Judge Grants Merrill ‘Limited’ TRO Against Wells Team in Tennessee
In a mixed decision, a Tennessee judge has blocked a Wells Fargo Advisors team from contacting former customers subject to a bank referral agreement but ruled they can still solicit the rest of their client base, according to an order in Chancery Court in Davidson County.
Their case highlights the challenges of navigating various carve-outs from the Protocol for Broker Recruiting, an industry agreement that allows brokers to solicit their former clients when moving among signatory firms.
Both Wells and Merrill Lynch ascribe to the truce, but Merrill had argued in its March 26 complaint that the bank referral program customers were exempt from the protections. By taking customer contact information for the 31 clients and contacting at least two of them, Merrill said that the team had nullified the entire agreement, which requires departing brokers to act in “good faith.”
Hobbs Lyle wrote that Merrill’s initial filings had not yet shown “sufficient evidence” that the team’s violation had been enough to break the good faith standard. The team had claimed they did not understand which clients were covered by the referral programs and also said they had already agreed to wipe contact information for those clients and to not solicit them after Merrill raised concerns, she said.
The filings did not specify what portion of the team’s $680 million in customer assets and $5.3 million in revenue was attributable to the 31 referral program customers.
“We are pleased with the judge’s ruling,” Merrill spokesman William Halldin said in a statement. “We look forward to addressing all the issues raised in this matter as the case moves forward.”
A Wells spokeswoman declined to comment.
The brokers, Will David Coleman, Jeremy Stephens, Justin Webb, and Steven Ragan, moved to Wells on March 19, and had served around 1,500 accounts, according to a source familiar with their business.
Merrill in its complaint took issue with one large “multifaceted trust and family household” that was part of the referral program and appeared to be driving the firm’s non-solicitation battle. The team had reached out to the family about moving accounts and were in the process of setting up times for a formal meeting, Merrill said.
Merrill has filed a parallel claim for damages and a permanent injunction against the broker with the Financial Industry Regulatory Authority’s arbitration forum. It is seeking to utilize the TRO to allow the case to be heard by arbitrators on an expedited basis.
A full hearing for whether to convert the modified order into a temporary injunction in court is set for April 14.