that prohibits Sevcik, "directly or indirectly, and whether alone or in concert with others," including others affiliated with D.A. Davidson, from doing the following:
- Soliciting or attempting to solicit any Morgan Stanley client serviced by Sevcik or any other Active Advisor in connection with the FAP, or whose names became known to him in connection with the FAP, while working for Morgan Stanley, with respect to any line of business in which Morgan Stanley or any of its affiliates is engaged (excluding Sevcik's immediate family);
- Soliciting any Morgan Stanley clients or household accounts that are subject to the Policy (excluding Sevcik's immediate family);
- Using, disclosing, or transmitting for any purpose, any records, documents, or information relating to Morgan Stanley's clients, business or marketing strategies, or business operations; or
- Retaining such information in any form.
[T]he representative submitted transactions under production numbers that were inconsistent with agreement with another representative resulting in a shortfall of revenue credited to the other representative.
As part of the FAP, Maddux agreed to give up his license and encourage his clients to remain with Morgan Stanley after his departure. His client accounts would be serviced by active Morgan Stanley financial advisors and, for a five-year period, Maddux would receive a declining portion of the revenue generated by the accounts.In the summer of 2017, Sevcik signed a memorandum of understanding in which he agreed to serve as an active advisor for some of the Maddux accounts through the FAP (the "FAP Agreement"). Doc. 1 Ex. A. These included accounts previously serviced under five "Joint Production Number[s]." Id. at 2. The FAP Agreement includes a non-solicitation provision that provides:
following the termination of your employment for any reason, for a period of one year or the remainder of the Payment Period, whichever is longer, you will not solicit or attempt to solicit, directly or indirectly, any of the Clients who were served by you or any other Active Advisor in connection with this FAP Arrangement, or whose names became known to you in connection with this FAP Arrangement[.]"
Id. at 3. It also includes provisions protecting "Confidential Trade Secret Information," including client contact information, which prohibit Sevcik from using or retaining such information after "the suspension or termination of [his] employment relationship with Morgan Stanley for any reason[.]" Id. Sevcik also agreed that Morgan Stanley "will be entitled to injunctive relief" for a breach of those provisions and "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." Id. at 4.
at Pages 4 - 5 of the DOR Opinion/Orders[S]evcik "began secretly diverting commission income away from" the FAP arrangement "including by improperly executing client trades outside of the" arrangement. Id. Sevcik's conduct started "almost immediately around the time of the consummation of" the FAP Agreement, "depriving Mr. Maddux of tens of thousands of dollars of retirement income." Id. "It took years for Morgan Stanley to uncover" Sevcik's conduct, but when it did, it terminated him as soon as it had completed its investigation. Id.
at Page 7 of the DOR Opinion/Ordershis conduct was an "honest mistake based on [his] misunderstanding" of the scope of the FAP Agreement. Sevcik Decl. ¶ 17. When he signed the FAP Agreement, Sevcik believed "that new transactional business after retirement was outside the FAP agreement and should be ticketed under the current existing team's rep code." Id. He continued operating under this understanding for four years, during which time no one told him that he was violating the FAP Agreement. Id. When Morgan Stanley did confront him about the issue, Sevcik "offered to pay back . . . any money received that was incompliant with" the FAP Agreement, but Morgan Stanley rejected his offer and terminated him. Id. Sevcik also asserts that because "[t]ransactional business is a very small part of [his] business, the amount involved is not anywhere close to 'tens of thousands of dollars.' " Id.
at Pages 11 - 12 of the DOR Opinion/OrdersA plaintiff seeking such relief generally must show that: (1) the plaintiff is likely to succeed on the merits; (2) the plaintiff is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in the plaintiff's favor; and (4) an injunction is in the public interest. Winter, 555 U.S. at 22 (rejecting the Ninth Circuit's earlier rule that the mere "possibility" of irreparable harm, as opposed to its likelihood, was sufficient, in some circumstances, to justify a preliminary injunction). . . .
at Pages 14 - 15 of the DOR Opinion/Orders[M]organ Stanley has not met its burden to show that Sevcik used or retained client contact information after his termination, in violation of the confidentiality provisions. Sevcik denies Morgan Stanley's claim that he "may have" taken client contact information with him and asserts that he has not personally reached out to any former clients. Sevcik offered affirmative evidence contradicting Morgan Stanley's assertions that Sevcik "reached out" to two clients. The only indirect communication with Morgan Stanley clients, the D.A. Davidson postcard sent to Maddux, was accomplished using a commercial mailing list that D.A. Davidson bought. On this record, the Court cannot find that Morgan Stanley's belief that Sevcik took and used client information is anything more than speculation.Additionally, on this record, the Court is not prepared to reach conclusions regarding Morgan Stanley's claim for breach of the duty of loyalty. Morgan Stanley offers no authority or legal argument supporting this claim. And, like Morgan's Stanley's claims that Sevcik took client information and solicited its clients, its claim that Sevcik misrepresented the circumstances of his termination in a way that harms Morgan Stanley's reputation is hotly disputed.
