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UBS Financial Services Inc. v. Fiore

United States District Court, D. Connecticut

July 24, 2017

PHIL G. FIORE, JR., JEFFREY H. FARRAR, et al., Defendants.


          Victor A. Bolden United States District Judge

         UBS Financial Services Inc. (“UBS” or “Plaintiff”) brings this action against Phil G. Fiore Jr., Jeffrey H. Farrar, Louis Gloria, and Thomas M. Gahan (collectively, “Defendants”), alleging breach of contract, misappropriation of trade secrets under the Connecticut Uniform Trade Secrets Act (“CUTSA”), violations of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110a, et. seq. (“CUTPA”), breach of fiduciary duties owed to UBS, and unfair competition. ECF No. 1. Pending before the Court is Plaintiff's motion for a temporary restraining order and a preliminary injunction against the Defendants, dated June 16, 2017, which the Court construes as a motion for preliminary injunction. ECF No. 3.

         Following a telephonic status conference held on June 20, 2017, ECF No. 21, the Court set a briefing schedule and hearing date. ECF No. 22. Defendants filed their response to the motion for a preliminary injunction on July 10, 2017. ECF No. 53. The Court held a preliminary injunction hearing and heard evidence on July 17, 2017.

         For the reasons that follow, the Court DENIES Plaintiff's motion for a preliminary injunction in its entirety.


         UBS is a Delaware corporation with its principal place of business in New Jersey. Compl. ¶ 9, ECF No. 1. UBS also transacts business from its offices in Stamford, Connecticut (“Stamford Office”). Id. Defendants are individuals who were formerly employed by UBS as financial advisors in the Stamford office. Id. ¶ 10. While at UBS, Defendants worked as part of a financial advisor team (the “FDG Group”) with Steve DesRochers and Dean Gaugler, among others. Id. ¶ 15. Some of the FDG Group's clients were introduced to them by “UBS financial advisors outside of their team, ” id. ¶ 17, while others were brought to the FDG Group and UBS by Mr. Fiore and his team, which included Mr, Farrar, Mr. Gloria, Mr. DesRochers, and Mr. Gaugler, when they joined UBS in 2009. Fiore Decl. ¶ 9.

         In 2016, the FDG Group serviced client accounts with approximately $8 billion in assets under management, generating nearly $6 million in annual gross revenue. Compl. ¶ 16. The type of work done by the FDG Group and by Defendants' includes institutional consulting, on behalf of “institutional clients - often ERISA plan sponsors, such as pension or 401(k) plans of a company, municipality, charity or professional practice.” Fiore Decl ¶ 4, ECF no. 51. The FDG Group and some of the Defendants, as well as Mr. DesRocher and Mr. Gaugler, also work on “private wealth management” on behalf of private clients. Id. ¶¶ 6, 12.

         The FDG Group typically collected fees from its institutional client consulting business as a “percentage of assets under management” or as a “hard dollar figure established by contract. Fiore Decl. ¶ 11, ECF no. 51. Fees from the private wealth management side of the business were “generally based on a percentage of assets under management, although some clients engage in commission-based business.” Id.; see also Minerva Dep. 33:19-34:15 (containing UBS representative's testimony)[1].

         UBS terminated Mr. Fiore's employment in November of 2016. Compl. ¶ 1. Mr. Fiore subsequently founded Procyon Private Wealth Partners, LLC (“Procyon”). Id. Mr. Fiore launched Procyon on June 2, 2017. Fiore Decl. ¶ 16, ECF No. 51. Mr. Farrar, Mr. Gloria, and Mr. Gahan resigned from UBS on June 2, 2017 and immediately joined Procyon. Compl. ¶ 1. This case concerns Plaintiff's allegations that Defendants have been soliciting UBS clients and misusing UBS client information. The parties agree that this dispute is subject to FINRA arbitration. See Def.'s Br. at 29, ECF No. 53; Pl.'s Br. at 27-28, ECF No. 4.

         A. Relevant Contractual Provisions

         1. Protocol for Broker Recruiting

         UBS and Procyon are signatories to the Protocol for Broker Recruiting (“Protocol”). Compl. ¶ 33 n. 3. In relevant part, the Protocol provides that, if certain conditions are met, signatory firms agree not to enforce their rights regarding non-solicitation of clients against financial advisors that depart their firms for other signatory firms. See id.; Def.'s Br. at 2. Specifically the Protocol provides that:

If departing [financial advisors] and their new firm follow this protocol, neither the departing [financial advisor] nor the firm that he or she joins would have any monetary or other liability to the firm that the [financial advisor] left by reason of the [financial advisor] taking the information identified below or the solicitation of the clients serviced by the [financial advisor] 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.”

