Get Advice on Restrictive Covenants

The case of Towry EJ Ltd v Bennett and others [2012] EWHC 224 (QB), in which Faegre Baker Daniels acted for the successful Defendants, is a reminder of the importance of taking legal advice when conducting a recruitment process against a backdrop of restrictive covenants. 

In 2009 the financial advisory firm Towry acquired another advisory firm, Edward Jones. Seven Edward Jones advisors left to join Raymond James Investment Services Limited and a significant number of their clients followed. Towry brought claims against the advisors for ‘soliciting' those clients and thereby breaching contractual post termination restrictive covenants. Towry also accused Raymond James of conspiring with the advisors to breach those covenants.

The argument put forward by the Defendants was that the clients had moved of their own volition and, since there was no clause in their contracts restricting them from dealing with former clients, there was no breach of the restrictive covenants. The Judge accepted this argument without hesitation and exonerated the advisors and Raymond James of all allegations against them.

The lesson for employers here is that a non-solicitation restriction on its own offers little protection to the former employer where the ex-employee has strong relationships with their clients and the clients want to follow the employee wherever they go. The fact that Raymond James and the advisors had taken legal advice on their position, and followed that advice, was described by the Judge as a "striking feature" of the case and a key component in the claims being dismissed.