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Hancock Whitney Investment Consultant Stung with Non-Solicit TRO
July 6, 2020
You work directly for a subsidiary but enter into an Employment/Non-Solicit Agreement with the parent. Things are fine until they're not. You leave. There is an allegation that you violated the non-solicit agreement. You get sued by the parent with whom you executed the agreement. What happens if the subsidiary lacks diversity jurisdiction in order to obtain a TRO in federal court? That's an interesting question. If you need to retain a lawyer to argue the point for you, it's also an expensive question. In a recent case, that interesting and expensive question gets answered in what proves to be a painful manner.
The 2012 Non-Solicitation Agreement
On December 3, 2010, Senior Investment Consultant Julian Paul Bourgeois and Hancock Whitney Corporation purportedly executed an Employee Confidentiality and Non-Solicitation Agreement dated December 3, 2012 (the "Agreement"). In December 2019, Bourgeois allegedly left Hancock Whitney and joined LPL Financial LLC, and solicited at least 25 Hancock Whitney customers to transfer over $6.5 million in managed assets to LPL Financial.
2020 TRO
Seeking to enforce Bourgeois's alleged contractual obligations under the Agreement, on January 13, 2020, Plaintiff Hancock Whitney Corporation filed for a Temporary Restraining Order ("TRO") against Defendant Julian Paul Bourgeois in the United States District Court for the Middle District of Louisiana ("MDLA").
On January 16, 2020, the United States District Court for the Middle District of Louisiana ("MDLA") granted a Temporary Restraining Order ("TRO") in favor of Plaintiff Hancock Whitney Corporation against Defendant Julian Paul Bourgeois. In granting the TRO, MDLA found, in part, evidence that Plaintiff was suffering immediate and irreparable injury for which there was no other adequate legal remedy and for which damages were incalculable. The TRO restrained, enjoined, and prohibited Defendant and others acting in concert with him from violating the Agreement.
Hancock Whitney Corporation, Plaintiff, v. Julian Paul Bourgeois, Defendant (Temporary Restraining Order, MDLA, 20-CIV-00028 / January 16, 2020). http://brokeandbroker.com/PDF/HancockTROMDLA200116.pdf.
Hancock Whitney Corporation, Plaintiff, v. Julian Paul Bourgeois, Defendant (Temporary Restraining Order, MDLA, 20-CIV-00028 / January 16, 2020). http://brokeandbroker.com/PDF/HancockTROMDLA200116.pdf.
As set forth in pertinent part, the TRO
2. Defendant Julian Paul Bourgeois and all persons or entities acting in concert with him are restrained, enjoined, and prohibited from, directly or indirectly, acting alone or with others, soliciting or attempting to solicit, inducing to leave or diverting or attempting to induce to leave or divert from doing business with Plaintiff Hancock Whitney Corporation, or any of its subsidiaries or affiliated companies, any customer with whom Defendant Julian Paul Bourgeois had professional contact, for whom he had responsibility or with respect to whom he was privy to any information during his employment with Plaintiff Hancock Whitney, which prohibition shall remain in effect through January 23, 2020, at 12:01 am, in the Louisiana parishes named on Exhibit A to the Agreement;3. Defendant Julian Paul Bourgeois and all persons or entities acting in concert with him are restrained, enjoined, and prohibited from servicing any customer of Plaintiff Hancock Whitney for whom he had responsibility or with respect to whom he was privy to any information during his employment with Plaintiff Hancock Whitney, which prohibition shall remain in effect through January 23, 2020, at 12:01 am, in the Louisiana parishes named on Exhibit A to the Agreement;4. Defendant Julian Paul Bourgeois and all persons or entities acting in concert with him are restrained, enjoined, and prohibited from divulging, revealing) discussing, publishing, disseminating, or communicating Plaintiff Hancock Whitney's confidential customer data, customer prospect names and contact information, financial portfolios, financial account information, financial needs, investment preferences, established business relationships, and other Confidential Information as defined in the Agreement;5. Defendant Julian Paul Bourgeois and all persons or entities acting in concert with him are restrained, enjoined, and prohibited from using or permitting use of, for his/their benefit or the benefit of third parties, Plaintiff Hancock Whitney's confidential customer data, customer and prospect names and contact information, financial portfolios, financial account information, financial needs, investment preferences, established business relationships, and other Confidential Information as defined in the Agreement;6. Defendant Julian Paul Bourgeois is restrained, enjoined, and prohibited from making or inducing others to make any oral or written statements to Plaintiff Hancock Whitney's customers that are negative, derogatory, or disparaging about Plaintiff Hancock Whitney, its products, management, and/or employees. . . .
2020 Motion to Dissolve/Amend
Following the invocation of the TRO, Defendant Bourgeois filed a Motion to Dissolve, or Alternatively, Amend Temporary Restraining Order. Defendant primarily argued that his former employer was actually Hancock Whitney Investment Services ("HMIS"), which is a Louisiana domiciliary, in contradistinction to the Plaintiff, which is a Mississippi domiciliary. Further, Defendant asserted that he is a Louisiana citizen, which means that there is no basis for diversity jurisdiction and that MDLA erroneously granted the TRO and, as such, it should be dissolved. In addition to the jurisdictional argument, Defendant argued that Plaintiff had failed to comply with the Financial Industry Regulatory Authority's rules requiring arbitration of intra-industry disputes. Finally, Defendant asserts that the Agreement's restrictive covenants are unenforceable and, as such, not entitled to injunctive relief.