Protocol at 1, Farrar Decl. Ex. A, ECF No. 46 (emphasis in original).

         Under the Protocol, departing financial advisors are permitted to take certain client information:

When [financial advisors] move from one firm to another and both firms are signatories to this protocol, they may take only the following account information: client name, address, phone number, email address, and account title of the clients that they serviced while at the firm (“the Client Information”) and are prohibited from taking any other documents or information. Resignations will be in writing delivered to local branch management and shall include a copy of the Client Information that the [financial advisor] is taking with him or her.”

Id. Thus, when a financial advisor resigns under the Protocol, they are obligated to provide their former firm with a resignation letter and attach a list that includes all of the Client Information they intend to take (a “Protocol list”). See Id. The Protocol further provides that:

In the event that the [original] firm does not agree with the [departing financial advisor's] list of clients, the [financial advisor] will nonetheless be deemed in compliance with this protocol so long as the [financial advisor] exercised good faith in assembling the list and substantially complied with the requirement that only Client Information related to clients he or she serviced while at the firm be taken with him or her.


         As for the departing financial advisor and their new firm's use of the relevant client information, the Protocol states that:

[T]he new firm will limit the use of the Client Information to the solicitation by the [financial advisor] of his or her former clients and will not permit the use of the Client Information by any other [financial advisor] or for any other purpose.

Id. Additionally, the Protocol also provides that:

[Financial advisors] that comply with this protocol would be free to solicit customers that they serviced while at their former firms, but only after they have joined their new firms. A firm would continue to be free to enforce whatever contractual, statutory or common law restrictions exist on the solicitation of customers to move their accounts by a departing [financial advisor] before he or she has left the [former] firm.

Id. at 2.[2]

         2.Mr. Fiore

         UBS employed Mr. Fiore from April 24, 2009 through November 30, 2016. Compl. ¶ 13. On or around April 24, 2009, Mr. Fiore signed a transition agreement with UBS, which contained certain post-employment restrictions. Id. ¶ 14. Specifically, the agreement provided that:

In the event Employee's employment with [UBS] is terminated for any reason whatsoever, whether voluntarily or involuntarily, Employee agrees, for a period of one year from the date of termination or until such time that all amounts owed by Employee to [UBS] and all related entities have been fully repaid, whichever is earlier, to not solicit, directly or indirectly, any of the clients who maintain accounts at [UBS] . . . whom Employee serviced during his/her employment at [UBS] or other [clients of UBS] whose names became known to Employee while in the employ of [UBS].

         Fiore Trans. Agr. ¶ 5, ECF No. 1 Ex. A. The agreement defined “solicit” as communicating in any way with a client that “may have the effect of inviting, encouraging or requesting a client” to (a) “transfer his/her [UBS] accounts to [Mr. Fiore] or his/her new employer”, (b) “open a new account with [Mr. Fiore] or his/her new employer”, or (c) “otherwise discontinue his/her existing business relationship with [UBS].” Id. The agreement also contained the following provision regarding the confidentiality of client information:

Employee further expressly agrees that, in the event Employee's employment is terminated for any reason whatsoever, whether voluntarily or involuntarily, Employee may not take any records or information referring or relating to Clients of [UBS], former clients of [UBS] and prospective clients of [UBS], whether originals or copies, in hard copy or computerized form.

Id. ¶ 6. Mr. Fiore's April 2009 transition agreement with UBS also included the following provision:

In the event that Employee enters into other agreements with [UBS] that contain non-solicitation and/or confidentiality obligations . . . the non-solicitation and/or confidentiality provisions of any such agreement shall govern Employee's conduct with respect to the solicitation of clients and use of client information covered by those agreements.

Id. ¶ 7.

         During his time at UBS, Mr. Fiore also executed other transition agreements and deferred cash award (“DCA”) agreements with UBS, which included comparable post-employment restrictions on solicitation of clients and use of client information. Compl. ¶ 14. More recently, in February 2016, members of the FDG Group, including Mr. Fiore, signed a financial advisor team agreement (“February 2016 Team Agreement”) governing their servicing of team accounts. Compl. ¶ 18. This team agreement provided that:

Upon the termination of employment of any Team Member or former Team Member, the departing Team Member or former Team Member agrees that, in addition to any other non-solicitation obligations he/she may have in any other agreement with UBS or its predecessors . . . he/she will not solicit, for a period of one year from the date of termination of the departing Team Member's employment, any clients of [UBS] serviced by the Team.

