Morgan Stanley Smith Barney LLC v. O'Brien
Filing
29
ORDER granting 2 Motion for Preliminary Injunction. See the attached Memorandum of Decision. Plaintiff is ordered to post with the Clerk of the Court a bond or other security in the amount of $25,000 pursuant to the attached Memorandum of Decision. Signed by Judge Vanessa L. Bryant on 11/6/13. (Ives, D)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
MORGAN STANLEY SMITH BARNEY LLC,
Plaintiff,
v.
DENIS O’BRIEN,
Defendant.
:
:
:
:
:
:
:
CIVIL ACTION NO.
3:13-CV-01598 (VLB)
November 6, 2013
MEMORANDUM OF DECISION GRANTING PLAINTIFF’S MOTION FOR A
PRELIMINARY INJUNCTION
Before the Court is Morgan Stanley Smith Barney LLC’s (“Morgan Stanley”)
Motion for Preliminary Injunction filed on October 31, 2013 against Denis O’Brien
(“O’Brien”) pursuant to Federal Rule of Civil Procedure 65. The Plaintiff seeks an
order directing the Defendant and anyone in concert with him to return to Morgan
Stanley any customer information O’Brien removed from Morgan Stanley at any
time during his employment, enjoining the Defendant and anyone in concert with
him from using in any way any confidential information to solicit Morgan Stanley
customers or to furnish such material to anyone else, and enjoining Defendant
and anyone in concert with him from soliciting or attempting to solicit any
customer O’Brien served or whose name became known to O’Brien during his
tenure with Morgan Stanley.
Based upon the parties’ briefs, supporting affidavits filed therewith and the
information presented at the November 4, 2013 hearing on the Motion for
Preliminary Injunction, the Court finds the following facts:
1
Denis O’Brien was employed by Morgan Stanley as a financial advisor. In
connection with his employment, O’Brien signed a Financial Advisor Employment
Agreement (the “Agreement”) on August 30, 2004, containing restrictive
covenants pertaining to solicitation of customers and the use and dissemination
of confidential information. [Dkt. #1, Agreement, p.1]. Paragraph 2.3 of the
Agreement states, in relevant part:
You agree that, during the course of your employment with
Morgan Stanley or otherwise, you will not remove Trade
Secrets or other Company Records from the premises of
Morgan Stanley in either original or copied form, except in the
ordinary course of conducting business for, and subject to
approval by, Morgan Stanley. You also agree that you will not
use Trade Secrets or other Company Records for any purpose
other than the purpose of conducting the business of Morgan
Stanley. You further agree that (a) your use of Trade Secrets
and other Company Records will stop immediately upon the
suspension or termination of your employment relationship
with Morgan Stanley; (b) you will immediately deliver to
Morgan Stanley, at the time of suspension or termination of
your employment or at any other time upon Morgan Stanley’s
request, any Trade Secrets or other Company Records in your
possession or control … In addition, you agree that, should
you decide to terminate your employment with Morgan
Stanley, your use of Trade Secrets and other Company
Records will stop immediately and permanently, unless
otherwise agreed to by Morgan Stanley.
[Dkt. #1, Agreement, ¶2.3]. Pursuant to paragraph 2.1, Trade Secrets include
“customer files, lists, and holding pages” and “the names, addresses, telephone
numbers, and assets and obligations carried in the accounts of Morgan Stanley’s
customers.” [Dkt. #1, Agreement, ¶2.1].
2
Paragraph 3.2 of the Agreement proscribes O’Brien’s ability to solicit
Morgan Stanley’s customers for one year after the termination of his
employment:
For a period of one year following termination of employment
for any reason, you will not solicit or attempt to solicit, directly
or indirectly, any of Morgan Stanley’s customers who were
served by you, or whose names became known to you, while
in the employ of Morgan Stanley or as a result of your
employment with Morgan Stanley, with respect to securities,
commodities, financial futures, insurance, tax advantaged
investments, mutual funds or any other line of business in
which Morgan Stanley or any of its affiliates is engaged. For
purposes of this provision, the term “solicit” includes
initiation of any contact with customers for the purpose of
conducting business with or transferring accounts to any
other person or firm that does business in any line of business
in which Morgan Stanley or any of its affiliates is engaged.