In response, Plaintiff asserted that HWIS is not a party (or an "indispensible" party necessitating joinder) in the pending action under Rule 19 of the Federal Rules of Civil Procedure. Further, Plaintiff argued that HWIS is, in fact, a Mississippi domiciliary. Hancock Whitney Corporation, Plaintiff, v. Julian Paul Bourgeois, Defendant (Order, MDLA, 20-CIV-00028 / July 1, 2020). http://brokeandbroker.com/PDF/HancockOrdMDLA200701.pdf
2020 Motion Denied
MDLA conducted an evidentiary hearing on the various assertions and allegations. In denying Defendant's Motion, the Court offered this rationale:
James Fujinaga, President and CEO of HWIS, testified that although his office is in New Orleans, his supervisor, Executive Vice President of Hancock Whitney Corporation James Milton, is located in Houston, Texas. Fujinaga further testified that Milton reports to the Chief Operating Officer Shane Loper, who is located in Gulfport, Mississippi. Fujinaga testified that although some high-level executive corporate decisions are made by all three of them, Loper has decision-making authority over Milton and him. Fujinaga explained that decisions regarding recruiting, compensation, acquisitions, business planning, and budgeting are ultimately made at Plaintiff's headquarters in Mississippi. Fujinaga also testified that HWIS does not have its own independent and autonomous human resources department, legal department, marketing department, and information technology department. Fujinaga testified that HWIS relies on Plaintiff for the services provided by these units, which are located in Mississippi. Fujinaga further explained that all decisions regarding legal action taken on behalf of HWIS are made by Plaintiff in Mississippi.During the hearing, Plaintiff submitted a copy of its registration and HWIS's registration with the Louisiana Secretary of State, which reflected that the principal office for both entities is in Gulfport, Mississippi. (Exhibits P-1 and P-2). Plaintiff also submitted a copy of the articles of incorporation for HWIS, which states that the domicile is in Gulfport, Mississippi. (Exhibit P-4).Defendant provided testimony to establish that HWIS, not Plaintiff, was his former employer. Defendant submitted two cease and desist letters from Plaintiff's counsel to support his testimony. (Exhibits D-2 and D-3). To prove HWIS's domicile, Defendant submitted two documents regarding HWIS's FINRA registration that provided a New Orleans address as the main office location. (Doc. 14, Exhibits 1-C and 1-D). Defendant also submitted a copy of Defendant's pay stub and a copy of HWIS's profile for the Louisiana Department of Insurance (LDI). Although the LDI profile had a New Orleans address for HWIS, Defendant's pay stub states that HWIS's address is in Mississippi. (Doc. 14, Exhibits 1-B and 1-E).The Court finds that Plaintiff has submitted sufficient evidence to prove that its wholly owned subsidiary, HWIS, is domiciled in Mississippi. High-level decisions such as recruiting, compensation, budgeting, acquisition, and business planning for HWIS are made in Mississippi. The departments on which HWIS relies for daily operations such as the legal, human resources, marketing, and information technology, are based in Mississippi. COO Shane Loper, who approves all decisions made by HWIS CEO Fujinaga, is based in Mississippi, and the articles of incorporation reflect a Mississippi domicile for HWIS. Finally, the paychecks that were issued by HWIS to Defendant provide a Mississippi address, which shows that payroll decisions are made in Mississippi. Testimony and evidence establish that Plaintiff's headquarters in Mississippi is the center of direction, control, and coordination for HWIS. The Court finds that Mississippi is the place of incorporation and the nerve center for HWIS; therefore, HWIS's citizenship is diverse from that of Defendant. Jurisdiction is therefore proper pursuant to 28 U.S.C. § 1332. Thus, the TRO was validly issued by the Court.
at Pages 4 - 6 of the MDLA Order
Bill Singer's Comment
A very instructive case for those subject to Non-Solicit Agreements and who are contemplating terminating their employment relationships. For those pondering the famous "What can they do to me if I leave and solicit clients?": The MDLA TRO spells it out with stunning impact. They can do a lot to you, and it may prove painful.
As best I can tell, MDLA seems to have concluded that HWIS was a wholly-owned subsidiary of Plaintiff Hancock Whitney Corporation, and that "Mississippi is the center of direction, control, and coordination for HWIS," Regrettably, I'm not quite sold on how that "nerve center" characterization transforms Plaintiff into Defendant's "employer" and the proper party to seek the TRO. Pointedly, I am NOT saying that MDLA got it wrong -- frankly, it feels as if the Court got it right. What I am saying is that there are many Points A pertaining to residence/domicile and there is the Point C of finding diversity jurisdiction. Unfortunately, I'm not seeing a clear, convincing Point B by which the Court transitions from Points A to Point C. I'm left with an uneasy sense that despite everything, HWIS is based in Louisiana and may not provide grounds for diversity jurisdiction in federal court. Perhaps a circuit court will clarify the finer points. Perhaps this is the end of the line. Only time will tell.