Richmond, Va.-based Salomon & Ludwin, a firm with $1.7 billion in assets under management according to its last Form ADV, has filed a lawsuit against four of its former employees who it claimed left the firm, stole its clients and sabotaged it in the wake of their departure.
Last month, Jeremiah Winters and Catherine “Kate” Atwood, who said they had managed a combined $750 million in client assets, left the firm along with Jennifer Thompson and Abbey Sorensen. The four publicly announced their departures from Salomon & Ludwin with the intention of launching Founders Grove Wealth Partners, also based in Richmond.
Winters serves as the founder, managing partner and CEO of Founders Grove, while Atwood is a founder, managing partner and president. Thompson is chief operating officer and Sorensen is the director of client experience.
In a lawsuit filed in the U.S. District Court for the Eastern District of Virginia, Salomon & Ludwin said the abrupt departure of the team hurt the firm’s viability.
“Defendants’ misconduct has caused, and continues to cause, S&L serious and irreparable harm,” the court documents said. “Defendants have intentionally and willfully misappropriated S&L’s proprietary information and trade secrets, unlawfully interfered with and jeopardized S&L’s relationships, and harmed the firm’s goodwill and reputation.”
The firm appeared to take the departures, which took place with little to no notice, personally as it had hired and trained all four individuals, according to court documents.
“Salomon & Ludwin’s founders personally mentored and invested in the four individuals that are the subject of the litigation,” said Denise E. Giraudo, a partner at law firm Sheppard Mullin, which is representing Salomon & Ludwin, in an email to Financial Advisor. “Unfortunately, the defendants took advantage of the founders’ goodwill for their own personal gain.”
Since the departing team included two of Salomon & Ludwin’s four financial advisors and two of its four operational professionals, the exodus hurts the firm’s ability to maintain operations, it claims in the complaint.
The firm also accused Thompson specifically of deliberately delaying the completion of an update to Salomon & Ludwin’s training manuals and transition processes for clients, which kept the firm from reacting in a timely way to the employees’ sudden departures, the lawsuit said.
“Thompson stalled and intentionally worked to undermine their development to ensure that, when the former employees left, S&L would be seriously hampered in responding to their misconduct and hiring new staff—thus allowing [Founders Grove] to promptly solicit S&L’s clients,” it said.
In the days immediately following the resignations of the four individuals, the lawsuit claims the defecting advisors possibly reached out to hundreds of Salomon & Ludwin’s clients to lure them to the new firm. They also allegedly implied that Salomon & Ludwin would no longer be able to handle their business because of account minimums, the lawsuit stated.
By soliciting Salomon & Ludwin’s current clients, the four violated an employment agreement they were all required to sign as part of their work at Salomon & Ludwin, court documents said.
The agreements state, in part, that the team members agree not to solicit any clients should they decide to leave the company. Any violation of those agreements means the individual must pay Salomon & Ludwin an amount equal to three times the total gross revenue earned from those clients in the past year, according to the lawsuit.
The firm’s lawyer said Salomon & Ludwin felt obligated to file the lawsuit to protect its reputation as well as look out for its clients.
“Our client filed this lawsuit to protect its clients and reputation,” Giraudo said. “Salomon & Ludwin is disheartened that its former employees have attempted to damage the firm’s reputation by publicly releasing resignation letters that have nothing to do with the employees’ unlawful conduct and include statements that S&L refutes.”
A woman who identified herself as “Abbey” at Founders Grove declined to comment and abruptly hung up.
“We’re not allowed to discuss anything at this time, but thank you for calling,” she said.
Salomon & Ludwin is seeking injunctive relief against Founders Grove and is looking to enjoin it from using and disclosing its proprietary information and trade secrets. The firm also wants to prevent the former employees from interfering with and soliciting its current clients. Salomon & Ludwin is also seeking damages, disgorgement of ill-gotten gains, attorney’s fees and costs and prejudgment and post-judgment interest, according to the court documents.
The firm’s lawyer stated that Salomon & Ludwin is committed to seeing the lawsuit through until the end.
“Our client is seeking all available relief to remediate the extensive harm the four former employees have caused,” Giraudo said. “To be clear: Salomon & Ludwin will not back down and will continue to fight to protect its clients and decades of hard work.”