[Dkt. #1, Agreement, ¶3.2]. The Agreement provides that “any controversy or
claim arising out of or relating to” either O’Brien’s employment by Morgan
Stanley or the Agreement will be settled by arbitration before the Financial
Industry Regulatory Authority (“FINRA”).1 The Agreement, however, expressly
allows Morgan Stanley to seek injunctive relief from a court of competent
jurisdiction should O’Brien breach the restrictive covenants enumerated above,
and further stipulates to expedited arbitration hearing procedures in the event
that a court grants injunctive relief. [Dkt. #1, Agreement, ¶¶4.1, 4.2]. Pursuant to
1
Paragraph 7.1 specifically calls for arbitration before either the National
Association of Securities Dealers, Inc. (“NASD”) or the New York Stock
Exchange. FINRA “was created through the consolidation of NASD and the
member regulation, enforcement and arbitration operations of the New York
Stock Exchange,” effective July 30, 2007. See
http://www.finra.org/Newsroom/NewsReleases/2007/p036329.
3
Rule 13804 of FINRA’s Code of Arbitration Procedure, “[i]f a court issues a
temporary injunctive order, an arbitration hearing on the request for permanent
injunctive relief will begin within 15 days of the date the court issues the
temporary injunctive order.” FINRA Code of Arbitration Procedure for Industry
Disputes, Rule 13804(b)(1), available at
http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4
193.
In 2009, Morgan Stanley became a signatory to the Protocol for Broker
Recruiting (the “Protocol”), the express “principal goal” of which is “to further
the clients’ interests of privacy and freedom of choice in connection with the
movement of their Registered Representatives [RRs] between firms” and which
forecloses any liability a departing RR or his or her new firm may incur by reason
of the RR taking certain information with him or her upon leaving one firm for
another. [Dkt. 20-1, Protocol, p. 1]. Signatories to the Protocol “agree to
implement and adhere to it in good faith.” [Id.]. Pursuant to the Protocol,
[w]hen RRs move from one firm to another and both firms are
signatories to this protocol, they may take only the following
account information: client name, address, phone number,
email address, and account title of the clients that they
serviced while at the firm (the ‘Client Information’) and are
prohibited from taking any other documents or information.
Resignations will be in writing delivered to local branch
management and shall include a copy of the Client Information
that the RR is taking with him or her. The RR list delivered to
the branch also shall include the account numbers for the
clients serviced by the RR. The local branch management will
send the information to the firm’s back office. In the event that
the firm does not agree with the RR’s list of clients, the RR will
4
nonetheless be deemed in compliance with this protocol so
long as the RR exercised good faith in assembling the list and
substantially complied with the requirement that only Client
Information related to clients he or she serviced while at the
firm be taken with him or her.
To ensure compliance with GLB and SEC Regulation SP, the
new firm will limit the use of the Client Information to the
solicitation by the RR of his or her former clients and will not
permit the use of the Client Information by any other RR or for
any other purpose. . . .
[Id. (emphasis added)].
On Thursday, October 24, 2013, O’Brien printed a list of his customers from
Morgan Stanley’s database and then, without Morgan Stanley’s knowledge,
changed 206 contact telephone numbers for 156 of his customer accounts in
Morgan Stanley’s computer system between 2:00 and 4:00 pm. [Dkt. 1, Verified
Complaint ¶9]. O’Brien also left some telephone numbers intact. On Friday,
October 25, 2013 O’Brien resigned from Morgan Stanley without prior notice, and
left a copy of the list he had generated the day before with Morgan Stanley,
purportedly pursuant to the Protocol, and containing the correct telephone
numbers of his customers. He advised Morgan Stanley that he was taking a copy
of this list with him. O’Brien has affirmed that he began his affiliation with
Raymond James Financial Services, Inc. (“Raymond James”) immediately
following his resignation from Morgan Stanley. [Dkt. 21, O’Brien Declaration ¶1].
