Moeschler v. Honkamp Krueger Fin. Servs.
| Decision Date | 21 September 2021 |
| Docket Number | 21-CV-0416 (PJS/DTS) |
| Parties | PETER MOESCHLER, Plaintiff/Counter-Defendant, v. HONKAMP KRUEGER FINANCIAL SERVICES, INC., and BCOR ADMINISTRATIVE SERVICES, LLC, Defendants/Third-Party Plaintiffs/ Counter-Claimants, v. MARINER, LLC, d/b/a Mariner Wealth Advisors, Third-Party Defendant. |
| Court | U.S. District Court — District of Minnesota |
Katie M. Connolly, Andrew Peterson, and Joel D. O'Malley, NILAN JOHNSON LEWIS PA, for Peter Moeschler and Mariner, LLC.
Jeremy D. Sosna, Benjamin D. Sandahl, Lauren Clements, and Michael R. Link, LITTLER MENDELSON P.C., for Honkamp Krueger Financial Services, Inc., and BCOR Administrative Services LLC.
Peter Moeschler is a former employee of Honkamp Krueger Financial Services, Inc. (“HKFS”). Moeschler resigned on February 12, 2021, and-that same day-filed this lawsuit seeking a declaratory judgment that the restrictive covenants in his employment agreements with HKFS are unenforceable. Almost immediately after filing suit, Moeschler began working for Mariner, LLC, a direct competitor of HKFS.[1]HKFS filed counterclaims against Moeschler and third-party claims against Mariner alleging breach of contract, violation of Iowa's Uniform Trade Secrets Act, and tortious interference with contractual relations. This matter is now before the Court on HKFS's motion for a preliminary injunction. For the reasons that follow, the motion is denied.
HKFS is a wealth-management company that partners with CPA firms to offer financial-planning services to the CPA firms' clients. ECF No. 13 ¶¶ 3-4. Moeschler was employed by HKFS as a financial advisor between 2003 and 2011. Moeschler returned to HKFS as a client-development specialist in June 2015. ECF No. 1 ¶ 16. Moeschler signed two agreements upon his return: an Agreement Ancillary to Employment (“Agreement Ancillary”) and an Employee Proprietary Information Agreement (“EPIA”). The Agreement Ancillary includes nonsolicitation and confidentiality provisions but does not include a noncompetition provision. ECF No. 1-1. The EPIA restricts Moeschler's use and disclosure of HKFS's trade secrets and confidential information. ECF No. 1-2.
In April 2019, Moeschler was promoted to client-development manager. ECF No. 9 (Answer) ¶ 16. In that capacity, Moeschler was responsible both for advising clients and for managing and developing relationships with CPA firms. Id. Moeschler signed a second EPIA a few months after his promotion, but he was not asked to sign any other agreements. See ECF No. 1-3. The Agreement Ancillary and the EPIAs are governed by Iowa law.
HKFS was acquired by Blucora, Inc., on July 1, 2020. ECF No. 9 (Answer) ¶ 5. Six months later, on January 1, 2021, Moeschler became an employee of BCOR Administrative Services, LLC (“BCOR”), an affiliate of Blucora. Id. ¶ 7. On February 12, 2021, Moeschler terminated his employment with BCOR. ECF No. 13-1 at 15. About an hour later, Moeschler filed this lawsuit against HKFS and BCOR seeking a declaration that the Agreement Ancillary and the EPIAs are unenforceable to the extent that they prohibit him from working for Mariner or from soliciting HKFS's clients or CPA affiliates.[2]
On the day that he resigned, Moeschler retained a forensic expert to image his cell phone and laptop and deleted all business-related contacts on his cell phone. ECF No. 19 ¶ 5. Moeschler alleges that he then used publicly available information to look up contact information for HKFS clients and CPA firms whose names he remembered. Moeschler also called a few clients whose phone numbers he had committed to memory. Some of those clients gave Moeschler contact information for their family members, who were also HKFS clients. And finally, some HKFS clients and CPA firms reached out to Moeschler on their own initiative after he left HKFS. ECF No. 19 ¶¶ 6-7. According to HKFS, clients with a total of $11 million of assets under management have followed Moeschler to Mariner. ECF No. 13 ¶ 31.
