Another Skeptical Judge Rejects TRO Against Fleeing Brokers
A second federal judge in as many weeks has denied a large firm’s request for a temporary restraining order that would prohibit brokers from soliciting former clients, questioning Wells Fargo Advisors’ claim that it would suffer “irreparable harm” if handcuffs weren’t imposed.
Wells on Monday asked a Florida judge to enjoin brokers Brady Pedler and Joseph Santana in Sarasota, Florida, from soliciting former clients to open accounts at RBC Wealth Management-U.S.. The brokers, who managed $306 million in assets, according to Wells, had joined RBC on Friday.
“It is not clear how injury is so imminent and irreparable that notice and a hearing on an application for preliminary injunction is impractical,” Judge Barber wrote in rejecting Wells’ motion for an emergency TRO. “The Court is not able to address WFA’s allegations without input from the Defendants and is unwilling to permit the use of such an extreme remedy.”
In the earlier case, Judge Janet Neff in the western district of Michigan wrote: “I don’t see how you could come to the conclusion that a single financial advisor in a small branch bank…could inflict irreparable harm on a financial giant like J.P. Morgan.”
“Irreparable harm” that cannot be compensated by monetary damages is a legal requirement for issuance of TROs and preliminary injunctions, but many firms for years have succeeded in convincing courts to issue orders in the crucial early days when they and departing brokers compete for client accounts.
The recent rulings are not precedential, but could send a tougher signal to firms, lawyers said.
“This can impact how firms decide to move forward on other cases,” said George C. Miller, a securities employment lawyer in San Diego at Shustak Reynolds & Partners, who represents both firms and brokers.
A spokeswoman for Wells Fargo declined to comment.
“We are pleased with the Court’s ruling and believe it is the right decision,” an RBC spokesman said in a statement.
Judge Barber also zeroed in on Wells’s request as “procedurally insufficient” because it did not include a dollar figure for a security bond deposit it would make if it were determined that the brokers were wrongfully restrained. However, he wrote that Wells can still argue for a preliminary injunction on an expedited basis.
In its complaint, Wells Fargo asserted that Pedler and Sananta violated their employment contracts as well as account inheritance agreements with a retired advisor by emailing marketing materials about RBC while they were still with their former firm.
Wells Fargo Advisors and RBC Wealth are members of the Protocol for Broker Recruiting, which allows advisors to take five pieces of rudimentary client-contact information with them when moving to signatory firms. But the Protocol does not override contractual obligations, lawyers said.