Raymond James is a signatory to the Protocol for Broker Recruiting. [Dkt. 20-1,
Protocol].
5
Following his resignation, Morgan Stanley reassigned O’Brien’s customers
to four financial advisors who, because they were unaware that O’Brien had
changed many telephone numbers in Morgan Stanley’s computer system, were
unable to contact various customers for several days. After receiving consistent
reports that the four new financial advisors were unable to contact O’Brien’s
customers at the phone numbers on the computer system, Morgan Stanley asked
its Information Technology department on Tuesday, October 29 to investigate.
The IT department in turn reviewed the records of O’Brien’s customers, which
reflected the changes to various customers’ telephone numbers. The IT
department completed its review of the records by Wednesday, October 30, 2013.
O’Brien has affirmed that he has used the information in the list he took
with him from Morgan Stanley to contact his clients, inform them of his new
employment and contact numbers, and ask them to continue to do business with
him. [Dkt. 21, O’Brien Declaration ¶12]. As of the date of the hearing,
approximately fifteen customers had chosen to leave Morgan Stanley and follow
O’Brien to Raymond James.
Morgan Stanley moves for injunctive relief on the basis that O’Brien has
violated the letter of the Protocol by failing to prepare the list he left for Morgan
Stanley in good faith and further has violated the express purpose and the spirit
of the Protocol by changing the contact information of more than 150 customers
in bad faith and in an attempt to thwart Morgan Stanley’s communication with its
clients, causing irreparable harm to Morgan Stanley’s relationship with its clients.
Morgan Stanley further argues that because O’Brien breached the Protocol the
6
restrictive covenants in his employment Agreement must control, and O’Brien
has breached these covenants by soliciting clients and removing trade secrets
from Morgan Stanley’s possession. O’Brien, on the other hand, asserts that he
has complied with the letter of the Protocol and is therefore entitled to possess
and use the list of customer contact information he took with him from Morgan
Stanley. Both parties agree that the Protocol governs a registered
representative’s entitlement to customer information upon his departure from a
member firm and establishment at another member firm and that, where the
registered representative is also subject to restrictive covenants that conflict with
the Protocol, the restrictive covenants are applicable only when the registered
representative has breached the Protocol.
“A preliminary injunction may be granted only upon a showing of (1) likely
irreparable harm, and (2) either (a) a likelihood of success on the merits or (b)
sufficiently serious questions going to the merits to make them a fair ground for
litigation, with the balance of hardships tipping decidedly in the movant's favor.”
Verzani v. Costco Wholesale Corp., 387 F. App’x 50, 51 (2d Cir. 2010) (citing
Doninger v. Niehoff, 527 F.3d 41, 47 (2d Cir. 2008)). “A showing of irreparable
harm is the ‘single most important prerequisite’ for issuance of a preliminary
injunction.” Id. (quoting Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d
110, 118 (2d Cir. 2009)). Injunctive relief, though, “is an extraordinary and drastic
remedy, one that should not be granted unless the movant, by a clear showing,
carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972
(1997) (emphasis and citation omitted). Further, “[w]here there is an adequate
7
remedy at law, such as an award of money damages, injunctions are unavailable
except in extraordinary circumstances.” Moore v. Consol. Edison Co. of New
York, Inc., 409 F.3d 506, 510 (2d Cir. 2005).
Likelihood of Success on the Merits
On the basis of the factual findings delineated above, the Court finds that
Morgan Stanley has shown a likelihood of success on the merits. Although
O’Brien argues that he has complied with the four corners of the Protocol and is
thus entitled to its protections from liability, he has violated the spirit of the
Protocol, the prohibition against bad faith expressly contained in the Protocol,
and the express purpose of its creation to protect brokerage clients’ rights of
choice and privacy. The Protocol unequivocally proclaims that its “principal
goal” is “to further the clients’ interests of privacy and freedom of choice in
connection with the movement of their Registered Representatives [RRs]
between firms.” [Dkt. 20-1, Protocol, p. 1]. Signatories to the Protocol “agree to
implement and adhere to it in good faith.” [Id.]. O’Brien’s deliberate use of the
Morgan Stanley computer system and his calculated corruption of more than 200
customer telephone numbers ostensibly to prevent Morgan Stanley from
immediately contacting his portfolio of clients upon his departure evidences bad
faith and a contempt for his clients’ right to freely choose whether to remain with
Morgan Stanley or to follow him to Raymond James. Moreover, O’Brien’s
conduct deprived Morgan Stanley’s customers of information necessary to make
informed decisions to either maintain their accounts at Morgan Stanley or
8
transfer their accounts to Raymond James. O’Brien has offered no explanation
for his conduct.
