Broker Seeks Declaratory Relief on Employment Agreement

And obtains the relief – before he leaves his current employment

BUTLER v. PWI, NASD ID #01-00763 (Atlanta, 4/12/01):

In this unusual “raiding/recruiting” case, the broker seeks and obtains declaratory relief before he leaves the broker-dealer.

The broker was a partner in J.C. Bradford & Co., a Tennessee regional house acquired by PaineWebber. From the summary in this Award, it appears that the broker had not departed PaineWebber when he brought this injunctive proceeding under NASD Rule 10335.

In his claim, he sought preliminary and permanent relief that restrictive covenants in his employment agreement would be unenforceable, should he leave PWI. There is some indication that the broker also feared retaliatory action or that the sale of his partnership interest might in some way be encumbered. Thus, a number of issues were teed up for the three-person Panel to decide.

The Regular Injunctive Arbitrator made no apparent decision, except to refer the claims for relief to the full Panel. The full Panel acted within two months from filing, according the broker virtually most of his requested relief.

The Panel did caution, though, that, while the non-solicitation clause in the Employee Forgivable Loan Agreement “is void and unenforceable” against Claimant, PaineWebber may still have a claim to the proceeds of that loan.

(ed: Ripeness of the dispute in such circumstances was likely a real issue; PaineWebber objected that the Panel would be issuing an “advisory opinion,” since Claimant had not resigned and “PaineWebber has not engaged in any of the activities which Claimant seeks to enjoin….” It would not be wise to view this decision as reaching beyond its facts.) (SAC Ref. No. 2001-18-03)

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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.