[EDITORS" NOTE: Late on Friday, Hightower issued a strong response to Lars Knudsen's lawsuit.]

A Washington advisory firm is suing Hightower Holdings for allegedly poaching its clients through a litany of acts, including breach of contract, spreading false allegations and trying to enforce sweeping non-compete agreements.

The plaintiff, Lars Knudsen and his entity Telos Investment Holdings Inc., a former affiliate of Hightower, alleged that these actions were intended to support Hightower’s value “given its rumored attempts to sell its business,” according to the suit, filed with the King County Superior Court of Washington.

“Greed” was the motivation for Hightower’s actions against Knudsen and Telos, the plaintiff declared in the filing.

The list of the other defendants in the suit includes Hightower Advisors LLC, Hightower Bellevue Opco, LLC, Hightower Securities, LLC, HT Holding LLC and individuals Dan Stober, Randy Williams-Gurian, Tara Johnson, Sharon Lailey.

Hightower, a giant aggregator with $131 billion in assets, has been hit with other similar suits, alleging sweeping and overly restrictive non-compete agreements. Last month a former advisor, Darren Reinig of San Diego, sued Hightower for allegedly restricting his ability to obtain further employment through such restrictive covenants. 

In fact, Knudsen’s complaint cited the Reinig suit along with others Hightower is contending with. Furthermore, lawsuits against restrictive non-competes and allegations of poaching clients are rising across the RIA space, especially against large wealth management firms.

Hightower issued a response indicating it would aggressively contest the lawsuit. "Although we do not comment on the underlying substance of pending litigation, as you will note from our legal filings, Hightower intends to seek enforcement of its agreements, specifically including the protection of client information, to the full extent allowed by the laws," the firm said in a statement issued through a spokesman. "We lookforward to vigorusly pursuing our claims and obtaining appropriate relief from the court."

The Knudsen suit contends that the facts alleged in its complaint reveal a pattern exhibited by Hightower “of hijacking other investment advisors’ 'books of business,'” and getting advisors’ to sign “overly broad (and legally unenforceable) non-compete/non-solicitation agreements,” the plaintiff alleged in the suit. Hightower then uses “pretextual grounds” to sever ties with “the advisors so the company and its affiliates can keep the business the advisors brought to Hightower, the lawsuit says.

“Hightower’s motivation in severing advisors like Knudsen from their clients is clear: greed,” the plaintiff declared in the suit. “At a company level, Hightower is trying to steal clients from successful advisors that are departing or that it is trying to force into retirement (like Knudsen) so that it can prop up its valuation as it looks to find an acquirer.”

Furthermore, younger Hightower advisors employ “false, unsubstantiated, and defamatory accusations” to grab clients of senior advisors, the lawsuit says.

“It’s no secret that Hightower is known for its strong-arm bully tactics that are nothing less than predatory,” said Knudsen’s lawyer, Andrew R. Escobar, partner at Seyfarth Shaw LLP, in a press release. “Our lawsuit outlines how HighTower is systematically pushing Lars out of his profession by spreading false and misleading information to his long-time clients so as to poach his clients and their millions of dollars in financial assets.”

Escobar added that Hightower’s non-compete agreement would bar the plaintiff from “building back his business anywhere in the United States until 2030.”

Besides trying to enforce the six-year nationwide non-compete, the suit also claims that the defendants, among other things, intend to accuse Knudsen of misconduct through a “false, and defamatory regulatory filing.” 

The defendants allegedly are also tainting Knudsen’s reputation by telling clients “falsely” that he had “retired” and that he “’stole’ funds from Williams-Gurian and Hightower, all to poach those clients, according to the filing.

The lawsuit claimed Knudsen has “no choice” but to sue to, among other things, to “prevent defendants from breaching their contracts with plaintiffs” and from “terminating” his relationship with Hightower on “a pretext and blatant falsehoods.”

The plaintiff is also asking the court to block Hightower from enforcing its “wholly unenforceable restrictive covenants against” him, according to the filing, which also added that many of the “longtime” clients Knudsen brought to Hightower would “prefer to continue working” with him.

Knudsen, a resident of Kings County and a recipient of the Forbes 2023 Best-In-State Wealth Advisors award, said in the release, “I believe Hightower is calculating its possible sale price by inflating its assets through attempting to take my client base, ruin my reputation, and bar me from practicing my profession.”

According to the filing, Knudsen founded Triad Wealth Stewardship, a wealth management and financial services firm, “in or around 2008.” The firm eventually added Stober as a partner, with a 30% ownership. Knudsen held the remaining 70%. In or around 2018, Knudsen and his partners, which now included Williams-Gurian, another defendant, were approached by Hightower about becoming affiliated with it.

They entered an affiliation deal to move their clients to Hightower and its affiliates in late 2019, in a transaction that the plaintiff described in the lawsuit as complex and “involving several entities and multiple different contracts.”

The affiliation relationship eventually soured, for several reasons. Most notably, Knudsen said he was assured he would be able to maintain his relationship with his clients despite his affiliation with Hightower. Knudsen and his partners Williams-Gurian also disagreed over revenue-sharing model of the business.

In January, in a series of Zoom calls that culminated in his termination, according to the lawsuit, Hightower defendants questioned Knudsen about “brandishing” a firearm in the office years ago—which Knudsen denied—and about charges he made to the corporate credit card.

On a Zoom call “on or about February 26, 2024,”Hightower Chief Administrative and Legal Officer Scott Kees told Knudsen” for the first time that he would be terminated from” the partnership services and affiliation agreement, or PSAA, the plaintiff alleged in the suit. However, contrary to language in the PSAA, the plaintiff, according to the filing, “was not provided with any reason for his termination, much less notice of any “breach” of the PSAA or opportunity to cure, and instead was simply told ‘you won’t be surprised.’”