Feb. 2016 Team Agr. ¶ 11(A), ECF No. 1 Ex. G. It further provides, in the next paragraph that:

Notwithstanding the preceding Paragraph, the Team Members agree and acknowledge that unless otherwise prohibited by a non-solicitation provision in another agreement, this provision does not apply to client accounts the departing Team Member introduced to the team either at its inception or during its existence.

Id. ¶ 11(B). This team agreement also contains a provision governing confidentiality and nondisclosure:

Each Team Member hereby agrees not to disclose to any person any Confidential Information relating to [UBS] except in the course of carrying out his or her duties for [UBS] or as required by law or governmental agency with jurisdiction. For purposes of this paragraph, “Confidential Information” means any nonpublic information concerning [UBS's] . . . customer lists, customer financial information . . and any other proprietary information; except for specific items that have become publicly available other than through a breach by you of this Paragraph 20 or any other confidentiality agreement.

Id. ¶ 20.

         As with the other Defendants, Mr. Fiore agreed to be bound by a code of conduct, and agreed to maintain the confidentiality of UBS's confidential information. Minerva Aff. ¶ 19, ECF No. 6.

         3. Protocol Defendants

         Mr. Garrar, Mr. Gloria, and Mr. Gahan (collectively, the “Protocol Defendants”) worked at UBS until June 2, 2017. Compl. ¶ 22. Throughout their employment at UBS, the Protocol Defendants also executed transition agreements and DCA agreements with UBS, which also contained post-employment restrictions on solicitation of clients and non-disclosure of client information as in Mr. Fiore's April 2009 transition agreement, discussed above. Id. ¶ 24 n. 2. After UBS terminated Mr. Fiore in November 2016, the Protocol Defendants signed a new team agreement with Mr. DesRochers and Mr. Gaugler (the “December 2016 Team Agreement”). Id. ¶ 23. This team agreement contained the following provision regarding non-solicitation:

If the employment of any Team Member (current or former) terminates for any reason, that Team Member will not, for a period of one year from the employment termination date, solicit any clients that were serviced by the Team. This provision does not apply to client accounts the departing Team Member introduced to the Team, either at its inception or during its existence. Nothing in this Non-Solicitiation provision limits any rights UBS or any Team Member may have under the Protocol for Broker Recruiting.

Dec. 2016 Team Agr. ¶ 5, ECF No. 1 Ex. H.

         Throughout their employment at UBS, the Protocol Defendants were also required to read and comply with firm policies and procedures. Compl. ¶ 25. These policies and procedures, including UBS's Code of Conduct and Investment Advisor Code of Ethics (“Code of Conduct”), included provisions “designed to ensure the confidentiality and security of UBS's confidential client and business information.” Id. The Code of Conduct includes an agreement that departing employees “would not be permitted to retain, disclose or utilize any of UBS's Confidential Information after the termination of their UBS employment.” Id. ¶ 26.

         B. Events Prior to Defendants' Employment at UBS

         At the Preliminary Injunction hearing, Mr. Fiore testified as to the history of the FDG Group, which he had built, initially under another name, prior to the group joining UBS. Mr. Fiore worked in the financial services business in Connecticut since 1994, beginning his career at Prudential Securities, Incorporated (“Prudential”). Fiore Decl. ¶ 4. Mr. Fiore testified that he began focusing on institutional client consulting in 1997. While at Prudential, Mr. Fiore formed the Fiore Consulting Group.[3] Id. ¶ 5. In or around 2003, Prudential eventually “sold its retail securities business to Wachovia Securities” (“Wachovia”), at which point Mr. Fiore's team went to Wachovia.[4] Id. While Mr. Fiore and his group were at Wachovia, his group merged with that of a Mr. Monaghan, whose work focused on religious institution clients, and became the Fiore- Monaghan Consulting Group, until Mr. Monaghan retired before Mr. Fiore's group moved to Merrill Lynch.

         In or around October of 2005, Mr. Fiore moved his business to Merrill Lynch, Pierce, Fenner and Smith (“Merrill Lynch”). Id. ¶ 6. There, Mr. Fiore formed an “FDG Group” (the “MLPFS FDG Group”) that included Mr. Farrar, Mr. Floria, Mr. DesRochers, and Mr. Gaugler. Id. ¶ 6. Mr. Farrar and Mr. Gloria had been financial advisors at Merrill Lynch before Mr. Fiore's arrival in October 2005. Fiore Decl. ¶ 6. By 2009, the MLPFS FDG Group had built a business with approximately $1.8 billion in assets under management and approximately $2 million in annual revenue.[5] Id. ¶ 7. Mr. Fiore maintains that he developed many of the institutional consulting relationships by himself, or with Mr. Farrar and Mr. Gloria, and that Mr. DesRochers and Mr. Gaugler introduced very few, if any, new institutional consulting relationships to the MLPFS FDG Group. Id.

