memories and publicly available information. JPMorgan, the judge said, “has not shown, or even argued, such conduct is violative of its covenants”
The firm’s complaints were partly based on “anonymous hearsay,” the judge writes in her ruling.
Plus, the firm’s restrictive covenants are designed to prevent advisors from soliciting clients, not competing for business, she says.
Finally, the judge also took issue with JPMorgan’s argument resting on Indiana law, rather than New York law, which governed the agreements signed by the advisors.
Spokeswomen for JPMorgan and Raymond James declined to comment. Neither the team nor their attorney were unavailable for comment.
Although JPMorgan’s motion was denied in this instance, the firm has had success or arrived at settlements in other lawsuits filed this year. Earlier this month, the bank reached a settlement with a team that had advised clients with $14 billion in assets before leaving for Merrill Lynch.