Morgan Stanley Seeks TRO Against New Jersey Broker Fired Last Week
Morgan Stanley has once again sued a broker for allegedly breaching terms of his joint production agreements, claiming he is asking former customers to transfer their accounts to his new employer in apparent violation of one-year non-solicitation clauses.
The motion for a temporary restraining order and preliminary injunction was filed Tuesday against Jon Stankovich, a broker in Red Bank, New Jersey who had worked at Morgan Stanley from 2004 until he was terminated last week, according to a filing in U.S. District Court in Newark.
He registered with the employee channel of broker-dealer Capitol Securities Management one day after his termination, according to the lawsuit and his BrokerCheck history.
The lawsuit revives the aggressive stance Morgan Stanley had taken against departing brokers in the weeks following its withdrawal from the Protocol for Broker Recruiting last November. The firm succeeded in obtaining courtroom orders temporarily restraining at least four brokers from calling former customers pending arbitration hearings and inciting debate within the brokerage industry over broker autonomy and “ownership” of their books.
Tuesday’s lawsuit appears to be Morgan Stanley’s first since February claiming violations of employment agreements, and it subsequently withdrew that suit. Lawyers have said that the firm’s decisions to sue are case-specific, and they and recruiters have argued that brokers can still leave non-Protocol firms if they carefully follow the letter of their various employment agreements and do not actively contact customers.
The nine-page complaint against Stankovich abounds with specifics about the reasons for his termination but does not allege facts about his having misappropriated firm-owned data, as other complaints have done.
Morgan Stanley fired him for allegedly diverting commissions from his joint production partner, Joseph Paul GaNun. Stankovich admitted to receiving full credit for more than 450 transactions in the joint agreement totaling over $150,000, according to the lawsuit.
Reached last week by AdvisorHub, Stankovich declined to comment.
“We don’t comment on ongoing litigation,” Joe Jianos, chief executive of Richmond, Va.-based Capitol said in a prepared statement. “However, this is yet another example of an advisor and his clients being subjected to the hostile environment and culture of the now-diminishing big firms.”
A Morgan Stanley spokeswoman declined to comment on the lawsuit or Jianos’ remarks.
Two people familiar with Stankovich’s history said he produced about $525,000 last year but was in a long-term dispute over production credits with GaNun, a former branch manager who Stankovich believes had been diverting revenue credits to himself from customers of the junior broker.
The legal complaint liberally cites various joint production agreements and client list restrictions signed by Stankovich, but is less specific about its allegations of soliciting former customers.
“Stankovich is undoubtedly using customer information he took with him from Morgan Stanley to solicit these customer [sic], one of whom so far has indicated that he intends to transfer his accounts as a result of Stankovich’s solicitation,” the complaint says.
As in previous motions for temporary restraining orders, Morgan Stanley alleges breach of contract, breach of fiduciary duty, unfair competition, tortious interference and misappropriation. The Stankovich lawsuit also sites violation of the New Jersey Trade Secrets Act,.
“Morgan Stanley faces irreparable harm and loss,” the lawsuit says in asking for return within 24 hours of all documents and computerized materials that Stankovich may have taken, including email messages to customers. “There is every reason to believe that unless Defendant is enjoined, he will continue such unlawful conduct.”