A Stifel team is trying to put the kibosh on a second attempt by Morgan Stanley to get a federal judge to impose a temporary restraining order on its former employees’ ability to talk with clients.
The spat — over disputed allegations of non-solicit violations — has seen both sides try to bolster their arguments by pointing to Facebook, joint production agreements, news articles and more in an effort to sway a federal judge to their side.
It’s the latest example of brokerage firms and their former employees wrangling over contacts with former clients. The Broker Protocol, a 2004 industrywide accord that permits brokers switching employers to take basic client contact information with them, has traditionally smoothed over such disputes. But Morgan Stanley
Morgan Stanley’s lawsuits mirror similar court challenges filed by non-protocol member firms such as JPMorgan Chase, which have had a
The stakes are often high for such court battles.
While at Morgan Stanley, the Stifel team oversaw $660 million in client assets and generated $4.2 million in revenue, according to court documents. The group includes Zachary Birkey, Ronald Ouwenga, Jeff Schimmelpfennig, Myron Hendrix, Brian Thomas and Michael Bruner.
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Judge Joan Gottschall, however,
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Craig Schmell says the firm terminated him because of alcohol and drug addiction issues he had 30 years ago.
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The firm says former employee John Lockette agreed to have disputes heard in a private forum when he did not take advantage of an opt-out provision.
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The dispute pits four advisors against big Wall Street names: Wells Fargo, Morgan Stanley, Raymond James and Merrill Lynch.
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Her fresh criticism comes after FINRA barred her former Morgan Stanley branch manager this week.
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On Oct. 15, Morgan Stanley filed a renewed legal complaint with the court, repeating its allegations and request for a restraining order and injunctive relief.
The firm says that Birkey, who also served as a Morgan Stanley branch manager, signed an offer letter with Stifel in May 2018 — a month after the wirehouse renewed the lease on its Bourbonnais, Illinois, office.
“As branch manager, defendant Birkey had a duty to notify Morgan Stanley that renewing the lease was not financially beneficial to Morgan Stanley, especially since he knew that the other defendants would also be leaving for Stifel and that Morgan Stanley would be losing 75% of the financial advisors in the office,” the firm writes in its complaint.
The firm says clients have reported being asked to move their accounts to Stifel. Morgan Stanley also points to a Facebook post by one of the advisors’ wives as an example of improper client contacts. Clients have liked and shared the post, the firm says.
The advisors are also contacting clients because their signing bonuses are contingent on moving assets over, claims Morgan Stanley, which points to an AdvisorHub article about Stifel’s recruiting deal as well as a Birkey’s offer letter. Both were filed as exhibits in court documents. “Accordingly, defendants are heavily incentivized to move as many Morgan Stanley clients as possible to Stifel,” the wirehouse says.
Offering recruiting bonuses is an industrywide practice that Morgan Stanley also engages in.
A spokeswoman was unavailable for immediate comment on the matter.
The Bourbonnais team rebuttal filed in court denies the wirehouse’s allegations. Morgan Stanley, they contend, filed suit against the entire group, but only names one team member — Bruner — as having “asked” a client to move an account.
“And, even with respect to the allegation pertaining to Michael Bruner, there is no allegation that the alleged ‘ask’ occurred before the client expressed an interest to follow Bruner to Stifel,” the team says.
The advisors also say that Morgan Stanley fails to name any clients allegedly solicited to move accounts, and that while the firm claims the advisors retained confidential information it neither says which team members did so nor what specific information was taken.
Morgan Stanley’s lawsuit hinges in part on a non-solicitation clause contained in joint production agreement that team members signed. The group contends that this agreement does not constitute a contract. The advisors also contest Morgan Stanley’s claim that the employee handbook constitutes a contractual commitment as well. The firm is relying on “mere policy,” the advisors say.
It’s not clear when the judge may rule on the case. An attorney representing the Bourbonnais team has asked for a hearing on Nov. 9 to request leave to file more documents with the court.
Neither a Stifel spokesman nor the attorney was available for comment.
