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J.P. Morgan Securities LLC v. Weiss

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

November 15, 2019

J.P. MORGAN SECURITIES LLC, Plaintiff,
v.
ERIK W. WEISS, Defendant.

          ORDER ON PLAINTIFF'S MOTION FOR TEMPORARY RESTRAINING ORDER

          TANYA WALTON PRATT, JUDGE

         This matter is before the Court on a Motion for Temporary Restraining Order (Filing No. 3) filed by Plaintiff J.P. Morgan Securities LLC (“JPMorgan”). JPMorgan initiated this lawsuit against former employee, Defendant Erik W. Weiss (“Weiss”) for breach of contract, misappropriation of trade secrets, breach of fiduciary duty, and unfair competition, among other things. JPMorgan asks the Court to issue a temporary restraining order to protect its trade secrets, goodwill, and customer relationships until such time as a duly appointed panel of arbitrators at the Financial Industry Regulatory Authority (“FINRA”) renders an award in the underlying dispute. The parties submitted evidence and briefing, and the Court held a hearing on JPMorgan's motion on Friday, November 8, 2019. For the following reason, JPMorgan's Motion for Temporary Restraining Order is granted.

         I. BACKGROUND

         Plaintiff JPMorgan provides traditional banking, investment, and trust and estates services in the Indianapolis, Indiana area through its Chase Wealth Management branch offices. Defendant Weiss began employment with JPMorgan (or its predecessors) in January 2007 when he joined Chase Investment Services Corp., then a registered broker-dealer and an affiliate of JPMorgan.

         Weiss entered into a Chase Investment Services Corp. Supervision, Arbitration, Confidentiality, and Non-Solicitation Agreement (the “2007 Agreement”), which contained provisions prohibiting him from soliciting the firm's clients for a one-year period after the termination of his employment. The 2007 Agreement required that Weiss maintain the confidentiality of the firm's confidential and proprietary business and client information. Effective October 1, 2012, Chase Investment merged with and into JPMorgan. JPMorgan is the surviving legal entity. (Filing No. 5 at 5.)

         In 2013, Weiss was promoted to a Private Client Advisor position and he entered into a new Chase Wealth Management Supervision, Arbitration, Confidentiality and Non-Solicitation Agreement (the “2013 Non-Solicitation Agreement”) with JPMorgan. Like the 2007 Agreement, the 2013 Non-Solicitation Agreement also contained provisions prohibiting Weiss from soliciting JPMorgan clients for a one-year period after the termination of his employment and requiring him to maintain the confidentiality of JPMorgan's confidential and proprietary business and client information. Id. at 5.

         Unlike traditional brokerage firms (where clients are serviced almost exclusively by one financial advisor), JPMorgan's Chase Wealth Management adopts a team approach. Id. at 4. Weiss serviced approximately six hundred of JPMorgan's clients or households, representing approximately $197 million in assets under management. The substantial majority of these clients were pre-existing clients who were simply given to Weiss by JPMorgan to service. To perform his official duties at JPMorgan, Weiss had access to extensive confidential financial records and information about JPMorgan's clients, including information about each client's investment and trust and estate needs. JPMorgan Chase Bank, N.A., an affiliate of JPMorgan, referred its bank clients to Weiss in his capacity as a Private Client Advisor for Chase Wealth Management in order for him to build JPMorgan's relationship with such clients. Weiss sat at his desk at a Chase Bank branch and was introduced to hundreds of existing bank customers to offer and provide access to investment opportunities through Chase Wealth Management. In his role as a Private Client Advisor, Weiss was not expected to engage in cold calling or attempt to build a client base independent of referrals from JPMorgan. The substantial majority of the clients Weiss serviced at JPMorgan were assigned or referred to him by JPMorgan. Id. at 4-7.

         On September 13, 2019, Weiss abruptly resigned his employment with JPMorgan and immediately commenced employment with Raymond James & Associates, Inc. (“Raymond James”), a competitor of JPMorgan. At the time of his resignation, Weiss was a Private Client Advisor in one of JPMorgan's branch offices in Indianapolis, Indiana. Weiss' post-employment activities were restricted by his agreements with JPMorgan and JPMorgan's Code of Conduct. Weiss agreed in his 2007 Agreement and 2013 Non-Solicitation Agreement that, when he left employment with JPMorgan, he would be restricted from soliciting JPMorgan's clients for one year and from using, disclosing, or transmitting confidential and proprietary information related to JPMorgan and its clients. Id. at 2, 5, 7, 8, 10.

         JPMorgan presents evidence that Weiss misappropriated its confidential client information and is using this information to solicit JPMorgan's clients in violation of Weiss' contractual obligations to JPMorgan. In particular, JP Morgan learned that after resigning from JPMorgan and joining Raymond James, Weiss contacted JP Morgan's clients in an effort to induce them to move their accounts to Raymond James and Weiss is engaging in aggressive solicitation of JPMorgan's clients and disparaging JPMorgan in the process. (Filing No. 5 at 2, 10-11.) JPMorgan produced evidence that its employees have spoken with many of the clients that Weiss was assigned to service during his employment with JPMorgan, and several of those clients have informed JPMorgan that Weiss has contacted and solicited them since his departure from JPMorgan. These clients have confirmed that Weiss has contacted them not simply to announce his change in employment but to actively solicit their business on behalf of Raymond James. (Filing No. 5 at 10.) Weiss is also soliciting JPMorgan's clients through telephone calls and text messages to clients on their personal cellphones in an effort to induce them to do business with him at Raymond James. Id. at 2. JPMorgan has been informed by at least three clients that they received calls from Weiss in which Weiss asked to meet with them to discuss Raymond James or asked them to transfer their accounts to him at Raymond James. Id. One of these clients told JPMorgan that he felt pressured by Weiss to meet with him and transfer his account to Raymond James. Id. at 11.