Although the Defendant has complied with the technical aspects of the
Protocol – namely, providing a copy of his clients’ names, addresses, telephone
numbers, email addresses, and account titles to Morgan Stanley with his
resignation – he did not do so in good faith because the telephone numbers on
the list he left were different from the erroneous telephone numbers he entered
on Morgan Stanley’s computer database. Although he argues that Morgan
Stanley possessed numerous methods of obtaining the correct telephone contact
numbers for the clients in question, O’Brien undoubtedly intended and knew,
after working at Morgan Stanley for approximately nine years, that his corruption
or Morgan Stanley’s database by altering the telephone numbers in its computer
system would create delay and confusion and would impede Morgan Stanley’s
ability to communicate with the clients. Leaving Morgan Stanley with a paper
copy of his the client list containing the correct telephone numbers was
tantamount to a misrepresentation in furtherance of his sabotage. O’Brien’s
deliberate sabotage of Morgan Stanley’s client records deprived customers of the
right to make an informed decision to either maintain their account at Morgan
Stanley or transfer their account to Raymond James.
Both parties agree that if O’Brien has breached the Protocol then the
restrictive covenants in his Agreement are applicable. The Court finds that
Morgan Stanley has established that it is likely to prevail on its claim that O’Brien
9
has breached both the Protocol and the non-solicit and confidentiality clauses of
his Agreement.
Further, because it is likely that O’Brien has violated the Protocol, it is also
likely that the client information he took upon his resignation constitutes a trade
secret to which his new firm, Raymond James, has no more right of access than
does a non-signatory to the Protocol. O’Brien has affirmed that he took from
Morgan Stanley upon his resignation a list containing client information. This
client information (including customer names, addresses, and telephone
numbers) falls explicitly within the definition of “Trade Secrets” in his Agreement,
which includes “the names, addresses, telephone numbers, and assets and
obligations carried in the accounts of Morgan Stanley’s customers.” [Dkt. #1,
Agreement, ¶2.1]. By contacting Morgan Stanley’s clients after his resignation,
O’Brien violated the confidentiality clause in his Agreement which proscribes the
removal of Trade Secrets from Morgan Stanley’s premises and their use for any
purpose other than conducting the business of Morgan Stanley. [Dkt. #1,
Agreement, ¶2.3]. As O’Brien has admitted that he has contacted his former
clients for the express purpose of soliciting them for his new firm, he has also
violated the twelve month non-solicit clause of his Agreement.
Morgan Stanley has also established that the use of the client list will result
in its irreparable injury. This Court is persuaded by the rationale articulated in
Citigroup Global Markets Inc. v. Smith, No. 3:09cv597 (JCH). In Smith, the court
granted Citigroup’s request for injunctive relief where a broker took more
information than she was entitled to take with her upon her resignation and move
10
to a non-signatory firm to the Protocol. The defendant in that action was bound
by nearly identical restrictive covenants as O’Brien and, upon her departure, took
with her the names, addresses and telephone numbers of her Citigroup clients,
who she then attempted to solicit for her new firm. [Citigroup Global Markets Inc.
v. Smith, 3:09-cv-597, #20, 4/20/09 Preliminary Injunction Hearing Transcript, 34:525, 35:1-11]. The court held that the broker’s possession and use of the client
information and her solicitation of the clients violated the confidentiality and nonsolicit clauses in her employment agreement, which were akin to those in the
present case, and that the client information the broker took from her former
employer constituted a trade secret. [Id. at 35:8-25].
The defendant in that action, as here, argued that the client information at
issue could not constitute a trade secret because signatories to the Protocol
have, in essence, agreed to share their client information with other broker firms.
