Fid. Brokerage Servs. LLC v. Clemens

• Decision Date: 04 November 2013
• Docket Number: NO: 2:13-CV-239,: 2:13-CV-239
• Parties: FIDELITY BROKERAGE SERVICES LLC, Plaintiff, v. MELISSA CLEMENS, Defendant.
• Court: U.S. District Court — Eastern District of Tennessee

FIDELITY BROKERAGE SERVICES LLC, Plaintiff, v. MELISSA CLEMENS, Defendant.

NO: 2:13-CV-239

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TENNESSEE GREENEVILLE DIVISION

Dated: November 4, 2013

MEMORANDUM OPINION AND ORDER

This matter is before the Court on plaintiff's Motion for a Temporary Restraining Order, Preliminary Injunction, and Order Compelling Arbitration, [Doc. 5]. The defendant has responded in opposition, [Doc. 22], and the Court heard oral argument on September 23, 2013. For the reasons set forth below, the motion will be GRANTED IN PART and DENIED IN PART.

I. Facts

Melissa Clemens ("Clemens" or "defendant") abruptly resigned her position as an account executive at the Johnson City investor center of Fidelity Brokerage Services LLC ("Fidelity" or "plaintiff") without notice on September 6, 2013. Fidelity provides investment services to customers, the vast majority of which are high-net-worth customers who have a minimum of $250,000 or above in invested assets at Fidelity. Account executives are assigned by Fidelity to manage Fidelity's relationship with these customers. In order for Clemens to service these accounts, she had access to customers' confidential personal and financial information for at least 424 households, representing in excess of $466 million in assets underFidelity management. Clemens was assigned approximately half the assets under management of the premium service group at the Johnson City investor center.

At the beginning of her employment on April 13, 2001, and then again on July 30, 2010, Clemens signed an Employee Agreement [the "Agreement"] as a condition of her employment with Fidelity. The Agreement "describes certain aspects of [her] employment, protects Confidential Information and goodwill of the Fidelity Companies, and assists the Fidelity Companies in complying with their legal, regulatory and other obligations." [Doc. 5-1 at 13]. "Confidential information" is defined under the Agreement as "all information pertaining to the business of any of the Fidelity Companies that is not generally known to the public" at the time disclosed to Clemens and includes, among other things, "customer, prospect, vendor, and personnel lists." [Id.]. In the Agreement, Clemens agrees that confidential information, as defined in the Agreement, was "imparted to [her] in a relationship of confidence" and that during her employment and thereafter, she will not "copy, reproduce, use, disclose, or discuss in any manner, in whole or in part, any confidential information" except as necessary to carry out her job responsibilities. [Id.]. Important to this case, the Agreement contains a "non-solicitation" provision as follows:

6. Non-solicitation. During my employment and for a period of one year following my separation from employment by the Fidelity Companies, I will not directly or indirectly, on my own behalf or on behalf of anyone else or any company, solicit in any manner or induce or attempt to induce any customer of the Fidelity Companies to divert or take away all or any portion of his/her/its business from the Fidelity Companies or otherwise cease the relationship with the Fidelity Companies. For this same period, I also will not directly or indirectly, on my own behalf or on behalf of anyone else or any company, sell any security, insurance or annuity product or any other product or service to any customer or prospective customer with whom I had personal contact during the course of my employment by the Fidelity Companies. During this same period, I also will not directly or indirectly, on my ownbehalf or on behalf of anyone or any company, hire, solicit in any manner, or induce or attempt to induce any employee of any of the Fidelity Companies to leave his/her employment.

[Id. at 13-14]. The Agreement also provides that it shall be "governed in accordance with Massachusetts law." [Id. at 14].

Since Clemens' abrupt resignation on September 6, 2013, the branch office manager of the Johnson City Investment Center has "begun to receive reports that immediately after Clemens resigned from Fidelity and began working for a competitor, she was contacting Fidelity customers to solicit their business." [Doc. 5-1, Decl. Of Jonathan Bell, ¶ 12]. Bell's investigation revealed the following contacts between Clemens and Fidelity customers:

• On Monday, September 9, 2013, an unknown customer called the Johnson City branch office and spoke with the account executive who has taken over most of Clemens' customers and asked for Clemens' cell phone number. The customer said that Clemens had called him over the weekend and they had scheduled a meeting for Monday. The customer indicated that he knew Clemens no longer worked at Fidelity.

• On Monday, September 9, 2013, an identified Fidelity customer came into the branch office and reported that Clemens had called his home on Saturday.

