A Truce Just About Does It In Schwab Solicitation Case

They can fire you. You can quit. That pretty much sums up the employer-employee relationship for most American workers. To be clear, that's an overly broad brushstroke. Many employment relationship are not at-will but governed by employment contracts. Similarly, employers can't simply fire you for illegal reasons . . . well, on second thought, that's not correct: An employer can fire you for an illegal reason but you have the right to sue. Conversely, employees can't always just get up and walk out as they see fit. You can't take things that don't belong to you or destroy your employer's property. Then there's that whole battlefield about the rights that a former employer and former employee have concerning customers. In today's BrokeAndBroker.com Blog, we consider the war between a former Schwab employee and his firm. A truce of sorts gets called. Both sides lay down their weapons. The cessation of hostilities aside, you get the sense that one of the combatants came away with more than the other. As Wall Street regulator Willie Nelson so wistfully asks: "Maybe we should call a truce. We could but what's the use? That just about does it, don't it?"

1. An injunction, enjoining Lamb for a time period to be determined by the Panel, directly or indirectly, and whether alone or in concert with others (including any new employer), from soliciting any business from, or initiating any further contact or communication with, any customer of Schwab whom Lamb serviced at Schwab, and/or any customers or prospective customers whose identities Lamb learned as a result of his employment with Schwab (the "Customers"), including for the purpose of advising any Customers of his new employment or for the purpose of inviting, encouraging, or requesting the Customer to divert business from Schwab (excluding members of Lamb's immediate family and any Customers who have signed account transfer forms); and/or

Bill Singer's Comment: Schwab wants Lamb enjoined from soliciting or contacting any customer (or prospective customer) for the purpose of advising of his new employment or to divert that customer's business from Schwab (excluding from "customer" Lamb's immediate family or customers who already signed transfer forms). A "customer" is a concept that many of us can agree on but the concept of a "prospective customer" is a bit more nuanced. The entire world could be a "prospective" customer. In grappling with that expansive definition, Claimant Schwab has narrowed the world down to those men and women whose "identities Lamb learned as a result of his employment with Schwab." A narrowing to some degree but imagine how testy it may be to figure out whether a given prospect was "learned" about only as a result of employment with your former firm as opposed to in conjunction with or not really, really related to that circumstance. Then there's that very ticklish request that the injunction exist "for a time period to be determined by the Panel." That could be a long, long time or barely a blink of an eye. Talk about a crap shoot.

2. An injunction, enjoining Lamb, directly or indirectly, and whether alone or in concert with others (including any new employer), from using, disclosing, or transmitting information pertaining to Schwab clients, including, but not limited to, the names, addresses. email addresses, telephone numbers, personal data and financial information of the clients (excluding members of Lamb's immediate family and any customers who have signed account transfer forms) for any purpose; and/or

Bill Singer's Comment: In addition to enjoining Lamb's contact with its clients, Schwab is further seeking to prevent its former employee from using "information pertaining to Schwab clients." Just from my perspective as a veteran industry lawyer, I'm not sure that I comprehend the difference between the "customer" usage in Paragraph 1 and the "clients" usage in Paragraph 2. If there is a difference, then the two terms need to both be defined. If there isn't a difference, then don't use two different terms. I'm a stickler for consistency. Also, I like to drive trucks through very teeny-tiny holes of inconsistency. 

3. An injunction ordering Lamb, and anyone acting in concert or participation with him (including any new employer), to return to Schwab and/or purge from their possession, custody and control any and all records or information pertaining to Schwab's customers, whether in original, copied, computerized, handwritten or any other form (excluding members of Lamb's immediate family and any customers who have signed account transfer forms); and/or

Bill Singer's Comment: Schwab wants Lamb to return or destroy all records/information pertaining to its customers --and this return-or-burn policy extends to anyone who acted in concert or participation with Lamb.

4. Compensatory damages to compensate for harm caused by Lamb's actions; and/or

5. Liquidated damages as set forth in Lamb's Confidentiality, Non-Solicitation and Intellectual Property Ownership Agreement with Schwab ("Lamb's Agreement");and/or

6. Attorneys' fees and costs pursuant to Lamb's Agreement and pursuant to statute, including but not limited to all FINRA fees, in addition to costs of any experts or other out of pocket costs borne by Schwab in the prosecution of this action; and/or

7. Punitive and exemplary damages pursuant to statute and as permitted by law; and/or

8. Any other or further relief the Panel deems just and proper.  Unless specifically admitted in his Answer, Lamb denied the allegations made in the Statement of Claim.

Respondent Lamb generally denied the allegations and sought costs and fees.

1. Through and including May 7, 2018, Lamb is hereby enjoined, directly or indirectly, and whether alone or in concert with others, including any officer, agent, employee and/or representative of Narus Financial Partners (f/k/a ClearStone Capital Management) ("Narus"), from: soliciting any business from, or initiating any further contact or communication with, any customer of Schwab whom Lamb serviced at Schwab, and/or any customers or prospective customers whose identities Lamb learned as a result of his employment with Schwab ("Customers"), including for the purpose of (i) advising any Customers of his employment with Narus; (ii) providing any Customers with any newsletters, financial updates or market analyses; and (iii) inviting the Customer to any meal, sporting event, or trip.