The Smith court, however, opined that the Protocol “limits the disclosure of the
trade secret information which I view to be customer lists in a way that preserves
its trade secret status. I come to that conclusion because I’m mindful of the
requirements of the trade secret to get trade secret – to get the blanket of the
trade secret categorization, one of the requirements is to not disclose the
information to anyone beyond that necessary to use it, in effect.” [Id. at 36:20 –
37:7]. O’Brien too has posited that the information he took from Morgan Stanley
may not be classified as a trade secret because such information is routinely
passed between firms upon a broker’s resignation pursuant to the Protocol. This
Court is not persuaded. To the contrary, client information subject to disclosure
11
under the Protocol is only subject to disclosure to the broker’s new employer and
not the brokerage community at large. The information is never made public and
remains a trade secret subject to non-disclosure to any other person unless the
broker complies with the Protocol again upon separation from the second
brokerage firm.
This conclusion is buttressed by the Connecticut Unfair Trade Secrets Act,
Conn. Gen. Stat. § 35–50 et seq., which defines a trade secret as “information,
including a … customer list that: (1) Derives independent economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (2) is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.” Conn. Gen. Stat. § 35-51(d).
Statutory misappropriation of trade secrets includes “[a]cquisition of a trade
secret of another by a person who knows or has reason to know that the trade
secret was acquired by improper means.” Conn. Gen. Stat. § 35-51(b)(1).
The parties do not dispute that the customer information at issue here – in
the context of customer relationships with broker houses – is not readily
ascertainable by those who can obtain economic value from its disclosure or use,
with the exception of disclosure pursuant to the Protocol. The Protocol itself
constitutes a reasonable measure to protect the secrecy of exactly this type of
information, with the limited exception being that client information obtained by a
broker who in good faith complies with the Protocol may inure to the benefit of
that broker’s new firm. Further, given that O’Brien violated the Protocol in bad
12
faith and by means designed to thwart the very agreement which would have
afforded him protection for proper use of the trade secrets he appropriated,
O’Brien knew or should have known that he had acquired the customer
information from Morgan Stanley by improper means, thus constituting
misappropriation of trade secrets. Based on the foregoing, Morgan Stanley has
demonstrated a likelihood of success on the merits as to its misappropriation
claim.
Morgan Stanley has likewise demonstrated a likelihood of success on the
merits as to its Connecticut Unfair Trade Practices Act (“CUTPA”) claim. CUTPA
provides that “[n]o person shall engage in unfair methods of competition and
unfair or deceptive acts or practices in the conduct of any trade or commerce.”
Conn. Gen. Stat. § 42-110b(a). Courts determine whether a practice violates
CUTPA by analyzing
(1) whether the practice, without necessarily having been
previously considered unlawful, offends public policy as it has
been established by statutes, the common law, or otherwise-in
other words, it is within at least the penumbra of some
common law, statutory, or other established concept of
unfairness; (2) whether it is immoral, unethical, oppressive, or
unscrupulous; (3) whether it causes substantial injury to
consumers, [competitors or other businesspersons].
Am. Car Rental, Inc. v. Comm'r of Consumer Prot., 273 Conn. 296, 305-06 (Conn.
2005) (internal quotations and citation marks omitted). “All three criteria do not
need to be satisfied to support a finding of unfairness. A practice may be unfair
because of the degree to which it meets one of the criteria or because to a lesser
extent it meets all three.” Id. at 306.
13
Here, O’Brien acted in bad faith when, for no purportedly innocent reason,
he accessed Morgan Stanley’s computer system and altered the telephone
numbers of approximately 150 of his soon-to-be former clients in order to thwart
Morgan Stanley’s expedient communications with these clients. This conduct
violates the spirit of the Protocol, an agreement between nearly one thousand
brokerage firms that contains the procedure pursuant to which registered
representatives must act when they depart from one firm and move to another.
