Morgan Stanley Loses Bid to Mute Brokers Who Jumped to Rival
A Texas judge has denied an attempt by Morgan Stanley to prevent two brokers who left the firm this month from soliciting their former clients at their new firm, but has scheduled further hearings on the wirehouse’s attempt to restrain them.
Morgan Stanley sought a temporary restraining order last Friday aiming to gag brokers Jason Bottenfield and Brett Diamond from soliciting clients from their $240 million-asset practice to follow them to Steward Partners, an independent broker-dealer affiliated with Raymond James Financial Services.
Bottenfield and Diamond generated more than $2 million in annual revenue at their former office in Dallas, Morgan Stanley said in its filing. It accused them of “egregious employee disloyalty” and breach of their non-solicitation agreements, unfair competition and possession and use of proprietary and confidential information.
A Morgan Stanley spokeswoman declined to comment on its filing and on whether it demonstrates a renewed contractual enforcement vigor. The firm filed a spate of motions for TROs in the weeks after it departed from the Protocol for Broker Recruiting in November 2017, sometimes successfully.
The legal motions tailed off last year, as outside lawyers said advisers and the firms that hired them have become more careful about staying within the boundaries of their employment contracts. Morgan Stanley filed one case, which is pending in arbitration, last December against brokers who joined Stifel Nicolaus, but has not pursued teams who left this year in Florida and Boston.
Bottenfield and Diamond, who had been with Morgan Stanley and predecessor firm Smith Barney for 14 and 18 years, respectively, prior to their March 15 departure, did not respond to several requests for comment.
Judge Bridgett Whitmore did not provide a written explanation for her refusal to immediately clamp the brokers through a TRO, but has scheduled an April 25 hearing on Morgan Stanley’s request for an injunction. The firm, as is typical, also has filed an arbitration complaint with the Financial Industry Regulatory Authority seeking a permanent injunction and unspecified damages.
Andrew Shapren, a lawyer at Buchanan Ingersoll Rooney who represents the brokers, did not return a call for comment. Steward Chief Executive James Gold declined to comment.
In its TRO request, Morgan Stanley alleged that the brokers printed out thousands of pages of client financial plans and accounts in the month prior to their resignation and worked late into the night and on weekends in preparation for their departure.
Morgan Stanley alleged that the brokers had contacted at least four clients with reduced-fee offers and comments about not having to “push certain funds” now that they were with an independent firm.