Faegre Baker Daniels Scores Comprehensive Victory in High Court Restrictive Covenant Case

Faegre Baker Daniels LLP yesterday secured a comprehensive victory on behalf of our clients, Raymond James and seven former Edward Jones financial advisers, resulting in all claims against them being dismissed and indemnity costs awarded in their favour. 

Towry Law acquired Edward Jones in late 2009 and brought proceedings after the EJ employees left to join Raymond James and a significant number of their clients followed.  Towry claimed that the employees had "solicited" the clients and were therefore in breach of their restrictive covenants.  It also pursued a number of other allegations, including misuse of confidential information and conspiracy. 

Following a two-month trial involving more than forty witnesses, the judge comprehensively exonerated our clients of all allegations of breach of their restrictive covenants, misuse of confidential information and alleged conspiracy.

The key messages from the case are as follows:

• Take legal advice – the fact that Raymond James and the advisers had consistently taken and followed our legal advice was described by the judge as being "a striking feature" of the case and a major factor in the claims being dismissed in their entirety. 
  
  
• "Non-solicitation" does not equal "non-dealing" – Towry had argued that a non-solicitation restriction was effectively the same as a non-dealing restriction.  The judge rejected this argument.  The lesson here is that a non-solicitation restriction on its own offers little protection to the former employer where the employee has strong relationships with their clients or customers. 
  
  
• Inference alone was not enough – Towry based its entire claim on inference.  In this case, that was not sufficient to show that there had been solicitation.  The judge was satisfied that the clients had moved of their own volition and that no solicitation had occurred.  
  
  
• Avoid "kitchen sink" litigation – Towry had brought pretty much every claim available against Raymond James and the advisers, including, most seriously, conspiracy.  The conspiracy claim was found by the judge to be "manifestly unreasonable," and it was this that led to indemnity costs being awarded against Towry, which is the most penal level of costs that can be awarded.

Alex Denny, Head of Employment at the London office of Faegre Baker Daniels, advised Raymond James on the recruitment process and commented as follows:

"This was an outstanding victory for Raymond James and the seven advisers.  The case against them was never only about restrictive covenants; it was about Towry Law haemorrhaging advisers and clients at a time of financial upheaval and needing to find a way to stem the flow.  Bringing aggressive litigation was a strategic decision designed to scare off other advisers thinking of moving.  As obvious as this may seem, if you want to stop an employee from dealing with their clients or customers, you need to have a properly drafted "non-dealing" restriction.  There was no such restriction applicable to the advisers in this case.  Interestingly, it was this restriction that Towry tried to impose on its other advisers after the individual defendants had left: a case of closing the stable door after the horse had bolted."

Mark de Ste Croix, Head of Legal and Compliance at Raymond James, commented as follows:

"Raymond James is absolutely delighted with the outcome in the case.  Without question, Faegre Baker Daniels have played a pivotal and key role from start to finish in getting all of the defendants to where we are, and, as with all of these cases, we understand that it is very much a team effort all round.  On behalf of all at Raymond James, I would like to thank everyone at Faegre Baker Daniels who has been involved in the case, however large or small that involvement.  It has been a pleasure to work with you."

Our employment team at Faegre Baker Daniels regularly advises companies on both the recruitment and departure of key employees and teams in the City.  The Raymond James case is an outstanding example of the complete service that the firm is able to provide to its clients and demonstrates the leading expertise that we have in this area.