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Edward D. Jones & Co., L.P. v. Kerr

United States District Court, S.D. Indiana, Indianapolis Division

November 14, 2019

EDWARD D. JONES & CO., L.P., Plaintiff,
JOHN KERR, Defendant.



         This cause is before the Court on Plaintiff Edward D. Jones & Co., L.P.'s (“Edward Jones”) Motion for Temporary Restraining Order and Preliminary Injunction [Dkt. 4] filed on September 6, 2019. With that motion, Edward Jones seeks, consistent with Defendant John Kerr's employment agreement, an order enjoining him from soliciting, attempting to solicit, inducing to leave, or attempting to induce to leave any Edward Jones client serviced by Defendant while at Edward Jones or with respect to whom Defendant was privy to trade secret or confidential information [Dkt. 4-1]. Plaintiff also seeks to enjoin Defendant from using, disclosing, or transmitting for any purpose Plaintiff's documents, materials, trade secrets, and/or confidential or proprietary information pertaining to Plaintiff's employees, its operations, and/or its clients [Id.] This matter came before the Court for oral argument on October 28, 2019.

         For the reasons detailed in this entry, Plaintiff's motion is DENIED.

         Factual Background

         I. The Parties

         Edward Jones is a limited partnership and a registered broker/dealer operating more than 14, 000 branch offices across the United States, including in Westfield, Indiana [Compl. ¶ 8]. It offers a wide variety of investment and financial advisory services and specializes in operating one-person branch offices in small to medium-sized markets that have not traditionally been serviced by larger investment firms [Dkt. 5, at 2]. Mr. Kerr was employed as a Financial Advisor in Edward Jones's Westfield branch for over twenty years, beginning his employment in July 1998 until his departure on August 1, 2019 [Dkt. 5, at 2; Dkt. 22, at 2-3]. Mr. Kerr served as the sole financial advisor in the Westfield branch for his entire tenure [Dkt. 22, at 3]. Mr. Kerr asserts, and Edward Jones does not dispute, that a substantial portion of the Westfield branch's client base was generated from Mr. Kerr's personal network in the community [Dkt. 22, at 3-4; Dkt. 22-1, ¶¶ 4, 6, 7].

         The parties agree that their dispute is subject to arbitration pursuant to the Financial Industry Regulatory Authority (“FINRA”)[1] Code of Arbitration. Notwithstanding the FINRA arbitration proceedings, Edward Jones is entitled to seek preliminary injunctive relief. FINRA Rule 13804(a) (2019).

         II. The Agreement

         As a condition of his employment with Edward Jones, Mr. Kerr agreed to an “Investment Representative Employment Agreement” (“the Agreement”), which he executed at the outset of his employment in 1998 [Compl., Exh. A]. The Agreement has never been revised.

         The Agreement requires that all of Edward Jones's property be returned upon an employee's termination or resignation. It provides:

You shall keep and preserve all furniture, equipment, signs, account records, customer statements and files, manual, forms, supplies, and literature and shall deliver such property to Edward Jones, if requested, during the course of your employment. In the event your employment with Edward Jones ends either through termination by Edward Jones or through resignation by you, you will surrender to Edward Jones all of the above such property which shall be and remain the property of Edward Jones.

         The Agreement states in a subsequent paragraph: “It is understood and agreed that the identities of and information concerning the customers of Edward Jones are confidential information, constitute a trade secret, and are the sole and exclusive property of Edward Jones.” The Agreement also prohibits Mr. Kerr from soliciting Edward Jones's clients:

For a period of one year following termination of this Agreement, you will not directly or indirectly solicit sales of securities and/or insurance business to or from any customer of Edward Jones or otherwise induce any said customer of Edward Jones to terminate his/her relationship with Edward Jones, if you contacted or dealt with such customer during the course of, or by reason of, your employment with Edward Jones or if the identify of such person was learned by you by reasons of your employment with Edward Jones.