In sum, the Court cannot find that Morgan Stanley has shown a likelihood, rather than a mere "possibility," that it will suffer some irreparable harm in the form of lost client relationships and accompanying financial damage in the absence of temporary injunctive relief that prohibits Sevcik from soliciting its clients. . . .
On this record, the Court finds that, at most, Morgan Stanley has shown "serious questions" going to the merits of the case and that the balance of equities weighs slightly in its favor, but it has not shown a likelihood of irreparable harm, and the public interest does not favor either side. Morgan Stanley has, therefore, failed to show that it is entitled to preliminary injunctive relief and Morgan Stanley's Motion for a Temporary Restraining Order (doc. 4) is DENIED.The Court will contact the parties to schedule a telephonic status conference to discuss a briefing schedule for Sevcik's Motion to Compel Arbitration (doc. 18) and whether and how Morgan Stanley wishes to proceed on its request for a preliminary injunction.
1. Defendant Robert Sevcik ("Sevcik" or "Defendant") is hereby enjoined from initiating, whether directly or indirectly, including in concert with any D.A. Davidson & Co. ("Davidson") representative or other person, any contact or communication of any kind with any Morgan Stanley client that is subject to the Financial Advisor Program Agreement entered into by Defendant ("FAP Client") and/or the Joint Production Policy and any related Joint Production Agreement entered into by Defendant ("JPA Client").2. Nothing in Paragraph 1 of this Order shall prohibit Defendant from: (a) processing account transfer requests received from FAP and JPA Clients; (b) doing business with FAP and JPA Clients after they transferred their accounts to Davidson; or (c) responding to communications from FAP and JPA Clients that are initiated by the FAP and JPA Clients, provided that Defendant shall keep a log of all such clients who initiate contact with him including the identity of the client, the date on which the contact was made and the mode of contact3. Defendant is enjoined from using, disclosing, and transferring to any person or entity any Morgan Stanley confidential information which he created, developed, received, used, learned of or had access to by virtue of his employment with Morgan Stanley, that Defendant retained upon his departure from Morgan Stanley, including, but not limited to, all documents (whether in hard copy or electronic form) containing client names, contact information, account numbers, and/or account information ("Confidential Information").4. Within two business days of the execution of this Stipulated Preliminary Injunction Order, to the extent he has any, Defendant will return to Morgan Stanley any Morgan Stanley Confidential Information in his possession custody or control, and all other information Defendant retained upon his departure from Morgan Stanley which was not voluntarily disclosed by clients to Defendant after he joined Davidson. If Defendant contends he is not in possession of any such Confidential Information, he shall certify in writing, under penalties of perjury, that after a diligent search of his personal effects and electronic devices, Defendant does not have any such Confidential Information in his possession, custody or control.5. Any FAP and JPA Clients who inquire of Defendant's whereabouts shall be advised he works with Davidson. Morgan Stanley will provide contact information for Defendant at Davidson upon request by any FAP and JPA Clients.6. Plaintiff and Defendant understand and agree that they have an obligation to preserve all evidence related to the claims and defenses in this case, including but not limited to evidence of Defendant's communications with Morgan Stanley clients, specifically those communications that occurred after July 12, 2021.7. By stipulating to this Preliminary Injunction Order, the parties waive their right to a temporary restraining order and/or preliminary injunction hearing and, other than the execution of this Order, the Court shall take no other action on Plaintiff's request for such relief.8. Plaintiff acknowledges that by Defendant stipulating to this Preliminary Injunction Order and consenting to a Preliminary Injunction, Defendant is not agreeing to or admitting liability or acknowledging any wrongdoing. Nothing in this Stipulated Preliminary Injunction Order makes any findings of fact or any determination as to liability and, further, it is not making any findings as to whether Defendant violated his agreements with Morgan Stanley. This Stipulated Preliminary Injunction Order is not a decision on the ultimate merits of this dispute, and is without prejudice to the rights, remedies, claims, or defenses of any party hereto, and no party hereto shall argue in the FINRA arbitration that this Order precludes the making of any substantive argument in the FINRA arbitration.9. This Preliminary Injunction Order is entered without bond by agreement of the parties and remains in effect until the FINRA arbitration panel issues an order resolving Morgan Stanley's claim for permanent injunctive relief. . . .