Boilerplate Denials by Clients Fails to Get Broker Off the Hook in Raiding Case: E*TRADE Financial Corp. v. Pospisil
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By James L. Komie

In a raiding case, boilerplate unsworn statements submitted by clients of a defendant broker stating that the defendant did not “solicit” during undocumented calls, but without providing any details of the calls are unpersuasive evidence that the plaintiff is not entitled to a temporary restraining order.

E*TRADE Financial Corp. vs. Pospisil, No. 18 C 5908 (N.D. Ill., 9/4/18).

Unpersuasive Clients

Defendant worked as a financial consultant for Plaintiff E*TRADE. A few days prior to her resignation to join Morgan Stanley, Defendant accessed E*TRADE computers in the middle of the night to review “an extensive list of client information.” Upon joining Morgan Stanley, Defendant made phone calls to E*TRADE clients and, according to her, simply informed them of her new employment and contact information. A handful of clients transferred their accounts to Morgan Stanley. E*TRADE moves for and is granted a temporary restraining order (TRO) enforcing the non-solicitation and confidentiality agreement that Defendant signed with E*TRADE.

The Court is unpersuaded by Defendant’s argument that she did not impermissibly “solicit” the clients. Defendant did not simply send clients an announcement card. Instead, she made phone calls to clients, “the content of which is undocumented … [and] is a much more likely method of recruitment than an impersonal notice by mail.” Defendant submits unsworn statements from clients that she did not “solicit” them during the calls, but the statements are unpersuasive. They “all repeat the same boilerplate, conclusory and formalistic language” and do not provide any detail about the conversations with Defendant.

Suspicious Activity

Defendant’s claim she did not take any information from E*TRADE and simply relied on memory to look up client contact information on publicly available databases is likewise unpersuasive. Even if that is to be believed – and her late-night accessing of computer information is “suspicious” – the names of the clients were not publicly available information and can constitute a trade secret, even if memorized rather than physically misappropriated. E*TRADE has thus shown a likelihood of success on the merits.

E*TRADE has also shown that it will be irreparably harmed without a TRO. While lost commissions can be tracked, it is “extremely difficult” to estimate with any confidence lost future income. The Court thus grants the motion for a TRO, but it denies the request for expedited discovery and a preliminary injunction, since under FINRA rules a hearing will take place within 15 days to address the question of permanent injunctive relief.

(J. Komie: Financial advisor transitions between firms like E*TRADE and wirehouse firms like Morgan Stanley often result in litigation and can be difficult to defend. The Court specifically notes that the clients were not developed by defendant through her own efforts, but rather were assigned to her by E*TRADE.)

(SOLA Ref. No. 2018-39-03)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis. 

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