         In or around September 2008, Bank of America announced that it would purchase Merrill Lynch. Fiore Decl. ¶ 8. In April 2009, the Defendants, Mr. Gaugler, and Mr. DesRochers left Merrill Lynch to join UBS. Id. They continued to refer to themselves as the FDG Group. Id. ¶ 10. Mr. Gahan was a UBS financial advisor who joined the FDG Group shortly after it came to UBS from Merrill Lynch. Id. According to Mr. Fiore, Mr. Gahan also focused primarily on the institutional consulting business. Id. Christopher Foster also joined the FDG Group at UBS shortly after the move to UBS, and Mr. Foster worked on much of the reporting that the FDG Group provided to its institutional consulting clients. Id.

         Mr. Fiore testifies that many of the institutional clients that he worked with at Prudential or Wachovia had followed him to Merrill Lynch and continued to work with him and the MLPFS FDG Group. Fiore Decl. ¶ 9. He further testifies that when his team moved from Merrill Lynch to UBS in 2009, many of the institutional clients also moved. Id.

         C. Clients that Defendants Allegedly Introduced to UBS

         While the parties generally dispute which clients were ones that Defendants introduced to UBS, see Minerva Aff. ¶ 40 (indicating that members of the FDG Group that remained at UBS reported that the Protocol Defendants incorrectly claimed to have introduced certain clients to UBS), that dispute is largely not relevant to Plaintiff's motion for a preliminary injunction. At the hearing, UBS agreed that its argument as to the Protocol Defendants focused on Procyon's communications with FDG Group clients that were not included on their Protocol Lists when they resigned from UBS.

         D. Alleged Solicitation of UBS Clients

         UBS terminated Mr. Fiore on November 30, 2016. Fiore Decl. ¶ 16; Compl. ¶ 1. Mr. Fiore became the owner of Procyon on May 26, 2017, and the registered investment advisor entities owned by Procyon became operational on June 2, 2017. Fiore Decl. ¶ 16.

         On June 2, 2017, the Protocol Defendants resigned from UBS without prior notice to UBS. Minerva Aff. ¶ 33. Each of them tendered a resignation letter to Frank Minerva, the Branch Manager of the Stamford office of UBS, where Defendants had worked. Id. ¶¶ 1, 33. Their resignation letters stated that they were joining Procyon. Id. ¶ 34. Their resignation letters each included a Protocol list. Id. ¶ 36. These lists included clients' names, addresses, phone numbers, e-mail addresses, and account titles, and no other information. Id. ¶ 38. The lists included both institutional consulting clients and private wealth clients that had been serviced by the FDG group. Id. ¶ 37. Mr. Foster also resigned from UBS to join Procyon on June 2, 2017. Id. ¶ 56.

         At the preliminary injunction hearing, Mr. Farrar testified that the Protocol lists specifically excluded about 17 or 18 FDG Group institutional clients. See E-mail, Pl.'s Ex. 5 (attaching document listing institutional clients that Protocol Defendants intended to exclude from their Protocol lists). Procyon eventually contacted individuals from some of those clients, including Satterlee Stephens, DXL Group, and Apollo. Additionally, Procyon's communications were also sent to at least one FDG Group private client that had been introduced by Mr. Gaugler rather than one of the Defendants.

         1. Conduct Predating June 2, 2017

         UBS presented evidence that Mr. Fiore and the Protocol Defendants engaged in certain communications with FDP Group clients between Mr. Fiore's November 30, 2016 termination from UBS and June 2, 2017, when Procyon opened for business and the Protocol Defendants resigned from UBS. Pl.'s Br. at 8-10, ECF No. 4. Defendants dispute whether these communications are solicitations or otherwise improper. Def.'s Br. at 20-22.

         a. Mr. Fiore

         i. Jersey City

         At the hearing, UBS presented evidence of Mr. Fiore's text messages with Lori Disbrow, the Chief Investment Officer and plan administrator for Jersey City's 457 Plan (“Jersey City”), which had been a significant client of the FDG Group. Specifically, UBS presented several text messages that Mr. Fiore sent to Ms. Disbrow in the period starting from January 25, 2017 through June 2, 2017. Mr. Fiore also testified about the larger context of the communications between himself ...

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