A federal judge has temporarily barred a Wytheville financial advisor from soliciting clients of his former employer to move their investments to his new company.
U.S. District Judge Glen E. Conrad said the advisor’s general denials of the accusations could not overcome several documented second-hand accounts of clients reporting the advisor’s active solicitation to move their money to his new office. The advisor’s former company said he was violating a nonsolicitation clause.
In his Aug. 19 ruling, Conrad also concluded that a potential arbitration award could not cure the potential for irreparable harm to the business’ reputation among investors.
Conrad’s 14-page opinion is Edward D. Jones & Co. LP v. Clyburn (VLW 020-3-422).
$42 million transferred
Samuel (“Ed”) Clyburn Jr. worked for Edward Jones for 11 years before quitting that firm in June. He is now set up in his former office in Wytheville, but working for Ameriprise Financial Services LLC.
Edward Jones says Clyburn wasted no time in letting clients know of his move and inviting them to move their funds with him. As of July 20, about $25 million in assets were transferred from Edward Jones to Ameriprise. As of Aug. 13, the amount was $42 million, out of an original amount of $70 million, according to affidavits of company officials cited by Conrad.
Edward Jones sued on July 28 asserting claims for misappropriation of trade secrets and breach of contract in regard to the nonsolicitation clause. The company also initiated arbitration proceedings in accordance with terms of the contract.
Edward Jones marshaled evidence that Clyburn had actively solicited its clients. Four days after he resigned, 20 clients reported to Edward Jones that Clyburn had called them, several indicating they planned to move their accounts, Conrad said.
Some reported Clyburn questioned the reliability of the younger financial advisor who replaced him at Edward Jones, Conrad said. Others said Clyburn promised lower fees if they transferred.
Clyburn denied any solicitation in violation of his contract, Conrad said. He said some of his former clients chose to transfer their accounts “as is their right.” According to Clyburn, most of his Edward Jones accounts were with family, friends and acquaintances in the Wytheville community.
Conrad observed that a temporary restraining order is an “extraordinary remedy” requiring a “clear showing” that a plaintiff is entitled to it. But the plaintiff need only show a likelihood of success on a single claim. Conrad concluded Edward Jones had met the requisite burden on its breach of contract claim, so consideration of the trade secrets claim was unnecessary.
The judge looked to the specific definition of “solicitation” in Clyburn’s employment contract: “[A]ny contact or communication of any kind whatsoever for the purpose of inviting, encouraging or requesting any Edward Jones client to transfer…”
“Edward Jones has provided detailed affidavits and a supplemental declaration indicating that Mr. Clyburn contracted specific clients to schedule appointments, that he asked at least three particular clients to move their accounts to Ameriprise, and that he contacted another client more than once and advised her that he wanted to complete the paperwork necessary for her to switch firms,” Conrad wrote.
“Although Mr. Clyburn generally denies having solicited clients in violation of the Agreement, his declaration does not specifically address or refute their particular allegations contained in the sworn statements submitted by Edward Jones,” the judge said.
Conrad rejected Clyburn’s objection to the hearsay accounts of client experiences as “plainly without merit.” He cited case law from the 4th U.S. Circuit Court of Appeals approving of the use of hearsay evidence for purposes of a preliminary injunction.
Conrad found “unpersuasive” Clyburn’s argument that any harm is not irreparable because Edward Jones could seek compensatory damages in the arbitration proceedings. Current transfers are “only part of the harm and part of the remedy,” the judge said. Edward Jones “also risks losing future business opportunities with the clients defendant has diverted as well as future referrals,” Conrad said.
Conrad determined to “temporarily enjoin” Clyburn from soliciting Edward Jones clients in violation of the contract. In a separate order, Conrad set the time frame as 14 days and echoed the language of the nonsolicitation clause.
Edward Jones is represented by Caitlin N. Meyers of St. Louis. Clyburn is represented by Joshua E.P. Long of Roanoke.