Mariner Wealth Advisors has asked a judge to pause a lawsuit by Edelman Financial Engines that accuses the firm of allegedly poaching advisors and misappropriating trade secrets.
In the motion to stay, filed earlier this week, Mariner Wealth Advisors argues that Edelman already had arbitration cases and a lawsuit pending with similar issues against advisors named in the suit it filed against the firm. “A stay should be granted in order to promote judicial economy and avoid the potential for inconsistent results,” Mariner Wealth said.
Edelman’s suit, filed last month in U.S. District Court in Kansas, accused Mariner of defaming its reputation, and stealing the fruits of its “multimillion dollar investments in marketing and client goodwill,” to “run Edelman out of business.”
Edelman claimed Mariner’s recruitment of 10 of its advisors has resulted in Edelman losing at least 851 clients representing more than $621 million in assets under management. “Defendant’s unlawful scheme to poach Edelman’s clients and steal its business and trade secrets is ongoing,” the suit said. Edelman is seeking “damages and injunctive relief” to prevent further harm to its business.
But in its filing, Mariner said the 10 advisors who joined the firm within the past three years did so “at-will,” and eight of them were employed by at different branch locations around the country and resigned at separate times.
Noting that Boston-based Edelman employs more than 1,500 people, including about 650 advisors with more than 420,000 clients and more than $240 in AUM, Mariner argues that it is absurd that Edelman would accuse the firm of trying to run them out of business. As of June 30, Mariner, which was founded in 2006 with $300 million in assets under advisement, now advises on more than $114 billion in assets.
“It is Plaintiffs, rather, who have been on a nearly three-year campaign to unlawfully stifle fair competition in the investment advisory services industry,” Mariner said in its filing, adding that Edelman has “carried out that campaign, in part, by suing and/or initiating arbitration proceedings against four of the individuals referenced in the complaint.”
The filing noted that all the cases Edelman has brought against the advisors involve similar factual and legal issues as those raised against Mariner. The advisors are accused of breaching their agreement with Edelman, disclosing confidential information or trade secrets, and soliciting business from clients. The advisors have adamantly denied the allegations of wrongdoing against them and are vigorously contesting the claims, the filing said.
“Given the other pending cases, it can be reasonably deduced that Plaintiffs commenced this action not out of any real concern about purported proprietary information. Instead, Plaintiffs wish to send a chilling public message to the marketplace that a financial planner who decides to work for Mariner and leaves in accord with industry standards, customs and practices, will be subjected to meritless litigation, even where clients themselves have affirmatively chosen to discontinue their relationships with [Financial Engines Advisors] and continue working with their financial planners,” it said.
Edelman, in a statement at the time of the filing said, “The complaint we filed describes in great detail a prolonged pattern of deceptive actions used to steal EFE’s confidential and proprietary business information, mislead our employees, and misappropriate our clients and the assets we manage for them. We are taking this step to put a stop to these unlawful practices.”
Mariner declined to comment.
Edelman’s claims, it said, should be stayed pending the outcomes of the other arbitrations. “Staying this action will promote judicial economy because the arbitrations involve common factual and legal issues,” the filing said, adding that “There is a possibility of inconsistent results in this action versus one or more of the arbitrations.