Wells Broker Prevails Against Morgan Stanley’s Bid for Restraining Order
A federal judge has denied Morgan Stanley’s attempt to block a California broker who jumped to Wells Fargo Advisors two weeks ago from contacting former clients.
In a stinging rebuke on Monday, District Court Judge Otis D. Wright of the Central District of California characterized the request for a temporary restraining order as “a drastic remedy” that was inappropriate because Morgan Stanley failed to prove that Brent Jacobs had taken customer contact information with him when he joined Wells in Oxnard, California, on May 17.
“Plaintiff does not provide the Court with any evidence that Plaintiff physically took this information with him,” Wright wrote in denying Morgan Stanley Wealth Management’s May 24 restraining order and injunction requests. “Nor did Plaintiff provide a computer forensic analysis showing that Defendant took the files with him electronically.”
Since exiting the Protocol for Broker Recruiting in November 2017, Morgan Stanley has had mixed success in obtaining TROs against fleeing brokers. In recent months, it prevailed in handcuffing a Pennsylvania broker who moved to Janney Montgomery Scott but lost a TRO claim against a Texas team that jumped to independent broker-dealer Steward Partners.
A spokeswoman for Morgan Stanley declined to comment on the order.
Morgan Stanley continues to press claims against Jacobs and the other brokers in slower-moving Financial Industry Regulatory Authority arbitration forums.
The ruling in the Jacobs case could hearten other advisers who carefully follow procedure in transitioning to new firms, said Brandon Reif, a California-based employment lawyer who was not involved in the case.
“This is going to show up in federal case law, and it’s going to be relied upon by other financial advisors who are departing,” Reif said. “The lesson learned here is that the misconduct must be severe and be supported by a digital trail or an eyewitness account to have a chance at restraining the financial advisor.”
The wirehouse submitted photos of empty credenza drawers to support its contention that Jacobs took confidential files, but the judge said the evidence was insufficient to prove that the broker possessed them. The firm’s digitization of paper files at its Oxnard branch in February could explain the missing files, he wrote, and he also said he believed Jacobs’ declaration under oath that he had not taken client files.
“Plaintiff essentially requests that the Court make an inferential leap that because Defendant’s files are empty, that must mean that Defendant is in possession of the files,” Wright wrote. “Recognizing that a temporary restraining order is a drastic remedy, the Court is not prepared to make such a jump.”
He also ridiculed Morgan Stanley’s request that Jacobs return the files. “[T]he Court cannot force Defendant and his assistant to return documents or prohibit using documents they do not possess,” he wrote.
If Morgan Stanley had succeeded in receiving the TRO, the Finra arbitration claim would have proceeded on an expedited basis (within 15 days of the court order), under Finra rules.
The claim against Jacobs will now proceed on a “standard track,” which Morgan Stanley’s initial court filing said could delay a hearing for a year or more.
Jacobs, who started his brokerage career at UBS in 2001 and moved to Morgan Stanley predecessor Smith Barney in early 2009, did not return a call for comment. A Wells Fargo spokeswoman declined to comment, and Jacobs’ lawyer, Craig R. Bockman, a partner at Jones Bell Abbott Fleming and Fitzgerald in Los Angeles, did not return a call for comment.
Morgan Stanley did not provide details of Jacobs’ practice, but said it believed that Wells Fargo offered him more than $2 million in the form of an upfront forgivable loan and/or bonuses for hitting certain asset and production targets to make the move.