Virginia Lawyers Weekly

A broker who jumped ship defeated his former employer’s effort to keep him from contacting clients who might want to switch their accounts in a June 13 decision from the U.S. District Court in Norfolk.

Bank of America Investment Services sued former broker Michael A. Byrd, saying he abruptly walked out to join Wachovia Securities, and then began dialing for dollars to BAI customers. BAI made similar allegations against Gregory F. Harris.

Not so, the brokers responded. In fact, the brokers said they had strictly followed industry protocol for broker recruiting by working only from memory and public records to contact clients and let them know about the switch, according to their responses filed with the court in Bank of America Investments Servs. Inc. v. Byrd (VLW 009-3-379).

Byrd and Harris contended that just providing their own new contact information to former BAI clients did not violate duties related to nonsolicitation or confidential information under their BAI contracts or common law.

BAI supported its claim of tainted contacts with former clients with affidavits from two current BAI employees who had called many of the BAI clients. The BAI brokers reported that about 50 current clients said Byrd had encouraged them to move their accounts to Wachovia.

One actual customer BAI could point to as having been directly solicited by a former broker, Harris, happened to be the mother-in-law of a BAI branch manager, according to the court.

Wachovia tried to trump BAI’s affidavits with a submission from a senior vice president who said he “personally sat in on telephone calls” made by Byrd and Harris to their former clients and “did not hear Mr. Byrd or Mr. Harris encourage or ask customers to transfer their accounts to Wachovia.”

Weighing the dueling affidavits submitted by the parties, Norfolk U.S. District Judge Mark S. Davis held that BAI had not demonstrated the potential for irreparable harm that warranted an injunction during the time the claims could be arbitrated.

The affidavit from a BAI assistant vice president said he had telephone conversations with more than 100 BAI customers previously served by Byrd, and approximately 50 of those customers stated they were contacted by Byrd, some said repeatedly, and encouraged to move their accounts to Wachovia.

A BAI financial advisor also submitted an affidavit asserting that former customers of Byrd she contacted “on numerous occasions” informed her that Byrd already had called them to encourage them to move their accounts. She also alleged Byrd had used a confidential BAI password to provide a Pacific Life annuity statement to a customer.

Byrd acknowledged contacting former clients to provide new contact information, by phone and through a “very limited announcement card.” Harris attested to following a similar practice. Byrd said he provided the annuity statement at the customer’s request, using a Pacific Life password that was his own and that he continued to use to access that third-party Web site.

BAI followed up with rebuttal affidavits containing customer-specific details, but they still were “non-affiant statements,” according to Davis.

None of the affidavits submitted by BAI alleged that it had lost a single customer account to Wachovia based on Harris’s or Byrd’s alleged improper solicitations, Davis wrote.

The court recognized that the affidavits from Harris and the Wachovia vice president, pitted against the affidavit from the BAI branch manager’s relative, were to some degree self-serving. But Davis said the burden of proof lay with BAI, which offered no evidence of loss of good will, damage to its reputation, or the likelihood of loss of a single customer based on the alleged solicitation.

Davis denied the motion for a preliminary injunction, saying BAI had not proved that possible money damages through the parties’ mandatory arbitration would be an inadequate remedy.

Richmond lawyer Henry I. Willett III represented the defendants and Richmond lawyers James C. Cosby and Kevin J. Funk represented BAI. None of the lawyers were available for comment.

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