A high-profile scuffle between a member of J.P. Morgan’s advisory group and its private bank group intensified last week when J.P. Morgan asked a U.S. District Court to require one of its former advisors, Gwen Campbell, to post a $10 million bond to cover any losses the bank might suffer should her request for a temporary restraining order—designed to protect her clients from internal poaching at the firm, she said—be granted.
The reality-show vibes of Campbell’s complaint and J.P. Morgan’s opposition had some industry professionals nodding their heads in recognition, some just shrugging their shoulders, and others voicing surprise that a major institution hasn’t figured out how to handle channel conflicts within its own ranks.
No matter what the take, the alleged behavior at the banking titan and similar incidents at other firms have opened the door to much discussion in the industry. The questions range from the salacious (What exactly is going on at J.P. Morgan?) to the practical (What can investment advisors do to protect themselves when they’re thinking of moving from one advisory group to another?).
This dispute was first aired on Dec. 2 when Campbell, a heralded veteran investment advisor at J.P. Morgan Advisors, filed a complaint in the San Francisco division of the U.S. District Court asking for a temporary restraining order and preliminary injunction against J.P. Morgan Private Bank (formerly J.P. Morgan Wealth Management).
Campbell’s complaint centered around allegations that the Private Bank group of her firm was undercutting her relationships with the top clients she brought with her when, after a year of negotiations, she left Merrill Lynch to join J.P. Morgan Advisors along with 40 clients and a $1.1 billion book of business. In addition, she accused the Private Bank of trying to poach her three top clients and move their assets out from under her, including those of baseball player Alex Rodriguez, who was identified by the Financial Times.
“Unbeknownst to Campbell at the time she agreed to join the firm, J.P. Morgan has a history of hiring advisors with significant books of business, only for the Private Bank to attempt to poach their most high-profile and high-net-worth clients and move their assets to the Private Bank,” the complaint said, later adding that “Campbell is a victim of a hire-and-poach ‘Playbook’ that is known within J.P. Morgan to be a consequence of the internal conflict between JPMA and the Private Bank.”
J.P. Morgan filed an opposition to her complaint the next day stating that Campbell’s request had no merit and the court should deny her plea for injunctive relief, as she had not lost a single client or suffered “any net loss in her total assets under management.” The institution then wrapped up its opposition with a request to the court that Campbell be required to post a $10 million bond to cover damages to the firm that might arise from being wrongfully enjoined if the relief is granted.
A hearing on the temporary restraining order was held on Thursday, and the judge’s written ruling is expected this week.
Within both filings is an acknowledgement that the employment contract between J.P. Morgan and Campbell contains a clause stipulating that all disagreements of legally protected employment-related claims would go to binding arbitration. According to Campbell’s filing, however, there is an allowance for actions “seeking only declaratory and/or emergency, temporary or preliminary injunctive relief (including a temporary restraining order)” as long as Campbell submits her underlying claims to arbitration following any court ruling on the relief sought.
“Plaintiff filed this action for the limited purpose of seeking injunctive relief against Defendant to preserve the status quo pending the outcome of that arbitration,” the complaint said.