UBS Sues Ohio Team, Says Manager ‘Shopped’ $20-Mln Branch to Top Bidder
(Updated with additional information about UBS and raiding claims in fifth paragraph.)
In a federal lawsuit laced with multiple allegations of breaching employment, cash award, team and other partnering agreements and contracts, UBS Financial Services has accused a producing manager in Ohio of working for more than a year to sell his office “to the highest bidder,” and asked a court to temporarily enjoin his three-advisor, $4.5 million-production team from calling clients at their new firm.Michael Platte, the New Albany branch manager who was a 19-year veteran of UBS and predecessor firm McDonald & Co., joined Morgan Stanley last week with brokers Lance White, Mathew Penrod and support staff for a transition deal that “could be worth more than $25 million,” UBS alleged in a complaint for injunctive relief filed against the three brokers in the southern district of Ohio’s eastern division on Friday.
The move followed those of a second three-advisor team in the branch to Morgan Stanley in September and of another New Albany team last fall to Wells Fargo Advisors. The three teams produced over $14 million, or more than 70% of the branch’s $20 million in revenue—the base for Platte’s pitch to launch a fully created branch for a competitor, according to the lawsuit.
“For more than a year, Platte—in flagrant breach of his contractual obligations and duty of loyalty as a branch manager—worked secretly to implement this plan since early 2018, meeting with different competitor firms,” including Raymond James Financial, according to the filing. “He eventually found a willing partner in Morgan Stanley, which agreed to pay Platte and his colleagues extraordinary transition packages.”
UBS on Friday also filed a Finra arbitration claim against Morgan Stanley and the three brokers, the complaint said. The team that joined Wells Fargo in Columbus last year declined to move “en masse” with Platte out of concern they would be embroiled in a raiding lawsuit, according to the complaint. (An arbitration panel last month ordered UBS to pay $9 million to Credit Suisse to resolve a raiding claim.)
A spokeswoman at Morgan Stanley declined comment on Friday’s lawsuit—which also seeks an order enjoining Platte from recruiting UBS employees—as did Platte, White and Penrod. The spokeswoman declined to say whether UBS has pursued the New Albany team that joined Morgan Stanley’s Columbus office last month. A person answering their phones at the UBS office said they were not available to speak.
“[E]xact details [of the transition package] are not known at this point,” the lawsuit said of Morgan Stanley’s offer to the Platte team.
UBS’s complaint for injunctive relief is part of its effort to gather more evidence prior to seeking a temporary restraining order, according to people involved in the case. UBS officials got wind of Platte’s alleged plans to relocate his and other teams this summer, and put White, Penrod and an associate on administrative leave while firing Platte one week before they joined Morgan Stanley, the lawsuit said.
Litigation to prevent brokers from calling former clients is not unusual, but UBS has not brought many lawsuits in recent years despite pulling out of the Protocol for Broker Recruiting in late 2017. Instead, it requires brokers accepting performance bonuses—a major part of their compensation—to refrain from calling former clients for a year. Morgan Stanley has been more aggressive about seeking restraining orders and injunctions against brokers who allegedly take client contact information and other “trade secrets” with them to new firms.
UBS Wealth Management USA initially slipped the non-solicits into bonus acceptance agreements in late 2016 without alerting brokers, setting off a firestorm when the clauses were discovered. Senior executives later apologized and delayed the policy, but restored it in the 2018 compensation plan. Other non-solicits for departing brokers are included in employment, team-sharing, private client group advisor sharing and management agreements signed by Platte and his teammates, according to the lawsuit.
Friday’s complaint alleges that the Ohio branch manager leveraged discontent in his branch over some of the policies.
“Platte knew that these significant producers were unhappy about certain developments within UBS in early 2018, including with respect to the firm’s introduction of a new form of agreement relating to annual compensation awards,” the lawsuit said. “Rather than attempting to address their concerns and advising UBS senior management so that it could take appropriate steps, Platte, for over a year, fanned the flames and used this information about their discontent as ammunition to consider joining him in leaving the firm.”
It characterized Platte’s conduct as an “egregious breach of his duty of loyalty under UBS policy and applicable law and his contractual obligations not to influence, induce, or recruit employees to leave.”
One person close to the branch who was not authorized to speak for the team said Platte did not negotiate the moves of teams other than his own. He also considered himself a candid spokesman to senior management about brokers’ attitudes, delivering intelligence on behalf of non-producing branch managers who were reluctant to offer direct criticism, the person said.
One senior member of Platte’s team in New Albany, Stephanie McCurdy, remains with UBS. The team agreement she and the other brokers signed impose a one-year client nonsolicitation period on terminated brokers, though the provision does not apply to accounts introduced by a departing broker, according to the lawsuit.
Joseph Alonso, a lawyer at the Atlanta firm of Gregory, Doyle, Calhoun & Rogers who is representing Morgan Stanley and the advisors, did not respond to a request for comment.