A lawsuit brought by Credit Suisse Securities against two of its former financial advisers highlights the legal hurdles brokers continue to face when moving to a new firm, even when they think they have followed the right steps.
Judge Carol Edmead in the New York State Supreme Court in Manhattan granted a limited temporary restraining order against two brokers after Credit Suisse accused them of violating their non-solicitation agreements.
The two, David Starker and John Delehanty, allegedly took client lists and e-mailed confidential documents to their personal accounts in advance of their move to J.P. Morgan Securities, the boutique wealth management arm of JPMorgan Chase Bank NA, according to the suit.
“Respondents engaged in a concerted effort to misappropriate Credit Suisse confidential, proprietary and trade secret information in order to use it to unfairly compete against Credit Suisse in their new positions at JPMorgan,” the firm said in its petition.
Credit Suisse also filed a claim for damages with the Financial Industry Regulatory Authority Inc. The firm did not specify a dollar amount, but said that the two brokers oversaw relationships that generated some $3.5 million in annual revenue last year.
At issue was a list of around 3,000 contact names that Mr. Starker allegedly sent to his personal e-mail account from his Credit Suisse work e-mail before he moved in May. The list contained names and “voluminous” notes about prospective clients, the firm said. Mr. Delehanty, who left in March, had also sent some confidential client relationship reports to his personal e-mail account, the firm said.
Both firms are signees to the Protocol for Broker Recruiting, but Credit Suisse said that the e-mails invalidated the protocol's protections.
The protocol, which approximately 1,100 brokerage firms have signed, protects a broker from litigation provided that they take only a spreadsheet containing certain client information, such as names and phone numbers.
Brokers frequently send additional information to themselves ahead of time in order to prepare a compliant spreadsheet or work from home, but they must return or destroy those documents before the date of the move, according to Liam O'Brien, who focuses on employment litigation at McCormick and O'Brien.
“They e-mail themselves data or download data or print data, all of which is ascertainable through an audit of the technology to see what data has been downloaded or e-mailed or printed out,” Mr. O'Brien said. While that is a violation, depending on the data, he said, that violation can be undone if they return the data at the time of their resignation.
Mr. Starker and Mr. Delehanty did not respond to requests from Credit Suisse to comply with the protocol after their move, according to the firm's petition.
Thomas B. Lewis, an attorney with Stevens & Lee, said the case will likely be about proving that any documents that they had sent were destroyed or left with the firm in accordance with the protocol.
“If these individuals can prove that they don't have confidential information, this case will end very quickly,” Mr. Lewis said.
Providing some hope for the respondents, Ms. Edmead denied portions of Credit Suisse's request, including a requests for a return of the documents, a deposition and expedited discovery.
Mr. Lewis said that lawsuits like this can sometimes be used to send a message.
“There's a couple reasons why companies file a lawsuit like this,” he said. “For all we know, Credit Suisse might have filed this action to send a message to JPMorgan, which is, 'Stay away from our employees.' ”
A spokeswoman for Credit Suisse, Nicole Sharp, declined to comment.
Leonard Weintraub, the attorney representing both brokers in the case, referred a request for comment to J.P. Morgan Securities spokesman Darin Oduyoye. Mr. Oduyoye declined to comment.