© 2020 Arizent. All rights reserved.

Former JPMorgan broker defeats restraining order in FINRA arbitration


A former broker with JPMorgan has beaten back a temporary restraining order that blocked him from contacting his former clients after he jumped to Raymond James.

Erik Weiss, who had worked in JPMorgan's banking channel in Indianapolis, left to join Raymond James last September. JPMorgan alleged that he immediately began improperly soliciting his former clients, sued, and won a temporary restraining order in federal court.

Now, Weiss' attorney has notified that court that a FINRA arbitration panel struck down JPMorgan's request for a permanent injunction, dealing a blow to the firm in what has been an aggressive litigation campaign against former employees.

Weiss and spokespeople for JPMorgan and Raymond James declined to comment for this article. Attorneys for Weiss did not immediately respond to requests for comment.

The case comes as the latest legal spat between brokerage firms involving employee transitions, and the extent to which departing advisors can engage with their former clients.

Commonly, the plaintiffs prevail in the initial phase — a lawsuit seeking a temporary restraining order in federal court — when they can demonstrate that without relief, they will suffer "irreparable harm" and that "the former employee had engaged in outrageous and indefensible conduct," according to Bill Singer, a long-time securities attorney who maintains the Broke and Broker blog.

"Although that two-prong test is not technically the rule as promulgated by courts, veteran industry lawyers know that it is frequently the basis upon which courts order a TRO," Singer says.

The advisor switched firms only to see his new employer close shop 18 months later.
January 13

"That being said, it is important to note that the T in TRO stands for 'temporary,'" he adds. "Upon imposing a TRO in industry non-compete or non-solicit cases, the courts typically remand to FINRA arbitration, and once the change of forums occurs, the courts tend to allow arbitrators the discretion to remove or modify the TRO."

James Eccleston, a securities attorney at Eccleston Law in Chicago, says that it's not uncommon for advisors to beat back the claims of their former employers, either in district court or later in FINRA arbitration.

"Assuming the transition has not gone smoothly, and it ends up in court, the elements for a court to grant an injunction of any kind are not easy to prove," Eccleston says.

But too often, he says, advisors don't lay the proper groundwork for a transition, a lengthy and involved process that entails working with an attorney to review all the relevant employment documents and ensuring that the advisor stays on the right side of all applicable laws.

"Regrettably, many advisors don't fully appreciate the significance of the transition process, cut corners, do unwise things, don't plan, don't document, and hire incompetent counsel," Eccleston says.

"That makes the job of counsel for brokerage firms easier, and they have the advantage of surprise as well," he says. "But on an even playing field with competent counsel representing the advisor, there should be sufficient ammunition in most cases to defeat one or more of the critical elements necessary for an injunction."

For reprint and licensing requests for this article, click here.