United States District Court, D. Oregon, Medford Division
OPINION & ORDER
AIKEN, DISTRICT JUDGE:
matter comes before the Court to determine if the Temporary
Restraining Order ("TRO") granted to Plaintiff
Morgan Stanley Smith Barney LLC ("Morgan Stanley")
should continue as a preliminary injunction. Oral argument
was held on July 19, 2019. ECF No. 19. For the reasons set
forth below, the motion for continuing injunctive relief is
DENIED and the previously-issued injunction is hereby
preliminary injunction is an "extraordinary remedy that
may only be awarded upon a clear showing that the plaintiff
is entitled to such relief." Winter v. Natural Res.
Def. Council, 555 U.S. 7, 22 (2008). A plaintiff seeking
a preliminary injunction generally must show that: (1) the
plaintiff is likely to succeed on the merits; (2) the
plaintiff is likely to suffer irreparable harm in the absence
of preliminary relief; (3) the balance of equities tips in
favor of the plaintiff; and (4) an injunction is in the
public interest. Id. at 20.
Supreme Court's decision in Winter, however, did
not disturb the Ninth Circuit's alternative "serious
questions" test. Alliance for the Wild Rockies v.
Cottrell, 632 F.3d 1127, 1131-32 (9th Cir. 2011). Under
this test, "'serious questions going to the
merits' and a hardship balance that tips sharply toward
the plaintiff can support issuance of an injunction, assuming
the other two elements of the Wiiiter test are also
met." Id. at 1132, Thus, a preliminary
injunction may be granted "if there is a likelihood of
irreparable injury to plaintiff; there are serious questions
going to the merits; the balance of hardships tips sharply in
favor of the plaintiff; and the injunction is in the public
interest." M.R. v. Dreyfus, 697 F.3d 706, 725
(9th Cir. 2012).
Stanley is a Delaware LLC with its principal place of
business in New York. Morgan Stanley is a broker-dealer and a
member of the Financial Industry Regulatory Authority, Inc.
("FINRA"). Morgan Stanley conducts its business
through offices nationwide, including an office in Medford,
Oregon, In 2006, Defendant David James Sayler
("Sayler") began working for Morgan Stanley, or its
predecessor, as a financial advisor in Medford, Oregon.
Sayler resigned from his position with Morgan Stanley on June
13, 2019 to take a position with one of Morgan Stanley's
2016, Sayler joined the Cedar Ridge Group (the
"Group"), a joint production group based out of
Morgan Stanley's Medford branch office. As part of the
Group, Sayler was compensated based on the revenue generated
by the entire team, rather than the revenue generated by the
accounts he directly serviced. "As a result, [Sayler]
was paid almost 15% more than he would have if he had not
become part of the team." Compl. ¶ 6.
2017, another member of the Group, James Maddux, retired. On
his retirement, Maddux entered the Former Advisor Program
("FAP"), under which Maddux agreed to encourage his
clients to remain with Morgan Stanley after his departure.
Maddux's accounts would be serviced by active Morgan
Stanley financial advisors and, in exchange, Maddux would
receive a portion of the revenue generated by his former
August 2, 2017, Sayler signed a memorandum of understanding
(the "2017 Agreement"), by which he agreed to serve
as an active advisor for some of the Maddux accounts through
the FAP. Compl. Ex. B. These included accounts previously
serviced under Joint Production Number 173-035 (the
"173-035 Accounts"). As an active advisor on the
Maddux accounts, Sayler agreed that the client information
associated with those accounts was "highly confidential,
proprietary and the property of Morgan Stanley," and
that "the misuse or misappropriation of such information
would be of immeasurable loss and detriment to Morgan
Stanley." Compl. Ex. B, at 3. Sayler agreed that, if his
employment with Morgan Stanley was siispended or terminated,
he would immediately stop using the Maddux account
information and that he would immediately deliver that
information to Morgan Stanley, without retaining any of it.
Sayler also agreed that, in the event of termination, for any
reason, [F]or a period of one year or the remainder of the
Payment Period, whichever is longer, you will not solicit or
attempt to solicit, directly or indirectly, any of the
Clients who were served by you or any other Active Advisor in
connection with this FAP Agreement, or whose names became
known to you in connection with this FAP Agreement, while in
the employ of Morgan Stanley or as a result of your
employment with Morgan Stanley, with respect to securities,
commodities, financial futures, insurance, tax advantages
investments, mutual funds, or any other line of business in
which Morgan Stanley or any of its affiliates is engaged,
Compl. Ex. B, at 3.
of the 2017 Agreement, Sayler agreed that Morgan Stanley was
entitled to seek injunctive relief in the event of a breach.
Compl. Ex, B, at 3-4. Sayler further agreed that any dispute
over the 2017 Agreement would be resolved by FINRA
April 2019, Sayler became dissatisfied with his participation
in the Group. Sayler Decl. Sayler decided to leave the Group,
but remain with Morgan Stanley as a financial advisor. On
April 22, 2019, Sayler and two other advisors signed the
Morgan Stanley Wealth Management Former Advisor Program Joint
Active Advisor Agreement (the "2019 Agreement").
Compl. Ex. C.
the 2017 Agreement, the 2019 Agreement was concerned with
protecting the Maddux's retirement income. It
memorialized that Sayler would serve as the lead active
advisor on the 173-035 Accounts and would receive 74.67% of
the revemie generated by those accounts, which would increase
annually until 2022, when Sayler would receive 75% of the
revenue generated by the 173-035 Accounts. Compl. Ex. C, at
1-2. The 2019 Agreement included terms covering
confidentiality and non-solicitation of clients identical to
those set forth in the 2017 Agreement.
2019 Agreement also incorporated the Joint Production
Agreement Policy (the "Joint Production Policy")
with respect to the 173-035 Accounts and the Joint Production
Policy was attached to the 2019 Agreement. Compl. Ex. C, at
9. The Joint Production Policy included additional terms
concerning confidentiality and ...