Getting to Your Day In Court

During the last episode of “Looking Out for ‘U,’” on the day before they were to appear in court, Regina Repp was consulting with her attorney, Sheryl Repsfrend, regarding the TRO that her former employer, BeeDee, obtained against her. Repsfrend drafted papers in opposition to BeeDee’s Petition, including a Memorandum of Law and Affidavit in Opposition that Regina signed. However, always looking out for Regina’s best interests, her attorney additionally wished to speak with Regina’s colleagues -- the ones who left BeeDee to join Regina at New BD-- as well as some of Regina’s customers and former associates. She also wanted to see if there was any opportunity –even at this early stage – to discuss a settlement of the parties’ dispute with opposing counsel.

With that in mind Repsfrend called BeeDee’s attorney, Bill Firmsmann. Repsfrend and Firmsmann have worked on a number of cases together over the years --- typically one would represent a BD and the other would represent the same BD's current/former registered person. Quite frankly, this is a fairly common occurrence and the better-known securities industry attorneys all tend to know each other. It's a fairly small sorority/fraternity.

Regina’s Attorney Sheryl Repsfrend: Hey, how are you? Looks like we are on opposite sides of BeeDee v. Repp. As you know we've got the TRO hearing scheduled for tomorrow and I was wondering if we can work this one out? Any chance of adjourning the hearing so we can try to get things resolved?

BeeDee’s Attorney Bill Firmsmann: Well, my client's pretty pissed off right now. Look, bottom line, I'm being pressured to send a message with this one, so there's very little courtesy I can extend to you. I'll agree to an adjournment but you'll have to stipulate to continue the TRO in the interim.

Repsfrend: I know my client is not going to like that . . . but, if you'll give me a two-week adjournment on the hearing, I'm confident I can persuade her to give me permission.

Eventually, the two attorneys agreed on the two-week adjournment with the TRO remaining in place. Regina was not happy, because she was still restrained in her ability to do business. BeeDee was less unhappy, but still complained to Firmsmann that they wanted Regina brought into court and made an example of --- they wanted to punish her and to let their other employees know that they planned to play hardball.

During the ensuing two-weeks, try as they could, the two lawyers could not reach a settlement of the case. Bottom line, they could not agree on how many and which customer accounts BeeDee would let Regina take with her. The attorneys would continue their negotiations throughout the course of this action and even through arbitration --- should the case go that far. The door to a reasonable settlement should always remain open. The idea being that it is generally in both sides’ best interest to take control over the resolution of a controversy rather than leave one’s fate in the hands of strangers, whether those hands belong to a judge or an arbitration panel.

And then, the fateful court date arrived.

Regina met Repsfrend at New York’s Supreme Court (the trial level court in New York). Regina had a seemingly never-ending stream of questions for her attorney, including: Why was it necessary for her or anyone other than the attorneys to be present in court? Who else would be there besides her? What would happen once they arrived? Was her charcoal gray suit too ostentatious? And so on.

Once in Court, Regina and Repsfrend met the other named parties in the TRO. Howie Duing, the Regional Manager for New BD (the BD seeking to employ Regina) appeared with his own counsel, as did New BD the entity, as did Regina’s three friends (the named “John Does” in this action i.e. her assistant and the two brokers who also chose to go to New BD). Repsfrend had Regina, two other former co-workers and three of Regina’s long-time clients present in the event that their testimony was warranted. She had previously reviewed their anticipated testimony with them and they were fully prepared. Regina’s attorney already obtained and submitted sworn affidavits from not only Regina, but the others as well. This turned out to be prescient because the Court neither requested nor allowed oral testimony during the hearing.

Something to think about:

Sometimes one attorney will represent several or all of the respondents during a TRO hearing (and often during subsequent arbitrations/trials). Before accepting such multiple-client representations, lawyers should determine that they may ethically proceed notwithstanding any actual and/or potential conflicts of interest. Should a conflict of interest become such that it interferes with a lawyers ability to handle such clients, the alternative is often the withdrawal of that attorney from all clients so represented (or depending upon the terms of the retention, withdrawal from one or some).

Why should you agree to such multiple representations? Well, the most compelling reason is frequently that the cost of litigation is expensive and if your current/former employer is prepared to pick-up the costs (or a group of clients can share and thus reduce the costs), it may be sensible to work within that framework.

Why shouldn't you share a lawyer? One, the attorney may have a major client in the paying BD and if there are any "close calls," you may not always get the benefit of the doubt. Two, if at some point during the process you need to retain your own lawyer (or the prior lawyer withdrew), it may be expensive for a new attorney to get on the learning curve, i.e., to read all the prior correspondence, pleadings, and transcripts.

BeeDee’s attorney Firmsmann goes first.