As noted, the Protocol’s principal goal is “to further the clients’ interests of
privacy and freedom of choice in connection with the movement of their
Registered Representatives [RRs] between firms.” The intent of O’Brien’s
conduct appears to have been to directly impede Morgan Stanley’s
communication with its clients, which cannot be said to comply with the industry
goal of fostering client choice and freedom of movement. Thus, O’Brien’s actions
both violated an established concept of fairness and were unethical, oppressive,
and unscrupulous.
In sum, Morgan Stanley has established that it is likely that O’Brien has
breached the spirit and purpose of the Protocol and, by virtue of this breach, that
it is further likely that O’Brien has breached the restrictive covenants in his
employment Agreement as well as having violated CUTPA and misappropriated
trade secrets pursuant to the Unfair Trade Secrets Act.
Irreparable Harm
14
To establish irreparable harm, a party seeking injunctive relief must show
that “there is a continuing harm which cannot be adequately redressed by final
relief on the merits and for which money damages cannot provide adequate
compensation.” Kamerling v. Massanari, 295 F.3d 206, 214 (2d Cir. 2002)
(quotations omitted). Irreparable harm must be “actual and imminent, not remote
or speculative.” Id. Morgan Stanley contends that O’Brien’s continued use of
Morgan Stanley’s customer information and solicitation of its customers
constitutes irreparable harm by destroying many years of client marketing,
goodwill, and reputation. O’Brien counters that Morgan Stanley has not
demonstrated that it will suffer irreparable harm for which money damages are
inadequate because O’Brien’s alteration of the telephone numbers is a completed
act and will cause no future harm, Morgan Stanley is a party to the Protocol,
which was not breached, and monetary damages, which are calculable, are an
adequate remedy for O’Brien’s alteration of the telephone numbers and the brief
delay it caused.
The Court agrees with the Plaintiff that O’Brien’s calculated alteration of
the customer telephone numbers, which led to a delay of several days in Morgan
Stanley’s ability to contact its clients, has caused irreparable harm for which
money damages may not adequately compensate. Morgan Stanley argued at the
hearing before this Court that the time lost in its ability to contact its customers
may influence the light in which these customers view Morgan Stanley. Because
O’Brien was able to contact customers immediately upon his resignation, and
because Morgan Stanley could not, some customers likely experienced a delay in
15
receipt of a call from a Morgan Stanley financial analyst. These customers, in
turn, may be apt to believe as a result of this delay that Morgan Stanley does not
value their accounts and that they will receive lesser service than they would
receive with O’Brien and Raymond James. This constitutes not only a potential
loss of customers and the potential for future business brought in by these
customers, but also a loss of Morgan Stanley’s goodwill and reputation.
Various courts have similarly held that loss of a company’s goodwill
constitutes irreparable harm. In Citigroup Global Markets Inc. v. Smith, the court
issued a preliminary injunction enjoining a defendant from continuing to contact
her former customers and ordering the return of client information pending
FINRA arbitration. [3:09-cv-597, #20, 4/20/09 Preliminary Injunction Hearing
Transcript; #19, 4/17/09 Order granting Motion for Preliminary Injunction]. Noting
that there is a “public interest in the protection of the goodwill of businesses,”
the court explained that “a former employee who, in effect, takes [or attempts to
take] a client from their former employer in violation of an employment contract,
that is irreparable harm. . . . Initially it would be very difficult to calculate money
damages that would successfully address the loss of the relationship with a
client that would produce an indeterminate amount of business for years to
come.” [Citigroup Global Markets Inc. v. Smith, 3:09-cv-597, #20, 4/20/09
Preliminary Injunction Hearing Transcript, 38:23-25, 41:10 – 42:3]. See also
DeWitt Stern Grp., Inc. v. Eisenberg, 13 CIV. 3060 RWS, 2013 WL 2420835
(S.D.N.Y. June 4, 2013) (internal citation and quotation marks omitted) (finding
irreparable harm and issuing injunctive relief where insurance broker solicited
16
former employer brokerage firm’s clients, several of whom moved to new
brokerage firm, and sent confidential company property to his new firm, and
concluding that “[i]rreparable harm to an employer results through both the loss
of client relationships and customer goodwill from a breach of a non-compete
clause, and where an employee has misappropriated trade secrets or confidential
customer information, including pricing methods, customer lists and customer
preferences.”); N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38, 49 (2d Cir. 1999)
(holding that “loss of trade secrets cannot be measured in money damages
because a trade secret once lost is, of course, lost forever,” and issuing
preliminary injunction where employer established that former employee’s use of
list containing client information would result in irreparable harm).
