Schwab Gets Client Data Back from Dismissed Employee, Settles Age Suit from Another
(Updates story with response from the former Schwab broker in the fifth paragraph.)
Charles Schwab prevailed this week in a legal battle to stop a dismissed broker from calling former clients, ten days after agreeing to settle an age-discrimination lawsuit from a former relationship manager in its Advisor Services division.The discount brokerage pioneer and former broker Peter Pavlakis reached a stipulated settlement on Thursday in which he agreed to refrain from soliciting clients he had developed over 19 years with Schwab until next August 21, and to return any records he may have obtained.
Schwab sued Pavlakis in September, continuing a string of litigation that it and other online giants have unfurled against brokers who worked with wealthier clients in advisory units.
Pavlakis also agreed to return any information pertaining to Schwab’s clients or business, “even if such information was recreated utilizing his memory,” according to the stipulated agreement, approved by Judge Cathy Seibel in the Southern District of New York. Some lawyers have said that brokers are immune from charges of taking “trade secrets” if they do not have physical client-contact and account records on paper or electronic devices.
The broker, who since July has worked at M&T Securities in suburbs north of New York City, said the quick settlement was not a capitulation. “There was noting that I did wrong,” he said. “I didn’t take any documents and I showed proof, so that within one month we were able to wrap everything up.”
Pavlakis, who represented himself, did not admit to liability or wrongdoing in the settlement.
Schwab dismissed him in February amid allegations of “non-sales-practice-related” note-taking system inaccuracies that “may or may not have been intentional,” according to his BrokerCheck record.
Schwab continues to press a claim for damages against Pavlakis in a Financial Industry Regulatory Authority arbitration panel. Schwab will not hesitate to enforce contractual obligations concerning customer information, said Pete Greenley, Schwab’s managing director of corporate reputation.
In the age discrimination case, Monica Knowles, 63, alleged that a Schwab Advisor Services managing director forced her to resign in 2017 over alleged infractions that went unpunished when committed by younger colleagues. The Ann Arbor, Mich., relationship manager, who worked with registered investment advisors who custody with Schwab, sought unspecified compensatory and punitive damages, interest, costs and attorneys’ fees in the lawsuit she filed in August in U.S. District Court in the Eastern District of Michigan, south division.
She and Schwab reached a settlement, according to papers submitted on October 15 by lawyers from both sides in U.S. District Court in the Eastern District of Michigan, south division.
Schwab’s Greenley declined to comment on the terms of the settlement. Angela Mannarino, a lawyer representing Knowles, did not respond to a call for comment.
Knowles began her career as a registered representative in 1983 with Prudential-Bache Securities. She worked at Schwab for three years before resigning in October 2017, and since last March has been employed by Mercer Global Advisors, an RIA roll-up in Ann Arbor.