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JPMorgan Levels Lawsuit at $14B Merrill Team for ‘Bad-Mouthing’

When financial advisors transition from one bank to another, there is always a litigation risk. This risk can be minimized and greatly reduced by seeking proper counsel and gaining a full understanding of the restrictive covenants and duties of loyalty employment contract impose on financial services employees. A recent move that resulted in litigation was Kirk Cunningham and Todd Helfrich, who together manage close to $14 billion in assets, moving from JPMorgan to Merrill Lynch. JP Morgan has brought a suit against the former employees, claiming that the two advisors engaged in “bad-mouthing” the firm to former clients and that they allegedly violated the one-year non-solicitation clauses in their employment agreements. According to JPMorgan, the team allegedly told clients that the firm “only has junior people left to manage the client accounts,” and “forces its clients to use only its own products.” JP Morgan is seeking a temporary restraining order so as to halt this alleged activity.

The firm is suing Merrill advisors Kirk Cunningham and Todd Helfrich for violating non-solicitation agreements and improperly taking client contact information. Cunningham and Helfrich left JPMorgan’s private bank in February, after nine years as a private banker and seven years as an investment specialist, respectively. Together the pair served over 100 clients, making the $14 billion business a narrow-focused book, according to federal court documents from the U.S. District Court for the Northern District of Illinois.

Cunningham and Helfrich’s alleged solicitation efforts came to JPMorgan’s attention after the bank received complaints from clients about phone calls and emails from the duo. One client claimed his private data was being compromised by the duo and provided emails wherein Cunningham asks to discuss advisory services that he could offer from his new position with Merrill Lynch, according to JPMorgan’s suit.

The bank claims that Cunningham and Helfrich have successfully solicited at least six of the firm’s clients since joining Merrill, transitioning assets totaling approximately $160 million. JP Morgan further contends that the pair’s client list is largely a product of the bank’s own work and reputation, and that about 80% of Helfrich’s clients and 69% of Cunningham’s have been JPMorgan clients for a decade or more. JP Morgan is a non-protocol member firm, meaning that it is not a signatory of an agreement that supersedes restrictive covenants in employment contracts.

The attorneys at Lax & Neville LLP have extensive experience in successfully transitioning brokers from one firm to another and advising brokers on how to avoid violating restrictive covenants or other legal obligations to their departing firm.  If you are considering a transition, please contact Lax & Neville LLP today at (212) 696-1999 to schedule a consultation.