Bear Stearns' plight spawned the first of what could become a parade of lawsuits over defections of top brokers and clients to rival firms.
In separate suits last week, Bear won a temporary restraining order in Massachusetts against one group that jumped to Morgan Stanley, and sought a similar order in New York against former workers who jumped to Morgan Stanley and UBS.
The bank persuaded a federal judge to temporarily block Douglas Sharon, an executive director who headed its Boston office, from working for Morgan Stanley or soliciting other brokers or clients from his former firm. Bear's lawsuit alleged that Sharon violated a 90-day notice provision in his employment contract when he resigned March 17 to join Morgan Stanley. Bear also accused Sharon and two sales assistants who decamped with him of spending the weekend of March 14-16 printing "thousands of client account statements" and leaving the office with company documents. The group then solicited nearly all of Sharon's clients to transfer their accounts to Morgan Stanley, the suit said.
Bear is seeking a preliminary injunction at a court hearing slated for April 3.
Bear Stearns and its prospective purchaser, JPMorgan Chase, have been fighting to retain top-producing brokers since mid-March, when a loss of liquidity forced it to obtain emergency credit guarantees from the Federal Reserve and then agree to be acquired. Morgan Stanley, one of the most active recruiters of Bear brokers, reportedly hired 12 with combined revenue of $26 million, including three from the Boston office.
JPMorgan has countered by offering retention bonuses of up to a year's production to brokers who generated at least $500,000 in commissions and fees last year. Sharon, as executive director of the private client services group in Boston, generated $5.12 million of commissions and oversaw more than $867 million of client assets, according to the complaint, as reported by Reuters.
"Lawsuits are another kind of strategy to stem the tide," observes the Boston Globe. "It's unclear how aggressively Bear Stearns will use legal strategies to keep its former brokers from pitching their former clients."