Brokers Who Fired First at Morgan Stanley Settle Claims
A pair of Morgan Stanley Wealth Management brokers in San Diego who took the unusual step of suing the firm when they left for Hilltop Securities in May have dismissed their claim, according to a court order issued on Thursday in U.S. District Court in the Southern District of California.
George Miller, a lawyer at Shustak Reynolds & Partners, P.C. who represented brokers Michael J. O’Leary and Connie E. Sanders-Timian, said he could not provide details of the settlement because terms were confidential.
The brokers, who had asked the court to void non-solicitation strictures in their Morgan Stanley employment contracts and to restrain it from suing them, also withdrew a parallel complaint they had filed against the firm in a Financial Industry Regulatory Authority arbitration, he said.
Miller’s firm has brought a series of cases in which brokers on the move sued before their former employers sought restraining orders, a strategy aimed at giving the brokers a wider window in which to solicit their clients. The lawyer declined to discuss whether the strategy succeeded for O’Leary and Sanders-Timian.
Morgan Stanley, which never filed a response to the complaint, according to court records, did not give the brokers any money as part of the settlement, said a person close to the company.
O’Leary and Sanders-Timian were not only buying time but attempting to get the upper hand by moving before Morgan Stanley sought a temporary restraining order against them as they tried to restart their practice. The firm has filed at least six claims for restraining orders against brokers who left since its exit last November from the Protocol for Broker Recruiting.
Some lawyers said the strategy of preempting a former employer’s TRO filing was risky because it could invite more aggressive counter-claims that would add to the time and expense of litigation.
Given the fact that Morgan Stanley appears to have curbed its litigation appetite against departing brokers in recent months—a $3 million-production team joined Raymond James a few weeks ago without triggering a courtroom filing—the lawsuit also may have been unnecessary.
“Things have calmed down” regarding Protocol litigation, said Thomas B. Lewis, an employment lawyer at Stevens & Lee in Princeton, N.J. who often represents brokers.
Firms subscribing to the Protocol permit brokers to bring a limited amount of customer contact information with them when joining another signatory firm. However, Lewis said litigation has dwindled even when movement involves non-Protocol firms if brokers do not take confidential information about clients or commit other egregious violations of their contracts.
In seeking a ruling voiding their non-solicitation agreements, O’Leary and Sanders-Timian argued that they had arrived at Morgan Stanley under the protections of the Protocol and expected the firm “continue to be a Protocol member in the future.” They also asked for unspecified compensatory damages.
O’Leary, who joined Sanders-Timian at Morgan Stanley in 2010 following four years of retirement after a 30-year career at Merrill Lynch, referred requests for comment on the settlement to Hilltop. A spokesman at the Dallas, Tex.-based firm declined to comment.