         Pursuant to a choice of law clause in the Agreement, the parties agree that Missouri law governs Edward Jones's breach of contract claims.[2]

         III. Mr. Kerr's Departure from Edward Jones and Commencement of Employment with Thurston Springer Financial

         The parties dispute the circumstances underlying Mr. Kerr's departure from Edward Jones as well as other events that took place in the days surrounding his resignation.

         In Edward Jones's version of the facts, Mr. Kerr was facing disciplinary issues[3] at work, which prompted Edward Jones to request that Mr. Kerr report for a human resources meeting at its headquarters in St. Louis, Missouri on August 1, 2019 [Compl. ¶¶ 42, 43]. Edward Jones claims that Mr. Kerr had to have known he was going to be terminated at the human resources meeting and thus had begun planning his transition to Thurston Springer Financial (“Thurston”) [Id. ¶ 44]. At the meeting, Edward Jones allowed Mr. Kerr to resign in lieu of a termination and used that opportunity to remind him of his obligation, pursuant to the Agreement, to return any of Edward Jones's property in his possession [ Id. ¶¶ 46, 47]. Edward Jones did not identify who was present at the human resources meeting or who directed Mr. Kerr to return Edward Jones's property, nor could counsel for Edward Jones confirm these identities at the court hearing on the request for an injunction. Edward Jones asserts that Mr. Kerr, knowing a termination was impending, illicitly printed confidential client reports for the benefit of his future employer, Thurston, before the St. Louis human resources meeting [Id. ¶ 44, 45, 50; Dkt. 5, at 5]. These reports allegedly listed the clients at the Westfield branch along with their assets managed by the branch as well as the commissions generated by each client [Compl. ¶ 45; Dkt. 5, at 5]. Edward Jones states that it has been unable to ascertain the whereabouts of these client reports [Compl. ¶ 49]. At the court hearing, counsel for Edward Jones confirmed that Edward Jones never contacted Mr. Kerr to inquire about the clients reports prior to initiating this lawsuit.

         Mr. Kerr's factual account sharply contrasts with Edward Jones's and is buttressed by his sworn, detailed affidavit. Mr. Kerr states that from July 16, 2019 to July 27, 2019, he was traveling in Ireland on business for Edward Jones [Dkt. 22, at 5; Dkt. 22-1, ¶ 14]. During that time, unbeknownst to Mr. Kerr, Edward Jones reassigned many of Mr. Kerr's clients [Dkt. 22, at 5; Dkt. 22-1, ¶ 14]. When Mr. Kerr returned to work in Westfield on the afternoon of July 29, 2019, Mr. Kerr was informed that Edward Jones required him to travel to St. Louis on August 1, 2019, for a human resources meeting regarding an ongoing dispute with his long-time branch office administrator, Kennetta White [Dkt. 22, at 5; Dkt. 22-1, ¶ 15]. Upon learning that he was being summoned to St. Louis, Mr. Kerr contacted a friend who had experience with Edward Jones to discuss the problems with Ms. White [Dkt. 22, at 5; Dkt. 22-1, ¶ 33]. During that conversation, the friend informed Mr. Kerr that there may be a potential job opportunity for him at Thurston. Mr. Kerr states that this was his first awareness of or discussion regarding any potential employment with Thurston [Id.].

         Prior to the Ireland trip or the scheduling of the human resources meeting in St. Louis, Mr. Kerr had previously scheduled a branch meeting for July 30, 2019 [Dkt. 22, at 5; Dkt. 22-1, ¶ 16]. On the morning of July 30, in preparation for that meeting, Mr. Kerr printed the client reports now in dispute [Id.]. Because his practice had undergone a material change during the time he was in Ireland due to the reassignment by Edward Jones of his clients, Mr. Kerr sought to review the reports to fully understand these changes in preparation for the branch meeting. He states that when he printed these reports, he did so openly and in the ordinary course of business with the sole purpose of using them at the branch meeting [Dkt. 22, at 5; Dkt. 22-1, ¶¶ 16-17]. He claims he had no intention of resigning or transferring to Thurston when he printed the reports on July 30, 2019 [Dkt. 22, at 5; Dkt. 22-1, ¶ 20].

