In what has become something of a rarity in the financial industry, two major brokerage houses are embroiled in a legal dispute over a breakaway broker who took a book of business with her when she switched firms.
The case, currently working its way through the FINRA arbitration process, stems from a complaint Oppenheimer brought against Ameriprise and a former employee, Deborah Goodermuth, seeking monetary relief and an injunction to bar her from soliciting her old clients.
Goodermuth runs an Ameriprise franchise in Glen Allen, Va., a suburb of Richmond.
Eastern District Court of Virginia Judge Henry Hudson denied Oppenheimer's motion for a preliminary injunction, writing that the plaintiff had "failed to clearly demonstrate that it is likely to prevail on the merits" of its allegations against Goodermuth and Ameriprise, and referred the matter to FINRA.
The industry self-regulatory organization has scheduled a pre-hearing conference for Dec. 21 to address the remaining arbitration deadlines, including hearing dates. The case is now in the discovery phase at FINRA, according to the most recent status report filed with the court.
The dispute recalls the fights that firms would routinely engage in before the advent of the Broker Protocol, a widely accepted industry agreement that lays out parameters for employees or reps of a firm looking to transition clients from one brokerage shop to another.
THE PROTOCOL SOLUTION
"It used to be common," says Mark Astarita, a partner at the securities law firm Sallah Astarita & Cox. "We used to do these -- a broker would leave, so a firm would sue, go to court, emergency injunction, and everyone would spend a lot of time and energy."
The Broker Protocol, Astarita explains, "was designed in part to stop that."
"It was a significant amount of money that was being spent with no discernible benefit," he says, about the lawsuits preceding the protocol.
An attorney representing Oppenheimer referred an inquiry to the company; representatives of the firm did not respond to several requests for comment. Goodermuth and her attorneys also did not respond to email and phone messages seeking comment on the case.
Chris Reese, a spokesman for Ameriprise, declined to discuss the details of the case, but defended the company's actions in a statement.
"The case is without merit and, in fact, a federal court denied the injunction. We followed industry protocol throughout this process," Reese says.
ALLEGED FIDUCIARY BREACH
In its initial complaint, Oppenheimer leveled an array of charges at Goodermuth, including breach of fiduciary duty, breach of contract and misappropriation of trade secrets. The complaint charges Ameriprise with misappropriation of trade secrets, conversion and tortious interference of contract.
The case turns on an agreement Oppenheimer says Goodermuth signed as a condition of receiving a book of business in 2012, barring her from contacting those clients for one year if she were to leave the firm. The agreement further prohibited Goodermuth from taking any documentation relating to the accounts without permission from an Oppenheimer principal, the company alleges, arguing that that covenant supersedes the Broker Protocol.
"This case has got a wrinkle," Astarita says. "It's got a wrinkle in that there's this agreement that she would not solicit the customers that were brought to her."
Ameriprise has vigorously denied Oppenheimer's charges, saying that Goodermuth's move was a "commonplace" occurrence in the brokerage sector, and that it fully conformed with the guidelines set out in the Broker Protocol, which both firms adopted in 2009.
Ameriprise contends that Goodermuth acted in good faith in transitioning the clients she served while at Oppenheimer, and that "application of the [Broker] Protocol is fatal to Oppenheimer's claims."
CLOAK-AND-DAGGER OPERATION?
Oppenheimer charges that Goodermuth secretly compiled the proprietary customer account information at the direction of an Ameriprise representative, describing a sort of cloak-and-dagger operation where Goodermuth received instructions on her cell phone while sitting in her car "parked in the company parking deck or in other locations to avoid being seen or overheard."
That contention, while colorful, is hardly unusual, nor is the abrupt manner in which Goodermuth is said to have left Oppenheimer, according to Astarita.
"That's what happens in every one of these cases -- whether you're a broker or a Xerox copy salesman or any other type of employee -- you do your negotiations with your new employer away from your office," he says.
"Brokers resign without notice," he adds. "It happens. It's standard. I don't know of any broker who resigns with notice."
Read more:
- Why the Broker Protocol May Matter More Than Ever
- Breaking Away? How to Avoid Litigation
- Broker Protocol: What Breakaways Need to Know