Moreover, O’Brien himself covenanted in his Agreement that “Morgan
Stanley will suffer immediate and irreparable harm and that money damages will
not be adequate to compensate Morgan Stanley or to protect and preserve the
status quo pending arbitration [in the event of a breach of O’Brien’s obligations
concerning Trade Secrets or the non-solicit clause of his Agreement].” [Dkt. #1,
Agreement, ¶4.1]. While this Agreement cannot provide the legal conclusions
that fall within this court’s province alone, O’Brien’s assent to this Agreement
demonstrates his knowledge and agreement of the severity of a breach of the
restrictive covenants to which he agreed.
The Court thus holds that a violation that compromises a company’s
goodwill, as here, is irreparable and continuing. Morgan Stanley’s failure to
contact these customers for several days tended to undermine the goodwill it had
17
built with its customers over the course of, in some cases, many years. This
delay and the loss of goodwill it has engendered may not be remedied by money
damages. Rather, Morgan Stanley is entitled to level the informational playing
field rendered uneven by O’Brien’s deceit and to attempt to make up the gap by
communicating with the clients whose contact information O’Brien altered by
pitching the merits of their services over O’Brien’s. The grant of preliminary
injunctive relief would mitigate the unfair advantage that O’Brien created for
himself when he violated the terms of and undermined and subverted the express
purpose of the Protocol by allowing Morgan Stanley to attempt to salvage its
relationships with customers that may have been damaged by O’Brien’s unfair
conduct.
Plaintiff’s motion and Defendant’s opposition having been heard by the
Court, and the Court having reviewed the entirety of the record in this case, it is
ORDERED that, pursuant to Fed. R. Civ. P. 65 and until further order of this Court
or decision by a FINRA arbitration panel:
1. Defendant is directed, along with his agents, employees, and
representatives, and all those in active concert or participation with him
and/or his agents, employees, and representatives, to return to Morgan
Stanley within 24 hours any and all documents and computerized materials
including, without limitation, all customer information of any sort, and
copies and/or extracts thereof (the “Confidential Information”), removed at
any time from Morgan Stanley, and O’Brien is further directed not to retain
any copies thereof, and to permanently remove any and all such
18
information (including data contained on computer software, hard drives,
and/or personal digital assistants) from his possession and custody;
2. Defendant is enjoined, along with his agents, employees, and
representatives, and all those in active concert or participation with him
and/or his agents, employees, and representatives, from (a) using or
disclosing in any way any of the Confidential Information to solicit Morgan
Stanley customers, and (b) using in any way or furnishing to anyone any of
the Confidential Information; and
3. Defendant is enjoined, along with his agents, employees, and
representatives, and all those in active concert or participation with him
and/or his agents, employees, and representatives, from soliciting or
attempting to solicit, directly or indirectly, any customer O’Brien served, or
whose name became known to O’Brien, while in the employ of Morgan
Stanley.
This Order shall not apply with respect to any customer who had
transferred his or her account from Morgan Stanley to Raymond James as of the
date of the hearing on this matter, November 4, 2013. This Order is further
without prejudice to the Plaintiff’s filing of a motion seeking an order respecting
those customers who had transferred their accounts from Morgan Stanley to
Raymond James as of November 4, 2013.
It is further ORDERED that the Plaintiff shall post a bond of $25,000 with
the Court on or before November 8, 2013. Said funds shall be deposited into an
interest bearing account and the Clerk shall deduct from the income earned on
19
this investment a fee of ten percent (10%) of such income earned, whenever such
income becomes available for deduction in the investment so held and without
further order of the Court.
IT IS SO ORDERED.
________/s/______________
Hon. Vanessa L. Bryant
United States District Judge
Dated at Hartford, Connecticut: November 6, 2013
20
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?