A federal judge has issued a temporary restraining order barring a former advisor with Janney Montgomery Scott from soliciting his former clients as he sets up shop at a new firm.
According to the complaint, filed earlier this month in the Eastern District of Pennsylvania shortly after the advisor, Laurence Braunstein, tendered his resignation, Janney alleged that Braunstein had misappropriated confidential information and trade secrets, claiming that in transitioning to his new firm Braunstein violated both his fiduciary duty and his duty of loyalty.
At the center of Janney's complaint is the allegation that Braunstein breached both the Broker Protocol and his internal agreement with the brokerage house regarding the extent of the client information he could take with him to a new firm.
Braunstein denies the charges in a filed response to Janney's complaint, contending that "the vast majority of the clients were clients he serviced at Janney," and that he "substantially complied with the Protocol."
But Judge Nitza I. Quinones Alejandro was unconvinced, issuing a temporary restraining order against Braunstein based on the finding that Janney "has shown a reasonable probability of success on the merits of its claims."
The Philadelphia-based financial services firm is seeking damages and injunctive relief from Braunstein, who joined Paradigm Wealth Management, based in Bridgewater, N.J., where he holds the title of director of advanced planning, according to the firm's website.
There was no immediate response to phone and email messages left for Denis Dice, a partner with the law firm Winget, Spadafora &Schwartzberg in Philadelphia, who is representing Braunstein and Paradigm, which is named as a co-defendant in the suit.
In the complaint, Janney claims that Braunstein wasn't permitted to take any clients to his new firm owing to a non-solicitation clause in an agreement he had signed with Janney. The firm further contends that even if it were simply a matter of operating under the Broker Protocol rules for solicitation, the 36-page list of clients Braunstein presented to Janney upon his resignation went well beyond the legacy clients he had brought with him from his previous employer and the new ones he had recruited while at Janney, where he led the Lexington Avenue Wealth Management team practice.
"Instead, in clear violation of the Protocol and the Team Agreement, the list contains not only legacy clients and clients Braunstein introduced to the team, but also appears to contain the names of every single client designated as a team client of Lexington Avenue Wealth Management" including many clients brought into the firm by other advisors, the Janney complaint reads.
Braunstein counters that he was in compliance with Janney's rules for advisors who transition to firms that aren't in the Broker Protocol, such as Paradigm.
Beyond the dispute over Protocol compliance, Janney’s complaint alleges that Braunstein violated an agreement he had reached with the firm in 2018, following a bankruptcy filing. At that time, Braunstein owed a significant debt ($6.5 million) to his former employer, Morgan Stanley, from a promissory note, and owed another $2.5 million to Janney under a similar arrangement.
Braunstein filed for bankruptcy in April 2018, and the next month reached an agreement to continue his employment with Janney and repay his debt through a reduced commission schedule, according to Janney's complaint.
Janney alleges that violating either that agreement or the Broker Protocol would bar Braunstein from soliciting any of his former clients for one year.
Braunstein counters that most of the clients on his Protocol list were longstanding accounts with him that predated his association with Morgan Stanley. Viewed that way, his attorney argues in his client’s filing, those "are not clients of Janney but are clients of Mr. Braunstein and their information is not a trade secret to Janney nor is it confidential information of Janney."
A hearing on the matter is scheduled for Oct. 2, with the temporary restraining order to expire Oct. 4.
