With the aid of their attorneys, former advisory firm principals Don Rembert and Marjorie Fox settled their respective lawsuit and countersuit over who owned advisory clients after she was terminated-narrowly avoiding a trial that could have cost either of them millions of dollars in damages each was seeking and could have set far-reaching precedents in the advisory industry.
Instead, the former long-time advisory firm partners reached a confidential settlement Sunday evening, just hours before their Monday morning trial was to begin in Virginia's Fairfax County Circuit Court. Citing the confidential nature of the agreement, Fox said only: "We are happy with this resolution."
Fox's attorney, James E. Campbell of the law firm Campbell, Miller & Zimmerman, Leesburg, Va., said his firm was ready to litigate, but that the settlement was in the best interest of all parties involved.
"As in many cases, as the case got closer to trial, the facts and theories became better developed and it led to a settlement," Campbell said.
Neither Don Rembert nor his attorney Michael J. Holleran of the law firm Walton & Adams, Reston, Va., returned calls for comment by press time.
"There were a variety of issues here," Fox's attorney maintains, "but this wasn't an allegation of breech of a nonsolicit or noncompete contract, because there was none." In fact, Fox had declined to sign a noncompete contract when Rembert presented her with one, which led to her termination from the firm of Rembert, Pendleton and Fox in Falls Church, Va., in late 2005. Jobless, in early 2006 she started a competing firm down the street, Fox Joss & Yankee, with two other former lead advisors of the Rembert firm also named in the lawsuit. They sent a letter to the clients they had recruited and worked with for years, letting them know that they were starting a new firm and would be happy to work with them if they so chose. Fox had spent 35 years at the Rembert firm, 15 years as a principal and 20 years as an employee. She was, in fact, both an employee and principal of the firm, a C-corporation, at the time she was terminated.
Rembert's lawsuit was seeking $2 million and punitive damages. The Fox countersuit sought unspecified damages.
Campbell says: "Fox was being sued in her personal capacity for allegedly wrongfully communicating with clients who elected upon her departure to move their business with her. The question is: After a CFP leaves employment, can she communicate with folks she's advised? In some cases, these folks were Marjorie's clients for more than a decade. I think the CFP Board (Section 407c) says they think advisors should communicate with clients, so there are many conflicts between the way some people perceive this law. The question," Campbell says, "which this court did not have the opportunity to decide, is does an employer alone own addresses and phone numbers of an advisor's clients?"
In the legal profession, the clients that an attorney has in his or her Rolodex, cell phone and PDA "are seen as resources you can take with you," says Campbell. "This would have been nice for the court to decide for advisors, especially because of the multidisciplinary nature of advisors' relationships and communications with clients. They don't just talk about money, but life choices."
Also undecided? Rembert's claim that Fox and her partners stole trade secrets and proprietary information from the firm, in the form of client balance sheets and cash flow statements. "These are documents that are solidly in the stream of advisor commerce," Campbell argues. "You can't open a financial planning textbook with seeing these worksheets. They're solidly in the stream of commerce and everyone uses them. The CFP Board requires that you use them. Just because your letterhead is across them, doesn't make them a trade secret," Campbell says. "What advisor can do any kind of planning-retirement, estate, tax or investment planning-without this basic type of information?" Campbell asks.
Today, both Rembert and Fox operate their own firms in northern Virginia, just miles apart. Rembert's firm manages some $611 million clients and Fox's firm managing $193 million, according to according to their Securities and Exchange Commission filings.

- Tracey Longo