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Todd Thomson. REUTERS/Brendan McDermid

Judge halts ex-U.S. Trust team from using client info

12/10/2010 COMMENTS (0)

NEW YORK, Dec 10 (Reuters Legal) - Todd Thomson's drive to start a new wealth management firm hit a bump after a New York state judge temporarily blocked a team of former U.S. Trust advisers from using client records they brought to his new firm, Dynasty Financial Partners.

Michael Brown, a U.S. Trust adviser with $5.9 billion in assets, and three others joined Dynasty this week to help Thomson build a firm that will provide technology and other support to high-end investment advisers.

U.S. Trust parent Bank of America said in a complaint filed on Thursday that the employees essentially stole trade secrets when they took client records with them from the bank.

Judge Melvin Schweitzer of New York state court in Manhattan said in an order late on Thursday that the employees temporarily may not use or disclose customer lists, other property or trade secrets taken from U.S. Trust.

Brown and his team can, however, continue to advise clients who want to work with them.

The order also directs the employees to return customer lists and other property pending a hearing now scheduled for Jan. 14. A Bank of America spokesman provided a copy of the order to Reuters.

Bank of America in its complaint said neither U.S. Trust nor the bank signed a voluntary industry agreement known as the "Protocol for Broker Recruiting," which provides a framework for client solicitation when financial advisors change firms. The pact has helped reduce lawsuits over broker departures.

Merrill Lynch, a unit of Bank of America, is a party to the protocol.

Brown and his team in their resignation letter contended the protocol allowed them to take client information, according to Bank of America's complaint.

Bank of America argues that the defendants were employees of the U.S. Trust rather than Merrill Lynch and were not protected by the protocol. It says the defendants had U.S. Trust email addresses and identified themselves as employees of the U.S. Trust.

In addition to a temporary injunction and the return of customer lists and other property, the bank requested money damages and an order to prevent the defendants from soliciting any U.S. Trust clients for six months.

Dynasty was founded by Thomson and Shirl Penney, two former Citigroup wealth management executives. Thomson, also a former chief financial officer at Citi, left the bank in 2007 after he was accused by then Chief Executive Officer Charles "Chuck" Prince of improper use of company aircraft.

Officials at Dynasty could not be reached immediately for comment.

The case is Bank of America v. Michael Brown et al, Supreme Court of the State of New York, County of New York (Manhattan), No. 10115949. The complaint lists Alan Sclar of Silverman Sclar Shin & Byrne in New York as counsel for Bank of America. Brian Carlis and Thomas Lewis of Stark & Stark in New Jersey are listed as counsel for the defendants.

(Reporting by Joseph A. Giannone of Reuters; Additional reporting by Terry Baynes of Reuters Legal)


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