Salomon Smith Barney, Inc. v. Vockel

137 F.Supp.2d 599 (2000)

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Nature of the Case

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Facts

D has worked as a bond trader or financial consultant for a number of years. Merrill Lynch, Pierce, Fenner & Smith, Inc. hired him as a financial consultant in 1991. He left Merrill Lynch and started with the Philadelphia branch of P in November 1994. In late January 2000, D approached his long-time acquaintance Elliott Goodfriend, who is the Philadelphia Branch Manager for Paine Webber Inc. about the possibility of moving from P to Paine Webber. On approximately March 28, 2000, Paine Webber made D an offer of employment, which included a sizeable signing bonus. D accepted. Paine Webber told D it needed D's current client account statements. While still employed by P and without asking for permission from it or any of his clients, D provided to Paine Webber the account statements for 254 of the 470 accounts he was servicing at P. Paine Webber prepared solicitation packages and then mailed them to the account holders. The solicitation package contained a cover letter drafted and signed by D, an account transfer form with each client's P account number(s) preprinted on it, and a Paine Webber 'new account' form. The solicitation packages were mailed, via overnight delivery, on Friday, April 28, 2000. That same day, in the late afternoon, D submitted his letter of resignation to P. D took with him newly printed gain and loss statements for all of the P accounts he had serviced and a 'household list,' which showed the total assets, monthly activity, and gains and losses for each of his P accounts. D spent the weekend calling his clients. He told them about his move to Paine Webber and explained that they soon would be receiving solicitation packages that would enable them to transfer their accounts to his new employer. Just about the same type of activity had occurred when D moved to first work for P but the victim was Merrill Lynch. D used the October 1994 solicitation letter as a model when he drafted his April 2000 cover letter. The two letters are nearly identical. When D left P on April 28, 2000, he was managing approximately 470 accounts worth a total of approximately $70 million, and annually these accounts generated over $500,000 in commissions. In November 1994, D signed a 'Principles Of Employment' agreement with P that provided: You must never use (except when necessary in your employment with us) nor disclose with anyone not affiliated with [Smith Barney] ... any confidential or unpublished information you obtain as a result of your employment with us. This applies both while you are employed with us and after that employment ends. If you leave our employ, you may not retain or take with you any writing or other record which relates to the above. D also signed an 'Employee Acknowledgements' [sic] form wherein he promised: I will not publish or otherwise disclose, or use for other than Smith Barney's benefit, either during or after my employment, any unpublished or proprietary or confidential information or secret relating to Smith Barney or its affiliates or any of their businesses or operations, nor will I publish or otherwise disclose proprietary or confidential information of others to which I have had access or obtained knowledge in the course of my employment. If I leave the employ of Smith Barney, I will not, without its prior written consent, retain or take with me any writing or other record in any form or nature, which relates to any of the foregoing. In November, 1994, D signed an 'Acknowledgment' form which stated that he had received, read, and understood Smith Barney's Code of Ethics and that he agreed 'to comply fully with the standards contained in the Code and all of Smith Barney's other policies, rules and procedures (including those set forth in the Smith Barney Employee Handbook).' P filed for a preliminary injunction against D. P had also instituted an arbitration proceeding against D under the rules promulgated by the National Association of Securities Dealers. In that proceeding P seeks, among other things, a monetary award. Until the dispute between the parties can be arbitrated on the merits, P asks this court to restrain D from using, disclosing, or misappropriating P's customer information, to compel D to undo account transfers for any former P accounts he successfully caused to be transferred to his new employer, and to require D to return all documents containing P client information. The complaint does not seek a permanent injunction or other relief. A TRO was denied and this was the preliminary injunction hearing.