Bill Singer's Comment: In lieu of leaving the time period to the FINRA Arbitration Panel's discretion, the parties nailed it down to about one year from the date of the settlement. Effectively, Schwab is enforcing a one-year Non-Solicitation Agreement against Lamb and his new employer Narus, which is not a party to the FINRA arbitration. Beyond the standard parameters of what constitutes "solicitation," however, the settlement further bars "initiating any further contact or communication" with Schwab customer that had been serviced by Lamb during his tenure with the firm or whose identity he learned of as a result of his employment. Not all contact/communication is necessarily a "solicitation," but this more expansive coverage gives more to Schwab than it would likely have obtained under a more standard Non-Solicitation Agreement. Pointedly, the Stipulated Award enjoins Lamb from "advising any Customers of his employment with Narus," which would seem to preclude the use of so-called Tombstone announcements or even generic notices that do not include any solicitations. Also note that for one year, Lamb cannot send any customer newsletters/analyses or invite said individual to a meal or event. It's not a "forever" restriction but it is a signficant one-year crimp in style.

For purposes of clarity, this paragraph 1: (A) prohibits Lamb from initiating contact with any Customer regardless of whether that Customer previously asked Lamb to contact him/her in the future or otherwise expressed consent to any such future contacts; provided further, however, that Lamb is permitted to initiate contact with a Customer after the execution of this Stipulated Award in response to a specific, temporally proximate, communication initiated by that Customer after the execution of this injunction; and (B) does not prohibit Lamb's maintenance of a professional or social profile on such social media platforms as Linkedln or Facebook, provided, however, that Lamb shall not use such professional or social media accounts in violation of this injunction.

Bill Singer's Comment: Did you hear the pounding of another nail in Lamb's coffin? Note that Lamb can't even "reply" to a customer's prior request for contact. Wow, that's really highlighting and underlining the point. On the other hand, maybe that nail sort of gets a bit pulled out because Schwab does concede that Lamb may initiate contact after the execution of the Stipulated Award in response to what seems like a "new" post-executed-Award request from a customer. Of course, that detail is a bit quirky in and of itself because, after all, how can Schwab prohibit a customer from contacting anyone that man or woman wants to do business with? Would strike me as an interesting customer lawsuit if Schwab were to prevent one of its customers from opening an account with a former stockbroker at a new firm, assuming that it was the customer's desire and not wrongly manufactured by a former employee. The further concession about social media platforms is fascinating and should be noted by all practitioners.

The restrictions in this paragraph shall not apply to members of Lamb's immediate family and any Customers who have signed, or in the future sign, an Asset Management Agreement for the purpose of being serviced by Lamb at Narus.

2. Lamb is hereby enjoined, directly or indirectly, and whether alone or in concert with others, including any officer, agent, employee and/or representative of Narus from: using, disclosing, or transmitting for any purpose, including the solicitation or conducting of business or initiation of any contact with Schwab clients, the information contained in the records of Schwab, or other information pertaining to Schwab clients, including, but not limited to, the names, addresses, email addresses, telephone numbers, personal data and financial information of the clients. The restrictions in this paragraph shall not apply to members of Lamb's immediate family and any Customers who have signed, or in the future sign, an Asset Management Agreement for the purpose of being serviced by Lamb at Narus.

3. To the extent he has not already done so, Lamb, and anyone acting in concert or participation with him, including his counsel, and any agent, employee, officer or representative of Narus, are further ordered to provide to Schwab's counsel any and all records or information pertaining to Schwab's clients or its business, regardless of whether they were obtained by Lamb as a result of his employment with Schwab or created or received after the termination of his employment with Schwab, whether in original, copied, handwritten or any other form, and then Lamb shall purge any such records or information from his possession, custody, or control, within 24 hours of notice to Lamb or his counsel of the terms of this Stipulated Award. The requirements of this paragraph shall not apply to members of Lamb's immediate family and any Customers who have signed, or in the future sign, an Asset Management Agreement for the purpose of being serviced by Lamb at Narus.

4. By and through his undersigned counsel, Lamb hereby represents and warrants that between his deposition on October 4, 2015 and the execution of this Stipulated Award, he did not invite any Customers to contact him in the future.

Bill Singer's Comment: A perfect example of why former employees ought not get cute during the pendency of litigation. Talk to you lawyer. Make sure that he or she knows about the stupidity that you are proposing to engage in. Listen to why they tell you to stand down, for now. Listen to why they tell you that what you're proposing to do may overly complicate any settlement. Afterwards, when you did what you promised not to do and what looked like a great settlement falls apart, make sure to fully pay the outstanding balance on your lawyer's past-due invoice and also make sure to agree to that new Retainer, which may well include an initial fee of double what you previously paid. Ya wanna do stupid? Great. Enjoy yourself. But it's gonna come back and bite you in the ass and cost you a bundle.

5. This Stipulated Award constitutes a final arbitration award. All other requests for relief that have been made by either party that are not expressly addressed herein are hereby denied. Nothing herein shall be interpreted as an admission of wrongdoing. Nothing herein shall be interpreted to nullify the terms of the settlement agreement between Lamb and Schwab pursuant to which this stipulation is made.  

• FINRA
• Arbitration
• Solicitation
• Non Solicitation
• Stipulated Award
• Schwab
• BrokeAndBroker
• Bill Singer