(Bloomberg) -- Two JPMorgan Chase units sued six former executives who defected to rival Morgan Stanley, seeking a court order blocking them from enticing clients and co-workers to follow.
The ex-employees, including a vice president, two executive directors and three managing directors, all quit in February and later joined Morgan Stanley, according to court papers. The six, who worked at JPMorgan's private bank office in Morristown, N.J., are accused of stealing trade secrets and breaching their duty of loyalty.
U.S. District Judge Madeline Cox Arleo in Newark, N.J., has said she'll begin considering the issue on July 6, according to court records. Attorneys for the former JPMorgan executives oppose the request for an injunction, saying client contact data isn't a trade secret and the bank can't show it faces imminent harm. They say soliciting clients is legal and point to a hiring protocol both companies have signed.
The decade-old financial industry accord called "The Protocol for Broker Recruiting" allows advisers to leave one firm for another and take basic client information, including names, contact details and account types, Jim Wiggins, a spokesman for the New York-based Morgan Stanley, said.
'GAME CHANGER'
"It's ultimately up to the client as to where they want to do business," he said, declining to comment on the lawsuit itself. The firm isn't a defendant in the case, which was filed May 7.
Darin Oduyoye, a spokesman for New York-based JPMorgan, said the bank's ex-employees were wrong to cite the protocol.
"Their reliance on the protocol is misplaced and not applicable in this case," he said in a phone interview.
Mindy Diamond, head of Chester, N.J.-based recruiting firm Diamond Consultants, said the protocol has been "a game-changer" for the industry. It allows brokers to change firms "with impunity," free from court fights and the threat of monetary damages as long as they abide by its terms.
The protocol contains "common sense stuff," she said. It bars brokers from taking original documents when they leave and says those who don't follow the rules may still be sued, she said.
"The punishment isn't 'we're going to steal our clients back,'" she said. "The client has the right to decide who they want to advise them."
As part of its request for an injunction, JPMorgan also asked the judge to block the executives from using bank documents and proprietary information, at least until the matter comes before a FINRA arbitration panel.
--With assistance from Hugh Son in New York
Read more:
Trouble With Management: Should You Stay or Go? Merrill Wins $1.3M Clawback From Ameriprise Advisor Advisor Owes Merrill $1M Clawback