Firmsmann tells the judge that Ms. Repp intentionally breached her employment contract with BeeDee. Under the terms of the contract, the only accounts that Regina could take with her are her immediate family members’ accounts and those listed on a schedule attached to the agreement – of which there were none. Beyond that, all account and attendant account data is proprietary and Ms. Repp had no right to solicit any other BeeDee customer. Additionally, Regina overtly recruited BeeDee employees to leave the firm and follow her, including a broker who alone generated 5% of the firm’s revenue, also in direct contravention of the terms of Ms. Repp’s employment contract.

Moreover BeeDee’s counsel argues, it was BeeDee’s advertising and marketing efforts (and the financial investment therein) and the firm's reputation that brought and/or maintained Regina’s accounts at the firm, and it is BeeDee’s finances and reputation that will be irreparably harmed if Regina absconds with a substantial portion of its accounts. The loss of the revenue from these accounts could have dire consequences to the firm’s future. And the far more intangible “loss of face” on the street cannot be measured by a mere monetary award. Firmsmann argues that in view of BeeDee's obvious likelihood of success on the merits at arbitration, the irreparable harm that BeeDee will otherwise suffer, and there being no adequate remedy at law, it is essential that the Court grant BeeDee’s request for a preliminary injunction (essentially an extension of the TRO) in order to maintain the “status quo” pending the outcome of the expedited intra-industry arbitration that BeeDee had already commenced.

Now it is Regina’s attorney’s turn at bat.

Repsfrend, admits that Ms. Repp signed the Association Agreement in question, butMs. Repp, like many brokers, was placed in the untenable position of facing a huge stack of new-employment documents to sign, with little or no time to fully review and appreciate the nature and consequences of the papers placed before her. She certainly did not appreciate that the agreement was a full-fledged, legally-binding employment contract. Certainly, she did notbelieve that BeeDee would be permitted take away her livelihood --- she never understood that she was an indentured servant.

But more to the point, in no way shape or form did Ms. Repp violate the patently illegal restrictive covenants contained in the Association Agreement. As a true professional, she simply discharged her ethical obligations to her clients by advising them that she was leaving for a position with New BD. What else was she to do? Had Ms. Repp not informed her clients that she was leaving, she would be doing them a disservice. Worse still, if one or more clients called her at BeeDee for advice and to transact business but found her “missing in action” as it were, Ms. Repp may have left herself open to potentially dozens of customer complaints if BeeDee did not satisfy these client’s needs in Ms. Repp’s absence.

And contrary to what BeeDee’s counsel has argued, it was Ms. Repp’s blood sweat and tears that built up her book of business—not to mention the hefty commissions she generated for the firm. She was BeeDee’s top producer and it was her own personal and professional integrity as well as her business acumen that has kept her clients loyal. Moreover, a customer clearly has the right to move his brokerage account to wherever he chooses. And if Ms. Repp’s customers are leaving BeeDee to follow her to New BD, it is merely further evidence that it was Ms. Repp efforts and not BeeDee’s who maintained these accounts.

To deny Ms. Repp’s customers the services of the broker of their choice, at the firm of their choice, will not cause hardship to BeeDee. It will serve only to harm the customers—rendering them innocent victims of BeeDee’s overtly vindictive action against one of that firm’s former top producers. And it will prevent Ms. Repp from earning a fair living in her chosen profession and could well put her out of business altogether.

As for improperly recruiting associates away from BeeDee, there too BeeDee’s counsel has erred in his reasoning. Ms. Repp’s friends left BeeDee of their own volition. They had worked with Ms. Repp at BeeDee and elsewhere for many years. It is perfectly understandable that they might wish to continue their relationship with her at New BD.

Finally, there is no reason why an arbitration panel cannot place a dollar value on what, if any, commissions are generated from the subject accounts. As such, there is in fact an adequate remedy at law, and a preliminary injunction, under the circumstances, is neither warranted nor appropriate. Therefore, BeeDee’s motion should be denied and the TRO lifted.

Next, New BD’s attorney as well as the attorneys for Regina’s colleagues stated their clients’ positions, either mirroring or at least buttressing the reasoning put forth by Regina’s attorney in her papers and through oral argument. Occasionally testimony from the parties will be heard—which is why it is very helpful to have the parties and any other relevant witnesses present (e.g. former co-workers and clients). Hence the reason that Regina’s attorney insisted that she be present and also asked that several other potentially helpful witnesses appear. In this case, the judge did not find it necessary to take testimony. The judge did however ask several clarifying questions of both BeeDee’s and Regina’s attorneys as to the purpose of certain of the contract terms, and what precisely Regina did to prompt BeeDee’s initiation of arbitration and this motion for injunctive relief.

And how will the court's rule on this motion between Regina and BeeDee? The anticipation mounts. Stay tuned as Regina continues her journey through litigation land in the next episode of "Looking Out for U."