Edward Jones loses bid to block ex-adviser from soliciting clients

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Edward Jones lost its bid for damages over trade secrets and a restraining order against an adviser who left the firm for Wells Fargo.

The firm accused D. John Dupuis Jr. of breaching his clients' privacy by soliciting them from Wells Fargo's Florence, Alabama, branch. A county court rejected Edward Jones' request for a restraining order, and a FINRA panel in Birmingham dismissed all of the company's claims earlier this month, according to a copy of the ruling.

Dupuis and his legal team successfully argued that the company could not block him from making calls to the clients to let them know about his move or mailing so-called tombstone announcements, notices that he changed employers. The panel tossed out Edward Jones' petition for a permanent injunction against him, plus punitive damages.

However, the panel refused Dupuis' bid for nearly $17,000 in attorney fees and ordered him to pay $11,075 in fees to cover the cost of the arbitration, according to a copy of the award. As is typical, the arbitrators did not explain their decision.

The payments show that Dupuis "didn't walk away unscathed" from what became a "battle" with his former company, according to arbitration expert Bill Singer.

"What's fascinating about this case is really that Edward Jones suffered no consequences," says Singer, an attorney for advisers and firms and a former arbitration panel chairman. He adds, though, that Dupuis' new firm, Wells Fargo, will "most likely" pay the fees for him.

A spokeswoman for Wells Fargo declined to discuss the case, and Dupuis didn't return a phone call and email seeking comment.

A spokesman for Edward Jones notes in an email that the panel billed Dupuis for the full cost of eight hearing sessions and two pre-hearing conferences. Executives with the firm still believe that Dupuis violated the terms of his employment, the spokesman says.

"This arbitration concerned the protection of client information, something we take very seriously," he says. "We will continue to vigorously pursue cases when we believe similar violations have occurred."

Edward Jones recently ramped up efforts to recruit experienced brokers in order to reach a goal of expanding its brokerage force by about 5,000 advisers to 20,000 by 2020. However, the firm's status outside the Protocol for Broker Recruiting led some to question whether fear of future litigation would hinder the firm's recruitment efforts.

While many firms try to stop advisers from retaining their clients at their new companies, Edward Jones pursues cases more often than most because they are not signatories to the protocol, according to Vic Hayslip, a lawyer who represented Dupuis in the case.

"More than a lot of other broker-dealers, you see Edward Jones, for lack of a better term, home growing a lot of their reps," the Birmingham, Alabama-based attorney says. "When they leave, clients tend to follow these people because that's the only person they've been working with."

The company filed its case against Dupuis and Wells Fargo Advisors in March 2016, accusing him of sharing trade secrets, breach of contract, civil conspiracy, unjust enrichment and other misconduct. Edward Jones alleged that Wells Fargo aided and abetted his breach of fiduciary duty.

The filing came the same month Dupuis left Edward Jones following 22 years at its Florence branch, according to his filing in Lauderdale County Circuit Court. The company had said in its own filing that he broke a section of his 1993 contract forbidding him from soliciting clients for a year upon departure.

"It is understood and agreed that the identities of and information concerning the customers of Jones is confidential information, constitutes a trade secret, and is the sole and exclusive property of Jones," the contract provision reads.

Dupuis and Wells Fargo, however, countered that the non-solicitation covenant in the contract is unenforceable in Alabama due to state laws against restraining the exercise of a profession. Edward Jones also "has not identified a single client it contends was solicited," according to the filing.

Further, Dupuis made the phone calls and mailings in compliance with FINRA rules about solicitation, they argued. The phone calls followed a required script similar to one used by Edward Jones. Plus, his former firm sent its own letters to his clients about the move, according to Dupuis.

"In other words, according to Edward Jones, activity deemed to violate the agreement's non-solicitation covenant when undertaken by Mr. Dupuis is of no consequence when undertaken by Edward Jones," according to his filing.

The St. Louis-based company alleged Dupuis and his client associates printed lists of clients' names, account numbers and balances, Dupuis added in an affidavit. The list in question, which Dupuis left at his prior office, actually related to invitations and RSVPs to a Valentine's Day lunch he held for women clients, he said.

"Many of my clients are either family members or friends of mine, or are friends or acquaintances of my family members or friends, i.e. 'friends of friends,'" Dupuis said. "Edward Jones did not give any of my clients to me; instead, I developed my book of business through my hard work."

Though the panel's judgment includes a "little slap on the back of the hand" to Dupuis in the form of the fees, it sends a positive signal to brokers nonetheless, according to Singer.

"This is an important case for registered reps to read, because what it shows is that, even when a large company takes you into court, you can win," he says.

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Arbitration Litigation Lawsuits Compliance Regulatory actions and programs FINRA Edward Jones Wells Fargo Wells Fargo Advisors