A recruiting dispute between LPL Financial and Ameriprise is moving into appellate court as advisors formally resist a judge's order that they surrender their personal devices to a forensic examiner.
Thirteen advisors recruited to LPL from Ameriprise between 2018 and 2021 filed a notice of appeal to the Ninth Circuit Court last week, seeking to stay a court order calling on them to turn over their computers and other personal devices so a third-party examiner could scan them for confidential client information. That filing was preceded by a separate appeal made by 10 other LPL brokers in July.
Both groups contend they've been involuntarily dragged into a protracted recruiting dispute, one that advisors in the July appeal contend is "a massive and multi-front recruiting battle"... "between two corporate behemoths." At the heart of the matter is an agreement LPL and Ameriprise reached in December to allow a third-party forensic examiner to search the advisors' personal devices for client information that they perhaps had no right to retain after switching firms.
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The advisors argue the deal was reached without their knowledge and that they were given no opportunity to weigh in on its final terms. "No one should be forced to surrender their privacy without notice, without consent, and without a say," one group of advisors argued in thier motion to intervene filed in May.
'Herculean uphill battle' to overturn judge's order
Judge Jinsook Ohta of federal court for the Southern District of California rejected that motion in an order handed down last month. The judge gave the advisors until Aug. 1 to complete a questionnaire about any client information they may have retained and until Aug. 15 to work with the third-party examiner on deleting and making forensic copies of data they shouldn't have.
One group of advisors appealed Judge Ohta's order on July 21; the second group filed its appeal on Aug. 15. LPL declined to comment on the appeals. An Ameriprise spokesperson said the attempts to overturn the judge's order run counter to the agreement reached in December and raise the risk of "leaving clients and advisors exposed and wasting the court's time."
"We're in this situation because LPL used its advisors to engage in unlawful recruiting practices directly subjecting them to legal and regulatory risks that continue today," the spokesperson said in a statement.
Thomas Lewis, a shareholder at Stevens & Lee in Princeton, New Jersey, and a lawyer who represents advisors and broker-dealers in industry disputes, said he thinks the advisors in this case face "a Herculean uphill battle" in their appeals to the Ninth Circuit.
Lewis, who is not representing any of the parties in the LPL-Ameriprise recruiting disputes, said appellate courts usually intervene in such instances only if petitioners can prove that a district court judge made an error.
"The chances of the appellate court reviewing this and overturning the district court are very slim," he said
LPL, Ameriprise and their long history of litigation
LPL Financial and Ameriprise have been caught up in a long series of court battles in the past year over LPL's recruiting practices. The firms are the two largest broker-dealers as measured by annual revenue and also boast large advisory headcounts; Ameriprise has roughly 10,000 brokers and LPL nearly 30,000.
The recent dispute involving advisors' personal devices started in July 2024 with an Ameriprise lawsuit alleging that LPL had engaged in a "widespread pattern and practice of harvesting and misappropriating Ameriprise's private, confidential client information and trade secrets." Ameriprise accused LPL of using something known as a "bulk upload tool" from 2018 to the start of 2022 to help 30 recruited advisors transfer customer data, including Social Security numbers, account numbers, account information, routing numbers, client dates of birth, client ID numbers, account values and securities values.
As part of the deal the two firms reached to bring in a forensic examiner, LPL and Ameriprise also agreed to send their dispute before an arbitration panel administered by the Financial Industry Regulatory Authority, the self-regulatory organization for the brokerage industry. The advisors caught up in the dispute argue that they shouldn't have to turn over their devices before arbitrators have had a chance to rule on the case.
Separately, LPL filed a lawsuit in April alleging Ameriprise had sent out spurious data breach notices to thousands of its clients who had transferred their business to LPL along with advisors recruited from Ameriprise. Ameriprise contended it was merely following laws designed to protect confidential client data, while LPL accused its rival firm of defamation.
LPL dropped the suit a month later, after it and Ameriprise agreed to exchange information about which clients received data breach notices. LPL also committed to informing Ameriprise of any non-LPL clients' information still in the possession of advisors recruited from Ameriprise.
Ameriprise has also sued LPL over individual recruitment deals. In June of last year, Ameriprise took LPL to court over its recruitment of a father-son advisory duo that had previously managed about $250 million for Ameriprise in the Detroit suburb of Bloomfield Hills, Michigan.
And in February, Ameriprise sued LPL over its recruitment of a three-member advisory team now known as Jackson Roskelley Wealth Advisors. Among other things, the legal actions accuse LPL of violating a voluntary industry pact known as the Broker Protocol, which limits recruited advisors to taking only client names, addresses, phone numbers, email addresses and account titles to their new firms. Both Ameriprise and LPL belong to the protocol.
Even with the lawsuits flying, LPL continues to recruit from its industry rival. This week, it announced it had recruited a three-person team named Zarra Wealth Management, which had formerly managed $270 million for Ameriprise in Westbury, New York.
