Wachovia Securities, L.L.C. v. Stanton
| Decision Date | 05 August 2008 |
| Docket Number | No. C 08-4058-MWB.,C 08-4058-MWB. |
| Citation | 571 F.Supp.2d 1014 |
| Parties | WACHOVIA SECURITIES, L.L.C., a Delaware limited liability company, Plaintiff, v. Donna STANTON, an individual, Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Daniel B. Shuck, Sioux City, IA, for Plaintiff.
TABLE OF CONTENTS
I. INTRODUCTION.............................................1019
A. Factual Background................................ 1019
1. The parties and their relationship.......... 1019
2. Stanton's resignation and new employment.... 1025
3. Stanton's post-employment conduct............1026
B. Procedural Background............................. 1030
II. LEGAL ANALYSIS......................................... 1031
A. Standards For A Temporary Restraining Order........... 1031
B. Application Of The Standards.......................1033
1. Likelihood of success........................1033
a. Breach of restrictive covenants.......1034
i. Arguments of the parties........1034
ii. Analysis.......................1035
b. Misappropriation of trade secrets.....1041
i. Arguments of the parties........1041
ii. Analysis.......................1042
2. Threat of irreparable harm...................1044
a. Arguments of the parties...............1045
b. Analysis...............................1045
3. Balance of harms.............................1047
a. Arguments of the parties...............1047
b. Analysis...............................1048
4. The public interest..........................1048
C. Expedited Discovery................................1049
III. CONCLUSION.............................................1050
In this action, filed on July 30, 2008, a securities broker-dealer seeks a temporary restraining order and a preliminary injunction to restrain a former employee from allegedly pirating confidential client information and other employees for the benefit of her new employer, a competing securities firm, pending disposition of arbitration proceedings on the parties' dispute before the Financial Industry Regulatory Authority (FINRA). The broker-dealer also seeks expedited discovery to aid in the disposition of the broker-dealer's motion for a preliminary injunction. Following a hearing on August 4, 2008, in which counsel for both parties participated, but no evidence or witnesses were presented, the court enters this order on the brokerdealer's request for a temporary restraining order and expedited discovery.
In a Complaint (docket no. 2), filed July 30, 2008, plaintiff Wachovia Securities, L.L.C., (Wachovia) seeks a temporary restraining order and a preliminary injunction against a former employee, defendant Donna Stanton, pending disposition of arbitration proceedings between the parties concerning various kinds of alleged misconduct by Stanton. Because of the preliminary nature of the proceedings, the factual background stated here is necessarily based primarily on the allegations in and documents in support of Wachovia's July 30, 2008, Complaint (docket no. 2), Wachovia's July 31, 2008, Motion For A Temporary Restraining Order And Preliminary Injunction And For An Order Permitting Expedited Discovery (docket no. 3), and Stanton's Opposition to Wachovia's Motion For A Temporary Restraining Order (docket no. 10). In making any findings of fact in this ruling, the court is mindful of the general rule that "the findings of fact and conclusions of law made by a court granting a preliminary injunction [or temporary restraining order] are not binding at trial on the merits." University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981); accord United States Sec. and Exchange Comm'n v. Zahareas, 272 F.3d 1102, 1105 (8th Cir.2001) () (quoting Patterson v. Masem, 774 F.2d 251, 254 (8th Cir.1985)); National Credit Union Admin. Bd. v. Johnson, 133 F.3d 1097, 1103 n. 5 (8th Cir.1998) (); Henderson v. Bodine Aluminum, Inc., 70 F.3d 958, 962 (8th Cir.1995) (). Thus, all findings of fact in this ruling are provisional.
Wachovia Securities, L.L.C., (Wachovia) is a corporation organized under the laws of the state of Delaware with its principal place of business in St. Louis, Missouri.1 Wachovia is a securities broker-dealer and a member of the Financial Industry Regulatory Authority (FINRA),2 the New York Stock Exchange, Inc., and all other major exchanges. Wachovia provides broker-dealer services to individual and institutional clients throughout the United States. In October 2007, Wachovia and A.G. Edwards & Sons, Inc., (Edwards) another securities broker-dealer, completed a merger. Thus, Wachovia alleges that it is a successor in interest to Edwards, which Stanton does not dispute. Wachovia has a branch office in Storm Lake, Iowa, which was formerly an Edwards office.
Defendant Donna Stanton had been employed at the Storm Lake office for Edwards, then Wachovia, for approximately twenty years as of July 2008. Wachovia alleges that Stanton was employed, first, as a "sales assistant" or "financial associate" for Edwards, then as a "registered sales assistant" for Wachovia. Wachovia contends that Stanton was responsible for providing a full range of administrative support services to Wachovia financial consultants in the Storm Lake office. There were two such financial consultants, or "senior brokers," in the Storm Lake office, who had combined assets under management of approximately $100 million. Wachovia contends that these assets generated more than $500,000 in combined revenue on an annualized basis. More specifically, Wachovia alleges that Stanton was the sales assistant to senior broker Tom McClinton. McClinton managed in excess of $40 million in assets for more than 300 of Wachovia's clients. Tom McClinton retired on July 18, 2008. Since McClinton's retirement, his clients have been reassigned to Alan Bowles, another Wachovia broker in the Storm Lake office. Wachovia alleges that, in addition to assisting McClinton with his clients, Stanton also had a small "book" of her own clients.
In a Declaration submitted in support of her Opposition, Stanton paints a quite different picture of her role at Wachovia. Although she concedes that she was originally hired by Edwards in 1988 as an unregistered sales assistant, she contends that, in 1996, she was asked to get her securities licenses. She contends that, at that time, she was told to sign the Sales Assistant Agreement (the 1996 Agreement), portions of which are set out below. She contends that she was not given new employment in consideration for signing the 1996 Agreement, but only materials to help her study for her licensing examinations. Wachovia alleges that, in consideration for entering into an employment relationship with Edwards (and its successor Wachovia) and executing her employment agreement, Stanton was provided with significant benefits, including fair compensation, office facilities, health insurance, securities registration, and participation in Wachovia's 401(k) plan. The record does not support a finding that Stanton entered into new employment with Edwards or that her continued employment was contingent on executing the 1996 Agreement, but the Agreement does, by its terms, as quoted below, identify adequate consideration for the Agreement. Stanton asserts that, to her knowledge, no other Edwards employees in the Storm Lake office were required to sign a non-solicitation agreement. She also argues that the 1996 Agreement is inapplicable to her ultimate position as a financial consultant.
Stanton represents that, over the twelve years after becoming registered, she personally originated, developed, and serviced approximately 200 clients under her own production number and that she received 100% of the commissions for such customers. She contends that many of her customers were developed through friends and acquaintances of her prior customers, her personal network of friends and relations, and her personal reputation. Thus, she contends that she developed these customers largely independent of any marketing efforts by Edwards or Wachovia. Stanton concedes that she did assist Tom McClinton with servicing of approximately 100 to 150 of his clients, but she asserts that she and McClinton, who was semiretired for the last three years that he worked for Edwards, split the commissions under a joint production number, and that she also provided full service to his clients, including research and recommendations, when he was out of the office, often for extended periods of time.
In a Declaration filed in support of Stanton's Opposition, McClinton confirms Stanton's description of her involvement with his clients and their commissions arrangement, adding that Stanton received 3 % of his gross commissions, as well. Stanton asserts that she also provided service to the clients of other financial consultants in the office, including Alan Bowles. Stanton asserts that she considered herself and her clients considered her a financial consultant. She also asserts that Alan Bowles was the only person in the office who did not treat...
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