A federal judge in Kansas dismissed a lawsuit by Edelman Financial Engines LLC alleging misappropriate of trade secrets by Mariner Wealth Advisors, Financial Advisor reported.
The case originated in 2023, when Edelman filed suit after Mariner hired 10 of Edelman’s financial advisors over a four-year period. Edelman alleged the advisors were encouraged to breach their non-solicitation agreements and trade secret obligations (including client information) when moving from one firm to the other. When they left, the advisors took at least 851 clients and more than $621 million in managed assets with them.
But in her ruling, Judge Holly L. Teeter determined that Edelman failed to show the partial client lists taken by the 10 advisors following their transition qualified as trade secrets or were improperly acquired. Teeter found that Edelman failed to show that Mariner advised its new hires to bring clients or information, or that the planners brought more than the memory of their clients’ names with them.
Teeter granted Mariner’s motion for summary judgment, concluding that no reasonable jury could rule in Edelman’s favor on the claims involving trade secrets. “Many aspects of the financial planning industry are confidential,” she wrote. “And the identity of and information about a wealth advisory firm’s clients inherently has some value. But confidential information with some value does not automatically equate to a trade secret.”
The judge noted that Mariner does not require planners hired from other firms to bring their clients with them, though the firm did offer a bonus of one-and-a-half to two times the net revenue generated by any clients they did bring with them during the first 18 to 24 months of employment with Mariner.
“Mariner does try to learn generally about a candidate’s field experience, including how much AUM the candidate has serviced. But Mariner does not ask for or receive client-specific information,” Teeter wrote. “Edelman’s attempt to show otherwise is disingenuous and insufficient to create a genuine issue of material fact.”
She also admonished Edelman’s legal team for using what she said were improper briefing tactics, including failing to provide citations and misrepresenting or even modifying evidence to better suit Edelman’s narrative. She said those tactics complicated her review of the case and were an obstacle to her resolving various pending motions.
According to the judge,”Neither problem is a one-off; they appear throughout Edelman’s briefing, to the point that the court cannot excuse them.”
Judge Teeter said that Edelman’s lawyers at one point stated, “The record clearly indicates that Mariner directed the departed planners to create the re-constructed client lists.”
“But the deposition transcript excerpts that Edelman cites do not indicate that Mariner directed the departed planners to create the client lists,” Teeter wrote. “The court reviewed every citation referenced by Edelman in its response to Mariner’s paragraph 43 and did not find a single departed planner who testified that Mariner directed him ‘to create the re-constructed client lists.’ Edelman’s misstatement of the record is frustrating and causes the court to question all Edelman’s representations.”
She added that Edelman’s position would create a “slippery slope” that “potentially federalizes every restrictive covenant case,” since any former employee who remembered a client name, even a family relative, and made contact could face a federal trade secret lawsuit.
Edelman Financial Engines’ attorneys filed that they intended to appeal the case to the Tenth Circuit Court of Appeals to overturn the judgment by Teeter.
In a statement, an Edelman spokesperson said they “remain confident in the merits” of the case.
“Our focus remains on protecting the trusted client relationships we have built over the past four decades and the long-term interests of our clients, our planners, and our business,” the spokesperson said.
Transitioning employment in the financial services industry requires counsel that can evaluate any potential legal implications so you can properly manage risk and focus on transitioning your clients. Hyman Cotter offers comprehensive and sophisticated counsel to clients nationwide, originating from years of advising financial firms and registered representatives on firm transitions. For more information on our legal services in this area, contact Hyman Cotter at (833) 665-0784 or through our online contact form for a free consultation.
