E*Trade Slaps Morgan Stanley Breakaways with Injunctions
At least three times recently employees have switched from E*Trade to Morgan Stanley only to have their former employer seek federal court injunctions barring them from soliciting E*Trade clients.
Courts issued the injunctions against two of the former employees. Still pending is E*Trade’s March 25-filed request for injunctive relief against the third employee.
In the pending case, E*Trade seeks a court injunction to stop Julius Agbonbhase, its former financial consultant who was based in Cupertino, Calif. and now works for Morgan Stanley in San Jose, from allegedly using its confidential information to solicit its clients.
The judge overseeing the case ordered Morgan Stanley to give E*Trade documents. E*trade has also initiated a Finra arbitration proceeding against Agbonbhase.
Most of its more than 6.6 million account holders never speak to an individual financial advisor, E*Trade states in its lawsuit against Agbonbhase. “Historically, E*Trade has attracted clients through extensively and costly advertising campaigns in various media outlets,” the lawsuit states. Agbonbhase, who signed a confidentiality agreement, had access to E*Trade’s brokerage clients, the lawsuit alleges. And while E*Trade had assigned Agbonbhase the task of managing those client relationships, he was not responsible for soliciting them, the lawsuit alleges. Thus Agbonbhase cannot claim ownership of the clients, E*Trade argues.
In a Nov. 16, 2018 resignation letter, Agbonbhase told E*Trade management he was exiting immediately, going to work for Morgan Stanley, and did “not possess any originals or copies of E*Trade proprietary documents,” according to the lawsuit.
But Agbonbhase’s deposition testimony refutes his claim, E*Trade lawyers told the court in their most recent request for an injunction.
“Forensic evidence shows the hallmarks of an employee who was trying to abscond with trade secrets,” the E*Trade motion states. E*Trade has lost about $29 million in managed assets and $61 million in total assets to date because of Agbonbhase’s move, the motion states.
A federal judge already issued an injunction against Heather Pospisil, a former E*Trade financial consultant who worked in Chicago for the online brokerage and moved to Morgan Stanley’s Phoenix office in August 2018. Once at the wirehouse, Pospisil solicited E*Trade’s clients and siphoned assets that had been under its management, and therefore needed to be stopped with an injunction, the discount brokerage alleged.
The court agreed. “[I]f Pospisil is not enjoined, it is not clear how many clients will follow suit in the future. Specifically, because Pospisil has now used E*Trade’s confidential information to solicit clients away, there is no way to ‘unring’ the bell, as the clients cannot be forced to return to E*Trade. The court finds that E*Trade has made a sufficient showing of an inadequate remedy at law and a likelihood of irreparable harm absent an injunction,” wrote Judge Ronald Guzman of the United States District Court for the Northern District of Illinois in his order granting E*Trade’s request for injunctive relief against Pospisil.
Another federal judge issued an injunction against Lance Eaton, a financial consultant for E*Trade who left the discount brokerage before Pospisil in 2017 for Morgan Stanley’s Phoenix office.
The injunction bars Eaton from soliciting E*Trade clients and required him to return his former employer’s confidential information.
In its lawsuit against Eaton, E*Trade presented at court as evidence several texts from him to former E*Trade clients, according to the order issued by U.S. District Judge John J. Tuchi in Arizona.
“He should come to my Noah’s ark. Lol. He can always transfer back,” Eaton texted one client, who had already decided to move her account, about her ex-husband, who was also an E*Trade client, according to the court order.
“I walked out of E*TRADE and my cell phone had some contact information of some people that entered into my cell phone throughout those six years of me doing my course of business at trade E*Trade,” Eaton told E*Trade lawyers at a hearing held before Tuchi issued the injunction, according to the transcript.
The E*Trade lawyer asked Eaton if that was “a direct violation” of his non-solicitation agreement.
“I suppose it is, right,” Eaton responded.
For this story, Morgan Stanley declined to comment. Lawyers representing Agbonbhase, Pospisil, and Eaton did not respond to a request for comment.