Judge Dissolves TRO Against Morgan Stanley Broker Who Joined UBS
A federal judge has refused to extend an order she put in place three weeks ago blocking a Morgan Stanley broker who joined UBS from soliciting clients he had inherited from a retired broker.Judge Ann Aiken of the U.S. District Court in the District of Oregon on Wednesday denied Morgan Stanley’s request to extend a temporary restraining order against David J. Sayler, writing that the firm failed to prove it would suffer “irreparable harm” from his using allegedly proprietary data in violation of his employment contracts.
“If Sayler is found to have violated the 2017 and 2019 Agreements by soliciting covered client accounts, the loss to Morgan Stanley is likely more financial than reputational,” Aiken wrote. “Such harms can be redressed by damages…and are not, therefore, irreparable.”
Courts typically continue TROs as preliminary injunctions that remain in effect until a determination by a Finra arbitration panel, said Thomas B. Lewis, a securities employment lawyer at Stevens & Lee in Princeton, N.J.
The decision appears to be the first in which a judge reversed his or her order in more than a dozen cases that Morgan Stanley has brought since leaving the Protocol for Broker Recruiting in November 2017.
“It is unusual,” Lewis said, cautioning that the ruling should not influence arbitrators. “This doesn’t mean the advisor has won this case.”
While Sayler could technically reach out to former clients now that the TRO has been lifted, that could exacerbate damages Morgan Stanley would receive if it prevails with its breach-of-contract claims in arbitration, the lawyer said.
Morgan Stanley filed a Finra arbitration claim on July 9, and expedited hearings began on July 24th, according to court papers.
The case has drawn attention because of Morgan Stanley’s contention that Sayler breached clauses of the increasingly popular account-inheritance and joint-production programs that younger advisers agree to join to get referrals from colleagues who plan to retire.
Sayler signed a “Former Advisor Program” agreement in 2017, and joined UBS Wealth Management in June 2019 after more than 12 years at Morgan Stanley and its Smith Barney predecessor.
His inherited accounts “constituted a substantial portion” of his business, according to the judge’s order. Whether he breached his agreements or took confidential client information “remains an open an unresolved question,” she wrote.
The FAP contract allows Morgan Stanley to claim damages as high as 2.5 times the revenue generated by clients in the 12 months before they moved their accounts to their broker’s new firm. Damage awards in arbitration are often based on the number and asset levels of clients who leave, and can also include attorneys’ fees, Lewis said.
A Morgan Stanley spokeswoman declined to comment on the termination of the restraining order or on its arbitration claim.
Sayler, who began his career with Smith Barney in Medford, Oregon, in late 2006, declined to comment on how the TRO has affected his ability to restart his practice.
In its initial court filing, Morgan Stanley said Sayler had printed 170 pages of documents and other data, called some customers after he left and pre-solicited some by sending thank-you cards that said, “I enjoy working with you and look forward to the years to come.”
The Oregon broker responded he printed out market research that team members regularly printed and distributed among themselves. He also said the thank-you notes were not part of “advancing any hidden agenda” and asserted that he had heard from some clients affirmatively asking him to manage their money rather than the other way around.
Morgan Stanley in May obtained a TRO against a broker who joined Janney Montgomery in Pennsylvania, while losing its attempt to have one issued against a California broker who went to Wells Fargo Advisors.