Judge Blocks Prime Capital FAs From Soliciting Edelman Clients
A Delaware federal court judge ruled in favor of Edelman Financial Engines, granting a temporary restraining order, in part, that prohibits two former Edelman advisors (now at Prime Capital Financial) from using confidential information and soliciting the RIA’s former clients. But U.S. District Judge Maryellen Noreika denied Edelman’s order to enforce the non-acceptance provision in the two advisors’ restrictive covenants.
Edelman filed for the restraining order against Prime Capital last month, claiming the firm poached two more Edelman planners and encouraged them to breach their employment contracts. The order concerns Joan Greenspon and Amanda Salyer, two former Edelman advisors who managed $550 million in assets in Edelman’s West Conshohocken, Pa., office. According to Edelman, Prime Capital recruited the two advisors who followed “Prime Capital’s playbook to the tee.”
In the latest development, Prime Capital will be temporarily restrained from using or disclosing any confidential information related to Greenspon or Salyer’s clients acquired during their tenures with Edelman. They’re also prohibited from contacting any of those clients, directly or indirectly.
The order is effective until the court makes a decision on Edelman’s motion for preliminary injunction. A hearing is scheduled for April 23.
In her discussion of the decision, the judge said that Edelman has shown “reasonable probability” that the non-solicitation and confidentiality provisions of the contracts are enforceable.
But the non-acceptance provisions are different. The judge cited a Pennsylvania case, showing that restrictive covenants that undercut an individual’s abilities to earn a living are disfavored.
“As written, they prevent Greenspon and Salyer from accepting former clients, including those who wished to work with Greenspon and Salyer regardless of employer, effectively forcing Greenspon and Salyer to start their careers from square one,” the order read. “But even more concerning is that enforcing the non-acceptance provisions could deprive consumers of their preferred financial planner.”
A spokesman for Prime Capital did not immediately respond to a request for comment.
This stems from a federal suit that began last November, in which Edelman sued Prime Capital and accused the competitor of “a coordinated and concealed scheme to pillage” the firm by stealing Edelman’s client information.
Edelman’s legal squabbles with Prime Capital extend back to last February, when it added the latter firm as a defendant in three ongoing suits concerning former Edelman advisors who left for Prime Capital. After Edelman directly sued Prime Capital last November, the latter firm moved to pause the suit, claiming the issues were already being addressed in the three lawsuits and ongoing arbitration claims.