         On August 1, 2019, Mr. Kerr drove to St. Louis to attend the human resources meeting. Claiming that he was unsure of the purpose of that meeting, he opted to bring the three client reports with him so that he could fully discuss the status of the accounts at his branch [Dkt. 22, at 6; Dkt. 22-1, ¶ 19]. However, upon arrival, Mr. Kerr learned that Edward Jones had decided not to continue his employment [Dkt. 22, at 6; Dkt. 22-1, ¶ 20]. He disputes Edward Jones's assertions that he himself had any prior intention of resigning or any prior knowledge that he would be terminated at this meeting [Id.]. Notwithstanding his decision at the meeting to tender his resignation, Mr. Kerr argues that no one from Edward Jones ever demanded that he return Edward Jones materials, nor did anyone provide any instructions regarding the distribution or disposal of materials [Dkt. 22, at 6; Dkt. 22-1, ¶ 21].

         Mr. Kerr did not return to his Westfield branch office again following the human resources meeting in St. Louis (with the exception of when he returned to collect his personal property with Edward Jones's consent and witnesses present) [Dkt. 22, at 6; Dkt. 22-1, ¶ 34]. Mr. Kerr states that he destroyed the three clients reports in his possession immediately following the human resources meeting, believing this to be the proper course of action, and never used or referred to the information therein, or any other Edward Jones information, after his resignation or for any improper purpose [Dkt. 22, at 7; Dkt. 22-1, ¶¶ 34-35]. Mr. Kerr joined Thurston on August 2, 2019, claiming that he did so only after being forced to resign from Edward Jones [Dkt. 22, at 6; Dkt. 22-1, ¶ 23].

         Edward Jones did not respond in its Reply brief to Mr. Kerr's averments that he did not know he was going to be terminated and that he had no plans to leave Edward Jones for Thurston prior to his resignation. At the court hearing, counsel for Edward Jones asserted that Mr. Kerr had worked for Edward Jones long enough to understand that a human resources meeting at headquarters was always a precursor to termination. Counsel for Edward Jones also stated that he believed discovery would uncover e-mails between Mr. Kerr and Thurston discussing employment opportunities prior to the human resources meeting. However, counsel ultimately conceded that Edward Jones did not currently have any evidence, aside from its speculations, to contradict Mr. Kerr's sworn statements that he had no intention of leaving Edward Jones at the time he printed the client reports.

         Edward Jones's Reply brief also did not address Mr. Kerr's assertion that he had printed the client reports only for legitimate, business-related purposes. Edward Jones's counsel, after confirming that there was no evidence that Mr. Kerr had taken any steps to secure employment with Thurston prior to his resignation, agreed that Mr. Kerr was operating within the ordinary course of business when he printed the reports and was entitled to take them to his meetings. Counsel also conceded that Edward Jones had no evidence that Mr. Kerr had retained or used the client reports following his resignation. Aside from the client reports, Edward Jones has not accused Mr. Kerr of any wrongful retention or use of Edward Jones information.

         IV. Mr. Kerr's Alleged Solicitation of Edward Jones Clients

         We note that Edward Jones's request for injunctive relief initially encompassed six claims: breach of the Agreement's confidentiality provision; breach of the Agreement's non-solicitation provision; violation of the Indiana Uniform Trade Secrets Act (“IUTSA”), Ind. Code. § 24-2-3-1 (2019); violation of the Defend Trade Secrets Act (“DTSA”), 18 U.S.C.A. § 1836 (2018); unfair competition; and tortious interference with business relationships. At the court hearing, counsel for Edward Jones conceded that it lacked sufficient evidence at this time to support preliminary injunctive relief based on the statutory trade secrets claims and the alleged breach of the confidentiality provision.[4] Additionally, despite initially stating that it was seeking preliminary injunctive relief for its claims of tortious interference with business relationships and unfair competition, Edward Jones has not developed a sufficient analysis of the preliminary injunction ...

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