A federal judge in Indianapolis has denied Edward Jones' motion for a temporary restraining order against a former broker who joined a competing firm, and in a stinging rebuke, said the broker-dealer seemed more interested in teaching him a lesson than in preventing the loss of clients.
The adviser, John Kerr, managed $113 million and
left Edward Jones at the start of August and began working at Thurston Springer Financial. In the complaint, Edward Jones alleged that Mr. Kerr, secretly and in violation of his contract, printed, copied and removed customer files and confidential records, and then solicited those clients, which allegedly violated his work contract with Edward Jones.
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Judge Sarah Barker ruled that Edward Jones' complaint, which included breach of contract, misappropriation of trade secrets and other claims, was not substantiated by the evidence.
The "glaring insufficiencies in Edward Jones's request for [a TRO] suggest that its intention in bringing this lawsuit was less about vindicating or recovering from or preventing its loss of client relationships resulting from Mr. Kerr's actions, and more to 'teach him a lesson' for having left Edward Jones (after he was fired) and connected up with a competing firm."
Granting Edward Jones request for a TRO "would unfairly and unjustifiably besmirch Mr. Kerr's professional reputation, while denying the injunction would not harm Edward Jones's interests, particularly since the conduct alleged by Edward Jones to have occurred in violation of the agreement simply did not happen," Ms. Barker wrote.
Edward Jones is not part of an industry agreement
called the protocol for broker recruiting. That agreement
makes it easier for a broker or adviser to leave one broker-dealer and start working at another because it allows him to bring a limited amount of client information with him.
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Brokers and adviser are generally fearful of being targets of such TRO litigation by the firm they are leaving.
In an email, Mr. Kerr said he was thrilled with the decision.
"This proceeding has been very difficult for me and has substantially damaged the reputation I worked so hard to build in my community," he wrote. "I want to thank Judge Barker for recognizing that clients have a right to choose their own advisers."
Edward Jones, meanwhile, intends to pursue the matter with the Financial Industry Regulatory Authority Inc.
"Edward Jones is disappointed in the outcome of the court proceedings," said company spokesman John Boul. "Further proceedings will now take place in arbitration before Finra."
According to his BrokerCheck report, Mr. Kerr worked for 21 years at Edward Jones and had no disciplinary issues before starting his employment at Thurston Springer Financial.
Ms. Barker's order "protects every adviser's right to earn a living after leaving his or her current firm," said Brian Sweeney, general counsel and chief compliance officer for Thurston Springer.
