UBS v. Fiore: Let The Games Begin

(a) Breach of the non-solicitation and non-disclosure provisions contained in multiple agreements defendant Fiore signed during his UBS employment;

(b) Breach of the non-solicitation provisions contained in the UBS Financial Advisor Team Agreement signed by defendants Farrar, Gloria, and Gahan;

(c) Misappropriation of UBS's trade secrets in violation of the Connecticut Uniform Trade Secrets Act ("CUTSA");

(d) Violation of the Connecticut Unfair Trade Practices Act ("CUTPA");

(e) Breach of fiduciary duties that Farrar, Gloria, and Gahan owed to UBS during their employment; and

(f) Unfair competition.

1. On June 2, 2017, defendants Farrar, Gloria, and Gahan resigned from UBS without prior notice and immediately joined UBS competitor Procyon Private Wealth Partners, LLC.¹ Procyon had been recently formed by their former UBS colleague, defendant Fiore, who had been terminated by UBS in November 2016.

2. At UBS, Defendants had been part of a team of financial advisors, institutional consultants and support staff known as the FDG Group who managed approximately $8 billion in assets for individual and institutional UBS clients generating approximately $6 million in annual revenue.

3. Almost immediately after defendants Farrar, Gloria and Gahan joined Procyon, Defendants began soliciting UBS clients to leave UBS and do business instead with Defendants at Procyon. Defendants used confidential UBS client information to accomplish the solicitation.

4. Defendants' solicitation of UBS clients and misuse of confidential UBS client information, which continues unabated, is in direct breach of non-solicitation and non-disclosure agreements they signed at UBS.

5. In addition, Defendants have been misleading UBS clients by stating that their former UBS team, the FDG Group, "is now" Procyon or that the entire team had moved to Procyon, when in fact Defendants constituted only part of the FDG Group and other members of the FDG Group - including two founding members - remain at UBS. Defendants' misrepresentations have caused substantial client confusion and concern.

6. UBS also believes that Defendants began competing against UBS during the six month period between defendant Fiore's termination in November 2016 and when the other defendants resigned on June 2, 2017. Upon information and belief, Fiore -- with the knowledge of the other defendants -- for months had had been telling clients about the plan to set-up Procyon and soliciting those clients to move their business to Procyon once the firm was operational.

7. By this action, UBS seeks injunctive relief pending arbitration of the merits of this dispute to protect itself from the irreparable harm being caused by the Defendants' conduct.

8. UBS is filing, concurrently with the filing of this action, an arbitration against Defendants before FINRA Dispute Resolution on the merits of the dispute seeking damages and permanent injunctive relief.

FOOTNOTE 1: Procyon Partners, LLC, Procyon Private Wealth Partners, LLC, and Procyon Institutional Partners, LLC (collectively, "Procyon") were formed by defendant Fiore in early 2017. Since June 2, 2017, all Defendants have been employed by Procyon in its Shelton, Connecticut office.

III. Legal Argument

The clients at issue are subject to the restrictive covenants contained in the agreements executed by Defendants during their UBS employment. By Farrar's, Gloria's, and Gahan's unlawful misappropriation of UBS's confidential and trade secret client records, soliciting of UBS clients they did not introduce to the FDG Group to transfer their accounts to Procyon, and deceptive and misleading communications with UBS clients, Farrar, Gloria, and Gahan have deliberately and openly violated their contractual provisions, fiduciary duties to UBS, and applicable Connecticut law. Further, by defendant Fiore's solicitation of UBS clients, deceptive and misleading communications with UBS clients, and possession of UBS's confidential and trade secret client records, Fiore has also violated his contractual provisions with UBS and applicable Connecticut law as well as engaged in unfair competition.

UBS has been and continues to be irreparably damaged by the actual and threatened loss of client goodwill and loss of revenue caused by the Defendants' actions. UBS has provided the Defendants with numerous opportunities to comply, and they have failed to comply voluntarily. Accordingly, UBS seeks the Court's assistance in securing and protecting UBS's trade secret and confidential client information and stopping the Defendants' knowing and intentional wrongful conduct.

For the reasons discussed below, the Court finds that UBS has shown a likelihood of success on the merits as to Mr. Fiore violating his non-solicitation agreements. The Court also finds that UBS can show neither a likelihood of success on the merits, nor sufficiently serious questions going to the merits to make them a fair ground for litigation as to the Protocol Defendants, because of the Protocol. As will be explained below, because the Court ultimately finds that UBS will not be able to show irreparable harm in the absence of an injunction and the Court will therefore not grant its motion for a preliminary injunction.

SIDE BAR: The preamble to the "Protocol for Broker Recruiting" states the following:

The principal goal for the following protocol is to further the clients' interests of privacy and freedom of choice in connection with the movement of their Registered Representative ("RRs") between firms. If departing RRs and their new firm follow this protocol, neither the departing RR nor the firm that he or she joins would have any monetary or other liability to the firm that the RR left by reason of the RR taking the information identified below or the solicitation of the clients serviced by the RR at his or her prior firm, provided, however, that this protocol does not bar or otherwise affect the ability of the prior firm to bring an action against the new firm for "raiding." The signatories to this protocol agree to implement and adhere to it in good faith.

Bill Singer's Comment: The Protocol for Broker Recruiting is a document drafted by management in an effort to constrain the post-employment conduct of former employees. No registered representative is a signatory to the Protocol. No public customer is a signatory to the Protocol. Accordingly, in my opinion, the Protocol's assertion that its "principal goal" is to "further the clients' interests of privacy and freedom of choices" is self-serving nonsense. Not that I have an opinion about the issue.