         A JPMorgan client informed the firm that after the client declined Weiss' request that they meet to discuss doing business, Weiss asked the client to call him back and report to him everything JPMorgan had to say. Another client reported having a similar experience where Weiss requested that the client call him to update him on what JPMorgan was telling the client. JPMorgan believes Weiss intended to use this information in his continued solicitation of JPMorgan's clients. Id. at 3.

         In an effort to further his solicitation of JPMorgan's clients, Weiss is making disparaging comments about JPMorgan to its clients. A JPMorgan client informed the firm that during Weiss' solicitation call to the client, Weiss said that JPMorgan has inferior products to that of Raymond James and that JPMorgan management limits the products that can be offered to clients. JPMorgan believes that Weiss is making these false and disparaging statements in an effort to induce JPMorgan's clients to transfer their accounts and assets from JPMorgan to Raymond James. Weiss' solicitation efforts have proven to be successful as approximately forty of JPMorgan's clients formerly serviced by Weiss already have transferred their accounts to him at Raymond James, and those accounts total more than $27 million in assets. Id. at 3-4, 10-12.

         In addition to soliciting JPMorgan's clients, Weiss took with him to Raymond James JPMorgan's confidential client information, including contact information such as cellphone numbers, which generally are not publicly available, and without which Weiss would have been unable to immediately commence calling and soliciting JPMorgan's clients upon his resignation from the firm (Filing No. 5 at 3, 11).

         When he left JPMorgan to join Raymond James, Weiss maintains that he did not retain any JPMorgan customer information. He took multiple steps to search his personal electronic devices and personal email account to ensure that he did not have JPMorgan's documents and confidential information when he left the firm, and he did not intentionally memorize JPMorgan's information (Filing No. 25-1 at 1, 4). Weiss denies soliciting JPMorgan's clients and asserts that since joining Raymond James, he has not solicited JPMorgan's clients or asked them to transfer accounts, he has not asked to meet with clients to discuss transferring accounts, he has not pressured clients to meet or to transfer accounts, and he has not made disparaging statements about JPMorgan. Instead, he has used only his casual memory and publicly available sources to contact his clients to simply announce to them his new employment with Raymond James and provide his new contact information. Id. at 2, 5.

         On October 9, 2019, JPMorgan initiated this litigation against Weiss seeking a temporary restraining order. JPMorgan has asserted claims for breach of contract, misappropriation of trade secrets, breach of fiduciary duty, breach of duty of loyalty, intentional interference with actual and prospective economic advantages, negligent interference with actual and prospective economic advantages, conversion, and unfair competition (Filing No. 1).

         JPMorgan is a member firm of the Financial Industry Regulatory Authority (“FINRA”), and is in the process of commencing before the FINRA Dispute Resolution an arbitration proceeding seeking permanent injunctive relief against Weiss. Pending final determination in arbitration, JPMorgan is entitled to seek preliminary injunctive relief from this Court even though the merits of the dispute between the parties ultimately will be resolved in arbitration. Rule 13804 of the FINRA Code of Arbitration Procedure for Industry Disputes requires a party seeking interim injunctive relief to obtain such relief from a court of competent jurisdiction (Filing No. 5 at 4; Filing No. 4 at 1; Filing No. 6-1).

         JPMorgan already has filed an arbitration action with FINRA against Weiss based on the same allegations in their Complaint, and JPMorgan is seeking monetary damages on the client accounts that have been transferred from JPMorgan to Raymond James. Pursuant to FINRA Rule 13804, a FINRA member firm such as JPMorgan can seek in court temporary injunctive relief against FINRA Associated Persons such as Weiss. If temporary injunctive relief is granted by a court, then within fifteen days, a hearing will be held before a FINRA Arbitration Panel that will determine if permanent injunctive relief should be granted. If temporary injunctive relief is denied, there will be no permanent injunction hearing. In either event, the parties will proceed in the pending FINRA action on JPMorgan's request for monetary damages and on the counterclaims that Weiss may file (Filing No. 24 at 8; Filing No. 6-1).

         JPMorgan seeks a temporary restraining order prohibiting Weiss and anyone working in concert with him from:

(a) soliciting, attempting to solicit, inducing to leave or attempting to induce to leave any JPMorgan client serviced by Defendant at JPMorgan or whose names became known to Defendant by virtue of his employment with JPMorgan (or any of its predecessors in interest); and
(b) using, disclosing or transmitting for any purpose JPMorgan's documents, materials and/or confidential and proprietary information pertaining to JPMorgan, JPMorgan's employees, and/or JPMorgan's clients.

(Filing No. 1 at 24.)

         JPMorgan also asks the Court to:

Order[] Defendant, and all those acting in concert with him, to return to JPMorgan or its counsel all records, documents and/or information in whatever form (whether original, copied, computerized, electronically stored or handwritten) pertaining to JPMorgan's clients, employees and business, within ...

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