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.
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.