• Also on Monday, September 9, 2013, another identified Fidelity customer reported that Clemens had called him on Saturday night.

• On September 9, 2013, a Fidelity employee reported that he had spoken with Clemens' husband who informed him that "Clemens hoped to take at least 20 of her Fidelity customers with her to Wells Fargo."

• On September 9, 2013, Clemens called Fidelity with a Fidelity customer on the phone with her who wanted to liquidate both of her accounts in the amount of $605,393 and transfer them to Wells Fargo.

• On September 13, 2013, Clemens called Fidelity with Fidelity customers on the phone with her. The customers wantedto liquidate their account and transfer assets in the amount of $993,445 to Wells Fargo.

• On September 19, 2013, Clemens called Fidelity with Fidelity customers on the phone with her. The customers wanted to liquidate both of their accounts and transfer $636,064 invested with Fidelity to Wells Fargo.

• On September 20, 2013, Clemens called Fidelity with Fidelity customers on the phone with her. The customers wanted to liquidate their accounts at Fidelity in the amount of $302,364 and transfer them to Wells Fargo.

[Doc. 5-1, Decl. of Bell, ¶¶ 13-18; Doc. 30, Supp. Decl. of Bell, ¶¶ 2-3]. As of September 23, 2013, seven Fidelity customers have transferred their money to Clemens at Wells Fargo, and three of these customers first established their accounts with Fidelity prior to Clemens' employment with Fidelity. [Doc. 30, ¶ 5].

Clemens acknowledges calling former customers to announce her new affiliation with Wells Fargo and to provide contact information. She asserts, however, that she has not solicited any customers to move their accounts to Wells Fargo but "[i]f clients asked [her] questions about [Wells Fargo], [she] answered them." [Doc. 22-2, Decl. of Clemens, ¶ 9]. Clemens states that Wells Fargo made it clear to her that she was not to use in her employment with Wells Fargo any of Fidelity's confidential information or solicit Fidelity's customers. Wells Fargo instructed her that she could contact Fidelity customers whose names she could recall and whose telephone numbers she could obtain from public sources, and then only to announce her departure from Fidelity, that she had moved to Wells Fargo, and provide her new contact information. According to Clemens, she followed Wells Fargo's instruction. [Id. at ¶ 7]. At the time of her resignation on September 6, 2013, Clemens took only her personal possessions and did not take anything belonging to Fidelity. [Id. at ¶ 5].

According to Fidelity, it does not have its account executives make "cold calls" to persons who have no existing relationship with Fidelity or who were not referred to Fidelity. Instead, Fidelity requires its account executives to develop service relationships based on leads that Fidelity provides from two primary sources. First, Fidelity provides information to its account executives from prospective customers who initiate contact with Fidelity or, second, regarding customers with whom Fidelity already has a relationship when these customers experience certain "triggering events," such as Fidelity 401(K) distributable events. In addition, account executives may be assigned to service customers previously serviced by other account executives who leave Fidelity or are promoted to another position. [Doc. 5-2 at ¶¶ 3-5]. Clemens apparently does not dispute Fidelity's assertions but does claim that from approximately April, 2011 through approximately April, 2013, her client base at Fidelity was "closed book," meaning Fidelity did not provide leads or new customers. According to Clemens, during that time she prospected for new customers by her own efforts through civic organizations, church, acquaintances, family, friends, and cold calls. [Doc. 22-2 at ¶ 2].

Fidelity maintains customer "look-up" reports in its customer information program known as "OneView." Fidelity also requires account executives to note their customer interactions on Fidelity's customer interaction software known as "Siebel." When a customer calls Fidelity, the account executive can look up extensive information about the customer in OneView and is required to enter information concerning a customer interaction, including the date, time and substance of the discussion, in the "notes section of Siebel." [Doc. 5-1 at ¶ 19]. Bell, the branch manager, reviewed Clemens' "look-ups" for her last day. On her last day, September 6, 2013, Clemens had looked up information on seven customers but had made a corresponding Siebel note only as to one. Nothing in the notes indicates that she had anyinteraction on that date with the other six. [Id. at ¶ 20]. The Siebel notes also indicate that immediately before her resignation, Clemens placed a call to a Fidelity customer responsible for a major corporate account which was worth approximately $5 billion in assets. [Id. at ¶ 21].

Clemens asserts that "[t]here is nothing suspicious or unusual" about her look-ups or Siebel notes, noting that Fidelity required a Siebel note for customer contact, not every look-up. She does...