A federal judge has ruled in favor of Morgan Stanley in its bid to block an exiting broker from contacting his former clients at the firm as he moves to set up his own independent firm.
In an order issued this week, Judge Marcia Morales Howard of Florida's Middle District extended a restraining order against Daniel Abel, the former Morgan Stanley employee, which the firm accused of breaching his non-solicitation and non-disclosure agreements
In her ruling ― the latest legal victory for Morgan as it charts a new course after breaking from the Broker Protocol ― Morales referred the dispute to an arbitration proceeding at FINRA, which could take up the matter as early as this week.
"[T]he court notes that because the controversy between Morgan Stanley and Abel in this action may implicate policy determinations which are required to be resolved by FINRA, FINRA industry experts appear to be better suited to examine and resolve the issues than the judiciary," Morales writes in her order.
A spokeswoman for Morgan Stanley declined to comment. Attorneys for Abel did not immediately respond to requests for comment.
In Morgan Stanley's initial complaint, the firm argues that Abel had made a "deliberate breach" of his non-solicitation and non-disclosure agreements "to misappropriate [the] plaintiff's confidential information and trade secrets relating to plaintiff's clients with over an estimated $18 million in combined assets for the benefit of himself and his own new firm."
Abel disputes Morgan Stanley's argument, and cited in his defense the firm's long-time adherence to the Broker Protocol, the industry agreement governing what client information exiting brokers could take with them when leaving their employer. Morgan Stanley
Among other disputes, Abel argues that Morgan Stanley was acting hypocritically in targeting him for seeking to continue to work with past clients, when it had long supported incoming advisors doing the same thing.
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In a concession to the advisor, he can still respond to client emails and calls, even though he may not initiate contact.
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"Fundamentally, [the] plaintiff is not entitled to injunctive relief because, despite its handwringing over Mr. Abel's alleged conduct, it has for years condoned and encouraged that very same conduct," Abel's attorneys argued.
The suit against Abel isn't Morgan Stanley's first litigation against a former broker following its exit from the protocol. In December, the firm
Morales extended the temporary restraining order against Abel to Feb 20. It had been set to expire on Tuesday Feb 6. Arbitration proceedings at FINRA, which Morales says will offer a fuller vetting of the case, are scheduled to begin on Thursday.
"[A]ny decision made by the court would be based on the limited record before the court on a motion for preliminary injunction," Morales writes. "In contrast, the FINRA hearing, scheduled just two days later, will allow the parties to litigate the dispute in a full evidentiary hearing, including the calling and cross examination of relevant witnesses."
