Morgan Stanley Seeks to Restrain California Broker Who Jumped to Wells
Morgan Stanley on Friday sued a California broker who jumped to Wells Fargo Advisors in a claim that shows it remains intent on pursuing brokers who allegedly take client contact information when they move.
In a complaint filed in federal court in the Central District of California, Morgan Stanley accused Brent A. Jacobs, who left for Wells’ private client group in Oxnard outside of Los Angeles on May 17, of “misappropriating” hard copies of client files and using them to contact his former clients in violation of his employment agreements. The complaint also claims Jacobs breached a “duty of loyalty” in preparing for the move by expensing flowers for 38 clients the week of his departure and liquidating a large account.Morgan Stanley has asked for a temporary restraining order blocking Jacobs from contacting his former clients and mandating that he return the documents. The firm said it also filed a parallel claim in arbitration for damages and a permanent injunction.
A spokeswoman for Wells Fargo declined to comment. Jacobs, an 18-year industry veteran who joined Morgan Stanley in 2009 from UBS, did not return a call for comment.
The filing comes amid a string of non-solicitation filings from Morgan Stanley, which has continued to flex its legal muscle to enforce its employment agreements since it withdrew from the Protocol for Broker Recruiting 18 months ago.
Morgan Stanley earlier this month won a claim in New Jersey in which it similarly accused a broker who jumped to Janney Montgomery Scott of removing client documents.
The California complaint is a reminder to brokers that Morgan Stanley is on the look-out for brokers who slip up and watching closely for “red flags” of pre-solicitation or missing files, said Brandon Reif, a Los Angeles-based lawyer with the Reif Law Group who has represented firms and brokers in employment disputes.
“Morgan Stanley wants to teach a lesson to other brokers who are thinking about moving and not leaving everything in pristine shape,” said Reif, who was not involved in this case. “Everything you do in that 60 day prep window is going to have a presumption that you did it for your future brokerage firm.”
Similar to its claim in the New Jersey case, Morgan Stanley did not cite direct evidence that Jacobs removed the documents but said it has not been able to locate the files, which include contact information for 10 of his largest clients. It padded its case with the allegations of sending 38 clients flowers in the week prior to his departure. Two days before he left, Jacobs convinced a “very large client” to liquidate an account, which “resulted in a sizable capital gains tax for the client but made it far easier for Defendant to move these assets to Wells Fargo,” according to the complaint.
Morgan Stanley did not provide details on the size of Jacobs’ book of business but said it believed that he was paid at least $2 million in an upfront forgivable loan and asset and production-based bonuses to move to Wells.
Still, Morgan Stanley could face an uphill battle in California where labor laws tend to favor the employee, Reif said. Morgan Stanley itself earlier this month successfully defended against a non-solicitation claim in California in a case in which the firm was on the other side of the table and had argued that basic client contact information did not constitute trade secrets.
In that case, a judge in the Northern District of California denied E*Trade Financial’s attempt to restrain a broker from soliciting his former clients to move to Morgan Stanley on the basis of “the strong public policy in California in favor of an individual’s ability to practice his profession without restraint.”
“Morgan Stanley taking contrary positions in asserting that records are confidential in some cases and in others not is going to work against them,” Reif said.
In addition to the case against the Janney broker in New Jersey, at least two other non-solicitation claims remain pending in arbitration including bid in court to restrain a Dallas team that joined Steward Partners and another that it brought in December against a New Jersey team that jumped to Stifel Nicolaus.
He bought flowers for 38 clients before leaving!?! Talk about flagrant! I love it…
So again the question presents itself: Is the client a client of the Advisor, or the broker-dealer?
The clients and their account activity legally belong to the firm unless you are an independent. While employee advisors don’t like to be reminded of this, they really don’t “own” squat as an employee. The firms, albeit clumsily and hypocritically, are trying to demonstrate that in the courts. Unless an advisor is represented by competent, experienced counsel well before any move to a new firm is made, the risks are real and significant.
Ron your a horrible person. You revel in the sorrow of others .We work for a living and you prey off our suffering. Just understand that your business is going away even faster than ours. I hope you save some money because your career is going away faster than ours. Your just a piranha
Freddy, your point is as inane as claiming that a physician preys off the suffering of the ill. Do you actually believe that I possess persuasion skills strong enough to convince intelligent advisors that they should leave their firms and move just so I can get paid by another firm for facilitating their move? Perhaps you believe it is my fault that firms sometimes terminate advisors for questionable reasons, or alter their comp grids or impose new restrictions on advisor business. Those catalysts often are the reason advisors seek greener pastures and my role is to help them identify, evaluate and effectuate a move to those opportunities. You clearly are not a fan of recruiters, but we are not “horrible” people. We serve a purpose and we provide people with options. If you think we all sit around and “revel” in the issues that can make being an advisor difficult, you are suffering from a derangement that you might want to have evaluated.
Ron , dude you’re like a bad penny. Despite the bashing and the obvious disdain for you , you continue to turn up and post here. It’s laughable and sad at the same time. How clueless are you? Do you just like being a clown for the entertainment value?
to Freddy & Derrick – WTH has Ron done to you? He only stated the obvious. Please tell me how his truthful comment was “prey{ing} off our suffering”? Seriously, your mean-girl comments make you both look like clowns. For the record: I choose to continue to work for MS … like a marriage vow … for better or for worse …
Buy, I appreciate (and agree wholeheartedly) with your comment…with the possible partial exception of the MS part. Loyalty has to work both ways and some firms are showing less and less of that lately.
; )
I think big Ron will agree, Wells Fargo is certainly the place to be….(in THICKEST form of SARCASM Possible)
Methinks you are beyond perplexed. Methinks you may be a moron.
Ironically- when you have a strong, loyal, relationship-based client base, actions such as these will actually help speed up the transition when the client base learns of it and gets pissed off (ie – MS thinks they “own” them, suing their trusted advisor/friend ). They’ll by lucky if some of the clients don’t figure out ways to ding and/or make life miserable for MS on the way out
MS (et al) want indentured servitude of the broker and the clients.