In this lawsuit, HKFS alleges that Moeschler has breached the non-solicitation and confidentiality clauses of his Agreement Ancillary, that he has used and disclosed trade secrets and confidential information in violation of the EPIAs, and that both Moeschler and Mariner have violated the Iowa Uniform Trade Secrets Act. HKFS further alleges that Mariner tortiously interfered with both the Agreement Ancillary and the EPIAs. HKFS now seeks a preliminary injunction enjoining Moeschler and Mariner from continued breaches, statutory violations, and tortious acts.
“A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). A litigant seeking a preliminary injunction “must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Id. at 20; see also Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc). HKFS, as the movant, “‘bears the burden of proving' that these factors weigh in its favor.” Mgmt. Registry, Inc. v. A.W. Cos., 920 F.3d 1181, 1183 (8th Cir. 2019) (quoting Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003)).
“In considering the likelihood of the movant prevailing on the merits, a court does not decide whether the movant will ultimately win, ” PCTV Gold, Inc. v. SpeedNet, LLC, 508 F.3d 1137, 1143 (8th Cir. 2007), but instead decides whether the movant has established, at minimum, a “fair ground for litigation, ” Watkins, 346 F.3d at 844 (quoting Loveridge v. Pendleton Wollen Mills, Inc., 788 F.2d 914, 916 (2d Cir. 1986)). The Court finds that HKFS has established a likelihood of success with respect to its claims that Moeschler breached and that Mariner tortiously interfered with the EPIAs but has not established a likelihood of success with respect to its other claims.
HKFS alleges that Moeschler breached the nonsolicitation clause of the Agreement Ancillary by contacting HKFS's clients and by soliciting and accepting business from those clients on Mariner's behalf. As evidence of Moeschler's breach, HKFS points to the $11 million in assets under management that it has lost to Mariner since Moeschler's resignation and to a February 23, 2021, email exchange between HKFS and Camille Richards (a former HKFS client). ECF No. 13 ¶ 31. A week after Moeschler resigned, an HKFS financial advisor emailed Richards to introduce himself as the new point person on her account. ECF No. 13-2 at 11. Richards responded that she had decided to partner with another firm, and HKFS subsequently learned that Richards had moved her business to Mariner.
HKFS alleges that these facts establish that Moeschler breached the client-nonsolicitation clause of the Agreement Ancillary, which provides that:
During Employee's employment and for a period of three years after [he] ceases to be employed by Employer, Employee shall not, directly or indirectly, solicit or divert business from, accept business from, provide, or attempt to convert to other methods of using, the same or similar products or services provided by Employer either before or after the date hereof by Employer, including clients with respect to whom Employee performed professional services prior to [his] employment with Employer. For purposes of this section, any client or account of Employer includes, but is not limited to, any person or entity to whom Employer provided service(s) within the twenty-four (24) month period prior to Employee's employment termination.
Moeschler argues that HKFS cannot establish a likelihood of success on this claim because the nonsolicitation clause is unintelligible. The Court agrees.
The clause begins promisingly enough: Moeschler is prohibited from taking various actions for three years. He cannot solicit, divert business from, accept business from, provide, or attempt to convert to other methods of using-something. But what? The phrase that follows this list of verbs is “the same or similar products or services.” But that makes no sense; Moeschler cannot solicit or divert or accept business from products or services.
It appears that the drafter meant “the same or similar products or services” to be paired with the two verbs that immediately precede it (“provide, or attempt to convert to other methods of using”) and the words that immediately follow it (“provided by Employer either before or after the date hereof by Employer”). On this reading, Moeschler is forbidden to: (1) “solicit”; (2) “divert business from”; (3) “accept business from”; or (4) “provide, or attempt to convert to other methods of using, the same or similar products or services provided by Employer either before or after the date hereof by Employer.” The last clause is still a mess-“by Employer” appears twice-but let's ignore the second “by Employer.” We still need an object. Solicit whom? Divert business from whom? Accept business from whom? Provide products or services to whom? Convert whom to other methods?
The next words following this list of verbs make up a modifying clause: “including clients with respect to whom Employee performed professional services prior to [his] employment with Employer.” But like the verbs, this modifying clause is an orphan. It is intended to clarify that something includes certain clients, but it does not say what.
Perhaps the word “including” is the problem If the Court were to ignore the word “including”-as it ignored the duplicate phrase “by Employer”-Moeschler...
To continue reading
Request your trial