At the hearing, the parties agreed that the Protocol does not apply to Mr. Fiore, and also agreed that he is governed by non-solicitation obligations arising from his agreements with UBS. Thus, the only issue that remains for the Court as to Mr. Fiore is whether any of his communications with FDG Group clients rose to the level of solicitation and therefore violated his agreements with UBS.

The Court finds that UBS has shown a likelihood of success on the merits as to Mr. Fiore violating his non-solicitation agreements because the Blast E-mail rose to the level of solicitation. Mr. Fiore, the Protocol Defendants, and Mr. Foster worked together to prepare the list of Blast E-mail recipients, which Mr. Fiore was aware would include FDG Group clients, clients that he had previously worked with at UBS and that were still at UBS. Thus the Blast Email was targeted at clients of UBS, clients that Mr. Fiore and the other Defendants clearly hoped to attract to Procyon . . .

There is some evidence in the record of questionable behavior on the part of Protocol Defendants here, with respect to the preparation of their Protocol lists. See Email, Pl.'s Ex. 5 ("I sorted the [private client] list by Zipcode just to fuck with them a little. It's the small things"); PC Protocol List, Farrar Decl. Ex. C, ECF No. 58 (appearing to sort private clients largely by zip code). The Court finds that this does not rise to the level of violating the spirit of the Protocol, unlike in Choy, because full private client contact information was still listed in the Protocol lists and UBS was not, therefore, hindered in its ability to contact the clients on the list. Furthermore, unlike in Choy, Defendants here did not remove physical files and therefore deprive UBS of any client files, nor was there active interference with UBS's ability to contact clients, as in O'Brien.

Where there were violations by defendant of the code of conduct or internal policies at their previous firm, courts have not found a violation of the spirit of the Protocol, and have applied the Protocol's protections. Even to the extent that a departing financial advisor violates their former firm's internal policies while preparing for their departure, i.e. by sending a firm file to a personal email address, courts have not found a violation of the Protocol . . .

To the extent that the Protocol for Broker Recruiting applies to the Protocol Defendants' conduct, the Court finds that UBS will not be able to show either a "likelihood of success on the merits" or "sufficiently serious questions going to the merits to make them a fair ground for litigation," Faively Transp., 559 F.3d at 116, as to its claims based on the Protocol Defendants' alleged use of UBS client contact information through Defendants' contacting of certain clients they worked with at UBS . . .

To prevail on a motion for a preliminary injunction, the movant must also demonstrate "irreparable harm in the absence of the injunction." Faively Transp., 559 F.3d at 116. As explained above, the Court found that UBS had only been able to show a likelihood of success on the merits as to Mr. Fiore's breach of his non-solicitation agreements with UBS, due to his participation in the preparation and sending of the Blast Email. The parties had agreed, during the preliminary injunction hearing, that the Protocol did not apply to Mr. Fiore.

Nonetheless, courts have found that where a defendant's previous firm has signed the Protocol, it can still show that there will not be irreparable harm in the absence of an injunction preventing a departing financial advisor from soliciting their former clients. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Baxter, No. 09-CV-45 (DAK), 2009 WL 960773, at *5 (D. Utah Apr. 8, 2009) ("[Plaintiff's] participation in the Protocol for Broker Recruiting impacts this aspect of the irreparable harm analysis. . . . [Plaintiff's] participation in the Protocol indicates that they understand the fluid nature of the industry; brokers routinely switch firms and take their client lists with them. By agreeing to a procedure for departing brokers to take and use client contact information, [plaintiff] tacitly accepts that such an occurrence does not cause irreparable harm."); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Brennan, No. 07-CV-475, 2007 WL 632904, at *2 (N.D. Ohio Feb. 23, 2007) (finding that even if "[defendant's new firm] is a not a signatory to" the Protocol which courts in this district have generally found precludes the Protocol from applying "[plaintiff's] signature indicates that they understand the fluid nature of the industry; brokers routinely switch firms and take their client lists with them" and "[b]y setting up such a procedure for departing brokers to take client lists, [plaintiff] tacitly accepts that such an occurrence does not cause irreparable harm"); see also Reidy, 477 F. Supp. 2d at 477 (finding that plaintiffs can not "demonstrate risk of irreparable harm" in case where the Protocol applies); Lee, 2011 WL 6153108 at *8 (same).

Furthermore, the Court finds that Defendants have shown that any damages potentially resulting from Defendants' conduct does not rise to the level of irreparable harm because it can be quantified as money damages. "[O]nly harm shown to be non-compensable in terms of money damages provides the basis for awarding injunctive relief." Wisdom Imp. Sales Co. v. Labatt Brewing Co., 339 F.3d 101, 113-14 (2d Cir. 2003).16 Mr. Minerva, UBS's own witness, has testified that, for the vast majority of the clients at issue, the revenues are easily calculated. See Minerva Dep. 33:19-34:15. That damages in this case would be calculable as money damages further establishes that UBS cannot show irreparable harm in the absence of an injunction, even if the Protocol does not apply to Mr. Fiore's actions. See Baxter, 2009 WL 960773 at *4 ("Another court has recognized that damages in these types of cases are calculable because . . . each individual transaction is monitored electronically, every customer transfer is documented, and every dollar earned in fees by [d]efendant doing business with those customers that the plaintiff considers its own can be traced precisely" (internal quotation marks omitted)).

• UBS
• Fiore
• Farrar
• Gloria
• Gahan
• Procyon
• Irreparable Harm
• Preliminary Injunction
• Injunction
• TRO
• Broker Protocol
• Protocol
• BrokeAndBroker
• Bill Singer